Osborne’s gas-land vision - 10 questions the Chancellor must answer...

...and a question each for Cameron, Clegg and Miliband on what they are going to do about it

23 Jul 2012, 16:33

One of the most frustrating aspects of the current row between the Treasury and the Department of Energy and Climate Change (DECC) - apart from the manner in which the Chancellor appears to want to eviscerate the green economy - is that No 11 has refused to publicly explain why it wants to slash support for renewables and remove barriers to increased investment in gas power plants.

The Treasury infamously rejected requests to appear before the Energy and Climate Change Select Committee of MPs, has given nothing but the most cursory responses to journalists' enquiries, and (this is partly the Opposition's fault) has faced few parliamentary questions on its interference in energy policy.

This means business groups such as the CBI, green business leaders and environmental NGOs have had to construct a defence against Osborne's attacks on the green economy without fully understanding the Chancellor's reasoning.

Without wishing to lapse into hyperbole, this is an affront to democracy. In both the short and long term, energy policy is one of the most important issues facing the UK: it influences energy bills and the cost of living, it determines whether or not we meet our carbon targets and respond adequately to climate change, and it has the potential to create or crush thousands of jobs. And yet we now know that an absolutely critical debate on the shape of our energy policy over the next 20 years is taking place entirely behind closed doors, with the Treasury privately calling for a complete shift in the policy landscape in favour of gas without explaining why.

We know why the DECC, the Lib Dems and green-minded Conservatives want to continue with an agenda based on the department's publicly stated goal to deliver a predictable policy environment that drives investment in a balanced low-carbon energy mix, including renewables, nuclear, and fossil fuel plants featuring carbon capture and storage. But we have no idea why Osborne has suddenly fallen in love with gas at the expense of other forms of generation, beyond speculation that he has been "got at" by the gas lobby and Lord Lawson and his climate-sceptic acolytes.

It's time for the Chancellor to answer some serious questions as to why he has chosen to turn energy policy into a political battleground with the Lib Dems. Here are 10 questions we've come up with should Osborne break cover and agree to answer his critics from the world of green business:

1. Why do you want to see unabated gas play a "core part" in the UK's energy mix through to 2030 and beyond?

The independent Committee on Climate Change has stated categorically that this cannot happen if the UK is to stay within its long-term carbon targets, and is insistent that the government should set a target of virtually decarbonising the electricity mix by 2030. Your letter is in complete defiance of this, instructing the DECC to signal that unabated gas has a role to play that goes beyond "just providing back-up for wind plant or peaking capacity", and insisting that no further decarbonisation targets are set after 2020. The Committee on Climate Change's role is advisory, but you have an obligation to explain why you have reached a different conclusion to a politically neutral committee of scientific and economic experts.

2. What evidence is there that turning the UK into a "gas hub" will ensure "that British consumers will be able to get the benefits if the price of gas falls"?

And more importantly, what evidence do you have that gas prices will fall? No one can predict future gas prices with any confidence, but what is known is that rising gas prices have been the main driver of recent increases in energy bills. Why would the UK want to become more dependent on imported gas from Russia and other countries we have a less-than-perfect relationship with? Where is the argument in favour of creating a gas hub?

3. What evidence is there that suggests cutting onshore wind energy subsidies beyond the 10 per cent proposed by the DECC is justified?

The DECC has repeatedly insisted that its proposals are evidence-based, while Scotland's First Minister Alex Salmond today opted for a 10 per cent cut to projects in Scotland, declaring that he was aware of no evidence to justify deeper cuts. Why do you think deeper cuts are justified, and where is the evidence to suggest that they are? You hint in your letter that you are concerned about the cost of renewable energy subsidies, but where is the evidence that these costs are excessive? And if you are concerned about costs, why are you targeting the lowest-cost form of renewable energy for the deepest subsidy cuts?

4. Are you concerned about the impact that uncertainty over renewable energy policy is having on investor confidence and job creation?

It is hard to recall an occasion when the normally staid CBI has been so critical of the Treasury. Business groups, investors and green campaigners are lining up to point out that the uncertainty the Treasury has created over renewable energy subsidies (which are due to be effected in just nine months, by the way) has delayed millions of pounds worth of investment and put major job-creating projects, such as the proposed wind turbine factories from Siemens and GE, at risk. What is your response to this criticism, as they would all love to hear it.

5. Are you concerned about the impact on investment in new nuclear capacity and carbon capture and storage technologies?

As recent reports have revealed, the UK is already finding it very difficult to attract investors to back plans for new nuclear reactors. But in talking up gas, you are both reducing confidence among renewables investors and raising serious questions about the attractiveness of new nuclear investment. Equally, how do you build the investment case for fitting carbon capture and storage (CCS) to gas-fired power stations when you want the Energy and Climate Change Secretary to signal that plants without CCS will be allowed to operate through to 2030 and beyond?

