2030 target: investor certainty or certain failure?
- 18 Jan 2013, 15:00
- Ros Donald
The Department of Energy and Climate Change's plan to
include a target to decarbonise the electricity sector by 2030 in
the UK's new Energy Bill was put on ice late last year.
The decision on whether there should be a target has now been
delayed till after the next election.
But is such a target, which would require power companies to keep
carbon intensity below a certain level, really a good idea? We've
asked a range of experts for their views.
The arguments against
The government says the reason it wants to
wait till 2016 to agree a carbon
intensity target for the power sector is because the UK's
fifth carbon budget will not be set
until 2015. So presumably it wants to ensure that the two do not
give conflicting directives.
Carbon budgets are agreed every five years, with the
aim of helping the UK meet its legally-binding target of reducing
its carbon emissions by 80 per cent by 2050 under the Climate
Change Act. They dictate how much carbon dioxide each sector of the
economy - including power generation- would be able to emit while
keeping the UK on track to meet its emissions goals.
So could the 2030 target be one target too many?
Professor Dieter Helm, an energy specialist at Oxford University
thinks so. He
told the House of Commons Energy Bill Committee on
Tuesday that a 2030 target would clash with the coming
fifth carbon budget, given that both will contain - possibly
competing - prescriptions for how much carbon dioxide the UK power
sector will be able to emit. If investors are uncertain about the
level of carbon intensity permitted under the budget or the 2030
target, he said the situation would create a disincentive.
Meanwhile, Guy Newey, head of environment and energy
at thinktank Policy Exchange, told Carbon Brief that the 2030
target is a "sideshow" when our focus should be on
setting a long term European-level cap
through the EU Emissions Trading Scheme. He says:
"What matter is overall
decarbonisation, not the decarbonisation of one sector of the UK
economy on a particular date. The drive for a 2030 target is part
of an obsession with sub-targets, like the Renewable Energy Target,
which risks making carbon emissions more expensive than they need
to be and falls into the trap that we can predict the future cost
of technologies in 20 years time."
He adds that the target could also mean "we pay more
than we need to, pushing up bills unnecessarily, and undermining
important action on climate."
There's also the question of what signals a 2030
target would send to other countries. Jeremy Nicholson, director of
the Energy Intensive Users Group, suggests that the target could
have an adverse effect in dealings with other nations. He told
"The government is right not to
commit to a 2030 target at this stage. Unconditional
unilateral commitments like this simply undermine the UK's
negotiating position in international climate negotiations whilst
doing nothing to render low carbon power generation commercially
"Trade-exposed industrial electricity
users need competitive power prices, not political grandstanding of
the 'my target's bigger than yours' variety."
Arguments in favour of a 2030
Those who argue in favour of a 2030 target say it
would provide one huge benefit: certainty for investors in
Professor Catherine Mitchell at Exeter University
also gave evidence on this subject to the energy bill committee
last week. She claims that critics of the 2030 target focus only on
economic arguments and ignore the much trickier reality of UK
politics. Mitchell says the UK's 'all of the above' approach to
energy - rather than supporting a particular technology -
makes it hard for investors to know where to put their money
without the target. So while it may not be perfect, a 2030 target
would stimulate investment.
Dr Rob Gross, director of Imperial
College's Centre for Energy Policy and Technology, told
Carbon Brief that the target is needed to come in as other
incentives, such as the EU 2020 renewables target, expire. He
"Investors fear a cliff edge,
with deployment largely ceasing post-2020. This cliff edge
discourages investment in a UK based supply chain, thus a 2030
target would help to ensure more of the jobs and other economic
benefits associated with renewable energy investments are retained
in the UK."
Alastair Harper, a senior policy advisor at thinktank
Green Alliance told Carbon Brief that this certainty could make the
UK a world leader in low carbon markets. He says a long term goal
for decarbonising electricity would help the UK get the maximum
benefit from making that transition by attracting investors who can
see a future in the country beyond the next few years. He says:
"This would make the UK exporters,
not importers, of low carbon infrastructure. Ultimately, a 2030
target is test of competence: Can a government ensure ideology does
not get in the way of the needs of our economy?"
It's not just investors in energy technologies who
need certainty. According to Will Straw, the Institute for
Public Policy Research's Associate Director for globalisation and
climate change, the target is needed to insulate consumers from
volatile gas prices. Straw says:
"Britain must wean itself off gas in
the medium term since this has been the main contributor to
volatile and rising energy bills. Since we are going to invest £7
billion per year in renewables over the next seven years, we must
ensure that domestic suppliers, like steel manufacturers, think we
are serious about our ambition in the 2020s. Finally, we must give
other sectors, like transport, every reassurance that we are
decarbonising the grid. A target to cut power sector emissions to
50g CO2/kWh by 2030 is the only way to achieve these goals."
And on international negotiations, Anthony Hobley,
head of climate change at law firm Norton Rose, told Carbon
Brief the target could help, rather than hinder, international
climate action. He adds, however, that to show true leadership
internationally the UK should take account of its carbon
consumption - which is estimated to double the country's carbon
footprint - not just emissions.
There's also the argument that the target is needed
just to ensure action on decarbonisation happens at all. Labour
peer and founder of the NGO Sandbag, Bryony Worthington, says in a
briefing sent to Carbon Brief that the reforms laid out in the
energy bill "do not provide any guarantee decarbonisation will
occur." She says:
"Explicit decarbonisation targets are
necessary, even though they are relatively easy to meet, because it
is far from certain that decarbonisation will be delivered by the
proposed policy framework."
Though there's universal acknowledgement that the
power sector needs clear signals, it's clear there's disagreement
about whether the 2030 target would provide them. And given that
the decision has now been pushed back for three years, much could
happen before the target's fate is finally decided. The
Treasury last year signalled it may
look to water down the UK's commitments under the Climate Change
Act. So those in favour of decarbonising the economy may have
enough on their hands defending the existing targets contained in
the carbon budgets, let alone pushing through a new one.