Connecting the Future - Greenpeace UK

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Connecting the future: the UK’s renewable energy strategy Conclusions 68 An evaluation of the main policies in the Climate Change Programme and the 2007 Energy White Paper shows a heavy emphasis on market mechanisms to achieve the necessary cuts in emissions. The problem with this approach is that it establishes short-term drivers to improve efficiency, but does not establish a long-term investment environment to encourage the implementation of low-carbon technologies. The uncertainties inherent in the ETS – relatively short periods for action, reliance on equal action in other member states, and the volatility of the price of carbon – mean that action with short-term, or even positive financial paybacks are logically more attractive for businesses than investment in new technologies which may be risky and are more expensive. It is clear that not only is the ETS central to the UK’s approach to reducing emissions, it is the only approach to reducing emissions. The leaked 2007 BERR memo argues that achieving the renewables target is undesirable because it might threaten the price of carbon in the ETS, this misses the point that the ETS is a means of achieving cost effective CO2 reductions, not an end in itself (BERR 2007). The price of carbon will be set by the permitted level of emissions, not by the availability of low-carbon technologies – if the price is threatened, the permitted limits should be tightened, rather than abandoning a commitment to sustainable energy technologies. This exposes a fundamental problem with the government’s approach to reducing emissions: its ideological commitment to market mechanisms over and above any other way of driving the necessary change is not just inadequate, it also risks actively undermining the new technologies and approaches which are needed. The government’s approach is astonishingly short sighted. Reducing emissions will of course involve improving energy efficiency, but it will also require a change in the ways that energy is produced. The nature of energy systems themselves will have to change to be able to incorporate low-carbon, often renewable generating technologies. Given the length of time that energy assets remain in place – typically decades – this shift has to begin in earnest now if there is to be a chance of meeting the required levels of CO2 emissions reduction up to 2050. If the UK misses the opportunity presented by the EU targets to begin meaningful development of new systems now, it will face an enormous struggle to meet the longer term targets.
Connecting the future: the UK’s renewable energy strategy Conclusions 69 Any new approach, which is urgently needed, will have to incorporate a much more sophisticated treatment of energy systems, innovation and technical change. It is not enough to put support mechanisms in place for new technologies and then expect them to automatically perform. The conditions in the broader system environment – such as planning, infrastructure, institutional and social attitudes – have to be supportive, or at least not hostile, to the new technologies. Without this, they will forever remain marginal to the current, unsustainable system configurations. In some cases, the government is beginning to address these broader issues, while in others it continues to fail to recognise the importance that they play. This is particularly apparent in the ongoing debate about the role of Ofgem, which has a significant influence over both the design of the market and therefore the economic performance of new technologies, and also the infrastructure which they rely on to deliver their output. The time has come for the government to recognise that it cannot aspire to reduce emissions while also allowing Ofgem to construct market and regulatory arrangements which condemn new technologies to failure. Overall then, the government must adopt a broader approach to energy systems and the mechanisms it employs to drive the necessary change. Its overwhelming preference for economic efficiency through market mechanisms may drive short-term gains, but will fail to put a longer-term strategic framework in place. It is, and will remain, an ineffective approach in enabling the emergence of sustainable energy systems. Instead, the government needs to set out a long-term strategic vision for energy systems with ambitious targets and a long-term policy framework with clear commitments to decisive action, whether this involves market mechanisms or more traditional, ‘command and control’ regulatory measures. Its priority should be on creating a framework whereby investors have a degree of certainty about their investments in new technologies if they are to have the necessary confidence to begin a shift to sustainable energy systems. Changing existing measures or introducing new ones could, of course, contribute to an improvement in the UK’s performance. This could include: • A one off increase in the level of the Climate Change Levy above the rate of inflation to re-establish its revenue neutrality for business, by bringing it back in line with the cut in National Insurance Contributions. • Bringing forward the target dates for both Zero Carbon Homes from 2016, and establishing an aggressive timetable for zero carbon nondomestic buildings rather than pursuing an ‘ambition’ aimed at 2019. • Maintaining the Merton Rule so that it continues to help create a viable market for new developments, small-scale renewables and emerging renewable energy supply chains, whether domestic or commercial.
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Connecting the Future - Greenpeace UK

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