Misspent energy

Bryony_Worthington_PictureBryony Worthington on why renewables policy needs a united government to deliver real change

The industrial revolution made Britain great and it was a revolution based on energy. Though we didn’t know it at the time, that revolution was to unleash a potentially catastrophic side effect in the shape of global climate change. A second energy revolution is now needed if this catastrophe is to be avoided and, like the first, it has the potential to make Britain great again.

The Coalition government, however, is sadly squandering this opportunity. A recent letter from George Osborne to Ed Davey illustrated how the two Departments have become locked in a debilitating, false battle between gas and renewables.

Done correctly both can play an important part in a low carbon future. But the Treasury, for reasons it has yet to properly articulate, wants to see big investments in gas and it does not want any limits placed on it. More investment in gas would be ok, if at the same time we acknowledge that in the future it will have to capture its carbon emissions and store them. This is the only way to accommodate greater gas use with meeting our longer-term carbon goals.

Fortunately, it is easier to retrofit to capture and store carbon from gas than it is from coal and the billion pound subsidy made available for the first UK demonstration plant, which now allows gas projects to compete for the money. (Ed Miliband set this in train as Energy Secretary and this government has only just committed to see it through.)

A low carbon vision and greater gas use is clearly not incompatible if managed correctly.

If we can agree that the way forward includes gas but made ‘capture ready’ then the battle that appears to be being waged against renewables need not be so fierce. Clearly renewables can and do already make a sizeable contribution to our energy mix and many, being virtually free to operate, have the potential to drastically reduce bills as the technologies mature.

The problem is that climate policy is failing. At a European level the carbon price mechanism, which should be the most efficient way for everyone to reach their targets, is all but irrelevant – thanks to a market based mechanism that has created a huge over supply of emissions allowances with virtually no demand.

In the UK, the carbon floor price is meant to address this but, being a tax set by the Treasury each year in the annual Finance Bill, it is considered too politically vulnerable to be of any use. It is a sad fact that this does not appear to worry the Treasury since it is primarily a policy designed to guarantee projected income levels and not to stimulate investment.

Another worrying side effect is that with incomes secured, the Treasury is now ambivalent as to whether Europe acts to tighten its mechanism, when it should be putting all of its efforts into securing that outcome.

While the Treasury rails against DECC for trying to find a way of compensating for these failures it would be better spending its energies addressing its own role. A recent CBI report highlighting that investment in green energy could be the real route to economic recovery, generating a much needed injection of investment, reducing our trade deficit and employing hundreds of thousands of people. But the report warns of mixed messages from government, mostly emanating from the Treasury, which undermine confidence and risk losing these benefits. The delay in announcing revised levels of support for renewables is just the latest example of their unwelcome interventions, delaying and deterring investment.

If George Osborne continues to put courting his anti-clean energy backbenchers (some of who are also notable climate skeptics) above the jobs and growth the low carbon economy offers, he will be committing a grave error.

In government, Labour fully understood the grave threats posed by climate change and we were united in our commitment to tackling it. Two years in, the Coalition seems incapable of agreeing on anything and as a consequence our burgeoning green energy industry is suffering. The sooner they leave office and make way for a united government that sees the bigger picture and can withstand the lobbying of a small group of self-interested individuals, the better.

Baroness Bryony Worthington is a member of Labour’s Shadow Energy and Climate Change team in the Lords

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