The Committee on Climate Change says the most important prospective source of cuts in greenhouse gases lay in the ‘decarbonisation’ of electricity generation. Photograph: Graham Turner/Guardian.

The budget confirmed the acceptance of the Committee on Climate Change‘s recommendation for carbon emissions in 2020. The UK will have to reduce its CO2 output by about 110m tonnes by 2020, equivalent to a 21% reduction on actual emissions in 2005 (and 34% on the 1990 figure). The proposed rate of emissions reduction is far faster than the UK has achieved thus far and the chancellor’s budget shows the government has started to recognise the scale of the challenge.

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The committee told the government in December last year that the most important prospective source of cuts in greenhouse gases lay in the ‘decarbonisation’ of electricity generation. This can happen by increasing the percentage of renewable electricity, by capturing carbon at power stations and from switching to low-carbon fuels such as nuclear and gas.

The budget had incentives to encourage all of these changes. Most importantly, it improved the prospects for offshore wind. The budget recognised that the decline in bank credit, the falling price of carbon permits, and the sharp drop in the price of fossil fuels have made offshore projects increasingly difficult to fund. The worrying prospect that the 400-turbine London Array might be abandoned in the next few weeks forced the chancellor to increase unexpectedly the subsidy for electricity generated offshore.

He claims it is new government support. This isn’t quite right: we will all be paying through higher electricity bills. The new subsidy encourages the developers of this vital scheme to place their turbine orders in the next twelve months. My guess is that the government may not quite have done enough and that further fiscal bribery will be needed to get this vital project completed. This scheme, the largest offshore wind farm in the world, cannot be allowed to fail if the UK is to achieve the necessary ten-fold increase in renewables generation by 2020.

The second major measure from Darling was an unexpectedly large increase in the money going into carbon capture and storage. Energy experts have warned that the UK would not be ready to install capture technology on power stations until after the crucial 2020 date, meaning that the government’s carbon budget would be likely to be breached. So £90m is offered for ‘preparatory studies’ by the electricity generators to try to encourage more rapid progress.

There was also a remarkably vague promise to fund a further three working demonstrations of carbon capture in addition to the single contract that is likely to be awarded to the new Kingsnorth power station. We urgently need more detail on this policy change.

There were some crumbs offered to the micro-renewables industry to stop it collapsing entirely in the next twelve months. £45m is not going to go far, perhaps putting solar panels on 5,000 homes compared with the millions around the rest of Europe.

By contrast, energy efficiency measures were emphasised by the chancellor. He promised £400m for research and development, although it is unclear how much of this money is additional to existing allocations. We are definitely seeing progress in government commitments to financing fundamental work in energy efficiency and power generation. But, for comparison, the UK spends about £2.5bn a year on basic defence research and development, over six times as much as the new figure for energy.

The Committee on Climate Change’s other priorities for meeting the carbon budget included an emphasis on low-carbon vehicles and the chancellor has already announced some remarkably detail-lacking plans for subsidising electric cars. In the budget he also committed to spending £20m installing a network of battery-charging points in a couple of UK cities. This is a good start, but he would have been better changing the harsh tax treatment of electric delivery vans. This is the single measure that would do most to get silent, non-polluting vehicles on our urban streets.

He also made some perverse changes to car tax. The owners of existing cars that were among the most efficient when they bought them will now pay higher rates of duty. Owners who thought they were being virtuous are now going to be penalised. The Treasury’s not-so-subtle reasoning must be that the car tax revenues, which are tied to the carbon emissions of the vehicle – providing about 6% of all government receipts last time I looked – will start declining sharply as more and more people buy ultra-efficient cars.

As for the extraordinary car scrappage scheme, the less said the better. It would have been far more effective to pay people to tear up their driving licences and promise to use public transport.

Two further measures were also the opposite colour to green: the excise duty on lorries was held down to placate the road transport industry. And a number of incentives encouraged more drilling for oil and the extraction of the last barrels from existing fields.

Nowhere was the inconsistency between these proposals and overall emissions reduction noted by the chancellor.



This article was originally published in the Guardian on Wednesday 22 April 2009.

As with other great popular causes, such as improving access to public libraries, reducing the use of plastic bags, and the protection of urban hedgehogs, everybody is in favour of ‘feed-in tariffs’ for renewable energy. Widely used in other parts of Europe, these tariffs guarantee a high price for every unit of electricity exported to the grid from very small generating stations. Put some solar panels on your roof in Germany and you get paid 40p for every kilowatt hour that you produce and don’t use yourself.

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The UK micro-renewables industry raised a cheer last week as the cabinet minister newly responsible for climate change gave the thumbs up to the idea of copying our European friends and improving the financial returns for electricity generation on the smallest scale. Ed Miliband appeared to promise to amend the climate change bill to force the electricity companies to buy power at elevated prices from such things as domestic wind turbines and hydro-electric generators capturing the energy in babbling streams. The idea is that this will increase the incentives for people to install small-scale renewable electricity systems.

I have to declare an interest. My battery of photovoltaic cells sends about 500 kilowatt hours (usually known as ‘units’ in Britain) back the wrong way up the wires every year. The rest of their somewhat unimpressive output is gobbled up in the house. Any proposal that increases the price I get from the electricity company will help defray the recent unprecedented jumps in energy prices. So I ought to be in favour. But despite the clear financial incentive, and the risk of being savaged on the street by right-thinking environmentalists, I have to admit that I think that feed-in tariffs are one of the most mistaken ideas ever to worm their way into UK law. Nothing better demonstrates the vacuity of the climate change debate in the UK than the unthinking obeisance to the romantic idea of paying people money to generate tiny quantities of electricity on their back roofs.

