Bloomberg News

U.K. Sees Pressure for Carbon Target in Electricity Bill

December 18, 2012

U.K. Prime Minister David Cameron and Chancellor of the Exchequer George Osborne face a rebellion within their own party after rejecting proposals to include a target for cutting carbon in new energy-market legislation.

Tim Yeo, a lawmaker in Cameron’s ruling Conservative Party and chairman of the Energy and Climate Change Committee, seeks to amend the electricity market bill to impose a target for so- called decarbonization on power generation. The goal is needed to give investors security to fund low-carbon energy, he said.

“This would have the support not just of a lot of the renewable organizations but a number of investors and part of the industry who would like to see it because it removes an element of uncertainty,” Yeo said in an interview.

Energy Secretary Ed Davey, who had planned to set a target to mostly cut carbon emissions from the power industry by 2030, introduced the legislation without the goal on Nov. 29 following opposition from Osborne. The chancellor has pushed for gas-fired generation as a cheaper alternative to low-carbon renewables.

The legislation as it stands, along with a strategy handing out incentives for natural gas, cast doubt on U.K. commitments to cut the nation’s carbon emissions in half by 2027, Yeo said.

“The gas strategy reinforced the need to have a carbon target in legislation,” he said. Yeo plans to seek support for his amendment from the opposition Labour Party, as well members of the ruling Conservative and Liberal Democrat parties.

iPad Age

Britain “risks being left behind” in a green industrial revolution, he said in a speech at Bloomberg’s London office today, comparing the country’s reliance on gas with running an “office using a fax machine in the age of the iPad.”

“The government has made its position clear,” Yeo said. “The chancellor and the prime minister have been very clear that they obviously considered this and they rejected it.” An amendment will be a “hard sell” that may be rejected, he said.

Osborne on Dec. 5 said the government will study tax breaks for shale gas exploration as it seeks to cut dependence on imports and hold down energy bills. The same day, the energy department laid out plans for as many as 30 new gas-fired power stations with 26 gigawatts of capacity to shore up supply, with a fifth of current capacity due to close in the next decade.

“Gas has an important role to play, particularly over the next 15 years,” Yeo said. Yet, with emissions from gas still “probably over 200 grams” per kilowatt-hour, replacing coal with gas won’t get the U.K. where it needs to be, he said.

Target 2016

Yeo may seek a “compromise” for power emissions of 50 to 100 grams a kilowatt-hour by 2030. In comparison, the Climate Change Committee, which advises the government, has recommended 50 grams, while current levels are more than 300 grams, he said.

Under government plans, a decision on a target isn’t slated until 2016. It also can review its 2023-2027 “carbon budget” in 2014. Budgets lay out what the U.K. can emit over successive five-year periods as it strives to meet a requirement under the 2008 Climate Change Act to cut emissions 80 percent by 2050.

A decision on the target should be brought forward to 2014 to coincide with the review of the carbon budget, Yeo said.

“We face now the prospect of the fourth carbon budget being reviewed in 2014 and two years later we may finally get an intensity target for electricity,” he said. “That removes certainty, which is not helpful for investors.” Yeo is non- executive chairman of hydrogen fuel-cell company AFC Energy Plc. (AFC)

Davey today told the Energy and Climate Change Committee he had agreed with other ministers that the decarbonization target should be set in 2016 because that coincides with the setting of the fifth carbon budget for the period straddling 2030.

Yeo said the energy bill should spur efficiency, adding: “They’ve made a statement of intent, which is encouraging.”

The legislation is due for a second reading in parliament tomorrow, before being scrutinized by a committee of lawmakers. Yeo plans to suggest amendments when the committee reports back.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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