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Treasury is undermining policy certainty on energy

23 July 2012

Responding to the report from the Energy and Climate Change Select Committee on the Draft Energy Bill today (23 July), WWF said that the Treasury appeared intent on undermining energy policy in the UK.

David Nussbaum, chief executive of WWF-UK, said: “The Committee could hardly be more damning in their criticism that the Treasury is making UK energy policy unworkable. Aside from their puzzling refusal to give evidence to the Committee’s inquiry on the draft Energy Bill, the worrying question is why George Osborne’s department appears so intent on undermining the policy certainty that investors desperately need.”

Noting the Committee’s call for ‘clear specific objectives’ to be included in the Bill, including clarity about the role the electricity sector is expected to play in contributing towards the UK’s long-term decarbonisation target, David Nussbaum said, “It is vital that a specific decarbonisation target features on the face of the Bill – without clearly setting a level of ambition, the Government risks increasing uncertainty around the role of the power sector in meeting the UK’s legally binding Climate Change targets and fatally undermining investor confidence.

“The Chancellor and the Treasury are looking increasingly isolated on energy policy - their failure to agree support levels for onshore wind might appeal to a narrow political faction, but is clearly not in the national interest.”

Energy efficiency

WWF welcomed the Committee’s suggestion that the Government had fallen into the trap of focusing too much on the supply side of the energy system, while neglecting the contribution that demand-side activities, including energy efficiency and encouraging more flexible and responsive demand, could have.

David Nussbaum said: “Despite the Government’s warm words on energy efficiency the Bill in its current form does nothing to address the huge potential to reduce demand for electricity. Energy efficiency is a no-brainer both in reducing emissions and avoiding wasting money on building generation capacity that we don’t need. That ought to be attractive to the Treasury, as well as to DECC.”

Contracts for Difference

The Committee have also concluded that the proposed support mechanism for new low carbon capacity is highly problematic. In particular, the Committee said that the proposed Contracts for Difference (CfD) mechanism in its current form was unworkable and overly complex. WWF has previously expressed concern, which the Committee appears to share, that should proposals on nuclear fall foul of state aid rules the rest of the bill may be held up, seriously damaging investment in new renewable generation capacity.

David Nussbaum said: “We applaud the Committee’s recognition that there are serious flaws with the Contracts for Difference mechanism as currently proposed. It is overly complex and appears to be designed to support nuclear at the expense of renewable generators.”

Emissions Performance Standard

The Committee also highlight that the current proposal on the Emissions Performance Standard which avoid curtailing emissions from gas plants before 2045 as currently proposed may undermine our ability to meet long term carbon targets.

David Nussbaum said: “The proposal that emissions from gas plants built before 2015 will effectively never have to limit their emissions jeopardises our ability to meet UK carbon targets. The announcement on this, which was slipped out late on a Friday and which had the Chancellor’s fingerprints all over it, is another example of the Treasury’s malign influence on energy policy."

ENDS

Notes to editors

1. Energy and Climate Change Select Committee report, Draft Energy Bill: Pre-legislative Scrutiny, is published on 23 July 2012.

For more information:

George Smeeton, Senior Press Officer WWF-UK
Tel: 01483 412 388, Mob: 07917 052 948, email: GSmeeton@wwf.org.uk

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