Blog

Budget 2014: Why freezing the carbon price floor is a symbolic blow to UK's climate commitment

  • 18 Mar 2014, 15:25
  • Mat Hope

Sometimes, the Chancellor must feel like he just can't win. When he introduced the UK's top-up carbon tax - the carbon price floor - environmentalists called it costly and ineffective. Now that he's announced it's going to be frozen, the same groups are accusing him of abandoning the UK's climate change agenda.

Derided policy

The carbon price floor is a top-up tax: it exists to bolster the existing EU price of carbon.

Energy companies already pay to pollute under the EU emissions trading scheme (ETS), buying permits to emit greenhouse gases when they generate electricity. But the price of the permits crashed to a  record low last year, meaning there's much less of a financial incentive for companies to cut their emissions.

The carbon price floor is meant to solve this by putting a minimum price on how much power generators in the UK pay to pollute. If the ETS price drops below this level, companies pay the difference to the UK Treasury. The carbon price floor was set to increase each year, from around £16 per tonne of carbon dioxide in 2013, to around £70 by 2030.

Carbon price Mar14The EU carbon price, March 2014

This may sound like a neat way to get polluters to pay for their emissions, but the policy was generally derided when it was introduced.

Left-leaning thinktank, IPPR, said the scheme was socially  regressive, and risked hitting the poor the hardest. Meanwhile Greenpeace's deputy political director, Joss Garman, described the policy as "precisely the sort of measure that  destroys public confidence in environmental policies".

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The carbon price floor: disliked, divisive and about to be frozen

  • 17 Mar 2014, 12:45
  • Robin Webster

Source: Arnold Paul

A controversial government measure aimed at increasing the price of fossil fuels looks likely to be frozen in this week's budget, in a move the Telegraph says will " reignite the row over green taxes". But unusually for low carbon legislation, the carbon price floor (CPF) is unpopular with green campaigners, while attracting support from some in the energy industry. What is it, and why is it earmarked to be chopped? 

Designed to reduce greenhouse gas emissions from electricity generation, the CPF first appeared in George Osborne's budget speech in March 2011. The chancellor announced the government's intention to increase certainty for investors in low-carbon generation by putting a minimum price on the greenhouse gases emitted by the power sector. 

It sounds like it should have been good news for supporters of low-carbon energy. But the CPF wasn't popular. Last year, left-leaning  thinktank IPPR and  manufacturing industry group EEF both called for it to be scrapped. Even  Greenpeace says it is costly and ineffective. 

But as the possibility of the CPF being reformed has come closer, the renewables industry has expressed  support for the measure - and worries about what happens if it's curbed. 

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Telegraph uses Sky-high estimate for cost of energy infrastructure

  • 14 Mar 2014, 16:00
  • Robin Webster

Credit:  Richard Humphrey

The cost of building new power stations, windfarms and upgrading the grid will cause consumer energy bills to "  soar" another £640 by the end of the decade, announces Sky News. But the claim - repeated in the  Daily Telegraph - is probably a significant over-estimate.

The future cost of energy bills is a regular  feature in newspapers. But the numbers that make it into the papers are not always what they seem - based on unstated assumptions for example, or  inaccurately reported. 

In this case, Sky cites consumer group Which? as the source of the story. But a spokesperson for the watchdog tells us "this figure isn't ours. We don't recognise it". 

So what's going on? We tracked the number down. 

£118 billion for new energy infrastructure? 

A range of factors are blamed for pushing consumer energy bills up - including  rising gas prices, energy company profits and energy infrastructure investment. 

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Mail’s dodgy maths bumps up the cost of wind

  • 12 Mar 2014, 16:30
  • Robin Webster

Subsidies for windfarms cost every household £25 a year, according to the Daily Mail today. Government figures show the Mail's calculation is an overestimate, however. 

Conservative MP Stephen O'Brien has been asking a series of parliamentary questions about the cost of wind power. The Mail appears to have based its claim that windfarms add £25 to household bills on one of energy minister Michael Fallon's answers, which gives a figure for the total cost of supporting windfarms in the UK. 

