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Energy: Time for the PM to Get Off the Fence

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To understand the current debate on energy in the UK, which is approaching fever pitch ahead of the publication of the Energy Bill later this month, heralding the biggest market reform of the energy sector for a generation, it's worth casting your mind back to 2008.

Almost exactly four years ago, the government passed the Climate Change Act, under which the UK is legally committed to reducing its greenhouse gas emissions by at least 80% by 2050 compared to 1990 levels. The overwhelming majority of MPs voted in favour of the Act (with only 5 voting against), reflecting an outstanding cross-party consensus behind an issue which was clearly understood to sit above every day politics. The 80% target was set to try to restrict levels of global warming to what climate science tells us the UK (and other industrialised countries) need to do to as a minimum to prevent temperatures rising by more than 2°C compared to pre-industrial levels.

The Act set up an independent Committee on Climate Change (CCC), to recommend carbon budgets for rolling five year periods out to 2050 and to advise the government on the action needed in each sector of the economy.

One consistent message from the CCC is that to be on a credible pathway to meet our 2050 target, the UK's power sector needs to be nearly carbon-free by 2030. The power sector is a major polluter in its own right, representing around 25% of the UK's carbon emissions today. It is also the sector where it is easiest to move quickly away from fossil fuels to renewable energy - and clean electricity, together with a much wiser use of energy, is a key part of addressing emissions from transport and heating.

So one of the most important issues in the debate over the Energy Bill is whether and how it should set a so-called 'decarbonisation target' for the power sector. Including such a target in the Bill, ideally at a level of 50g CO2 per kWh by 2030 (down from 500g today), as the CCC recommends, is one of the most important points that WWF and others are calling for, calls which have been backed by Labour, the Liberal Democrats and some prominent Conservatives like Tim Yeo.

A decarbonisation target should be a no-brainer - especially because it is a critical factor in ensuring that the UK delivers on the objectives set in the Climate Change Act just four years ago with broad cross-party support. But it would also greatly benefit economic growth in the clean energy sector, one of the few high performing parts of our economy.

2030 is a critical date in that from an investors' perspective, it is only one investment cycle away. Take the example of companies like global engineering giant Siemens and renewable energy company Gamesa, which both have plans to build offshore turbine factories in the UK. It takes roughly five years to build a factory and then around ten years of continued operation to make a return on investment. To make the case to their boards that they should invest in the UK, these companies therefore need to know that there will be a sizeable market for renewable energy in the UK out to 2030. And a key benefit of this long-term commitment will be to accelerate the deployment of renewable technologies and the rate at which their costs fall, making a clean energy system attractive and affordable.

But the more the Treasury keeps on refusing to engage constructively in the energy policy debate (having for instance ignored several requests to provide evidence to the Energy and Climate Change Select Committee's inquiry in the Energy Bill this summer) and the more we keep on witnessing unhelpful anti-wind farm declarations of the type recently made by Energy Minister John Hayes, the more international investors will consider the UK's energy market as a risky sector to invest in. This assessment has already been made by companies such as General Electric and Doosan Power who both shelved their major investment plans for the UK's renewable energy sector earlier this year.

It is high time for David Cameron, who made his support to the UK's green sector ever so clear back in 2006, to intervene and bring his government once and for all together in support of a strong Energy Bill. Inter-departmental politicking and coalition in-fighting have been features of the debate around energy within government in recent months, to the frustration of environmental groups, consumer bodies and industry alike. Yet, Mr Cameron, who once claimed he would be "the fourth minister" in DECC as energy was so important a topic, has been virtually silent on the energy issue for over two years. Mr Cameron is going to have to get off the fence at some point. Only then will we know whether he has kept his promise.