asked Her Majesty's Government:

What consideration has been given to electricity production prices in the light of the expected increased price of allocations in the second phase of the European Union Emissions Trading Scheme. [HL686]

The regulatory impact assessments carried out as part of the consultation process for the UK Phase II National Allocation Plan estimated that UK industrial electricity prices would increase by 1 per cent and domestic prices by 0.5 per cent, compared to Phase I, as a result of the UK cap.

The uncertainty involving the carbon price and electricity prices means that these impacts are indicative only. It is estimated that for every €1 increase in the carbon price, the wholesale price of electricity increases by up to 0.45 per megawatt hour. The increases seen in electricity prices are only partly due to the impact of the carbon price. Around 75 per cent of the increase is due to rising fuel prices.