The head of the Association of Electricity Producers has given the Chancellor’s Carbon pricing policy a cautious welcome. Chief Executive David Porter said the announcement of a price of £16 per tonne of C02 announced in Wednesday’s budget was only the first stage in a long process of encouraging investment.

Mr Porter said: “We are very pleased that it has increased the confidence of companies wanting to develop new low carbon technologies for electricity production. But, the pricing of carbon emissions beyond 2020, remains a major uncertainty for electricity companies, which have to make huge, long-term investments for the transition to a low-carbon power industry.”

After 2020 the price is scheduled to rise to £30 per tonne. But whatever the price Mr Porter said there would be a knock on consequence for those using current fossil fuels in their power plants.

“A more immediate concern, however, is that there should be no unintended consequences for existing power stations arising from the implementation of the carbon price floor.

“It is worth remembering, too, that the outcome of the electricity market reform consultation cannot be viewed in isolation from this announcement and we also look forward to hearing about that. In fact, it was frustrating that we had to submit our views on the carbon price floor in advance of the EMR consultation,” he concluded.