Renew On Line (UK) 70

7. Energy and Climate Policy

Tory and Lib Dem Green plans

The Lib Dems plan for a carbon-neutral, non-nuclear Britain by 2050, is out. So is the Tories Quality of Life review: it calls for new green taxes and backs renewables. It wants Feed-In tariffs for micro-power, but a FIT with competitive tendering instead of the RO i.e. back to the old NFFO! More in Renew 171.

Carbon taxes a mess

In Prospect magazine in July Richard Barry, a former petroleum engineer, argued that the ad hoc package of energy taxes and carbon trading arrangements the UK has at present needs revamping. He pointed out that the current levels of tax are very variable and inconsistent e.g. prices in the EU-ETS are very volatile last year the price plunged from almost £20 per tonne to less than £7 in just a few days . He added the ETS has a short time horizon- its next phase will only cover the years 2008-12, not too useful to a power company executive with a 2017-30 investment horizon , and the projected price of saving a tonne will only be worth £14 next year (this year s figure is a derisory 70 pence) .

He went on the British government also imposes three carbon taxes: vehicle fuel duty, the climate change levy (CCL) and the airline passenger duty (APD) all with very different implicit prices per tonne of carbon. For example, the CCL for electricity is equivalent to £11 per tonne and for gas its only £8 per tonne. The APD for an economy flight to Alicante is £48 per tonne. By contrast, although it s not presented as a carbon tax, the vehicle fuel duty is very large: at £200 per tonne, CO2 emission is almost a hanging offence . A ROC for wind is £102/tonne- although of course the extra cost consumers pay for the RO is tiny.

He concluded A widely discussed alternative is to replace ETS and the mish-mash of existing carbon taxes with a single “level playing field” tax for every tonne of CO2 emitted, whatever its source. Today s muddle suggests that the time has come to start moving in that direction. A charge of £47 per tonne would raise £26bn a year for the treasury and would be essentially tax neutral- replacing £24bn of fuel duty, £0.8bn of CCL and £0.9bn ofAPD. Imposition of a tax of £47 per tonnewould add about £19 to the cost of a MWh of electricity- increasing the wholesale price from £25 to about £44. Generators emitting CO2 would have to pay that extra £19 straight to the treasury in settlement of their emission tax liability. Generators using zero-carbon technologies (nuclear, carbon capture and storage, wind and so forth) would be able to charge the same £44 per Mwh for their electricity but- having no emission tax obligation- would be able to pocket all of it. This mechanism would provide low-carbon generating technologies with such a substantial, reliable and long-term incentive that, well before 2050, we could be looking at a zero-carbon electricity generating sector, or something very close to it. www.prospect-magazine.co.uk

DEFRA Act on CO2 Indifference may be a problem (see left), but DEFRA s new Act on CO2 promotional campaign for people inspired to act on climate change by events like Live Earth aims to encourage them to make small changes to reduce their impact on the planet and focuses on simple changes such as switching to low energy light bulbs, unplugging electronic chargers, considering what transport to take and using less water, as well as directing people to information on many more changes they can make . Meanwhile DEFRA says it s been making progress with the voluntary Climate Change Agreements made by business in energy-intensive sectors, which only pay 20% of Climate Change Levy. The scheme secured a saving of 16.4 million tonnes of CO2 last year, with 32 out of the 49 sectors covered meeting their targets outright, and 99% of facilities being recertified for levy discounts.

Fuel Poverty grows

Up to 3 million families in England could be living in fuel poverty by 2010, National Energy Action has warned, calling on utility providers to offer social tariffs to those most at risk. In 2001, the government committed to end fuel poverty among the vulnerable, families on low incomes, the elderly, and people with disabilities, by 2010, and to eradicate the problem completely by 2016. But steep rises in energy bills have seen the number of households caught in the poverty trap almost doubling to 2.5 million over the past 3 years. The government said that The recent energy white paper set out a number of measures to reduce the level of fuel poverty in the UK by 200,000 households by 2010 . Fuel poverty is defined as the need to spend more than 10% of household income on fuel costs in order to deliver adequate heating.

