Energy and Climate Change Committee says draft energy bill could lead to UK missing climate targets

By Ed King

UK government plans to reform the energy sector are lacking detail and could see the country miss its carbon emission targets, according to a report out today.

In a stinging critique of the draft energy bill, the influential Energy and Climate Change Committee says proposed objectives are ‘vacuous’, do not take into account current climate change targets, ignore the potential of energy efficiency measures and could hurt smaller renewable providers.

The report also suggests the bill in its current form could open the door to the construction of new high-emission fossil fuel power stations and could also encourage a new ‘dash for gas’.

AT A GLANCE: Key criticisms of UK draft energy bill

“Delivery according to timetable is crucial if we are to meet our climate change and renewables targets and retain security of supply for 2020,” the Committee said.

“We are extremely concerned that the Department of Energy and Climate Change (DECC) delivery timetable has already slipped, and that there is still a great deal of work that needs to be done to finalise the legislation.”

It added: “We believe that an explicit reference to the carbon budgets in the Bill, as well as making the Committee on Climate Change a statutory consultee on the delivery plan, would help to create greater certainty about the UK’s commitment to meeting its statutory obligations.”

The draft Energy Bill was published in May 2012 – proposing increasing state powers to intervene in the electricity market, and offering low carbon generators a fixed price for their energy.

Its stated aims are to: “Put in place measures to attract the £110 billion investment which is needed to replace current generating capacity and upgrade the grid by 2020, and to cope with a rising demand for electricity.”

A fifth of the UK’s fleet of fossil-fuelled and Nuclear power stations are likely to come out of service by 2020. Like many countries worldwide, the UK is facing the challenge of meeting increased levels of electricity demand cutting carbon emissions.

The 2008 Climate Change Act established a legally-binding target to reduce the UK’s greenhouse gas emissions by at least 80% below 1990 levels by 2050. In June 2011 the government adopted a new carbon budget, agreeing a 50% reduction in emissions by 2025 relative to 1990 levels.

Two weeks ago Secretary of State for Energy and Climate Change Ed Davey hailed the UK and the EU’s leadership in this sector, claiming it was critical for a binding global climate deal in 2015.

Squabbling departments

The report reserves particular criticism for the Treasury, accusing the department of deliberately ‘undermining’ their scrutiny process by refusing to take part in oral submissions.

It also raises concerns over the way departments within the UK government work together: “The perceived conflict between DECC and HM Treasury on some aspects of EMR is also contributing to uncertainty among the investor community.

“We sincerely hope that these two departments can in future develop a better working relationship than they have demonstrated to us during the course of our inquiry.”

Under current Chancellor George Osborne the Treasury appears to have become increasingly hostile to investment in renewable energy, and has insisted on capping a ‘levy’ on energy bills that would help fund low-carbon power.

EXPERT VIEW: How UK government policy is hobbling the green economy

Committee chairman Tim Yeo said in a statement: “The Government is in danger of botching its plans to boost clean energy, because the Treasury is refusing to back new contracts to deliver investment in nuclear, wind, wave and carbon capture and storage.”

IPPR Associate Director for Globalisation and Climate Change Will Straw said: “Ed Davey must go back to the drawing board and develop proposals which will keep energy bills down, improve competition and encourage essential investment, rather than deferring to the short-term thinking of George Osborne.

“It is crucial that Ed Davey heeds the Committee’s warning that a 2030 decarbonisation target for the electricity sector is essential for investor confidence.”

The Energy and Climate Change Committee is made up of members from all three major UK parties – and led by Conservative backbencher and former Environment Minister Tim Yeo MP. Its findings are based on 79 written submissions, five oral evidence sessions and a roundtable of investors and financial analysts.

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