3. Carbon Politics

Ducking the EU 20% by 2020 renewables target 

The UK has formally backed the EU plan to get 20% of the EU’s energy from renewables by 2020. However, the UK is unlikely to attain anything like that (we only get 2% at present), unless there are radical new programmes. Brown’s new proposals (see above) may help, but there have been signs that the government wants a lower UK target. Responding to the ‘ducking the 20% target’ claim

Energy Minister Malcolm Wicks said on Newsnight that the proposed Directive did not mean that all EU members had to get to 20%, as long as it was achieved across the EU as a whole. But the UK target has ‘got to be a considerable figure. It’s got to be somewhere between 10% and 15%’.

Another approach would be to try to meet the target in other ways. The Guardian (13/10/07) said the UK, and some other EU countries, were keen on ‘a system of mandatory trading permits between countries so that member countries that did not meet the renewables target would be able to buy in permits from other countries that had surpassed it’.

The EU Emission Trading System of course is based on this idea, and the next phase of that is now being negotiated. Not everyone may like the idea, but the UK government has already argued that it would be possible and reasonable to buy in carbon credits for up to half of what it needs to meet this, and its own longer term carbon targets, as proposed in the Climate Bill- including from countries outside the EU. But that would only provide a way to duck the EU’s parallel target of getting emissions down by 20% by 2020- it’s a carbon trading market.  But it’s not in theory a big step to setting up a tradable green certificate system for renewable energy, in parallel.

EU energy commissioner Andris Piebalgs told the Guardian ‘he and his team were working on a scheme to trade renewable certificates’. As the Guardian says ‘this would enable Britain to get to, say, 10% of its energy from renewables by 2020 and buy in permits from countries, perhaps outside the EU, to cover the rest’.

There is already some trading of green certificates, but it’s complex since each country has different schemes with different criteria. But the EC is keen on setting up a new ‘green certificate’ market with a standardised framework- something the EU is keen generally on as part of its push to a single harmonised EU energy market and support system. In terms of support schemes, the EU has so far focussed on the EU-ETS as the main way ahead, though it has had to accept that for the moment, the various guaranteed price Renewable Energy Feed-In Tariff (REFIT) schemes used around the EU are popular and effective. However the EU sees a new green certificate scheme as a new way forward to competitive market-orientated harmonisation.  But critics are worried that this could undermine REFIT.  

In addition, the Guardian noted, some critics fear that ‘a trading system will discourage EU member countries from developing renewable energy sources at a national level if they can buy green electricity from others. It would lead to an unbalanced concentration of renewable energy production in countries which have already managed to successfully produce renewable electricity cost-effectively. The price of renewable energy would rise, whereas it is falling in countries that have feed-in tariffs.’  While they say that ‘Mr Piebalgs and his officials insist that the two schemes are compatible... Oliver Schäfer, policy director of the European Renewable Energy Council  said they would end up destroying each other’.  

On 30/10/07, Energy Minister Malcolm Wicks indicated that ministers ‘have not yet come to a firm position on whether tradable certificates should play a part’ in enabling the renewable targets to be met, and it may be they will choose other options. One would be for the UK and other countries unhappy with the 20% renewables target, to try to change or fudge it. Another DBERR document leaked by the Guardian (23/10/07) claimed that meeting the target would not only cost the UK a lot  (£4bn p.a. just to get to 9%), but would also undermine the EU-ETS, and ‘reduces the incentives to invest in other carbon technologies like nuclear power’. That will clearly never do, so according to the leaked paper, one way out would be to try to renegotiate the target, or rules about compliance with it, though it was admitted that allowing member states to fall short of their targets will be ‘very hard to negotiate... and will be very controversial’.

Asked on Oct 22nd in the Lords about this issue, DBERR minister Lord Jones simply noted that ‘EU Heads of Government agreed unanimously in March that differentiated national overall targets should be derived with member states’ full involvement, with due regard to a fair and adequate allocation taking account of different national starting points and potentials, including the existing levels of renewable energies and energy mix’.  Nuclear of course included.

In the  Commons on 24th Oct Gordon Brown said ‘We are committed to the targets agreed in the EU. The EU will now publish what it believes that each country is able to do, and we will engage in a consultation.’ However  the EU has delayed it’s decision on this- it was meant to have been in Dec.  

