Party that grabs ‘Greener, Cheaper’ energy story at election will thrive
Worries about energy bills (the kind you pay, not the kind that stumble interminably through parliament) mean that energy and climate policy will be a crucial battleground at the next election.
A poll we did last year found that, when asked ‘what is the most helpful things politicians could do to improve life for you and your family?’ and presented with a list of 18 options that included ‘make your streets safer’ and ‘improve your local school’, people’s most chosen option was ‘cut my energy bills’ (‘reduce fuel prices’ was number two). While there are limits to governments’ ability to affect energy bills, the cost of social and environmental policy is something they can control. The party that can come up with a convincing answer on gas and electricity bills, as well as wider cost of living concerns, will be in a strong position.
At the same time, the imperative of tackling climate change remains. Voters are unlikely to be convinced that political parties are serious if they are not dealing with large, inter-generational risks. A party that did not have credible answers to recidivist criminals, education, reforming the care system and reducing poverty would not be taken seriously at a General Election. Reducing UK and global climate emissions also fits that category.
The story that political parties should tell at the next election is crucial. First, they must make a clear commitment that carbon emissions will be reduced. Secondly, they must be able to show they are doing everything possible to keep down the cost of cutting carbon. This means a focus on consumers and competition, saying ‘we will be greener, but we will do all we can to make it cheaper’.
Emphasising cost-effective carbon reductions reduces the impact of higher energy prices on the economy. JRF’s work with the Centre of Sustainable Energy that shows how the poorest will suffer most from climate policy should be keeping politicians awake at night. Furthermore, the cheaper the low carbon transition is, the more likely that other countries will follow our example.
So what manifesto policies follow from this cost-effective decarbonisation narrative?
1. It is imperative that the UK pushes for an international deal and serious ambition at a European level. This means strengthening the EU ETS to provide a better long-term signal and a more ambitious 2030 carbon target (we will be releasing work on this in the next few weeks). The more work the ETS can do on cutting carbon, the less we have to rely on subsidies.
2. Scrap the most expensive technology support policies. The worst of these is the microgeneration feed-in-tariff. It is now expected to cost three times its original estimates. Despite the cuts in subsidy, it remains an extraordinarily expensive way of decarbonising. It is immoral that poor people are having to subsidise rich people’s income.
3. Reconsider renewable energy support. The Government says that support for renewables will add around £100 to the average bill by 2020, mainly to reach the pointless 2020 Renewable Energy target. The first step is to ask if this mass roll-out of some immature technologies is the best way to support new technologies, with all the squeezing of supply chains it creates. If the government cannot scrap the target, it could take this cost off bills and into general taxation. It is not clear why current billpayers should be paying for the development of technologies whose benefits will be enjoyed by future generations (through avoided climate change). This is what government spending should be for. Obviously, such an approach would face fierce Treasury resistance, but it would be a tangible demonstration that politicians understand concerns about energy bills.
4. Show that policies have improved energy efficiency. For the Coalition, this means showing that the Green Deal has captured most of the work previously done by CERT and at a lower cost to the billpayer. It also means showing that ECO is not horrendously expensive in the run up to an election.
5. Dig for shale, but without compromising on European climate ambition. It would be foolish to ignore the potential of shale. However, the important thing is that shale, or natural gas, is used to replace more polluting fuels, in particular coal.
6. Cut the cost of smart meters. The current plan looks potentially incredibly expensive, including the looming danger of a giant government IT project. Policymakers should take advantage of the sensible delay in the roll-out to re-examine the entire programme for cost savings, including whether suppliers are best placed to install the 50 million new meters.
7. Help people cut energy use. Changing how people use energy in the home is not straightforward. It requires sophisticated intervention. But we do not yet understand well how people cut energy use and whether it is sustained. Smart meters can help with that, but will not be enough on their own. We suggested opening up the ECO to allow programmes that reduce energy use in homes to compete for the subsidy in our recent report, Smarter, Greener, Cheaper. This would show government is trying to help people learn where they are wasting energy, and if they may be able to cut down.
Above all, the Government’s approach should be about competition between low carbon energy sources. Energy efficiency should be competing with gas competing with solar power competing with offshore wind to show which can cut carbon the most cheaply. This should not mean competing over who can secure the best subsidy rates, but who can deliver in the marketplace. This would provide the best deal for consumers. It is the only credible path to a low carbon economy, and the Party that seizes such a story will be well placed.