But the Mail need not have tried to do the maths. In another question, O'Brien asks directly how much windfarms add to consumer energy bills. Fallon answers the government estimates that cost is £18 - £7 lower than the Mail's calculation. We look at why.

The Mail's calculation

The government supports the development of the windfarm industry through a subsidy known as the  Renewables Obligation (RO). Support for onshore wind through the RO cost £557 million last year, and offshore wind cost £669 million. So all in all, support for windfarms through the RO cost £1.2 billion last year, according to Fallon's  answer.

The costs of the RO is added to consumer energy bills. If the £1.2 billion was divvied up among the  26.4 million households in the UK, every household would pay about £48. 

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Curbing enthusiasm and anticipating global ‘sideswipes’: Predicting the future cost of electricity

  • 12 Mar 2014, 14:15
  • Mat Hope

Credit: TpsDave

The UK government wants to reduce emissions from the power sector without breaking the bank. But there are a lot of uncertainties involved in predicting the future cost of power from nuclear, gas, or renewable sources, with analysts often getting things wrong. So how can policymakers know which estimates to trust, and which technologies to back?

report from the UK Energy Research Centre (UKERC) seeks to understand why estimates often get thrown off track. It looks back over old predictions to identify a number of pitfalls such analyses fall into, with the hope of improving estimates in the future.

Comparing estimates

The UKERC team surveyed a number of studies estimating the future cost of generating electricity. It found that in all cases, later estimates predicted electricity costing much more than previously predicted.

That's a problem because policymakers want to know which energy sources represent value for money, and want reliable data to base their decision on. The graph below shows how estimates for a range of technologies changed over the course of five years.

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Government 77 years behind on plans to cut emissions through solid wall insulation

  • 06 Mar 2014, 16:00
  • Robin Webster

The government could be 77 years behind on plans to cut carbon emissions by insulating hard to reach homes, according to its own figures. Cuts to its flagship scheme the Energy Company Obligation (ECO) mean its  commitment to building one of the "least wasteful, more energy efficient, most climate friendly societies in the developed world" may be hard to achieve.  

Government advisor the  Committee on Climate Change (CCC) suggests that if the country is going to hit its carbon emissions reductions targets, 2.3 million solid walls need to insulated by 2022. But under new government plans, energy companies are only required to install 25,000 solid wall insulation measures a year. 

The changes have also threatened the solid wall insulation industry, making it less likely that it can play a significant part in bringing down the country's emissions in the near future. 

Struggling for solid wall insulation 

The  ECO programme forms a part of the government's plan to tackle  fuel poverty and reduce carbon emissions. It requires energy providers to subsidise home insulation in low-income households and hard to reach areas. A core part of this mission is a requirement to install   solid wall insulation in older houses, which would be hard for most people to afford without help. 

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New opportunities come with big risks as climate change opens up the Arctic

  • 05 Mar 2014, 15:40
  • Mat Hope

From creating new shipping channels, to accessing previously unreachable oil and gas wells, climate change is presenting companies with new economic opportunities in the Arctic. But the risks posed by a changing climate may make companies think twice about moving in to one of the world's most challenging environments.

Speaking to an audience of industry specialists at The Economist's  Arctic Summit yesterday, Greenland's prime minister Aleqa Hammond said climate change was "remapping the world", allowing companies to explore the Arctic's economic potential like never before. That means countries such as Greenland are now "open for business", she said.

Industry representatives weren't so optimistic, however. They maintained that while climate change does make it easier for companies to access the Arctic, it remains a challenging environment to operate in - with climate change creating risks as well as opportunities.

Tough conditions

Arctic sea ice is thawing at greater rates year by year, providing new opportunities for mining, fuel production and tourism. But the Arctic's extreme cold and remoteness make it a challenging environment for companies to operate in. The rapidly changing climate makes it difficult to ensure safety, in particular.

