Tuesday, 24 September 2013

Labour price freeze pledge will mean cancelling carbon tax increase

Ed Miliband's headline grabbing pledge to freeze energy prices unti 2017 must mean the cancellation of the planned increase in the 'carbon floor price' brought in by the Coalition Government.

The carbon floor price is set to increase sharply. The carbon floor price, a Treasury tax that keeps up carbon prices in the UK, effectively pushes up electricity prices because the increased price of carbon allowances (associated with the EU's Emissions Trading System (ETS) makes electricity from gas and especially coal more expensive. According to the Government's plans it will increase prices significantly by the likely general election date in 2015. But it is set to increase thereafter as well. If Ed wants to freeze electricity prices he will have little alternative but to cancel the proposed increase. See details of the projected price rises at:


But what is in doubt also is that George Osborne will be able to sustain the increase until then anyway. A fall in energy prices may make this politically possible, but otherwise pressure will mount against what is really a carbon tax. The majority of the proceeds go to the Treasury. You may ask why I, as a green energy supporter, might not be too upset that this increase is cancelled. Well, the truth is that the carbon floor price does next to nothing to encourage new green energy investments because of the uncertainty about the future levels of the tax. All the carbon floor price does is, for the most part, keep old nuclear power stations running and give EDF a financial boost.

Offshore wind, energy efficiency, solar pv  loses out in favour of more tax receipts

Really it would be much better to have a smaller tax and target it to be spent on energy efficiency, offshore windfarms and solar pv. See Transform UK for their programme on energy efficiency and the failings of Treasury policies at http://www.transformuk.org/en/articles/932/budget-chancellor-gives-no-help-to-households-to-bring-down-/

Feed-in tariffs for offshore windfarms are set to fall to £135 per MWh after 2018. This sounds a lot, but the small print on the Government's EMR programme is that the government's version of feed-in tariffs aren't anything like as high as they appear when compared to the effective payments available under the existing Renewables Obligation (RO). That is because the Government's terms for the new feed-in tariff are very inferior to the RO. For a start the premium prices will only run for 15 years as opposed to 20 under the RO. Secondly there will only be a partial inflation adjustment since the 'consumer price index' (CPI) will be used which simply fails to keep pace with inflation that is more accurately measured by the Retail Price Index (used to uprate inflation under the RO). So £135 per MWh is more like £115 per MWh when compared on the same terms as the RO.

The Government are using smoke and mirrors to engineer a policy that claims to deliver green energy but in fact delivers little but higher tax income and more  money for EDF.

Can Ed think of a better policy than this? I hope so, because for offshore wind after 2015, and solar pv and energy efficiency even now,  it could not be much worse under current Government plans

No comments:

Post a Comment