UK's coal-fired Eggborough power plant may close in March 2016

* Around 240 jobs at risk

* Company hit by UK carbon tax

* Plant could provide 4 pct of Britain's electricity (Adds government response, background)

LONDON, Sept 2 (Reuters) - Britain's coal-fired Eggborough power plant may close at the end of March 2016 as it is too costly to continue running the 53-year-old power station, its owner said on Wednesday.

Eggborough Power Limited has started consulting staff on stopping production at the plant and the ultimate cessation date will depend on the outcome of those talks, as well as discussions with government bodies, it said.

Around 240 jobs are under threat at the power plant in northern England.

"A continued fall in power prices driven by the decline in commodity prices, combined with continued high carbon tax, means that Eggborough is unable to cover its future operating costs," the company said in a statement.

Eggborough Power Limited is owned by Czech energy company EPH, which completed its purchase of the business in January.

British wholesale power prices have fallen around 9 percent since the beginning of the year, while costs soared after Britain's carbon tax doubled this April to 18.08 pounds ($27.68) per tonne of carbon dioxide (CO2) emitted.

Coal plants emit almost double the amount of CO2 per megawatt produced as gas plants, so they have been hit hard by the tax.

Eggbrorough Power said it would need additional funding of around 200 million pounds over the next three years to keep the plant running.

The British government said the news was "disappointing" but that security of electricity supply was unaffected by the potential plant closure.

Last year the company was unsuccessful in securing funding under Britain's capacity mechanism, which was introduced to help drive investment in the electricity sector and ensure that the country can keep its lights on.

The 2 gigawatt plant has the potential to provide power to around 2 million, or 4 percent, of Britain's homes, the company said.

($1 = 0.6532 pounds) (Reporting by Karolin Schaps and Susanna Twidale; Editing by Louise Heavens and Mark Potter)