UK will miss EU targets  

The UK may not be able to meet the new 20% emissions reduction target set by the EU for 2020, according to a report by independent think-tank Cambridge Econometrics, which claims that 15% is probably the best that can be done by then. One of the problems is, it says, that projected carbon prices in the European Union’s Emissions Trading Scheme (EU ETS), may not be enough to provide an incentive to cut emissions by the required amount, especially in terms of road transport and also aviation- the later will only be included in the ETS from 2011. The report, ‘UK Energy and the Environment’, notes that the UK may surpass its Kyoto commitments by making a 20.5% cut on overall Greenhouse gas (GHGs) emissions by 2012, based on the assumption that, ‘under the EU Emissions Trading Scheme, the CO2 allowance price will rise from Euro15.5 in 2006 to average around Euro 19 per tonne of CO2 over Phase 2 (2008-12), and because of large expected reductions in some other GHGs’.

However, this may not be enough to ensure continued reductions after that.  It claims that the UK ‘will miss its renewables electricity target for 2010 and 2015 by wide margins’, although it is hopeful that the UK could get up to 19% of its electricity from renewables by 2020- only just short of its target. But continued energy demand increases and new gas fired plant will add more emissions.

Prof. Paul Ekins, co-editor of the report, commented, ‘These forecasts provide a reality check to the rhetoric on climate change that is now standard government fare. We consistently forecast that the government’s 20% carbon reduction goal by 2010 would be missed by a wide margin, but the necessary policy measures were not put in place and the government itself now accepts that it will miss the goal. We are now forecasting that the goals for 2020 will also not be achieved without stronger policies than have yet been put in place.Our projections have consistently identified the main barriers to a low-carbon economy to be higher emissions from the transport and household sectors, which are expected to rise to just under a half of the UK’s CO2 emissions by 2010.’  

For more see:  www.camecon.com/press_releases/uk_energy_environment.htm

Responding to the report, a Defra spokesperson said, ‘This report does not take account of a number of these measures, such as the carbon reduction commitment and the zero carbon homes initiative, which will help us meet this target. We intend to put the 2020 target into legislation through the Climate Change Bill, and the Energy White Paper provides a strong foundation for a range of policies and programmes that will help us reach it.’

One of the proposals is of course that the UK and other EU countries could import carbon credits from outside the EU to make up the shortfall. See the critique by Open Europe, covered in the Groups and Reviews sections of Renew 171- they suggests that the majority of UK emissions might be offset in this way. This idea has recently been presented as part of  a wider global policy. Ybo de Boer, head of the UN Framework Convention on Climate Change, has suggested that rich nations should be absolved from the need to cut emissions if they pay developing countries to do it on their behalf.  Robin Webster, Friends of the Earth climate campaigner, responded ‘This proposal doesn’t make environmental, economic or political sense. Emissions need to go down in industrialised countries if we are going to get to grips with climate change. We simply don’t have the option of buying our way out of trouble. Rich and poor nations need to work together- the longer we leave it to take action the more damaging it will be to our economy and the environment.’  

But the Centre for Alternative Technology seem to be happier with the idea. CAT's very ambitious Zero Carbon Britain plan (see Renew 170 and the Reviews section in Renew 171) included the import of carbon credits from overseas- rising up to the equivalent of around 1000 TWhrs worth in 2025 and then tailing off to zero by 2027.

Kyoto let out clause 

The current Kyoto protocol allows richer countries to buy carbon credits, but states that most reductions must be made within the country itself.  However, interviewed on  BBC Radio’s ‘Today’ programme last August de Boer argued that: “We have been reducing emissions and making energy use more efficient in industrialised countries for a long time, since the oil crisis. So it’s quite expensive in industrialised countries to reduce emissions more. But in developing countries less has been done to reduce emissions and less has been done to address energy efficiency.” As a result, he argued: “It actually becomes economically quite attractive for a company, for example in the UK, that has got a target to achieve that target by for example reducing emissions in China. And that’s where the resource transfer happens.”

