February 27, 2013 7:17 pm

Concerns raised over carbon energy target

Investors in low-carbon energy will avoid the UK or delay their projects unless the government sets a 2030 target for reducing carbon in the electricity market, the chairman of the Committee on Climate Change has warned.

Lord Deben, Conservative former environment minister, has written to Ed Davey, energy secretary, urging him to consider an amendment to set the target in 2014 to “address widely raised investor concerns”.

The CCC, which has a statutory duty to advise the government on how to hit its carbon targets, is concerned that the Treasury wants to pursue a new dash for gas at the expense of green energy.

Under one scenario published by the government in its recent gas generation strategy there would be a sharp drop in new low-carbon investment after 2020.

“We estimate that . . . a scenario that reaches 200g CO2/kWh in 2030 would require little or no further investment in low-carbon generation beyond 2020,” the committee said.

David Kennedy, chief executive of the CCC, warned that the strategy would be “very damaging” for UK investment in low-carbon power.

The letter comes after months of wrangling within the coalition over the direction of energy policy. George Osborne, the chancellor, has increasingly pushed for new gas stations rather than wind farms or solar power.

A 2030 target was ruled out by the Treasury in December after bitter arguments between Mr Davey, who supports the measure, and Mr Osborne. The energy secretary only capitulated after the Treasury promised generous subsidies for low-carbon energy through subsidies in the energy bill.

Since then the idea of a decarbonisation target has been revived by Tim Yeo, Tory chair of the energy committee, who has put forward an amendment to the energy bill.

In his letter, Lord Deben, formerly known as John Gummer, said that without the target there would be great uncertainty in the sector, and that would make supply chain investment decisions and project development more difficult. This would be particularly damaging for the offshore wind supply chain, he said.

Lord Deben’s intervention carries particular resonance because the Tory grandee was appointed last year as chair of the CCC after the personal intervention of David Cameron.

The prime minister threw his weight into the process to prevent Richard Lambert, former head of the CBI employers’ group and a former editor of the Financial Times, from getting the job.

Mr Cameron also intervened last year to prevent Mr Kennedy from taking up the job of permanent secretary at the energy department, in a sign of the Tory retreat from its once-cherished green agenda.

The political debate comes at a time of rising energy prices, with politicians determined to protect consumers from further increases. Centrica, owner of British Gas, which raised its prices by 6 per cent in October, announced a 14 per cent jump in profits on Wednesday.

The CCC acknowledged that investment in onshore wind and nuclear in the 2020s would be slightly more expensive than unabated gas generation. But it predicted that low-carbon energy would create “relatively low prices” beyond 2030.

In a separate letter to Caroline Flint, shadow energy secretary, Mr Kennedy said that a new “emission performance standard” for power plants could provide a “useful backstop” to a low-carbon target, although he stopped short of recommending the move.

Additional reporting by Guy Chazan

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