Behind the headlines: the UK Energy Bill and decarbonisation target

UK climate policy is high on the media agenda again, with David Cameron announcing last week that he may roll-back green charges on energy bills and the rejection last week in the House of Lords of a proposal to include a clean-power decarbonisation target in the UK’s Energy Bill.

The proposed amendment, which would have required the Government to set a target next year to all but decarbonise the UK power sector by 2030 was dismissed by just 14 votes, meaning the inclusion of a target is now unlikely to be reconsidered until after the next general election. In this article, we explore the background to the Energy Bill and the case for including a decarbonisation target in the Bill.

What is the Energy Bill?

Introduced in November 2012 and passed by the House of Commons in June 2013, the Energy Bill was introduced to provide the legislative framework to enable the UK to virtually decarbonise its energy sector by 2030, in order to meet its legally binding emission reduction commitments set out in the 2008 Climate Change Act. The Bill includes a number of measures aimed to ensure security of energy supply, cut emissions, and to encourage investment in cleaner, lower-carbon energy sources, across renewables, nuclear, carbon capture and storage (or CCS) and gas. Themes covered in the Bill range from measures to encourage large-scale investment to upgrade the UK’s current power generation infrastructure (through Electricity Market Reform), to a simplification of energy tariffs to increase fairness for consumers, by simplifying the number of tariffs energy companies can offer alongside provision of clear information for consumers. When first laid before the House of Commons, the Bill did not include a decarbonisation target for 2030. When later debated in the House of Commons in June 2013, a proposed amendment to the Bill, tabled by Tim Yeo and other MPs for the inclusion of a decarbonisation target for 2030 was voted down by 290 votes to 267, a difference of 23 votes.

Last week, attention was focused once again on the possibility of including a clean-power decarbonisation target once again, as a number of amendments to the Energy Bill were debated in the House of Lords. The proposed amendment in question was put forward by Lord Oxburgh, Lord Stern and Baroness Worthington, for the Government to set a target next year to decarbonise the UK power sector by 2030.

The case for a decarbonisation target

A number of proponents of the 2030 decarbonisation target highlighted its key role in helping the UK Government to meet its legally-binding emission reduction commitments, which are formally set out in the 2008 Climate Change Act. The Committee on Climate Change suggested that such a target could offer cost savings, acting as a “stepping-stone towards the cheapest possible route to cutting emissions”. Such a target could help keep the UK on track to meet its commitments to move to cleaner, low-carbon power sources which emit far less greenhouse gases. Decarbonisation of the power sector could have wider spin-off effects, offering emission reduction opportunities to other sectors, through the advent of clean electricity sources to power cars and rail travel for example.

A decarbonisation target is also thought to provide greater policy certainty for investors, enabling greater long-term planning by helping to “provide private investors with greater confidence about the direction of public policy” when it comes to future power generation and commitments to emission reductions. Such a decarbonisation target could encourage investment in renewables and low-carbon energy over higher-emitting fossil-fuel plants. This could prove crucial given investors are reviewing future investments in electricity generation infrastructure now, and if the UK appears to dither, the money could be invested elsewhere. Much of the UK’s power-generating infrastructure needs replacing over the next 15 years| to keep the lights on, as fossil-fuel and nuclear power stations reach the end of their lifespan. Replacing these now with high-emitting power sources (such as fossil-fuel power stations) would require a more rapid and costly move to less-emitting power infrastructure further down the line if the UK is to meet its commitments to cut greenhouse gas emissions and limit the worst impacts of climate change. Selecting high-emitting fossil-fuel plants could result in a later scrapping in order to cut emissions in line with the UK’s legally binding commitments. Alternatively, having a 2030 decarbonisation target in place to steer decision-making in favour of cleaner, low-carbon energy, could avoid a costly later transition to low-carbon energy sources and avoid the need for large-scale abandonment of highly-emitting fossil fuel power plants.

Where next?

Despite calls for the inclusion of a mandatory clean energy decarbonisation target, the proposed amendment to the Energy Bill was rejected by 14 votes in the House of Lords last week, with the Government arguing that setting a specific target in 2014 was not in the best interests of consumers and should instead be reviewed after the next General Election. This comes at a time of increasing scrutiny over Government commitments to emission reductions, as the Committee on Climate Change reviews the UK’s fourth carbon budget, which sets out a total cap on emissions not to be exceeded if the UK is to meet its emission reduction commitments under the 2008 Climate Change Act. As countries gear up towards the next round of international climate negotiations in Warsaw this November, many will be watching to see if UK government holds firm on its commitments to cut greenhouse gas emissions and limit the worst effects of climate change.

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