A Government scheme to rid Britain of carbon emissions will send household bills soaring, hasten the closure of old power stations and accelerate the introduction of electric cars.
Chris Huhne, the energy secretary, published the coalition’s Carbon Plan last week. The 83-page document sets out hard targets for a number of initiatives, such as the fast-track formation of a green investment bank, which experts say are critical to hitting pollution reduction targets that are among the toughest in the world.
David Cameron declared that his government would be “the greenest ever” and has stuck to commitments made by the previous government to reduce carbon dioxide emissions by 34% from 1990 levels by 2020, and 80% by 2050.
Most of the cut will come from the electricity industry, which is the largest source of pollution. In the Carbon Plan, Huhne commits the government to create by next month a law to set a carbon floor — a minimum price for emissions permits.
Under the European emissions trading scheme, power companies have to buy carbon permits for each tonne of pollution they emit beyond a pre-determined limit. However, prices are volatile and generally too low to motivate firms to develop new energy sources, such as wind, that are more expensive to build but cheaper to run because they emit virtually no greenhouse gases.
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The carbon floor, which is expected to come into effect by 2013, would be a hammer blow to coal-fired power producers.
Drax, operator of the giant coal-fired plant in Selby, North Yorkshire, which is Europe’s single biggest polluter, is among those fighting to water down the proposal.
“If they introduce a carbon floor, it kills Drax and will also hurt UK manufacturing,” an analyst said. Steel mills, cement plants and other big polluters will be incorporated into the European carbon trading scheme as well as the carbon floor programme in 2013.
The switch to low-carbon power will be felt by households too. Ofgem, the gas and electricity regulator, said that annual energy bills could hit £2,000 by 2017, up from £1,100 today, as the costs of expensive low-carbon technologies are passed on.
Most of the points in the Carbon Plan, however, are reiterations of previously announced policies rather than bold steps taking the country in new directions.
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The green investment bank, for example, was announced last year to great fanfare but details were scant. The Treasury has resisted Huhne’s argument that the bank should be able to raise finance from the capital markets, rather than simply being a fund that hands out modest sums of taxpayer money. His announcement that the bank must be up and running by September 2012 will increase the pressure to find a solution.
The Department for Transport, meanwhile, must publish by as early as June its plan on how it will build the vast infrastructure required for electric cars.