Trading a decarbonisation target for coal plant closures: Is it a good deal?
Parliamentarians have put their sparkly party conference shoes back in the cupboard, returning to the sobriety of Westminster and the arguments they left behind in September. That includes haggling over the energy bill.
The latest rumour is that the government may offer to regulate old coal power plants to pacify Lib Dems agitating for a power sector decarbonisation target in the legislation.
So just how good a deal is it for those who want to see the UK’s power sector emissions fall?
State of play
First, a bit of a recap. For months, factions of the government have been embroiled in a battle over including a target to drastically cut emissions from the energy sector by 2030 in new energy legislation.
The government has said it won’t set a target until 2015. But certain sections of the coalition want the government to commit to power sector decarbonisation now – and Labour has committed to setting a target if it gets elected.
In June, an amendment to require the government to set a decarbonisation target now, rather than in three years’ time, was narrowly defeated.
The target would have limited emissions in line with recommendations from government advisor, the Committee on Climate Change (CCC). The CCC previously called for power sector emissions to be limited to 50 grams of carbon dioxide per kilowatt hour by 2030. Supporters argued that adopting the target now would provide low carbon energy investors with more certainty.
Lords have been considering sending the bill back to the House of Commons with the decarbonisation amendment attached, forcing the government to look at it again.
That brings us to today, with the Financial Times reporting that the government is willing to accept an alternative amendment restricting emissions from old coal power plants. That’s if the Lords agree to the government’s decarbonisation target timeline.
Old coal
The coal amendment would effectively make old coal power stations economically unviable – leading many to close, and significantly reducing power sector emissions.
As the energy bill currently stands, the new fuel plants’ emissions are restricted through the Emissions Performance Standard (EPS). The government today said it would extend the EPS to old coal plants – despite having rejected this idea in June.
The EU’s Large Combustion Plant Directive (LCPD) currently requires old coal generators to upgrade their plants, limiting their sulphur dioxide and nitrogen oxide emissions, or close down. The LCPD has caused old coal plants across Europe (including the UK) to close in recent years.
But since coal is currently cheap, old coal generators might decide it’s worth upgrading to meet the EU’s regulations. Doing so would allow them to stay open – and emit – potentially for decades. The government’s proposal to limit the amount of carbon dioxide they emit could change this, however, making it much less economically viable to run coal plants.
The government has previously been against this, however. The Department of Energy and Climate Change previously told Carbon Brief:
“Applying EPS retrospectively to existing coal plants could undermine existing investments, which we think would impact negatively on the UK’s competitiveness, security of supply and costs to consumers”.
So today’s announcement is quite a U-turn, which could have a significant impact on the UK’s power sector.
Trading decarbonisation for old coal
By accepting the old coal amendment, the government is throwing a bone to parliamentarians who are concerned the energy bill doesn’t go far enough to reduce the UK’s power sector emissions. But is it a good deal – or should they hold out for a decarbonisation target?
Chief Executive of the CCC, David Kennedy, tells us the committee hasn’t modelled for this eventuality. It assumes old coal plants will be squeezed out of the energy system by existing policies, he said. For instance, the carbon price floor should make coal generation expensive, and support for biomass conversion and the LCPD should encourage switching to less carbon intensive forms of power generation.
Kennedy adds:
“[While] it is important that coal does come off the system to be replaced by low-carbon generation. A decarbonisation target is the best way of ensuring that this happens”.
That’s because a decarbonisation target would commit the coalition – and future governments – to low carbon policies. In contrast, extending the EPS is a short term measure with no strings attached.
It’s unclear whether the government’s proposal will be enough to persuade Lords to pass the energy bill without a decarbonisation target. The CCC’s comments suggest that if Lords accept the deal, they may be gaining short-term emissions reductions at the expense of longer-term commitments.
Lords have until October 28th to decide whether or not to accept the government’s low(ish)-carbon makeweight.