A Look at UK Energy Policy If the Tories Take Control

Prime Minister Gordon Brown Set the Election for May 6

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In less than two weeks, the British people will elect their next government. While small “c” conservative politics in the U.S. have hampered action on climate change and movement toward low-carbon energy and a renewable energy market in that country, would the same be true of a swing to conservative politics in the UK?

So far the punditry surrounding energy policy has found very little difference between the three major parties’ proposals. The leaders — current Prime Minister Gordon Brown of the Labour Party, David Cameron of the Conservatives (Tories), and Nick Clegg of the Liberal Democrats (Lib Dems) — have all committed to a green recovery for Britain.

“We’re impressed that they’ve made energy a priority and put in that quality of work,” Renewable Energy Association (REA) spokeswoman Jemma Robinson says of Conservative energy policy. “But, some of the detail is a bit thin.”

Indeed, overall, the detail is what’s been found to be lacking in Conservative policies for some months.

Renewable Finance

All three major parties have called for a green investment bank to fund low-carbon energy economy transformation. Under the Conservatives, the bank would consolidate existing funding mechanisms for the low-carbon energy economy, the Carbon Trust and the Marine Renewables Deployment fund. The Bank would act as a market intermediary to inject public funds and help to reduce the riskiness of investment in low-carbon technologies.

The Conservatives also include in their version of a Green bank a recycle bank, funded through reforming the landfill tax, which would encourage local councils to pay citizens to recycle instead of taxing for recycle pickup. The Conservatives also propose to alter the tax on the airline industry from consumers (pay per passenger) to airline (pay per plane, distance).

Further funding for investment would come from Green Bonds and Green ISAs sold to consumers and business. Notably, these bonds and savings accounts are supported by all three major parties, as are household subsidies to improve energy efficiency.

Labour and the Lib Dems propose to support bank taxes along the lines of the Robin Hood tax on financial transactions to further fund their versions of a green bank. While the Conservatives do propose a bank tax, it’s unclear what the proceeds will fund specifically. The only way any party will impose a bank tax is if it’s levied internationally so as not to threaten competition.

Perhaps the most controversial reform the Conservatives propose is the reform of the Climate Change Levy (CCL).

Under Conservative policy, the levy would effectively create a floor price for carbon. The levy is currently placed on the amount of electricity consumed by end users (non-domestic, with some exceptions), rather than the carbon intensity of the electricity generated. If elected, the Conservatives propose to reform the tax in such a way that it would be charged on the upstream users instead and would exempt nuclear power, which currently falls under the tax.

From Rebuilding Security, the Conservative energy manifesto:

“The rebateable levy would begin at a low rate, to be determined with the industry, and then increase at a defined predictable pace until it reaches an optimal floor price in the future.”

Experts have determined that the floor price would effectively amount to €13 (US$17). There is not a consensus among business and energy policymakers as to whether a carbon floor is necessary or desirable to spur investment in the market.

“They’re trying to re-engineer the auction of permits to make a more immediate investment signal for power companies to clean up their act,” says Damien Morris, an energy market analyst with the British activist group Sandbag. “There’s a better way this could be done.”

Morris goes on to explain that what the price floor might do is distort the market and ignore deeper structural and conceptual problems in the market to begin with. “You’re pushing up the price of power, there is no additional scarcity being introduced into the carbon market, the carbon budgets will remain unaffected so in theory the same amount of carbon will be emitted," he explains.

In any case, the €13 floor for carbon might be too low to be effective. Proponents of the low-carbon energy sector generally believe the floor should be between €22 and €37 (US$30-$50).

Greenpeace and other major environmental organizations have criticized the Conservatives’ renewable finance plans for putting too much emphasis on nuclear.

The REA is less worried about the emphasis on nuclear than about feed in tariffs (FiTs), which just went into effect under the Labour government this month. A move toward more FiTs may signal a shift away from the Renewables Obligation (RO) framework for energy suppliers already in place, which would de-emphasize the onus placed on energy suppliers to install renewable capacity as well as work to undermine UK clean energy technology industry.

Robinson says that, again, because the detail is lacking, it’s hard to know, but, to move away from the RO altogether and towards feed in tariffs "is slightly at odds with their underlining how important it is to have investor confidence for the industry to expand and have the huge investment capital we need for the next decade. … We’re slightly concerned about how deep the commitment goes in the party.”

Europe and Democracy

The Conservative party is notoriously lukewarm on Europe. Last fall, Shadow Secretary for the Environment, Food and Rural Affairs (DEFRA) Nick Herbert made a speech in which he criticized EU regulations of various environmental issues including fisheries and water, though he made it sound as if, left to it’s own devices, British policy would have been more stringent and effective.

Despite the tough Conservative language, though, there is no feeling that the Conservatives would diverge from Europe either on environment or energy policy. According to Stephen Booth, research analyst at Open Europe, a conservative think-tank,

“On other areas of EU policy, they are very keen to stress bringing back powers, in areas like social policy and home affairs, but the environment and climate change is conspicuously not one of them.”

Nor is there any danger to the carbon markets, which are expected to remain unchanged, according to Kjetil Røine, manager in carbon market research at Point Carbon. Environmental directives and EU ETS laws are already well established, and the UK is involved to such a degree that it would be difficult to alter.

Indeed, the Conservatives want to fund Carbon Capture and Storage projects through the EU ETS, where as Labour has wavered on implementing the technology.

Martin Chilcott, executive at 2degreesnetwork, says the anti-Europe rhetoric doesn’t concern him — he believes it “has to be said by the Conservatives to appease elements inside their party.”

But it’s those elements inside the Conservative party that Chilcott says do bother Britain’s sustainable businesses:

“If it’s a question about Conservatives, it’s can they keep the shire Tories and the blue-wind brigade, the core of Conservative party … can they keep them under control?”

Energy Policy Governance

The major policy proposed by the Conservatives in their manifesto is consolidation and decentralisation in energy policy governance.

The Conservatives propose to consolidate the government bodies responsible for energy policy under DECC (the Department for Energy and Climate Change). They mean to decentralize low-carbon energy policy by abolishing the Infrastructure Planning Commission (an independent, appointed body) in favor of oversight by elected officials. The ministers for various departments — DEFRA, DECC, DFID — would have final project approval.

They also propose more local involvement of energy planning through “community ownership” of alternative energy projects, specifically tax incentives for host communities. But there is concern that it might not be enough and indeed may open the door wider to NIMBYism. Labour have not proposed such structural reform.

The REA finds the structural policy reform to be “fine.” Indeed, business and industry leaders are generally satisfied with all three parties commitments to implementing renewable energy in order to meet carbon emissions reduction commitments. The best criticism the UK’s Green party could offer is that the Conservatives are temporally delayed copycats, as they’ve adopted the policies the Greens proposed in the 1990’s.

It is worth noting though, that the choicest policy proposals — from renewable energy policy goals to implementation — come from the Lib Dems, according to both REA and Sandbag. Historically only a marginally viable party, the Lib Dems are close to tying both the Labour and Conservative parties.

“The Lib Dems are the stand-out party on this," Robinson notes. "It’s right up there in their manifesto. It [energy policy] is one of three of their top four pledges, … they’ve obviously thought about it in a holistic way. What you can’t question is the leadership and political commitments.”

Whichever party ends up winning on May 6, Britain’s continuing transition toward low-carbon energy appears to be assured.


See also:

Britain Launches Comprehensive System of Feed-in Rates

Britain Blows Past 4GW Wind Mark, Still Has Long Way to Go

British Progress Toward Carbon Capture and Storage Drags

(Photo: donabelandewen/CC BY 2.0)

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