The Independent View: Cross-party amendment to decarbonise power by 2030 needed to stop Osborne

The Independent reports this morning that pro-green Conservative and Liberal Democrat MPs are considering a rebel amendment to the Energy Bill to create a target to decarbonise the power sector by 2030. The policy is critical to reducing carbon emissions and energy bills in the long run and creating jobs and growth.

Last week, Ed Davey revealed the details of the Government’s much anticipated Energy Bill which will be introduced to Parliament today. In exchange for an extremely positive and welcome outcome for the renewable sector up to 2020, Davey lost his battle to include a 2030 decarbonisation target in the bill in the face of opposition from George Osborne.

At Lib Dem conference in September, Ed Davey said “there’s a strong case for a carbon limit for Britain’s energy grid for 2030 as I hope you will back tomorrow.” A motion sponsored by Osborne’s Treasury colleague, Danny Alexander, in support of a 2030 target was and ‘overwhelmingly’ supported by the Lib Dem grassroots the following day.

They were not alone. Both the parliamentary Energy and Climate Change select committee and the advisory Committee on Climate Change endorsed the target. Four separate round robin letters from businesses including Alstom, Asda, Biffa, EDF, Eurostar, Heathrow Airport, Kingfisher, Marks and Spencer, Microsoft, Mitsubishi, Siemens, Sky, and Unilever were published in national newspapers. Trade associations, environment and development charities, the National Federation of Women’s Institutes and faith groups joined the call. Last week, Ed Miliband reiterated Labour’s support of a target.

The arguments in favour are profound. According to the select committee it would “deliver the most cost effective route to meeting our 2050 climate change targets”. As Green Alliance have outlined, without a 2030 target there is little medium term certainty for domestic firms in the supply chain for renewables. This means that much of the new investment for offshore wind will leak overseas.

Next Wednesday we will find more details about George Osborne’s gas strategy but, without a 2030 target, it is likely to condemn the UK to reliance on polluting, imported gas for years to come. As well as the devastating impact on the environment it leaves consumers at the mercy of the volatile international gas price which led to two-thirds of the increase in energy bills from 2004 to 2010. Domestic jobs and growth will also be foregone as the short-term boom in renewable energy peters out in the 2020s.

To rescue this situation, backbench Lib Dems and pro-green Tories should club together with Labour to amend the Energy Bill. 41 rebels are needed to defeat the Government. Excluding the 19 Lib Dem MPs on the Government payroll means that the Lib Dems alone fall short with just 38 backbenchers. But with support from Tories like select committee boss Tim Yeo, sacked energy minister Charles Hendry, Laura Sandys who has a large wind farm off the shore of her Kent constituency, and ecologist Zac Goldsmith could help tip the balance. In the Lords, the task is made easier since the Tories only have 212 out of 760 peers and some among their number, like Lord Deben, are outspoken supporters of a 2030 target.

Ed Davey has played an important role in securing significant investment for renewables up to 2020. But without a 2030 target, industry does not have the certainty it needs to create jobs in the long term and Britain is likely to fall off track in decarbonising the economy. A new cross-party consensus is now needed.

The Independent View‘ is a slot on Lib Dem Voice which allows those from beyond the party to contribute to debates we believe are of interest to LDV’s readers. Please email [email protected] if you are interested in contributing.

* Will Straw is Associate Director at IPPR

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15 Comments

  • Richard Dean 29th Nov '12 - 10:19pm

    This is a democracy, is it not? So a singe person, even a Chancellor, can’t really act alone like that, there must be enough people supporting his view. So what argumenta are they using against a target? Can we not engage with those arguments, or must we always seek a brawl?

  • Another effect of having a 2030 target is that the government will have to come off the fence over new nuclear capacity…

  • The principle argument against the decarbonisation target (i.e 100% zero carbon generation by 2030) is that we already have a regime of carbon budgets and EU targets that do the same thing. Only they are rather more tempered by the other aspects of energy policy, security of supply ad affordability, not just tackling climate change. The energy trilemma.