Smart meter trials

Around 40,000 households will be taking part in smart meter energy saving trials to cut household bills and help fight climate change. Contracts have been signed with EDF Energy, E.ON UK, Scottish & Southern Energy, and Scottish Power, to conduct the trials, with £10m provided by the Government, matched by a similar amount from the companies. The trials will include around 15,000 households receiving state of the art smart meters and 8,000 more receiving clip on real-time display units for their existing meters. The other households in the trial will test new ways of receiving information to help them cut their energy use. Next- dynamic demand: see box.

Clip on real time display units can tell people how much energy they are using, and how much it is costing when individual appliances are turned on. Smart meters allow energy suppliers to communicate directly with their customers, removing the need for meter-readings and ensuring entirely accurate bills with no estimates. They tell people about their energy use either through linked display units or via the internet or TV.

Bristol s Centre for Sustainable Energy has been appointed to lead evaluation of the national trials, which will be managed by Ofgem.

'Dynamic Demand control of appliances such as fridges and freezers may be able to help balance grids efficiently when there is a significant variable renewable energy inupt, says a new DBERR report. www.berr.gov.uk/files/file41011.pdf

DUKES 2007 from the 2007 Digest of UK Energy Statistics

In 2006 overall UK energy consumption fell by 1.5%: gas demand fell by 5%, electricity by 5.7%. Oil use was unchanged, with 72% used for transport.

Between 1990 and 2006: overall energy use has risen 5.5% between 1990 and 2006:

Industry -16%Domestic +12 %,Transport +23%, Services & agric: +3.5%.

Air transport energy use rose by 91%; rail 61%, whilst passenger road fuel use was unchanged.

Domestic energy use rose by 12%, with space heating accounting for three-fifths

Offset Code

A voluntary Code of Best Practice for the carbon emission offsetting industry is to be established, backed by the offsetting industry, business, and NGOs. DEFRA Climate Change Minister, Joan Ruddock said that an overwhelming majority of respondents to the consultation on the draft Code released last Jan. favoured a voluntary code.

Climate change: UK public not bothered

A Ipsos MORI public opinion poll found that although 68% of those asked believed we are seeing climate change, only 38% thought it would have an impact, while 51% thought it would have little or no effect on them. But 90% agreed it would have a significant impact on future generations. The survey found that 56% thought experts were still divided over whether human activity is contributing to global warming while 21% disagreed, whereas in fact there is a scientific consensus. There was a feeling that the problem is being exaggerated: 75% thought too much fuss had been made, 22% disagreed. 40% thought climate change was too complex and uncertain for scientists to make useful forecasts, 38% disagreed. 9% thought global warming was caused by natural events while 41% thought it was caused partly by both natural and human activity. These figures have not changed since a previous survey in 2002.

Although 45% of those asked placed global warming at the top of a list of the most serious threats to mankind, when placed in a national context it came behind race and immigration, the NHS and crime. Locally people were more concerned about traffic, litter, graffiti, parks, noise and dog fouling.

What can be done?

Nearly 46% felt a solution could be found to climate change, while 32% disagreed. 70% felt that the Government should lead in combating climate change even if that means using the law to change people s behaviour; and consumers are also look to business to take greater action on climate change. But 37% admitted they were doing nothing personally about it, while 23% said their main effort was via recycling.

MORI s Head of Environment Phil Downing, the author of the research, said: The public is still behind the scientific community and industry in recognising the severity of the threat we are facing. Unfortunately there is a split - not between believers and non-believers but between those who recognise the need to do something and those who have a more passive response. They are a bit concerned by climate change but they think it has been exaggerated and over-hyped. The idea that the debate is over is not true. There are a lot of people out there who have not bought into the view that climate change is a threat.

The survey concludes there is a need to bring home to individuals the realities of climate change: though public awareness is increasing, the facts need reinforcing.

DTI becomes CBI?

John Hutton has vowed that his new Dept. for Business, Enterprise & Regulatory Reform- replacing the old Dept. of Trade & Industry- would be aggressively pro-business . He told the FT This is not a rebranding. It s a serious attempt to redesign across government how we work with business . Hutton hailed the inspired appointment of Sir Digby Jones, the former chief of the Confederation of British Industry (CBI), as trade & investment minister. Sir Digby has expressed pro-nuclear views.

* The demise of the DTI and the shifting of science and technology oversight to the new Dept. of Innovation, Universities and Skills (DIUS) has meant that the House of Commons Select Committee on Science and Technology has been wound up. This has led to a lot of complaints, since the Committee was widely seen as providing an important level of independent scrutiny.