Cameron proposes carbon tax overhaul as he sets out Tory energy policy

In their green paper on energy policy, published today, Cameron and the Conservative Party commit to taking “immediate action” in a dozen key areas to ensure ‘ the lights stay on’ and the UK has the right investment climate for creating a sustainable energy sector going forward – including reform of the Climate Change Levy, a UK tax levied on energy-intensive industries. The paper also proposes to makes UK renewable energy incentive schemes more flexible, by given developers of large-scale renewable projects the choice between which scheme they opt for.

Some of the other key actions put forward in the green paper, include securing UK energy supply by creating a capacity guarantee in electricity and a security guarantee in gas supply, a streamlined planning regime for large infrastructure projects, and support for nuclear power, renewables and carbon capture and storage (CCS).

A number of the actions have been put forward before, including plans for a Green Investment Bank, creating a high-tech smart grid and retrofitting British homes through a ‘Green Deal’ with up to £6,500 of energy efficient improvements.

Launching the paper, dubbed ‘Rebuilding Security’, Conservative leader David Cameron said British energy policy was “out of date” and that after 13 years in Government, Labour had left behind an “energy debt”, which consumers would have to pay for “decades to come”.

“Today, we are setting out a Conservative programme for the long-overdue reform of British energy policy – together with the actions we will take to mobilise the investment required to enact those reforms and our strategy for minimising the cost to consumers,” he said.

Reform of the Climate Change Levy
The Conservatives say a “credible and sustainable price for carbon is vital” to ensure investment in long-term renewable projects, such offshore wind farms and nuclear power plants. In their green paper, they say both the European Emissions Trading Scheme (EU ETS) and CCL are “flawed”. The paper criticises the EU ETS for creating a volatile carbon price that disincentives long-term investment and proposes to reform the CCL by making it payable “upstream” on the energy generated and by allowing power generators to offset the costs of purchasing the ETS allowances against their liability of the reformed CCL, the rate of which would be set by the Treasury. It claims such a levy would act as “floor price for carbon in the energy sector”.

Concerns have been raised that setting a carbon price floor could have the negative impact of increasing energy bills, but today, Ben Caldecott, Climate Change Capital's head of UK and EU environment and energy policy, welcomed the move, saying “proposals to send long term and predictable carbon price signals to the market will help investors and project developers.

“Similarly, proposals to make investments in the infrastructure needed to improve Britain’s energy security more attractive will benefit the energy sector, as well as the wider economy”.

Business welcomes green paper
Business broadly welcomed today’s paper, but warned that the right frameworks would have to be put in place.

National Grid chief executive, Steve Holliday, said: “The Conservatives are focusing on all the right areas. Key energy issues like CCS, nuclear, renewables, the planning regime, smart grids will be crucial to meeting climate change targets and maintaining energy security.

“We particularly welcome the Conservatives’ proposals for a more strategic approach to creating an offshore grid, connecting up new wind generation and increasing our interconnection with the rest of Europe. This open networks approach will be the most cost effective way of helping the country achieve secure low carbon energy.

”But ultimately, in all these areas it is action that will count and it will be vital to get the detail of the commercial frameworks right.”

Feed-in tariff proposal "radical"
Gaynor Hartnell, chief executive of the Renewable Energy Association said she was pleased with the Tories’ commitment to the 15 per cent target on renewables by 2020, but raised concerns about a proposal for feed-in tariffs to be used as an alternative to the Renewables Obligation for very large-scale projects.

“This is a very radical suggestion,” she said. “The need for a stable framework runs through the document, and achieving this flexibility without causing instability would be a challenge.”

Meanwhile, Paul King, chief executive of the UK Green Building Council, said the Conservatives had recognised that “sustainability goes hand-in-hand with energy security and can also boost economic growth and job creation.”

“Demand for energy in our homes and buildings is responsible for 43 per cent of the UK’s carbon emissions, so this sector is absolutely critical. Energy efficiency has to be the number one priority and community scale energy systems, such as district heating, also offer a huge opportunity.”

Policy on energy efficiency is "missed opportunity"
However, Friends of the Earth's head of Climate Change Mike Childs described the Conservatives plans on energy efficiency as a "missed opportunity".

Referring to the Green Deal, he said: "ThePay as You Save scheme is welcome, but is only a small part of the answer," he said. "It allows householders to invest in energy efficiency and payback the loan over time as their energy bills drops. But it won’t make much of a difference in the rented sector or people suffering from fuel poverty.

"Where is the statutory minimum standard for private rented houses to clamp down on the dodgy landlords? Where’s the fuel poverty strategy? Where’s the requirement for energy companies to work with local authorities in renovating properties street by street? Where are the policies to drive energy efficiency in commerce?' he asked.

Commenting on today’s launch, Shadow Energy and Climate Change Secretary Greg Clark said: “The challenges of climate change and of securing our energy supplies present a growing threat and five more years of Gordon Brown would only make an already precarious situation worse. We need radical change and in this Green Paper we set out plans for the biggest overhaul of British energy policy in a generation.

“Our policies will deliver secure, sustainable and affordable energy for the years ahead, while boosting investment and creating jobs. Ours is a plan to turn a threat into an opportunity, demonstrating the energy leadership and values needed to get Britain back on track.”

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