The head of the Association of Electricity Producers has written to business secretary, John Hutton, to voice his opposition to the imposition of the EU industrial emissions directive (IED).
David Porter said the directive undermined the future of coal-fired power stations in the UK and could inadvertently embed a ?generation gap? between new sites for generation and plants due for decommissioning.
For the industry to comply with the new emissions limits, which tighten existing limits on emissions of sulphur oxide and nitrogen oxides, some £2.8 billion would have to be found, he said.
Suppliers failing to recover the cost of installing the required equipment would have to close, he warned.
"This is a scary example of bad regulation," he said.
"Something that looks appealing to a bureaucrat threatens to have huge unintended consequences. Piling regulation upon regulation so quickly also shows a lack of understanding of business and investment. We are talking to government and looking urgently for a sensible outcome."
The directive aims to incorporate six extant environmental directives into one piece of law.
The first reading of the directive is set to place for later this year in Brussels.
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