Mail on Sunday’s £300 billion ‘eco bill’ claim is almost double government estimates
The government has today announced households would be paying £50 less for energy next year – good news, says climate skeptic journalist David Rose in the Mail on Sunday.
But before everyone rushes out to spend their newly-recovered funds, they should hear the bad news: The paper says households will still be expected to foot a £300 billion “eco-bill” due to the UK’s climate legislation.
But that headline figure is almost double what the government says will need to be spent to modernise the UK’s energy system.
‘Eco-bill’
Rose says the government’s latest announcement is small fry compared to the bigger costs associated with the government’s obligation to decarbonise. He says the main reason bills are going to go up in the future is because the government is going to have spend big to reduce emissions.
That’s because MPs passed a law in 2008 which obliges the government to reduce the UK’s greenhouse gas emissions. He says the Climate Change Act requires the government “to reduce emissions of carbon dioxide by 15 per cent from their 1990 level by 2020”.
That’s not true. The government is legally required to reduce emissions by considerably more than this – 80 per cent cut by 2050, which implies a 42 per cent reduction in 2020 according to government advisors, the Committee on Climate Change (CCC).
It’s possible Rose was getting confused with an EU target to provide 15 per cent of the UK’s electricity from renewable sources by 2020.
Either way, Rose says transition to a low carbon energy system is going to cost a lot of money: £300 billion, he claims. That’s one heck of an “eco-bill”.
The government’s figures dispute this, however. The National Audit Office says the total cost of upgrading the UK’s energy infrastructure is closer to £158 billion by 2020, or £176 billion by 2030. So why the discrepancy?
Assumptions
Rose’s £300 billion claim appears to come from a report by consultants Liberum Capital, released earlier this year.
According to Liberum’s analysis, meeting the UK’s decarbonisation target would mean spending £376 billion by 2030 on building and connecting new power plants, as well as making homes more energy efficient.
But lots of investment will be needed regardless of the government’s low carbon goals, Liberum says. It estimates that without any effort to decarbonise at all, the government would still need to spend a little over £150 billion replacing the UK’s old power plants and pipelines.
So even based on Liberum’s analysis, the “eco” part of the UK’s energy infrastructure bill is around £175 billion – not £300 billion.
But the CCC says Liberum’s figures are still too high. One reason could be that Liberum seems to assume the cost of building low carbon energy sources will stay about the same as it is now, the CCC says.
For instance, Liberum assumes investors will need to spend £100 billion on offshore wind if the UK decarbonises the energy sector. It says this falls to £10 billion if the UK was to abandon its climate goals.
But the CCC projects the cost of building low carbon technologies like offshore wind will fall over the next two decades – from around £140 to £165 per megawatt hour in 2012, to £110 in 2030. If that were the case, the cost of building windfarms would reduce significantly.
Furthermore, by only looking at how much needs to be invested, Liberum assumes there is no economic benefit to switching to low carbon energy.
But failing to invest in low carbon technology could leave the UK vulnerable to volatile gas prices, the CCC says. It estimates the UK could save between £25 and £45 billion if it invests in low carbon generation instead of gas plants, and gas prices stay about the same as they are today. If gas prices rise – and fossil fuels become unattractive for other reasons, such as a high carbon price – it says the UK could save as much as £100 billion by investing in low carbon energy.
So while investors could save money by building more cheap gas plants instead of windfarms, that saving could be almost wiped out by high gas prices if the government abandoned its decarbonisation targets.
‘Winning’ on bills
So if the costs of renewable energy isn’t a good reason for scrapping the UK’s decarbonisation plans, why else should they be purged? Because people hate green levies, Rose says.
Rose backs his argument up with polling data featured in the Mail on Sunday in October. According to that story, the results show “a full 60 per cent of voters object to paying ‘green taxes'”. Just 18 per cent support the measures, according to the paper. In the light of this data, Rose says the Mail on Sunday’s anti-green levies campaign has “led the way in communicating the ordinary householder’s view”.
But this wasn’t the first poll the paper conducted on the issue. Just the week before, Survation had conducted its first survey on green taxes, which came out with very different results – though the Mail on Sunday never published them.
Indeed, the Mail on Sunday asked the question in several ways, but every time found that people are more likely to support green taxes than oppose them. It found 45 per cent think green taxes are an important way to protect the environment. 38 per cent said they were a “waste of money”.
The Mail on Sunday’s second go, which yielded the 60 per cent figure, was more direct. It asked: “At the moment, the average annual household energy bill includes £128 in “green taxes”, used to subsidise items such as wind farms, and other government measures. By 2020, this figure will be around £270. Do you support or oppose the existence of these charges?”
Hardly subtle, but it did the job. The Mail on Sunday’s coverage fails to give a more rounded view of how people see the wider energy debate, however. Polling expert, Leo Barasi, has noted before that the paper’s data shows that where people can see a direct benefit to themselves and others, they are supportive of spending.
The problem with the government’s £50 energy bill cut is that most of it comes from delaying an energy efficiency scheme that targets the fuel poor – precisely the kind of policy people are likely to support.
Unfortunately, the government’s announcement and Rose’s article don’t differentiate between the kinds of measures people are paying for through their bills. This has meant the most popular measure is the one in the firing line.
So Rose may be right on that front, cutting £50 off people’s bills by getting rid of the most popular part of the government’s decarbonisation plan is “no victory” for consumers.