The FTSE 250-quoted company, which is converting some of its units from coal to biomass to cut its carbon emissions, reported earnings of £102m, compared to £120m for the first half of 2013.
The UK’s carbon tax came into effect in April 2013, aimed at encouraging investment in low-carbon power generation.
“Looking forward, earnings will continue to be impacted by the increasing carbon costs until our biomass generation becomes more substantial,” said the company, although its full-year outlook remained unchanged.
Drax hopes to turn three of its six coal power stations into biomass by 2016.
Underlying earnings per share fell 46 per cent to 9.4p, reflecting investment in converting some of its units to biomass.
But its progress has been slowed by uncertainty over energy policy.
In April, the government rejected one of its units for a new type of renewable energy subsidy – called contracts for difference – with little explanation.
But the High Court ruled in favour of Drax, although the government is now appealing that decision.
Shares closed 1.9 per cent higher at 699.5p.