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UK coal imports jump ahead of carbon tax

Mar 31 2015 20:31

London - Britain's coal imports should show a spike for the first quarter of 2015 as utilities hoard ahead of a tax rise designed to encourage them to switch away from the more polluting coal-fired power generation.

From April, Britain's carbon tax, which charges power producers for each ton of carbon dioxide (CO2) they emit, almost doubles to GBP18.08 per ton.

In the short term, the impending jump in the tax rate has stimulated imports, but this is expected to end abruptly on April 1.

Climate change

A director at consultancy PwC, Ronan O'Regan, said: "By March utility stocks would usually be run down, as they build up stocks over summer, but with the higher price (of the carbon tax) coming, it makes sense for any utilities with the space to do so, to rebuild ahead of April."

Traders and brokers estimated first quarter imports would be up by around 10% to 20% compared to the previous year.

"In terms of imports it means they will front load in first quarter and you'll have less coming in during second quarter," said a broker.

In the first quarter of 2014, Britain imported 12.7 million ton, data from Britain's department for energy and climate change showed.

Britain is Europe's second largest coal importer after Germany but its shipments are declining as old plants close.

Coal-fired power generation fell to a five-year low in 2014, government data published last month showed.

Imports will go down

The carbon tax, introduced in 2013, was designed to help spur investment in low carbon technology and encourage utilities to switch fuels as coal-fired power generation produces almost double the amount of CO2 as gas-fired plants.

Preliminary figures show January coal imports hit an eight-month high of 3.5 million tons. February data has not yet been published.

The buying spree is expected to be short-lived, however.

"Clearly imports will slowdown fairly sharply after April a," said David Price, global head of steam coal at IHS.

"We've got a few coal stations that won't run through to the end of the year. I think imports will go down further this year on the whole."

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