Asked what limit he would put on such trading, he said: “I personally wouldn’t have a theoretical maximum. We are facing this huge challenge in terms of addressing climate change and the more economically viable we make it to do that the better I think it is...  I would let the market make that choice. There has been some talk in the international legal language about putting a limit on things. For example the Kyoto Protocol says that domestic action should be the main means of achieving a target, but negotiators have never managed to define more precisely what main means is. Is that 50:50 or 51% at home and the rest abroad?”

Asked finally whether his solution was ‘ethical’, de Boer responded: “It’s a very sensible part of the solution in the sense that ultimately the climate, the atmosphere, doesn’t care where the emission is reduced, as long as it is reduced.  But for economic reasons you want to find the cheapest reasons in the market.”  

Merton rules OK 

The Home Builders Federation and British Property Federation have opposed the so-called ‘Merton rule’, which requires builders to obtain at least 10% of a building’s energy from sustainable sources such as solar or wind power. The Merton rule was launched by the London Borough of Merton and has since been adopted by 150 councils.  Housing minister Yvette Cooper had called for the rule to be rolled out nationwide and the Greater London Authority stipulates that 20% of energy in new buildings must come from renewables. But a draft of proposed new Planning rules leaked by the Guardian last Sept., appears, it said, ‘to make it much more difficult for councils to force the pace on renewables, with the Merton rule applying only to specific sites with use of renewables having to be notified years in advance’.

Evidently the building and property lobby were worried that it would cost them too much to fit in-house renewables using local sources- it would be easier to buy in green power from external sources. The British Property Federation said it ‘has backed government plans to scrap the Merton rule because investing in inefficient on-site renewable energy sources is simply not the best way to reduce carbon emissions’.

However the Sustainable Energy Partnership, a coalition of renewable energy and green groups, has fought back defending the scheme. Organiser Ron Bailey said: ‘The current campaign by the British Property Federation and Home Builders Federation to overturn this modest yet proven and highly successful policy in the climate change policy planning statement is nothing short of scandalous bearing in mind the urgent need to reduce CO2 emissions.’ Andrew Warren, chair of the Sustainable Energy Partnership, said: ‘We’d expect ministers to be embracing the Merton rule... not falling for the current developer campaign of misrepresentation and skulduggery’.  

Then, in a letter to Merton Council, Yvette Cooper insisted the rule would stay, and in Dec she published new Planning Guidance basically adopting the Merton approach ... 

OFGEM says no to RO  

In response to the governments consultation on the proposed changes to the Renewables Obligation (RO), OFGEM, the energy regulator, argues that the proposed RO technology banding arrangements could distort development since it will be hard to set prices for each band effectively.  Some projects may get too much, some not enough, and the net effect could be more cost to the consumer. They suggest that the government look again at other options, especially given the new EU commitment to getting 20% of energy from renewables by 2020. OFGEM recycles its earlier idea of competitive bidding for contacts- effectively the old Non Fossil Fuel Obligation (NFFO) again (see Renew 167), something the Tories have also now proposed (see later). But OFGEM also says that the government should look at guaranteed-price Renewable Energy Feed in Tariffs (REFIT), since they seem to be the most cost effective.  A third idea is to use the income from the RO buy-out fine to fund specific projects, rather than recycling it to companies who meet their RO.  

Tinkering like this is unlikely to work- the main message  surely is that market orientated mechanisms like the RO and the NFFO don’t work-  e.g.  under the RO the unpredictable  ROC price variations make it hard for companies to borrow money cheaply, so few projects emerge and for those that do  manage to go ahead, the developers have to charge more.  Under the NFFO, to get contacts, bids were submitted at price levels which were in practice unworkable, so few projects emerged.  REFIT is widely seen as the way ahead- prices fall as capacity builds.  OFGEM say that needs careful initial selection of prices. True- and using learning curve data they can be reduced (‘degressed’) in stages to avoid any over or under payments. But Germany, Spain France and many others seem to be able to do it.  The UK government however seems to want to stay with the RO, and competitive mechanisms, come what may.

OFGEM report: www.ofgem.gov.uk/Sustainability/Environmnt/Policy/Documents1
/Ofgem%20response%20to%20Renewables%20Obligation%20consultation[1].pdf 

RO changes:  The new Energy Bill will enact reforms to the Renewables Obligation e.g. technology banding.