Energy & Climate Change

By pledging to become ‘Greenest Government Ever’ the Coalition looked set to put environmental issues at the top of its policy agenda.   Though it has made some progress, it has found the balance between going green and going for growth a difficult one to maintain. 

For instance, the Government has had to juggle strict carbon reduction targets with the rising costs of fuel, a top cost of living issue. Often, the emphasis has fallen on the side of keeping costs low with George Osborne scrapping the 3p rise in fuel duty in the 2012 Autumn Statement to help families.

Similarly, the pledge to scrap Air Passenger Duty has come into conflict with the Coalition’s commitments to deficit reduction. Though it has limited the rise of the levy to inflation over the 2010-11 to 2012-13 period, and devolved some powers over the tax to Northern Ireland, the Coalition has had to u-turn on replacing it with a per-flight duty.

The issue of Energy and Climate has also caused discontent within the Conservative Party. In February 2012, 101 Tory MPs signed a letter to the Prime Minister demanding that subsidies for wind turbines be dramatically cut, and that planning laws be tightened so that local people have a better chance of stopping new wind farms being developed.  Similarly, in the European Parliament, 17 Conservative MEPs voted against the pledge to increase emission cuts to 30% by 2020.

Perhaps a sign of the difficult economic situation, the issue of tackling climate change and cutting emissions has not proved universally popular with the public.  According to a YouGov poll conducted just days before the launch of the Green Deal in January 2013, four out of five people had never heard of the scheme. It has been suggested that the unpopularity behind many of these policies results from their being pushed on local communities by central Government. For instance, an ICM poll from October 2012 showed that if the project were community owned, 68% would support a wind turbine being built within two miles of their home, as compared to 49% if it were not community owned.

Looking ahead, the next challenge for the Coalition is to get the Energy Bill passed.  The Bill, which sets out how to decarbonise the economy without damaging the energy supply or drastically altering energy prices, has thus far proved divisive both for those supporting strict carbon reduction, and those sceptical. Tim Yeo MP, Chairman of the Climate Change and Energy Committee, defied the Conservative Party leadership by tabling an amendment to the Bill demanding that electricity generators remove coal-fired and gas-fired generators from their networks by 2030. This would contradict the pledge that allows coal-fired plants to be built provided they are equipped with sufficient Carbon Capture and Storage. Also, only 4% of green electricity companies surveyed by the Renewable Energy Association believe that the subsidies regime proposed in the Energy Bill will succeed in boosting low carbon power generation.

On the other end of the spectrum, business groups are concerned that the Energy Bill will cost jobs, reduce competitiveness, and drive energy bills up too high. So once again, the Coalition will have to juggle competing policy ambitions, partisan tensions, and public support.

energy

Progress against the Coalition Agreement

Energy & Climate Change     13 / 23 = 57% Done

Pledge: We will push for the EU to demonstrate leadership in tackling international climate change, including by supporting an increase in the EU emission reduction target to 30% by 2020.

Status:  Not achieved – This measure was defeated in the European Parliament in July 2011, partly due to a rebellion by the UK’s Tory MEPs.

Pledge: We will seek to increase the target for energy from renewable sources, subject to the advice of the Climate Change Committee.

Status: Not achieved – The Climate Change Committee did not recommend an increase, so the 2009 Renewable Energy Directive target for 15% of its energy consumption to come from renewable sources by 2020 remains.

Pledge: We will continue public sector investment in carbon capture and storage (CCS) technology for four coal-fired power stations.

Status: Done – The Government set up a CCS Commercialisation Competition, with a capital funding pot of £1bn. The competition closed in July 2012, and the four shortlisted CCS projects submitted revised proposals on 14 January 2013. The Government also has a £125 million four-year R&D programme for CCS.

Pledge: We will establish a smart grid and roll out smart meters.

Status:  In progress – The Government is requiring energy companies to install smart meters for their customers, with most households set to have smart meters installed between 2014 and 2019. Ofgem is providing £500 million for smart grid trials over the next 5 years through the Low Carbon Networks Fund, with DECC providing £2.8 million to 8 smaller smart grid demonstration projects through the Low Carbon Investment Fund.

Pledge: We will establish a full system of feed-in tariffs in electricity – as well as the maintenance of banded Renewables Obligation Certificates.

Status: Done - DECC ran a Feed-In Tariff (FIT) Comprehensive Review between 31 October 2011 and 26 April 2012, which has updated the FIT scheme launched by the previous Government on 1 April 2010.

Pledge: We will introduce measures to promote a huge increase in energy from waste through anaerobic digestion.

Status: Done – DEFRA published its Anaerobic Digestion Strategy and Action Plan in June 2011, and in July 2012, it published a progress report detailing the achievements made towards the plan within the first year.

Pledge: We will create a green investment bank.

Status:  Done - Vince Cable launched the £3 billion Green Investment Bank in Edinburgh on 28 November 2012.

Pledge: We will retain energy performance certificates while scrapping HIPs.

Status:  Done – Grant Shapps confirmed the scrapping of Home Information Packs (HIPs) on 20 May 2010.

Pledge: We will introduce measures to encourage marine energy.

Status:  Done – The Government, through the Technology Strategy Board, is investing over £6.5 million in seven marine energy projects. In February 2013, DECC awarded a share of £20 million to two British companies, MeyGen Ltd and Sea Generation Wales Ltd, through the Government’s Marine Energy Array Demonstrator (MEAD) .

