The government is forcing up energy prices faster than in the rest of the EU, ostensibly to reduce the impact of climate change, promoting inefficient and costly alternatives that are driving some of our manufacturers overseas.
The Climate Change Act (2008) includes the following provisions: a legally binding target of at least an 80 per cent cut in greenhouse gas (GHG) emissions by 2050, to be achieved through action in the UK and abroad; and a reduction in emissions subsequently agreed to be at least 34 per cent by 2020. Both these targets are against a 1990 baseline. The EU's target for carbon cuts in 2020 compared with the 1990 baseline is much lower - `at least' 20 per cent.
The EU's Renewables Directive (2008) sets the UK a target of meeting 15 per cent of its final energy consumption through renewable sources by 2020. The equivalent figure in 2005 was less than 1.5 per cent.
The Renewables Obligation is the obligation placed on licensed electricity suppliers to deliver a specified amount of their electricity from eligible renewable sources. It was introduced in 2002 and is intended to incentivise the generation of electricity from eligible renewable sources in the UK. The costs associated with the RO are rising as the obligation levels are rising.
The EU's Emissions Trading System [ETS] is an EU-wide `cap and trade' scheme which started in 2005. Phase I ran from 2005 to 2007, phase II is currently operative (2008 to 2012). The allocation of free permits is due to be substantially reduced under phase III (2013-2020), which will increase the price of electricity generated from fossil fuels.
The Climate Change Levy (CCL) is a tax on the use of energy in industry, commerce and the public sector (i.e. all non-domestic sectors) intended to reduce energy use and hence CO2 emissions. It was introduced in April 2001. There are exemptions but, notably, nuclear-generated electricity is not one of them - despite the fact such generation has no CO2 emissions.
According to official estimates released by BERR in June 2008, current climate change policies had already added 21 per cent to the average business electricity bill and 14 per cent to domestic bills. At that time BERR estimated that these policies would add 55 per cent (34 per cent higher than in 2008) to the average business electricity bill by 2020 and 18 per cent to domestic bills. The current climate change policies are also adding to gas bills: 4 per cent to business bills and 3 per cent to domestic bills.
The Department of Energy and Climate Change's Renewable Energy Strategy says, "...we estimate that, if taken in isolation, the measures included in this Strategy would increase ... [non-domestic energy bills] by an average 15% for electricity and 30% for gas by 2020". On government data, these policies will cause a 70 per cent rise in businesses' electricity costs for 2020 and a 33 per cent rise for domestic users. The net costs of the strategy for the period 2010-2030 are expected to range between £52 billion and £66 billion (in 2008 prices). In recent years, industrial prices have been almost double those in nuclear/hydro-dependent France and Sweden.
Britain's chosen route to meeting its highly ambitious EU renewables target depends on a huge expansion of expensive and intermittent wind power, which requires considerable conventional (i.e. fossil fuelled) back-up capacity.
The authors conclude wishfully, "Given the ETS's threats to EU industries in general and Britain's in particular, the EU should surely reconsider aspects of its energy and climate change policies."