The problem is a simple one. Micro-renewables are hugely expensive for every unit of electricity that they produce. The best example is the subsidy that the Germans generously give to solar photovoltaic installations in their cloudy country. Their feed-in tariff for solar power has been highly successful in expanding the number of homes, cowsheds, and office blocks that carry photovoltaic panels. But the cost is horrendous. Last year the Germans paid almost €1.9bn (about £1.5bn) to panel owners for their electricity. This bought about 0.6% of all the electricity that the country needed. The cost per megawatt hour was about six times the price paid for all types of electricity. The German government is gradually reducing the subsidies but their solar feed-in tariffs currently cost each householder about £40 a year. This may not seem a huge amount but as solar energy expands, the cost will get increasingly onerous.

It is true that solar power saves carbon emissions. The German solar tariff cut emissions by over 2m tonnes last year. But the cost was over £600 per tonne of CO2, or thirty times the current international price of carbon. Small-scale solar photovoltaic technologies are a truly terrible way of reducing emissions in sun-starved northern Europe. And micro-wind is unlikely to be much better except on tall buildings at the top of hills near to Scottish or Welsh coastlines.

To make a significant difference to the carbon emissions from electricity production, the UK needs to invest in tens of thousands of commercial-scale wind farms and find a way of cheaply capturing wave and tidal energy in the turbulent waters off our coasts. Done with vigour and good sense, we can hope to generate 20 or 30% of our electricity this way. We have to invest in gigantic projects like the London Array, a 300-turbine wind farm off the Kent coast. Feed-in tariffs are an expensive distraction that will do nothing to reduce UK emissions and its dangerous dependency on Russian gas.

We don’t even know what bribes the government proposes to offer the middle classes to give over some of their south-facing roofs to solar panels. Curiously, even the renewable industry body that has so successfully lobbied Ed Miliband declined to tell me that it thought the feed-in rate should be. Perhaps it is frightened that the Daily Mail will calculate how much electricity prices will have to rise to pay for the solar subsidy. My estimate is that to make photovoltaic panels a good financial investment for a UK householder, the feed-in tariffs probably need to be about 50p per unit, or possibly even more. I will certainly welcome the annual cheque from my electricity supplier but the impact on carbon emissions of even a massive expansion in UK domestic solar or wind installations will be utterly trivial.

The UK has one of the lowest percentages of renewable electricity in Europe. We could spend a billion pounds a year on subsidising solar panels and we would get barely half a percentage of our electricity from them. The UK would then be even further behind other countries. We don’t need feed-in tariffs; we need massive programmes of investment in research and development into low-carbon electricity, huge prizes for successful entrepreneurs, and participation in the global endeavour to find cheap forms of carbon capture at power stations.

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If you were prime minister and faced the need to cut UK greenhouse gas emissions by at least 80%, which policy would you support? Taxing the high profits of the energy companies or obliging them to invest a £1bn in energy-saving measures targeted at the houses with the worst insulation? Put this way, there shouldn’t be much argument. If we are to reduce CO2 output, the government must focus on improving the dreadful waste of energy in British homes. Our houses are far more important emitters of greenhouse gases than our car or even our holiday flights. About 25% of UK emissions come from running our homes, most of them badly insulated and leaky. The scope for improvement is immense.

By contrast, applying an unexpected windfall tax might actually increase emissions. The current profits of the utilities are going to be partly used to make the huge investments in renewable energy that we urgently need. E.ON, for example, faces the need to find at least £500m to build its share of the 1-gigawatt London Array, the biggest offshore wind farm in Europe. A raid on its bank account by the Treasury is not going to help E.ON pay for the new turbines.

If our only interest is climate change, Darling’s focus on energy efficiency is absolutely appropriate. The proposed £1bn home insulation scheme is the nucleus of a set of policies that might start reducing domestic energy use. About 8 million homes in the UK don’t have cavity wall insulation. Almost all households could profitably improve their loft insulation. Full double-glazing would benefit a large percentage of UK homes.

In fact, eco-renovation is probably the most effective and cheapest way of reducing UK energy use. Simple measures will cut 30-50% from the heating bills of most homes. We should welcome Darling’s proposals. In fact, we need to encourage the government to go much further, copying the German government’s commitment to improve the energy performance of its entire housing stock by 3% a year. Backed by grants and soft loans, the German scheme is substantially reducing energy use in over 200,000 homes a year. Many of the most successful schemes have reduced energy use by nearly 85%. We could easily do the same in the UK. It might also pull a hundred thousand people into good jobs.

‘But what about fuel poverty?’ people will say. Twenty thousand more people die in the UK’s winter than in summer, many because of inadequate indoor temperatures. Shouldn’t the government’s real priority be to increase the affordability of gas and electricity above every other objective so that people can heat their homes? No: it actually makes far more financial sense to improve the energy performance for decades to come than to temporarily reduce the price of fuel. A targeted investment of a few hundred or even a thousand pounds will typically pay for itself within three or four years in lower fuel bills. It may seem harsh, but this is far better than a short-run discount on prices.

Environmental groups led by Green Alliance have complained last week that the main political parties have begun to ignore climate change as they focus on the financial pressures faced by householders and business. Darling’s policy of not subsidising fuel costs or arbitrarily penalising the energy companies is a striking counter-example. He should be congratulated for his courage, not criticised for his inhumanity or berated for his obeisance to big business.

This article was originally published in the Guardian on Wednesday 10 September 2008.