"The climate change industry or energy consumers. One of these groups will end up unhappy. The Tory leadership can keep the climate change industry happy by pursuing expensive renewables and avoiding coal or it can keep energy prices down. Tory members are convinced that energy consumers should be the group we protect."
As we have discussed in the comments on earlier CentreRight posts, I think there is a huge political opportunity in this area. The Conservatives currently appear to be stuck around the narrow majority or hung parliament level in the polls. By promising a reformed climate change policy that cuts people's energy costs, they could really offer ordinary new, tangible reasons to vote Conservative that could change that situation and put them on the path to greater electoral success.
Recently we released a report on the Emissions Trading Scheme, and the burden it has imposed on consumers across Europe. In Britain, the bill is about £3 billion, equivalent to around £117 per family. That means higher electricity bills and spells trouble for manufacturing companies, as energy is often one of their biggest costs. Important policy objectives like diversifying the British economy so it is less reliant on financial services and reducing fuel poverty are being undermined by the ETS and other regulations like the Renewables Obligation. Climate change policies make up 14% of domestic electricity bills and 21% of industrial electricity bills.
At the same time, these policies aren’t doing much to curb climate change. As research (PDF) for the LSE Mackinder Programme and the Institute for Science, Innovation & Society at the University of Oxford has argued, existing policy has abjectly failed to decarbonise the European economies that have adopted it most enthusiastically. Our report shows the big problem with the ETS - the carbon price is hopelessly volatile, and that isn’t going to change. As the supply of allowances is capped any change in demand is reflected entirely in the price, leading to wild swings. The Renewables Obligation provides huge subsidies for wind farms that do little to cater for our need for reliable base load power.
What this means is that there is a huge political opportunity for any party that is willing to call time on these wasteful and ineffective policies. The poor and the elderly spend the biggest shares of their budgets on electricity. The over 74s spend nearly twice as much on electricity, as a share of their total expenditure, as the under thirties and significantly more than the middle aged (see page 13 of our report). Needless to say, the elderly are a very significant political constituency as they tend to turn out and vote. Beyond that, as our polling (PPT) shows, utility bills are a big source of most families' financial worries.
A political party that promised to take a significant share out of our energy bills could find it is on to an electoral winner. Whoever is in government after the next election will have to make big cuts in public spending and, while there is lots of fat to cut, ordinary people will feel the pinch when, for example, there are cuts in middle class welfare.
Scrapping these ineffective climate change policies is a way of cutting people’s bills without reducing revenue or increasing spending. The Renewables Obligation isn’t a revenue raiser for Government, the Emissions Trading Scheme only auctions some of its allowances – the rest are given away free, meaning windfall profits for the industry – and the revenue from auctions has been chalked up by the Conservatives for more spending to help uneconomical wind farms. Getting rid of these policies could put a lot of money in the hands of an electorally valuable group at no significant cost to the exchequer.
That’s the political opportunity for the first party to start plotting a more realistic climate policy. Focus on making sure the developed and developing world is rich, free and democratic enough to cope with whatever nature throws at it and invest in research, putting Britain’s scientists and engineers to work to give us new options rather than trying to force uneconomical alternatives to fossil fuels into action now. Pay for that by stopping funding for organisations like the Carbon Trust (if they are really saving big businesses money - they don't work with small firms - then those big businesses can and will pay their wages).
Cuts ordinary people’s electricity bills and they’ll reward you at the ballot box.
