Regno Unito : December 15, 2008
The recent establishment of the Department of Energy and Climate Change brings together much of the Climate Change Group, previously housed within the Department for Business, Enterprise and Regulatory Reform (BERR). As such it is a welcome move by the Government raising the political profile of both groups and bringing under one roof key elements of the closely related energy and climate change agendas. In the last few years energy policy has been substituted by a series of consultations and White Papers which have raised issues rather than provide concrete direction. The main focus has been on renewable generation without coming to grips with the impact on generation capacity of the EU Large Combustion Plant Directive which requires major coal-fired power stations either to be fitted with high cost emissions scrubbing equipment or retired by 2015.
It would appear that only lukewarm support has been given to Carbon Capture and Storage (CCS) projects with BP withdrawing from the bidding and RWE asking why it had been excluded from the short list. The previous BP demonstration project at Peterhead in Scotland did not proceed due to a lack of Government funding.
Leaving aside the present difficulties in financing new infrastructure projects, one of the major issues facing potential investors is the lack of a long term stable policy environment and, indeed, seemly contradictory initiatives. Despite the push towards renewable energy, under the proposed Carbon Reduction Commitment which commences in 2010, all externally sourced generation whether “green” or not will be deemed to emit the standard grid value (currently 480g of CO₂/kWh). This is a significant disincentive for companies to purchase renewable generation and appears to be counterintuitive to the objective of lowering greenhouse gas emissions.
As evidence of contradictory policies, protestors recently erected a barricade at Stanstead airport (one of four located in the London area) to highlight a discrepancy between the UK climate change targets and its encouragement of airport expansion which will result in increased air transport – a significant emitter of greenhouse gases.
The UK is in great need of common goals across its energy and climate change agenda. Let us hope that this new department under Ed Millband will provide a coherent energy climate change strategy which will be formed into sensible policy allowing investors the opportunity to take a longer term view.