Ruth Lea: With Huhne gone here are three paths to a sane energy policy

There has been much speculation that, not least of all on this site, Chris Huhne’s resignation as Secretary of State for Energy and Climate Change will lead to more realistic, less flawed and less costly energy policies. Mr Huhne was widely seen as a “green fanatic” and, significantly, his departure has been much mourned by the green movement. George Monbiot tweeted “I’m sad to see Chris Huhne go. He’s been one of the few voices of (relative) sanity in the Coalition”. And he added “…with Huhne gone, climate change deniers in Coalition will be emboldened. Kind of ironic that it’s about speeding.” Ironic indeed.

Ed Davey, his successor, has come from BIS and should be more attuned to the needs of business. He has already homed in on the impact of high energy costs for households, where green policies add a 15% “stealth tax” to electricity prices. One can only hope his concerns will extend to the impact of high energy costs on businesses, where the “stealth tax” is over 20% and rising.

The damage to businesses, especially energy intensive manufacturers, of the extra electricity costs is well documented. Last November for example Rio Tinto Alcan announced the closure of their aluminium smelter in Lynemouth, Northumberland. RTA could not have been clearer in their reason for closing the plant. They said “…it is clear the smelter is no longer a sustainable business because its energy costs are increasing significantly, due largely to emerging legislation”. As high energy costs close plants here the work, along with attendant carbon emissions, goes elsewhere.

The Government has acknowledged the problem. We remember the Chancellor’s conference speech last October which suggested that British companies would not be sacrificed in the race to build a greener economy. He said Britain would move “no slower, no faster than our fellow countries in Europe” and “we are not going to save the planet by putting our country out of business”. Reflecting these concerns, he announced some compensation for energy intensive users in the Autumn Statement, but not enough to offset the extra “green energy” costs coming down the track.

But we are only at the foothills of trying to correct, or offset, the flaws in our costly energy policies. Perhaps the new Energy and Climate Change Secretary could consider reforming three policies which underpin our energy policy for “starters”.

1. Firstly, the targets of the Climate Change Act should be brought into line with our competitors. I would like to see the act repealed completely, of course, given that most of the world is reluctant to damage their economies by imposing costly carbon reduction policies. But let us move in stages. The CCA has a target of cutting carbon emissions by 34% by 2020 and by 80% by 2050 compared with the 1990 level. The EU has a reduction target of “only” 20% for 2020. We are unilaterally attempting to decarbonise our economy, which will radically change the way the UK produces and consumes energy over the coming decades. Let us, at least for a start, alter our target to bring into line with the EU’s.
2. Secondly, as I explained in my recent Civitas paper, even if the Government wishes to continue pursuing carbon reduction policies wind turbines are not the answer. Not only is wind-generated electricity uncompetitive, and offshore wind absurdly costly by any standards, it is not even efficient in cutting carbon emissions. Wind-power is of course the Government’s renewable of choice to (try and) meet its wholly unrealistic 15% renewables target by 2020 under the EU’s Renewables Directive. Apparently, the then Prime Minister Tony Blair was warned against agreeing to such a high target in 2007. But, given to grandstanding and always the “Good European”, he pushed ahead regardless – as he did with our Budget Rebate in 2005. Note, by the way, that the Renewables Directive does not add to the pressures on Britain to cut carbon dioxide emissions further, it merely insists that renewables must contribute to the overall emissions cuts dictated by the climate change legislation. We should call time on our commitment to the Renewables Directive before we erect any more wind turbines, environmental horrors which wreck the countryside. And the Government must take a tough stance with the EU Commission if/when they threaten us with financial penalties for non-compliance. We must also get on with the serious business of building nuclear power stations
3. Thirdly, the policy underpinning the Government’s carbon price floor (CPF), a fixed price for carbon, needs radical review, if not repeal. The CPF will start at £16 per tonne of carbon dioxide in 2013 and then rise to £30 per tonne by 2020 and £70 per tonne by 2030, irrespective of the EU carbon price as set by the EU’s Emissions Trading System (ETS). Crucially the CPF for 2013 is significantly higher than the current EU carbon price and is moreover expected to remain well above what the EU price is projected to be. Suffice to say this unilateral policy of self-immolation will further disadvantage British energy consumers, both household and business.

Furthermore as Tony Lodge has recently written: “…importantly, the carbon price floor will not reduce EU carbon emissions. This new floor price will have no impact on the total number of permits available in the EU. Every tonne of carbon that is ‘priced out’ of the UK will simply be emitted elsewhere in Europe at lower cost”.

So these are my three concrete “starter” suggestions for a more rational approach to energy policy. I shall be watching developments with interest.

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And as a postscript let us note that the world is tiring of climate change policies and politics. They flourished in more economically flourishing times. Only last week Tesco, an early champion of the green revolution, announced that it would ditch its plans to emblazon all its products with a carbon footprint label. Be thankful for small mercies.