Pledge: We will establish an emissions performance standard that will prevent coal-fired power stations being built unless they are equipped with sufficient carbon capture and storage to meet the emissions performance standard.

Status: In progress – Part 1: Chapter 8 of the Energy Bill 2012 sets a statutory limit on the amount of CO2 emissions allowed from new fossil fuel generating stations, and makes an exemption for plants which form part of the UK’s CCS Commercialisation Programme or are funded by the EU or Contract for Difference funding for commercial scale CCS.

Pledge: We will cancel the third runway at Heathrow.

Status:  In progress – Many, including Boris Johnson, have suggested that the summer 2015 report date for Sir Howard Davies’ Airports Commission was set to allow the Government to kick the issue into the long grass and pursue a third runway at Heathrow after the next general election.

Pledge: We will refuse permission for additional runways at Gatwick and Stansted.

Status: In progress - Same as above.

Pledge: We will replace Air Passenger Duty with a per-flight duty.

Status: Not achieved  In the 2011 Budget, the Government announced that it would not proceed with a per-flight duty ‘given concerns over the legality and feasibility of the approach.’ Air Passenger Duty subsequently remains, and was increased by 8% in the 2013 Budget. This is despite heavy lobbying from aviation and tourism organisations and a backbench debate, led by Tory MP Priti Patel in November 2012, calling for a Treasury review of the tax.

Pledge: We will introduce a floor price for carbon, and make efforts to persuade the EU to move towards full auctioning of ETS permits.

Status: Done - The Carbon Price Floor came into effect on 1 April 2013, with phase III of the ETS mitigating the risk of carbon leakage by setting a target of 0% free allocation of permits by 2027.

Pledge: Through our ‘Green Deal’, we will encourage home energy efficiency improvements paid for by savings from energy bills. We will also take measures to improve energy efficiency in businesses and public sector buildings. We will reduce central government carbon emissions by 10% within 12 months.

Status: Done - The Green Deal was launched in January 2013, and the Government can boast that it cut its own emissions by 13.8% in its first year.

Pledge: We will reform energy markets to deliver security of supply and investment in low carbon energy, and ensure fair competition including a review of the role of Ofgem.

Status: Done - The conclusions of the Ofgem review were published on 19 May 2011, and Ofgem launched a Retail Market Review in October 2012.

Pledge: We will give an Annual Energy Statement to Parliament to set strategic energy policy and guide investment.

Status: Done – The Annual Energy Statement is given in late November.

Pledge: We will deliver an offshore electricity grid in order to support the development of a new generation of offshore wind power.

Status: In progress – Currently, the Government is working with industry professionals to develop a sector strategy that will make the most of the benefits offshore wind can provide. The Offshore Wind Cost Reduction Task Force (CRTF) has already been established to look at ways of reducing the cost of offshore wind from £140/MWh to £100/MWh by 2020. One significant development has been the signing of a memorandum of understanding to build an offshore electricity grid with 9 other countries bordering the North Sea in December 2010.

Pledge: We will encourage community-owned renewable energy schemes where local people benefit from the power produced. We will also allow communities that host renewable energy projects to keep the additional business rates they generate.

Status: Done - Chris Huhne overturned the law banning councils from selling renewable energy in August 2010. In November 2010, DECC launched Community Energy Online, a web portal to support the development and deployment of low carbon community energy infrastructure.

Pledge: As part of the creation of a green investment bank, we will create green financial products to provide individuals with opportunities to invest in the infrastructure needed to support the new green economy.

Status:  In progress – The Green Investment Bank is still to unveil its full range of green financial products.

Pledge: We will work towards an ambitious global climate deal that will limit emissions and explore the creation of new international sources of funding for the purpose of climate change adaptation and mitigation.

Status: Done - Chris Huhne attended the December 2010 climate change conference in Cancun, and helped push for a new UN deal to curb climate change. The agreement reached included the creation of a fund to help developing countries cut emissions.

Pledge: Liberal Democrats have long opposed any new nuclear construction. Conservatives, by contrast, are committed to allowing the replacement of existing nuclear power stations provided that they are subject to the normal planning process for major projects (under a new National Planning Statement), and also provided that they receive no public subsidy.

Status: Not achieved – The Government is planning to build 16GW of new nuclear power stations by 2030. Under a new pricing mechanism in the Energy Bill, energy companies will be guaranteed a ‘strike price’ for each megawatt hour of electricity plants produce. Industry experts debate the nature of this ‘strike price’, some referring to it as a clear example of subsidy, despite Government responses emphasising its role as a form of support. Nevertheless, Ministers have changed the wording in the Coalition Agreement pledge to ‘no unfair subsidies’, rather than ‘no subsidies’, thereby approving their provision if other low-carbon energy sources receive them too.

Pledge: We will implement a process allowing the Liberal Democrats to maintain their opposition to nuclear power while permitting the Government to bring forward the National Planning Statement for ratification by Parliament so that new nuclear construction becomes possible. This process will include: The Government completing the drafting of a national planning statement and putting it before Parliament; Specific agreement that a Liberal Democrat spokesperson will speak against the Planning Statement, but that Liberal Democrat MPs will abstain; and clarity that this will not be regarded as an issue of confidence.

Status: Done – DECC published a national policy statement in July 2011 stating that the Government believes that energy companies should have the option to invest in new nuclear power stations. It identified eight sites as suitable for new nuclear power. Parliament passed the measure by 267 votes to 14. During the debate on the statement on 18 July 2011, Martin Horwood MP spoke against the motion on behalf of the Liberal Democrats.