This morning the long-gestating Energy Bill returns to the House of Commons. Among the various amendments being proposed, one has taken on totemic significance for many green campaigners, the Committee on Climate Change (the government’s climate advisors) and numerous firms selling low carbon technology.
Proposed by Energy Select Committee stalwarts Tim Yeo (Conservative) and Barry Gardiner (Labour), the amendment would insert a target to reduce the carbon intensity of electricity (i.e. how much carbon dioxide is emitted to produce an average kilowatt hour of electricity) from just under 500 grams of CO2 per KWh today to 50gCO2/KWh by 2030. The details may sound arcane, but such a change would lead to a profound change in how we generate our electricity. Lots more nuclear power stations and wind turbines, a lot less coal and gas (or, more likely, a lot of gas-fired power stations being used much less frequently).
The UK certainly needs a dramatic change in how we produce electricity if we are to meet our legally binding targets to reduce carbon emissions by 80% by 2050 (compared to 1990 levels). However, it is far from clear that such a time-specific 2030 target for one part of the energy economy is prudent.
Those arguing for the target claim it will give investors the confidence to build new turbine and nuclear technology factories in the UK, which the UK can then sell to the rest of the world. However, these investors are already being given a huge chunk of their longed-for certainty. First, they have the Climate Change Act which gives those legally binding 2050 commitments, which no other country has matched. Secondly, the Energy Bill itself is going to provide low carbon generators with decades-long guaranteed prices. Thirdly, the Treasury has agreed to provide around £9billion of support for low carbon generation in 2020 or, more accurately, it has made the commitment on behalf of electricity billpayers as these tariffs will be collected through bills. How much more certainty do you need? Do the amendment’s backers really think that an airy commitment to electricity decarbonisation will entice investors presently unconvinced by the impending cash bonanza?
The second strike against the amendment is that it is yet another effort to try and plan in minute detail what our energy system will look like far into the future. No matter how detailed or brilliant one’s model, the idea that you can predict exactly what technologies will cost in 20 years’ time, let alone what gas or oil will cost then, is fanciful. It may turn out that decarbonising the electricity sector is actually more expensive than a new low carbon transport technology. The best system we have for dealing with such uncertainty is a market. It would be much better to price or limit the pollutant (carbon) and then allow the market to decide which technologies are cheapest to achieve that level of decarbonisation. The decarbonisation target amendment is just the latest in a long series of climate change targets and sub-targets, none of which have ever sated campaigners’ thirst for more.
The final, and biggest, problem with the proposal is that it will not save much carbon. Because emissions from electricity generation are covered by the European Union’s ETS cap, any additional savings made in one country create slack for others to emit more. British wind turbines will allow Polish coal to continue burning. While the ETS remains in place, the only way to reduce emissions from electricity further is to tighten the ETS cap. A 50g target would be about twice as demanding as current ETS-led emissions reduction efforts, taking the UK well out of step with the rest of Europe.
The correct approach to decarbonising electricity is to be ambitious at a European level. It is to this Government’s credit that it is proposing an ambitious 2030 objective for the EU (while avoiding the horrors of a specific renewables target which has pushed us towards very expensive ways of decarbonising).
There is plenty the Government can do – and indeed, plenty that it is doing – to show that it is serious about addressing climate change. It should be clear about the importance of cost-effective action to tackle greenhouse gas emissions and use market mechanisms that can unleash competition among low carbon technologies. This amendment is well-meaning, but misguided.