June 3, 2013

U.K. Says Energy Law to Bring ‘Massive’ Cut in Pollution

Energy Secretary Ed Davey urged lawmakers to back away from immediately imposing targets for carbon emission from U.K. power plants, saying legislation being considered now will make a “massive” reduction. 

His department estimated the law being considered in Parliament tomorrow will stimulate 110 billion pounds ($168 billion) of investment in power stations and the electric grid. It includes guaranteed power prices for atomic reactors and wind farms and payments for gas plants that remain available to smooth peaks and troughs of intermittent renewable generation. 

“The energy bill will lead to a massive decarbonization of the power sector by 2030, and will enable the U.K. to cut its economy-wide emissions by 50 percent by 2030,” Davey said in a statement e-mailed by the Department of Energy and Climate Change. It “will make the U.K. a destination of choice for investors in low-carbon energy,” driving growth and jobs. 

The comments were aimed at heading off a rebellion by some members of the ruling Conservatives and Liberal Democrat parties, who along with the Labour opposition want to impose a target to largely eliminate carbon emissions from power generation by 2030. The Treasury and some utilities are concerned that measure would boost power prices. 

Davey reached an agreement last year with Chancellor of the Exchequer George Osborne to postpone a decision on whether to have a target until at least 2016. Manufacturers of low-carbon power-generation equipment including Vestas Wind Systems A/S (VWS) and Area SA (AREVA) have said the lack of a target risks choking off job creation.

Davey’s View

“We are also legislating to set a decarbonization target range for the power sector in 2016, something no political party had in their manifesto,” Davey said. 

Barry Gardiner, a Labour member of Parliament, has joined with Conservative lawmaker Tim Yeo, who leads the energy and climate change committee, in proposing an amendment to the energy bill that would ensure a decarbonization target is set sooner than 2016. Labour failed to win broader backing for a similar measure in December, and it isn’t clear whether the rebels have enough votes to keep the matter alive this week. 

The U.K.’s biggest business lobby, the Confederation of British Industry, said debate over the decarbonization target shouldn’t be allowed to derail the legislation. Investment decisions are more likely to be based on the terms of the so-called contracts for difference, guaranteeing power prices to nuclear and renewables, and on capacity payments designed to ensure supply when the wind isn’t blowing, it said.

‘Vital Investments’

“Debates about the effect of including a target in the bill should not be allowed to prevent critical policy details being tied down,” CBI Chief Policy Director Katja Hall said in an e-mailed statement. “Vital investment decisions are hanging in the balance.” 

The bill reforming the electricity market will stimulate generation from a mix of nuclear, gas and renewables. It will also allow for carbon capture and storage technology. The government also wants to amend the bill to including payments for measures that cut power demand within its planned capacity market. 

Lawmakers are scheduled to vote on the amendments on Tuesday before sending the law to the House of Lords, the upper chamber of Parliament. The government says it wants to pass the law this year. 

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