Low-carbon strategy will raise household energy bills by £200 a year

Household energy bills will rise by more than £200 a year under the Government’s low-carbon strategy being announced next week.

Meeting Britain’s targets for cutting emissions could push another 1.7 million households into fuel poverty, meaning that seven million homes would be spending more than 10 per cent of their income on fuel.

The Renewable Energy Strategy, to be published on Wednesday, will state that more than £100 billion will have to be invested in renewable energy infrastructure, including 7,000 wind turbines, by 2020.

The Government has bound itself legally to cutting CO2 emissions by 34 per cent by 2020 and 80 per cent by 2050. To achieve this, it must increase the amount of energy generated from renewable sources from 2 per cent at present to 15 per cent by 2020.
The strategy estimates that energy bills will have to rise by about 20 per cent to pay for the investment. The average household currently pays about £1,150 a year for electricity and gas, a small decline on last year but still double the amount paid in 2003.

The cost of converting to renewable energy and modernising Britain’s power supply would add about £230 to annual bills. Costs are likely to ratchet up quickly as the investment is made, with the increase reaching 20 per cent within three years.
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G8's climate change targets

Because the leaders of the rich countries, at their meeting in Italy, have just made a great headline-grabbing pledge to cut their emissions of carbon dioxide, in the fight against climate change, by 80 per cent by 2050.
How would we go about an 80 per cent C02 reduction once it was properly agreed?

This will be the greatest common enterprise on which humanity has ever embarked. To bring it about you might instinctively think windfarms, or solar panels, or electric cars, and they're all on the way and important, but the basic tool is really a more abstract one: the price of carbon, as determined by markets such as that of the European Union's Emissions Trading Scheme (ETS).

Why is that so important?

Nicholas Stern, in his groundbreaking report on the economics of climate change, said that global warming represented the greatest market failure in history: the true cost of emitting carbon dioxide was not remotely reflected in its price. As the governments in the ETS (and later, we hope, the US and elsewhere) squeeze the amount of CO2 companies are allowed to emit each year, the rising price of permits will drive the efforts to do without it, throughout society; it will drive the necessary behaviour changes by consumers, from transport, to heating choice, to diet (Oxfam points out, for example, how large is the carbon footprint of a steak compared to the same amount of calories produced from vegetarian sources).

Behaviour change is one of the two ways forward, yet despite the fervent hopes of "deep greens", it will need state or market intervention to make most people change their ways. The ultimate (and fair) way of doing it would be to give everyone the same personal "carbon allowance" which they can use as they wish; this is a long way off in practical terms, but as global warming gets worse, it may yet appear on the agenda.

What's the other way forward?

Technological fixes. Nuclear power and the coming technology of carbon capture and storage may – stress the "may" – mean we can carry on with our electricity-based lifestyle while slashing our emissions, as renewable energy on its own is unlikely to be sufficient. Electric motors and hydrogen fuel cells may allow us to maintain private car mobility, carbon-free, on the roads.

Aviation is a lot more difficult: the aviation industry sees biofuels as its get-out-of-jail card, but their expansion shows every sign of drastically pushing up food prices, never mind wrecking the rainforest. Getting aviation emissions down may ultimately mean restricting people's ability to fly, a very difficult job for any politician to undertake. It is becoming obvious that technological fixes are much preferred by politicians to asking people to change their behaviour; it is dawning on them that no one ever got elected by asking voters to make do with less.

Is an 80 per cent cut in emissions just pie in the sky?

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Gas firms fail to pass price cuts

Consumers are being denied the benefits of a sudden collapse in the price of natural gas that is bringing a profits surge to gas utilities.

Margins in the gas industry are reaching record levels, experts claim, because of an emerging glut of fuel in the wholesale markets caused by the recession and new supplies.

But utilities are failing to pass on the benefit of a fall, by two thirds, in the wholesale price. The gap between the retail price and the wholesale cost is expected to boost the profits of the residential business of British Gas by more than 50 per cent this year.

Wholesale prices are tumbling and are expected to fall further, says Niall Trimble, director of The Energy Contract Company, a gas consultancy.
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