Dan Neville (Limerick West, Fine Gael)
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Question 82: To ask the Minister for Communications, Energy and Natural Resources his views in terms of whether or not windfall profits earned by energy companies, due to the price of carbon being factored into the price of electricity, should be recouped to the Exchequer; and if he will make a statement on the matter. [43724/08]

Eamon Ryan (Dublin South, Green Party)
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The Single Electricity Market Committee, which is statutorily responsible for the operation of the all-island electricity market on the island of Ireland, have determined that all electricity generators must include the full opportunity cost of carbon when bidding into the gross mandatory pool of the Single Electricity Market. This raises the wholesale cost of electricity and gives rise to the windfall profits being earned by electricity generators.

In deciding on the level of regulated electricity price increase effective from 1 January 2009, the Commission for Energy Regulation (CER) announced that they have agreed with the ESB that the latter will provide a significant rebate to electricity consumers in 2009. This rebate will be applicable to all electricity customers irrespective of their supplier. This rebate has a value of approximately 9.5% of the cost of electricity. It will mitigate the need for a price increase and largely address the issue of windfall gains earned by ESB in 2009.

My Department, in conjunction with the CER, will be examining options to address in the future, any windfall gains that might arise for electricity generators while they continue to receive free carbon permit allocations.

More generally I would point out that the emissions trading system established by the European Union, is the cornerstone of our climate change response and will be the basis of any subsequent international responses to climate change. This system currently allows for the free allocations of 90% of carbon credits in the electricity generation area.

My personal view is that the allocation of carbon credits, which is the basis for trading, should be done by auction rather than free allocation. I note that the European Commission is now proposing that post 2012 all carbon permits will be bought on the open market and producers can compete on the basis of carbon costs. This will eliminate any windfall gains for electricity producers and promote competition between generators as to who can produce electricity using the least carbon. In my view this is a welcome development which will be good for the environment and good for the consumer.