Wednesday, July 30, 2008

First, do no harm

In recent months there has been a lot of discussion about how the Government might help people facing high energy prices. The unions, politicians and various campaigners have called for a crackdown on energy companies they accuse of profiteering.

Yesterday, the Renewable Energy foundation revealed that the Government's own environmental policies are a major component of the price of energy:

  • Climate change policies make up around 14% of the average domestic electricity bill and 3% of the average domestic gas bill.

  • Climate change policies also make up 21% of the average business electricity bill and 4% of the average business gas bill (i).

  • By 2020 the burden of green policies will have risen to 18% of the average domestic electricity bill and 55% of the average business electricity bill(ii).

  • Despite this massive cost the regulations are projected to achieve very little. The Renewables Obligation is expected to cut emissions by just 1.6% at an incredible cost of £400 per tonne of carbon emissions saved.

    Most of these climate change policies, from the Renewables Obligation to the European Union Emissions Trading Scheme, have been introduced since the current Government came to power. They have been major drivers of the rises in energy prices. While politicians single out energy companies for criticism they keep quiet about their own complicity in rising prices.

    With Ofgem confident that our energy market is reasonably competitive isn't hounding electricity companies just a crude attempt to displace popular resentment of high prices? If the Government were really committed to bringing down prices it could easily do so by scrapping some of these ineffective climate change regulations.

    Cross-posted from the TaxPayers' Alliance blog.


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