Pádraic McCormack (Galway West, Fine Gael)
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Question 131: To ask the Minister for Communications, Energy and Natural Resources his plans to address the issue of windfall profits being made by electricity generators on the back of charging consumers for the cost of carbon; and if he will make a statement on the matter. [3393/10]

Eamon Ryan (Dublin South, Green Party)
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The current EU Emissions Trading Scheme (ETS), which runs until the end of 2012, requires a free allocation of carbon credits to electricity generators.

The North/South Single Electricity Market Committee, which is statutorily responsible for the operation of the all-island electricity market on the island of Ireland, decided that from 2008 all electricity generators must include the full opportunity cost of their carbon allocations when bidding into the Single Electricity Market.

The enterprise community in particular is concerned that this increases the wholesale cost of electricity and gives rise to windfall gains being earned by electricity generators. The cost impact of carbon and the related windfall gains for generators, fluctuates with the price of carbon, which is currently at approximately €13 a tonne.

The Government decided last July to work to progress the introduction of legislation to recover carbon windfall gains from electricity generators up to 2012.

My Department, in consultation with the Office of the Attorney General and the Department of Finance, is examining the complex issues inherent in designing a legislative mechanism, which could recover carbon windfall gains from electricity generation companies.

There are many legal and other considerations to take into account in any potential treatment of carbon windfall gains. I will be reverting to the Government with the outcome of the analysis in the near future.

I would point out that ESB contributed over €300m in 2009 to reduce electricity prices for all consumers, of which ESB's carbon benefits accounted for a significant portion.

For the future and in the context of the European Union's ambitious plans for carbon emissions and cap and trade after 2012, it remains my personal view that the allocation of carbon credits, which is the basis for trading, should be done by auction rather than free allocation. I strongly favour a scenario post 2012 in which all carbon permits should 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 an essential development, which will be good for the environment and good for the consumer.