6. What has changed between now and last October, when the Treasury agreed to the package of cuts to renewables subsidies that DECC is proposing ?

These debates have already been had once already and they led to the initial consultation on renewables subsidies, the draft version of the Energy Bill, the fourth carbon budget, and the government's overarching energy road map. All of these policies and documents are designed to give investors certainty and drive funding into crucial infrastructure projects. But your letter implies you want to re-open the debate on all of them - why? And why now?

7. Do you respect the UK's carbon budgets, and do you remain committed to ensuring they are met?

If the UK pursues your plan to make unabated gas a "core part" of the energy mix, the country will struggle to meet carbon budget targets that require a halving of emissions by the late 2020s, not to mention an 80 per cent cut by 2050. It implies you either have to deliver deeper cuts in emissions from other parts of the economy or breach the carbon budget and open the UK up to judicial review – which is it to be?

8. What is your message to those green businesses who have delivered five per cent growth across the green economy in the past year?

Rightly or wrongly, the bulk of these companies now feel that they are being attacked and undermined by the Treasury on almost every front. What reassurance can you offer them, particularly given the fact that they represent one of the fastest growth areas of the economy? You have argued in the past that if the UK moves towards a low-carbon economy too quickly, its competitiveness will suffer, but are you not aware that many other economies that are committed to greener forms of growth - Germany, Japan, South Korea, and even China and the US - are also having to navigate this balancing act?

9. How many times have you met with Lord Lawson in the past year, and to what extent was energy policy discussed?

Lord Lawson is often described as a hero of yours, but it was assumed this was more for his economic record than his bizarre insistence that climate change is not a problem and should be roundly ignored by governments. Now that it's become clear you are lobbying within government for an increased reliance on fossil fuels, this assumption is being rethought. Do you ascribe to Lord Lawson's view that man-made climate change is not a problem that requires significant action from government? And while we're asking about lobbyists, how often have you met representatives of the gas and renewables industry in the past year?

10. Do you support the government's stated aim to become the greenest ever?

A significant chunk of the coalition agreement is committed to driving forward progressive green policies, many of which you now openly defy. Do you still accept that this government should aspire to be the greenest ever, meet its carbon budgets, and lead the world in its response to climate change? Moreover, what political advantage do you expect to gain from this row with the Lib Dems? Green issues are one of the few areas where the junior partner in the coalition polls well, and the areas you are attacking are totemic to the party's membership. After your party failed to deliver on Lords reform, the Lib Dems have absolutely nothing to gain – and a lot to lose – by folding to you on this issue.

 

It is not only the Chancellor who faces questions about this increasingly damaging saga – answers are also needed from the leaders of all three main parties:

Cameron: Where are you?

The Prime Minister intervened in the last row on environmental policy over the fourth carbon budget, forcing through the adoption of demanding emission targets in defiance of his Chancellor. But he has been strangely absent from the current row, and the rumour in Whitehall is that some senior Downing Street advisers are less effusive in their support for the green economy than they once were. Is Cameron really willing to sell the low-carbon energy sector down the river and endorse a dash for gas after declaring his ambition to lead the greenest government ever? You said you would be the fourth minister at DECC, Cameron. Where are you now?

Clegg: What now?

The Lib Dems have secured plaudits from green groups for their willingness to stand up to Osborne in the last month (one observer told me they had "never been as impressed with the Lib Dems as I've been in the past few weeks") – but how does the party turn admirable resistance into policy victory? If the Lib Dems are to retain their reputation as supporters of the environment, they simply have to secure a reasonable deal for the renewables sector and block the Chancellor's absurd calls for a new dash for gas. But where does the party secure the leverage to get the Chancellor to back down, particularly when embarrassing Osborne by pointing out his previous vocal support for the green economy is unlikely to work. No one will want to resign and deal a major blow to the coalition over an issue that will be presented by the press as a spat over wind farms (even though we all know it is much more important than that), so what happens now?

Miliband: Why the silence?

The current row is essentially the endgame of a battle that kicked off when the leader of the Opposition was the UK's first Energy and Climate Change Secretary, and yet Miliband has been strangely silent on an issue about which he is well informed and has the potential to inconvenience his rivals. We are dealing with climate change and energy infrastructure issues that will impact the UK for decades to come - we have a right to know where the man who wants to be the next prime minister stands on them.

 

These are the questions green businesses need answering, one way or another.

No one wants to countenance the possibility that the Chancellor (and, by extension, the Prime Minister) has no interest in nurturing the renewables sector and the wider green economy, but if this is the case then it is best we know quickly so investors can make decisions accordingly.

Carbon targets are being put at risk, jobs are being lost and the chances of the lights going out in the second half of the decade are increasing, and all because the Chancellor is refusing to provide straight answers.

  
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