ENDS Report 437, p. 62, June 2011.
Despite the inflated claims of the middlebrow press, there are genuine concerns about how green taxes will affect future energy bills.
The Daily Mail does not knowingly let the facts get in the way of a good story. If that story lets it grind two of its axes at once so much the better. Hence the front-page splash with the headline “Hidden green tax in fuel bills” in mid-June. The paper makes no secret of its dislike of either the coalition or the prime minister’s green betrayal of the true blue. Here was an opportunity to batter both.
Armed with a truncheon provided by Benny Peiser of the Global Warming Policy Foundation, it laid into both as robustly as any Punch. To reinforce its attack it enlisted the support of the increasingly cantankerous Andrew Turnbull, the former cabinet secretary turned climate change sceptic.
Dr Peiser’s contribution to this farrago was the claim that “green stealth taxes are adding 15-20% to the average domestic power bill”. Lord Turnbull accused MPs and civil servants of failing to challenge the ‘climate change consensus’. The latter intervention was somewhat undermined by the accompanying photograph, in the Mail’s online edition, of a distinguished looking gentleman in wig and scarlet robes who was, however, not Lord Turnbull.
It does not add to his authority on climate change to remember that he was permanent secretary in the environment department before becoming cabinet secretary. This was when Lord Turnbull’s department was a leading builder of the very consensus he now reviles. I was a special adviser there at the time, and can confidently assure you that there was no occasion on which he shared any doubts about its wisdom with either his colleagues or ministers.
Dr Peiser has little authority on climate change to risk, but his intervention on energy policy reveals a less than sure grasp of the facts. He appears to have misunderstood or selectively misused data from the energy and climate department (DECC) on the impact of green policies on energy.1 His use of gas and electricity prices is muddled and he has confused prices and bills. When these errors are eliminated the DECC figures show that the increase in household energy bills is 4% not 15-20%. Nothing like as good a story.
However dubious the Daily Mail’s motives, or its professional standards, it does recognise barn doors when it sees them, even if, as in this case, it misses them both. There are real issues about both stealth green taxes and energy bills.
The Carbon Reduction Commitment (CRC) was an innovative but complicated measure intended to encourage businesses to improve their carbon emissions. At its heart is a league table. Companies would pay a levy, report on their reductions and the best performers would be rewarded from the proceeds of the levy. There was much grumbling at the reporting burden but broad acceptance that recycling the revenues made it worthwhile.
At the budget the chancellor stole – that really is the right word – £1bn of CRC revenue to help reduce the deficit. This effectively destroyed the CRC as a policy measure. Since the amount involved is no more than an accounting error on the deficit, it is hard to see this as anything more than a gratuitous act of destruction by a Treasury increasingly colonised by climate sceptics.
John Cridland, director-general of the CBI, was unusually pointed and public in his criticism of the government. At a public meeting on the Green Investment Bank he went out of his way to tell the deputy prime minister to his face of the real anger this had caused in the business community.
He might easily have gone on to be equally critical of another green stealth tax. The much heralded carbon floor price is nothing of the kind. It has no connection at all with the carbon price thrown up by the EU emissions trading scheme. In reality it is a simple carbon tax that will do practically nothing to alter investment in low-carbon electricity generation but will generate lots of reliable revenues for the Treasury.
When the fine print is examined this turns out to be an old- fashioned commodity support price. If you took out the word ‘carbon’ and wrote in ‘cocoa’ you have a policy that would normally have the Daily Mail in a paroxysm of rage and a legion of Treasury officials telling you how economically ignorant it was.
Energy prices will inevitably increase as the decade progresses. Energy bills do not have to. Energy prices will increase for many reasons, but the need to decarbonise the electricity system will be one of them. There is, thus, a growing political imperative to break the link between prices and bills.
The key to doing this is electricity market reform. A DECC white paper on the subject will be published in July. It will initiate the most fundamental change in the electricity market in 30 years. The results will determine the affordability and deliverability of the low-carbon, predominantly electric, energy system we must build if we are to avoid the ravages of climate change.
As the House of Commons Energy and Climate Change Committee pointed out, the current proposals seem designed more to disguise nuclear subsidies than to deliver affordable low-carbon electricity (ENDS Report 436, pp 49-50).
DECC has misled itself, and the climate change committee, comprehensively about the costs of new nuclear. Thus the electricity market reform currently envisaged will strengthen rather than break the link between prices and bills.
DECC says little about the options for avoiding new generation of any kind. Under the label D3, there is growing recognition that demand response, demand reduction and distributed generation will deliver low-carbon electricity at least cost and break the link between prices and bills.
Energy and climate secretary Chris Huhne must make it clear that his forthcoming legislation will create a level playing field for new generation and D3 in which each approach is given a fair chance to drive down energy bills. If he fails, the Daily Mail may well find itself with a barn door even it cannot miss.