Industry fears it will be hit by fresh drive to cut emissions

Electricity generators have warned that placing an even greater burden on the sector to reduce emissions of carbon dioxide, under a forthcoming official plan, will threaten Britain's already struggling power network.

Power stations and other heavy users of energy fear that they will again be seen as a "soft touch" for a government desperate to meet its ambitious target of a 20 per cent cut in UK carbon dioxide emissions by 2010.

Electricity producers believe it will be very difficult to reconcile the need for billions of pounds of new investment in power stations, to make up for a rapidly approaching shortfall in Britain's ageing generating capacity, with having to also shoulder almost the entire country's effort in cutting emissions of carbon dioxide.

David Porter, chief executive of the Association of Electricity Producers, said: "Companies want to invest in new, clean power plant, but it must be recognised that their choice of technology is affected not just by fuel prices, but by carbon costs, too. That could affect the extent of diversity in the UK's generating industry."

Separately, the CBI said the 20 per cent figure simply could not be achieved and the Government must set different targets. Matthew Farrow, head of environment policy at the CBI, said that there were "diminishing returns" attainable from ever-greater demands of emissions cuts from heavy industry. He said that households and other parts of the economy needed to share the burden.

"Government needs to understand that targets are not something that businesses can achieve by themselves, but that is the only lever they seem to have," Mr Farrow said.

He said that there was a series of relatively low-cost measures aimed at the consumer that could be used. For instance, he suggested that stamp duty payable on buying energy-efficient homes could be reduced.

The Government admits that the 20 per cent emissions cut figure, which has featured in the last three Labour election manifestos, will be tough to meet. However, a plan of action, called the Climate Change Review Programme, has been repeatedly delayed amid reports that the Department of Trade and Industry wants to ditch the goal. The DTI apparently has the support of the Prime Minister, who is fearful that it would harm British industry.

Britain's obligations under the Kyoto protocol only require a 10 per cent reduction by 2010, so an aim to double that figure would place restrictions on British business that key competitors do not have. However, the Department for the Environment, Food and Rural Affairs (Defra) is said to be determined to stick by the 20 per cent figure. A spokesman said the Climate Change Review Programme would be published "shortly".

The Government must also publish its next proposed "National Allocation Plan" before the summer. This would become the UK's submission to the European Commission for the country's permitted carbon emissions, for the period from 2008 to 2012.

According to Defra's figures, under the last National Allocation Plan, which covered the period from 2005 to the end of 2007, power stations had to cut 21.5 per cent of their historic emissions. All the other sectors covered by the scheme - except food, drink and tobacco - were actually allowed to raise their emissions over that time. As electricity generators do not export, analysts said the Government believes it can hit them without hurting British competitiveness.

Mr Porter said: "The brunt of the emissions cuts in Phase 1 was borne by the electricity generating sector. Eventually, that burden will have to be spread, or it will be impossible to meet government targets. But I have an uncomfortable feeling that we might be singled out for a hefty cut in emissions reduction when the next allocation plan emerges."