    The whole point of that nuanced system is that there are trade-offs. Gas prices are a risk, but with US gas 3-5 times cheaper than in the EU, and under-exploited EU shale gas, there is no reason to be sure the trajectory must be upwards in the next decade. Knocking out gas early then may improve neither affordability nor security of supply.

    Accelerating low carbon supply faster than other countries also means capital flight from industry where energy is a large cost of doing business. It means higher global carbon emissions from offshoring.

    Given wind, solar, nuclear and energy efficiency technologies contain many energy intensive products in their supply chains (steel, plastics and concrete for example) it means a ‘green growth paradox’, i.e. much will be sold in the UK, but not made here. Meanwhile higher energy costs will impact other sectors, including several of the Government’s target sectors for Industrial policy – automotive, aerospace, pharmaceuticals and construction.

    The net economic impact of radical unilateral energy policy then could be negative.. Lower growth, fewer jobs, offshoring pollution, higher consumer bills and no great change in security of supply. This problem is why the Government is consulting on a small industry rebate to the EU ETS and carbon floor price, and full exemption to the new contract for different feed in tariffs.

    The party then should be cautious about ideas like this. An international consensus is needed to tackle climate change, and international competition constrains how far you can ‘lead’ on policy without actual or opportunity cost.

    ‘George Osborne doesn’t like it’ or ‘green groups do’ are poor reasons to implement yet another layer of complexity to what is already one of the world’s least stable energy regimes. Add to this that the high and rising price of energy bills is a top 3 issue for voters and I’m not surprised the Treasury said ‘not yet’.

  • There is no way we will decarbonise by 2030 unless some technological deus ex machina materialises.

  • jenny barnes 30th Nov '12 - 9:12am

    Peak Gas expected 2035. Deus enough for you?

  • Jenny, anyone with the kind of perfect foresight required to second guess commodity prices and supply in 22 years time is wasted on politics, they should make their fortune in the City. The issue with ‘peak’ anything debates, whether oil & gas, or the Elizabethan ‘peak wood’ crisis that led to the rise of the (sea)coal industry, is we just don’t know what the future holds. Malthus and all his successors have always got it wrong, there is little reason to the think it’s different this time.

    What we do know is that scarcity causes prices to rise. So if it actually were the case that gas starts to run out, that would be fabulous news for the energy efficiency, renewables and nuclear sector without any need for government intervention or action. Investment would pour in.

    It is precisely because those industries don’t believe the future price of carbon-based fuel is certain to rise that they want intervention today to insure themselves and their investors against the risk it won’t.

  • jenny barnes 30th Nov '12 - 1:25pm

    Thanks for the career advice. Having worked in the energy business most of my working life, I think I’ll stick to what I know. One of the things I know is that world energy demand doubles every 35-50 years. You may have heard of the payment demanded for the inventor of chess? 1 grain of wheat on the 1st square of the chess board, 2 on the 2nd, 4 on the 3rd, and so on. No, he didn’t get paid. While Dieter Helm, professor of Economics at Oxford (I wonder if he has anything to do with those Oxford PPE graduates) considers that the idea of a finite supply of fossil fuel is a myth, in my opinion he’s just living on another several planets.

  • jenny barnes 30th Nov '12 - 2:00pm

    PS I was quoting an older remark by DH, but he’s been writing in the FT, and says that Peak Oil is “nonsense” This is a professor of economics we’re talking about, not someone with special educational needs.
    UK energy plan is dangerous and dated – Dieter Helm, Financial Times (£)

  • Just to clarify, the decarbonisation target for 2030 is not to be for complete decarbonisation i.e. Zero Carbon, but a cap on the carbon intensity of our electricity supply as a whole. This is to take into account the carbon emissions involved in the building of renewable energy installations (and nuclear which also involves a lot of carbon intensive activities, particularly decommissioning and waste processing & storage) so they can’t ‘hide’ that, as well as the supply chain of fossil fuel sourced energy.

