Reform climate change policy - 0/5

Shortly before the last General Election, the TaxPayers’ Alliance produced a manifesto. Here is the latest in our series of posts looking at how the Coalition Government has performed in relation to our recommendations.

The full TaxPayers' Alliance manifesto can be found hereClick here to see the full series of posts.

In 2010 we called for reform to the UK’s climate change policy. Specifically we wanted the next government to reverse the UK’s commitment to the EU of sourcing 15 per cent of our energy from renewables by 2020 and to ditch the flagship EU Emission Trading Scheme (ETS), the largest greenhouse gas emissions trading programme of its kind.
To cut a long story short: neither of these two commitments has been abandoned. And to add insult to injury in early 2012 the EU ETS was expanded to the aviation industry, meaning that the knock-on effects of the scheme would be felt not just on utility bills but also on the price tag of plane tickets.

Back in 2010 we feared that the effect of EU claws in our climate change policy approach would leave British families with increasing energy bills. There’s no doubt that energy bills have been rising: the Climate Change Committee calculates that from 2004 to 2013 the annual bill for a typical dual-fuel household in Britain rose from £650 to £1,140, despite general price inflation being at 23 per cent over the period. A closer look at the Committee’s December 2014 report shows a breakdown of how these low-carbon policies are hitting the pockets of the consumer. Direct support for renewable generation, for example, was allocated £3.3 billion in 2013/2014, a total which was capped under the Levy Control Framework but of which 100 per cent of the cost was billed to electricity consumers.

The problem with restricting the energy suppliers in the way that these regulations have is that ultimately the cost will land at the door of the consumer. With energy being a heavily global market in which EU and non-EU countries regularly export their product to one another in order to remain competitive suppliers need their pricing structures to not be entirely undercut by non-regulated competing producer states. The EU Emission Trading Scheme, specifically its third phase, puts this at risk. Fines too constantly hang over the suppliers should they fail to abide by the scheme. In 2010 ExxonMobil were fined an astonishing £2.8 million for failing to report carbon dioxide emissions to the EU. This persistent government-led charge at the energy suppliers ultimately leads to less investment in making existing infrastructure more energy efficient, something that leads to stagnation or increases in consumer pricing, regardless of wholesale energy costs.

As for the UK’s legally-binding agreement to reach a target of 15 per cent for renewably sourced energy by 2020, despite the billions of pounds being channelled into renewable projects, we stand at only 5.2 per cent. This is unsurprising given that the renewables supply would have to grow at a rate of 16.5 per cent a year to reach the target. Instead of looking at renewably sourced energy as a long term investment, rushing to reach artificially installed unrealistic targets has left us chucking money at unsightly and expensive wind turbines in the recovery period from a major economic recession instead of working to reduce household energy bills by looking at the way we tax energy.

So on this manifesto point it’s a measly 0/5 for the Coalition. Buying into the EU’s unrealistic outlook to our energy climate has left household bills rising despite wholesale prices decreasing and energy companies increasingly limited in their reinvestment projects.

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