Britain needs to revert to central planning of market

Britain needs to go back to old-style central planning of its electricity market, with the Government deciding who builds power stations where, so that it can take on the world’s toughest target to cut its emissions of the greenhouse gases causing global warming, the independent Committee on Climate Change tells the Government today.

The only way of getting the £150bn worth of new low-carbon energy generating plant – whether offshore windfarms, nuclear power stations or loaw-carbon and gas plants – will be for the Government to offer contracts with guaranteed prices for the electricity, the committee says.

In pursuit of its ultimate goal of slashing carbon dioxide by 80 per cent by 2050, the Government should now set a new, legally-binding interim target of a 60 per cent cut by 2030, the committee says in its latest report – which would be far and away the most demanding emissions target anywhere.

The committee, set up under the Under the Climate Change Act, 2008, says that anything less would not be compatible with the 80 per cent objective, and says it is making the recommendation after an extensive review of recent climate science which looked at 500 recently published peer-reviewed papers.

This led to the conclusion, the committee says, that “the science remains robust and the case for action is stronger than ever.”

Acting on recommendations from the committee, the Government has already set itself a legally-binding target of cutting UK emissions by 34 per cent by 2020, which is believed to be tougher than any other.

This should now be tightened to 37 per cent, the committee says, and tightened further to a 42 per cent cut if a world-wide climate change deal can be achieved through UN negotiations, like those going on this week at Cancun in Mexico.

Although a 60 per cent cut by 2030, on 1990 levels – which actually means a 46 per cent cut in carbon emissions from where Britain is now, in a mere 20 years – would represent an unprecedented level of ambition, the committee chairman, Lord Turner of Ecchinswell (who as Adair Turner was the director general of the Confederation of British Industry) characterised it yesterday as “stretching but realistic.”

Lord Turner said: “The case for action on climate change is as strong as ever. Climate science remains robust and suggests that there are very significant risks if we do not cut emissions. And countries acting now will gain economic benefits in an increasingly carbon-constrained world.”

The 60 per cent target would be achievable “at a cost of less than one per cent of GDP,” Lord Turner said, adding: “Any less ambition would not be compatible with the 2050 target in the Climate Change Act.”

In its new report the committee sets out in detail how the 60 per cent target could be reached, with its most striking recommendation being that Britain’s ultra-liberalised electricity market should return to a form of central planning.

Achieving the necessary “radical decarbonisation” of electricity will require 40 gigawatts of low-carbon power generation – the equivalent of 25 large conventional coal-fired power stations – to be added to the grid in the next two decades.

This massive investment, which would be largely a mixture of offshore windfarms, nuclear power plants, and coal and gas stations fitted with very expensive carbon capture and storage technology, can best be secured by the Government tendering long-term contracts for low-carbon capacity, the committee says.

In effect, the Government would be directing who builds a new power station where, and offering a fixed price for the resultant electricity, rather than leaving it all to the market as at present. The Government is known to be planning its own White Paper on electricity market reform for publication shortly.

Among other recommendations for radical CO2 emissions cuts, the committee says that 60 per cent of new vehicles coming onto the market should be electric-powered by 2030, and by that date there should be 11 million electric cars and 1.5 million electric vans on the road. Hydrogen could be used to power Heavy Goods Vehicles and half of all buses.

It anticipates seven million households using heat pumps rather than boilers for heating by 2030, and wants the widespread use of more carbon-efficient practices on farms.

Agriculture emissions could be cut by up to 20 per cent over the next two decades through a range of more efficient farming practice both as regards livestock and the application of fertiliser to soils, the committee says, noting: “Unlocking this potential may require stronger policies than the current voluntary approach, and the Government should consider the full range of levers to strengthen incentives for farmers.”

As for the cost of it all, although the committee does not spell it out, the one per cent of GDP to which Lord Turner refers is actually an enormous sum, as Britain’s current GDP of £1.45 trillion is expected roughly to double to £2.9 trillion by 2030.

One per cent of that would be £29bn annually, and if that is divided by the approximately 25 million households in the country, it comes out at £1,160 per home. Lord Turner’s estimate that the bill would be “less than” one per cent makes this a potential upper limit, but it is still a strong indication that household energy bills will have to rise steeply to pay the bill for combating climate change.

Under the Climate Change Act, the Government is not bound to take the committee’s advice – but it is bound to listen, and it is subject to the committee’s criticism in its annual reports.