Energy has dominated politics for the last few months and the Prime Minister hopes to counter Ed Miliband’s price freeze pledge by rolling back the green levies that contribute to rising bills. Both offers have very little credibility, in my opinion, for a reason that few of our politicians want to talk about. The bottom line is that when it comes to energy prices, both Party leaders’ hands are tried – somewhat willingly – by our links to the European Union.
Although energy policy remains under Member States’ control, the EU’s commitment to becoming the world’s leader in economic decarbonisation exerts pressure on Britain. For example, Mr. Miliband’s 2008 Climate Change Act commits our government to reducing the country’s carbon emissions to at least 80% lower than 1990s-levels by 2050 and can be seen as the ‘jewel in the crown’ of the EU’s decarbonisation mission. These legally binding targets are being pursued at an astronomical cost to British taxpayer, cutting off our access to cheap energy by closing down coal-fired power stations and focusing on using heavily subsidised renewable energy instead. Such radical changes were never going to come cheap.
These legally binding targets, which all the major parties agreed with at the time, have caused energy prices to soar for homeowners and businesses alike – pushing more and more people into ‘fuel poverty’. Depressingly, it has been estimated that electricity prices have increased by 17% in the last four years and could rise another 41% by 2040 as further measures within the Climate Change Act come into effect. This reflects well neither on Labour nor the Tories – both of which, despite the posturing, do not seem to be able to do much about it. A cynical person might think that Mr. Miliband has sought to lay the blame at energy companies (whose profits per year average at a quite normal 5-6%) to deflect attention away from his own role in inflating prices. He may also think Mr. Cameron is seeking to distinguish himself from the green-friendly Liberal Democrats to make himself a more viable option to UKIP voters who share Nigel Farage’s scepticism about man-made climate change.
However pressing you might think it is that we continue with decarbonisation, the needs of those who are already struggling with fuel bills will not be met with cheap gimmicks, especially if energy bills do indeed continue to rise. There is a reasonable political and moral case on top of the economic one, for the Prime Minister to include a more ‘laissez-faire’ attitude towards energy policy in any future re-structuring of our relationship with Europe. As already stated, although energy is under Member States’ control, our international reputation depends on us being on song with the EU’s carbon reduction plan – otherwise we could simply ignore all these targets as the enforcement mechanisms barely hold up to scrutiny.
With regards to specifics, the European Commission has stated that it wants to see the shale gas market regulated to the point where it doesn’t pose any significant environmental risk. This is another way of saying that fracking should be made less economically viable and, thus, more expensive when it reaches the consumer. The ‘better off out’ contingent of the Tories would no doubt be wondering why any potential damage to UK landscape should be the concern of the EU (evidence suggests potential damage has been grossly exaggerated), especially when shale gas development could potentially benefit an EU gas market that is being undermined by the shale gas boom in the USA that is flooding our own continent with unwanted cheap coal.
There is also the more complex issue of nuclear power. The EU has state aid rules in place that constrict the degree to which the British government can guarantee financial security to the private companies taking on the risk of building nuclear plants. Once again, the already lengthy and costly process of diversifying and spreading the burden of our energy needs hits those paying the bills in the end.
David Cameron will most definitely be aware of the EU’s impact on our ability to control energy prices, but I fear he has chosen to ignore this up until now because of his previous backing of the Climate Change Act, his husky hugging, and his pledge to lead “the greenest government ever”. He will now face accusations of fraudulent behaviour and political opportunism from his opponents, but if businesses and ordinary people have more money in their pockets as a result of a slowing down of economic de-carbonisation, then it will be worth it.
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