The Telegraph fumbles cost of carbon price floor to consumers
- 21 May 2012, 14:00
- Ros Donald
Today's Daily Telegraph reports that energy and climate change
secretary, Ed Davey, has admitted families will face higher energy
bills as a result of the so-called carbon price floor, the
Treasury's new levy on CO2 emissions. But in fleshing out the
story, political correspondent Tim Ross has got the numbers
slightly wrong in saying that a projected electricity bill increase
for high-emissions businesses applies to household electricity
The story - which appeared in the paper's print edition but not
online - picks up on an interview about government energy policy
Davey gave yesterday to Andrew Neil on the BBC's
The Sunday Politics show, talking about green measures
against the backdrop of rapidly-rising household energy bills.
Andrew Neil asked Davey why, when wholesale gas and oil prices
are already rising, the government is introducing policies that
further add to energy bills - in particular, the Treasury's coming
carbon price floor, which Chancellor George Osborne announced
in his budget speech last year.
The carbon price floor is supposed to spur investment into low
carbon technologies by putting a minimum price on the greenhouse
gases emitted by businesses. The sectors most likely to be affected
include those that use high energy intensity processes like
aluminium, chemicals, paper and clay, the Treasury says. The
unpopular, with both business and environmental groups arguing
that it is primarily a way to make the government lots of money.
Groups say the proceeds could be kept in the sector and used to
help reduce consumer bills, for example, as
Consumer Focus suggests in a submission on the measure.
The Telegraph article puts Davey's acknowledgement that the
price floor will add to electricity bills into context using
numbers from the Treasury's
response to a consultation on the policy, which states that the
floor price is expected to raise £1.4 billion for the Treasury by
2015-6, with 40 per cent of that coming from consumers.
This is accurate, but the article then goes somewhat awry. It
"Treasury estimates have suggested the floor price would add as
much as six per cent to household electricity bills, an additional
£25 for the average family."
Not according to
the Treasury's response. The department estimates, assuming the
cost of the carbon price floor is entirely passed through to the
cost of electricity, that "average household electricity bills will
increase by around one per cent (£6) in 2013 and around four per
cent (£17) in 2016".
So where does the six per cent figure come from? Our closest
guess is that it was picked from a subsequent paragraph in the
Treasury report, which looks at the cost the price floor will add
to businesses' energy bills. It says:
"Electricity bills for an average energy-intensive business will
increase by two per cent and six per cent in 2013 and 2016
Here the Telegraph appears to have mixed up the average family
with the UK's average aluminium smelting business. We tried to get
in touch (over Twitter) with Ross to ask whether the six per cent
figure came from any other source - he hasn't got back to us, but
if he does we'll update here.
The article also neglects to mention that the Treasury expects
consumer bills to be between two and four per cent lower for
consumers and two and five per cent lower for businesses than would
otherwise be the case - due to greater competition between energy
companies to move away from imported gas and oil. Gas markets are
proving increasingly volatile - according to UK energy regulator Ofgem,
wholesale gas and electricity prices counted for up to 48 per cent
of the average UK consumer energy bill.
Davey said in the interview yesterday that according to
a report by consultancy Oxford Economics, the UK
economy will suffer damage if the government doesn't act to
mitigate climate change. On the other hand, he said, climate change
reduce the cost of fossil fuel price volatility to the economy
by 50 per cent.
The gist of Davey's message is that policies like the carbon
price floor will add to energy bills - but not as much as volatile
imported fossil fuels will in the future.
There's plenty of arguments to be had over the carbon price
floor - some green voices are worried the pricing level is
too low to spur innovation, while others in business and the
third sector object to the fact that the Treasury is absorbing the
revenues instead of
ploughing them back into the sector.
The Telegraph's error isn't the biggest in the world, but it is
indicative of generally lax standards in energy reporting - and
particularly, it seems, in reporting the expected impact of
energy and climate change policies. If this was the mistake the
Telegraph made, confusing the price floor's impact on consumer
bills with extra charges to high-intensity industry doesn't do
justice to debate about the best ways to cut bills and CO2.