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Gas, not green policies, driving up energy bills, says climate expert

Green policy news - by GreenWise staff
15th December 2011
Claims that the rising cost of household energy bills is down to green policies have been dispelled by a report published today by the UK’s climate change watchdog.
In the first comprehensive study on the impact of carbon reduction policies on household energy bills to date and over the next decade, the Committee on Climate Change (CCC) found that in the case of most UK households, energy bill hikes are being caused by the rising cost of wholesale gas prices, not low carbon policies.

The Committee found that costs associated with the wholesale gas market have been responsible for more than three quarters (84 per cent) of the rise in bills over the last six years. By comparison, its analysis revealed that carbon reduction measures have been responsible for 16 per cent of the rise in bills over the same period. 

Household fuel bills have rocketed up by as much as 20 per cent this year. This has led to claims the cost of implementing UK environmental policies is behind the increases. But today, the CCC said its findings "disprove" such assertions.

As well as impacts to date on household bills, its report, 'Household Energy Bills – Impacts of Meeting Carbon Budgets’, studied the impact of green policies on household fuel bills over the next decade and found that measures to shift the UK onto a low carbon footing would add around £110 to household bills between now and 2020. 

The CCC pointed out that the increase was far less than some dramatic claims being made about decarbonising the UK’s energy infrastructure. Such claims have intensified over recent months and have even included the Chancellor of the Exchequer stating that green policies are pushing up the cost of household energy bills. A report published only this week by right leaning think tank the Adam Smith Institute claims that Government reliance on renewables is pushing up energy costs and jeopardising energy security.

CCC findings
The CCC analysis looked at the impact of carbon reduction policies on household bills up to last year from Britain’s 21 million dual-fuel energy customers, which make up 84 per cent of household energy bills. For these households, it found energy bills increased by £455 from around £605 per household in 2004 to £1,060 in 2010. But it found that £380 (84 per cent) of that increase was nothing do to with low carbon measures, but instead was related to a combination of the price of gas and supplier costs (£290), increasing transmission and distribution costs (£70) and VAT (£20). The cost of policies to reduce carbon emissions accounted for £75 (16 per cent) of the price rise, including £30 to support investment in low carbon power generation, and £45 for funding energy efficiency improvements in homes.

"We were keen to provide a dispassionate analysis of household bill impacts in what has become a politically controversial area," Lord Adair Turner, chair of the Committee on Climate Change said. "We found that bills have increased primarily in response to increased wholesale gas costs and not due to environmental policies." 

Bills in 2020
Looking forward, Lord Adair said the CCC anticipated investment in low carbon power capacity would increase the average household energy bill by around £100 over the next decade. Measures to improve energy efficiency in homes are likely to add another £10 to the average household bill. But Lord Adair said if new policies to stimulate energy efficiency improvement, such as the Green Deal, were introduced "then bills in 2020 could broadly be contained at current levels."

The CCC findings follow analysis published by the Department of Energy and Climate Change last month that showed that the Government’s low carbon policies would keep household energy bills on average seven per cent lower by 2020 than if nothing were done.

The Committee said impacts on bills up to 2020 for households with oil, liquid petroleum gas or solid fuels would be broadly similar to those of dual-fuel gas/ electricity households. However, for those homes run on electric heating, the costs associated with low carbon measures will be "disproportionately" greater, it noted.

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Gas, not green policies, driving up energy bills, says climate expert
The CCC says environmental policies are not the main cause of energy bill rises
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