Energy companies are obligated to plan for the worst, and that means being prepared to deal with oil spills or leaking wells. While the industry has a wealth experience of dealing with such disasters in less challenging environments, more research is needed to understand the Arctic's specific risks, according to Tom Bolt, performance manager for insurance company Lloyd's.

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UK isn't alone in tackling carbon emissions

  • 03 Mar 2014, 16:30
  • Robin Webster

Opponents of the UK's climate policies often  argue that green measures are forcing the country to cut emissions faster than its competitors. In fact, new analysis says the UK isn't acting alone.

At least 62 countries around the world are moving ahead with laws to reduce greenhouse gas emissions - and every major economic power has taken some kind of action. Two new papers lay out international progress on emissions legislation.

Flagship climate policies around the world

An  audit of climate legislation across 66 countries, which together account for 88 percent of greenhouse gas emissions, finds that 62 of them have a 'flagship law' serving as a "comprehensive, unifying basis for climate change policy". 

Only a "handful of countries" have not yet engaged with climate change as a policy problem, or fail to see it as a legislative priority, according to the  report, published last week by the Global Legislators Organisation (GLOBE international). It's not just rich countries introducing law to tackle emissions - developing countries like Ecuador, Costa Rica, Mexico, China, Indonesia, Kazakhstan and Kenya have also done so as well.

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Why experts say UK carbon capture and storage must work (this time)

  • 28 Feb 2014, 15:30
  • Mat Hope

The world uses a lot of fossil fuels - and there's plenty left to burn, if we want to - with all of the world's major economies still relying on coal, oil, and gas to provide most of their power. But the more countries burn, the more difficult it becomes to constrain global warming.

The trouble is, it's difficult to quickly swap a fossil fuel based energy system for one that's low-carbon. It takes considerable time and money to replace coal and gas with nuclear and renewables.

There is a technology that promises to allow continued fossil fuel use while providing emissions cuts, however - carbon capture and storage (CCS). In theory, CCS technology can capture emissions from fossil fuel power plants and lock them underground. That could allow power plants to burn fossil fuels with a fraction of the emissions.

For energy companies and governments wanting to tackle climate change, that's good news. But the bad news is that CCS has so far struggled to get off the ground, and is yet to be proven in a full scale power plant.

After nearly a decade of false starts, the UK government this week announced it was taking another stab at nudging the CCS industry forward, allocating  £100 million to two new demonstration projects. And after a long series of disappointments from UK CCS, it's promising that this time, things will be different.

Potential

It's increasingly likely that the world will need carbon capture and storage in a big way if it's going to reduce emissions quickly.

Research by thinktank Carbon Tracker suggests countries have already used about two-thirds of the fossil fuel allowance that will give a good chance of preventing more than two degrees of global temperature rise. That leaves a lot more coal, gas and oil in the ground than Carbon Tracker says can be burned.

And that, in theory, is where CCS comes in. Government advisor the  Committee on Climate Change says if the UK is still burning gas in 2030 - a likely proposition - it will be impossible to meet the country's climate targets without CCS.

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UK electricity mix in 2013: less gas, still lots of coal, but wind’s on the up

  • 27 Feb 2014, 15:30
  • Robin Webster

The UK sourced two thirds of its electricity from fossil fuels last year, official statistics show. Renewables still languish far behind, supplying about 12 per cent of the country's power. But wind power is growing rapidly - increasing its market share by 38 per cent in just twelve months. 

Coal accounted for 40.7 per cent of electricity supplied in the UK in 2013, according to provisional  figures from the Department for Energy and Climate Change (DECC). Gas generated about a quarter (26.7 per cent) of the country's electricity last year, and nuclear 21.1 per cent.

Wind power shows the most significant change, accounting for 7.7 per cent of the country's electricity supply. In 2012, the figure was 5.5. per cent, so that's a big jump, in relative terms.

Gas and coal still dominate 

Overall, fossil fuels still dominate the electricity mix, however. The chart below, created using DECC's numbers, illustrates the mix. Fossil fuels are coloured grey, nuclear power orange and renewables green: 

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