    The whole point of government should be

  • Just to clarify, the decarbonisation target for 2030 is not to be for complete decarbonisation i.e. Zero Carbon, but a cap on the carbon intensity of our electricity supply as a whole. This is to take into account the carbon emissions involved in the building of renewable energy installations (and nuclear which also involves a lot of carbon intensive activities, particularly decommissioning and waste processing & storage) so they can’t ‘hide’ that, as well as the supply chain of fossil fuel sourced energy.

    One point of government should be to correct for market failures, like the failure to invest in replacements to fossil fuel natural gas BEFORE price shocks come such as Peak Gas (not to do with gas running out, it’s when demand outstrips supply so prices jump). So the government should be investing in this as it should indeed be the most cost effective in the long run, so you’d think Osborne would want this.

  • @Andy
    I take it that you assume that because there was bread in the cupboard when you went to it today, there will be bread in it in the future? The folly with this approach is that when you next go to the cupboard (in the morning say to prepare the children’s packed lunches) you may find it bare, whereas if you did a little forecasting you could of made a timely visit to a bakery.

    I use this example to show that reserve estimates for oil/gas/coal/uranium ore and their conversion into dates for economic exhaustion based on forecast’ed demand serves a valid purpose, namely to allow us to determine when they are likely to become scarce and so plan and do something without it being a crisis. Given the size of our energy addiction and dependency upon it’s continuous flow, along with the long lead times necessary to construct say a nuclear power station or insulate sufficient homes so as to not require a power station, we can’t wait until such time as the guy’s at the well head tell us the well is now dry before making reasonable preparations for this very event …

    As for whether Malthus is or isn’t wrong, we’ll only know that after circa 2035 – and it will be the survivors who will decide if Malthus was the one who was warning us about the impending crisis or the one who was in denial…

    What consideration of peak/economic exhaustion of oil/gas gives us, is a further dimension to our problem. Carbon capture is going to be very expensive as it will reduce the overall efficiency of a plant, requiring the plant to consume more fuel to achieve the same output as it would of produced without the carbon capture overheads and as our projections indicate, fuel will be getting scarce and so is highly likely to carry a premium price.

  • Alistair states there is no way we will decarbonise by 2030 unless some technological deus ex machina materialises”. The key policy objective is to decarbonise energy supplies at LOWER unit cost than incumbent fossil fuel energy supplies.

    Such a technology has existed in UK for the last several decades, being the technology developed by HMGovernment and British Gas between 1955 and 1992 to supply the whole of post-2010 UK gas demand by Synthetic Natural Gas (SNG) when it was predicted North Sea gas would be exhausted. A relatively simple change to the fuel supply and gas clean up train enables high pressure carbon negative SNG, and high purity 60 bar liquid CO2 to be produced at no loss of net energy efficiency, or additional cost.

    The projected output cost of carbon negative SNG aat 45 to 50 p/therm is lower than the cost of fossil Natural Gas, thus enabling decarbonisation to be achieved at no net cost to the Nation, or loss of economic efficiency or competitiveness. Britsh companies are currently engaged in developing industrial SNG plants in China, but receive no policy recognition from HMG, which remains ‘hooked’ on electrification as the route to decarbonisation.

    Gas is 1/3rd the cost per unit energy of gas. Decarbonised gas will be 1/6th the cost per unit energy of decarbonised electricity. Gas supplies 5 times more energy than electricity at the Winter demand peak. UK stores 250 times more energy as gas than as electricity. The cost of gas inter-connectors is 1/15th the cost per MWkm of electricity inter-connectors.

    I would suggest that the LibDems escape the costly embrace of the UK electricity industry asap, and revert to a technology neutral stance in relation to the economics of decarbonising electricity versus the economics of decarbonising gas.

    Best wishes,

    Tony Day

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