Monday, September 03, 2012

Emissions from coal burning are rising. The Energy Bill must stop this.

Electricity Market Reform must address the continuing problem that the poor price of carbon is incentivising the burning of coal to generate electricity.

More bad news: burning coal to generate electricity in the UK increased by over a third in the first half of 2012, compared with a year earlier, as doing so became more profitable.

This has caused analysts at Thomson Reuters Point Carbon to forecast that the country's greenhouse gas emissions from the energy sector will hit 158.7 million tonnes in 2012, up a staggering 14% on the previous year.

The news comes in figures released last Thursday by the Department of Energy and Climate Change, which show that coal-fired plants produced 67.2 terawatt-hours (TWh), compared to 49.56 TWh the year before in the same period.

This trend was helped by a drop of 50% in the price of carbon permits over the year, which meant that it became, and continues to be at times, cheaper to burn coal than gas. Coal is more than twice polluting as natural gas in greenhouse gas emission terms.

At the same time, the output of nuclear power fell by 5%, or 2.6TWh, due partly to the retirement of plants at Oldbury and Wylfa, Anglesey.

On the positive side, output from renewable sources increased over this period, with wind power rising 28.3% to 7.17TWh.

Even so, the whole of the UK's energy sector emitted 139.8 million tonnes of CO2 in 2011, according to EU data, causing it to leap 28 million tonnes above its permitted cap in the EU Emissions Trading Scheme, which translates to the expensive purchase of emission credits.

The high profitability of coal means the UK is becoming more reliant on the dirtiest form of energy production, a trend that has been ongoing for the last few years, as I have warned before, both last December and in June this year.

The UK's greenhouse gas emissions increased in 2010 by 3.5%, more than double the 1.3% growth in the economy, and the previous years' statistics also show an increase in net carbon dioxide emissions of 3.8%.

Coal use hasn't been this high since the winter of 2007, and is attractive to generators due to the record low CO2 prices in the EU-ETS, which now stand at €7.65. These are prices which the European Commission seems unable to do anything about.

Hopes this week, that a linkup with the Australian carbon market would boost prices, were short lived.

U.N.-issued CERs also fell, even further, to a new record low of €2.5 last week, after a U.N. website showed that chemical companies were issued with almost 4 million offsets for destroying the potent greenhouse HFC 23, confounding expectations that the credits wouldn't be released for at least another few weeks.

Clearly the carbon market is failing abjectly, and having the opposite effect to what was intended.

If the European Commission and the United Nations cannot do anything about this, then there is a chance for the British government to show leadership, through its reform of the electricity market, the details of which are currently being finalised.

The bottom line is that the price of polluting must be higher than the price of buying renewable energy. This is the only way to reverse this trend.

If the combined weight of the Carbon Reduction Commitment and the European Emissions Trading Scheme is still failing to have the desired effect, the Energy Bill must rectify this.

As it stands, text of the draft Bill actually removes the obligation on the part of utilities to purchase renewable energy. This obligation must be kept.

Secondly, the Feed-in Tariffs with Contract for Difference (CfD) must be weighted so that the system rewards the purchase of renewable energy, and the carbon price floor should be set so that the relative cost of purchasing the most polluting forms of energy, i.e. coal, is always significantly more expensive.

This is more or less what was recommended by the Select Committee on Energy and Climate Change, in July, when it sent the Government's plans back to the drawing board.

The Treasury should welcome such a move, since taxing coal-generation would raise further finance which could be directed into subsidising new renewable generation infrastructure, or paying off government debt.

The move would also guarantee that the country's emissions fall within those permitted by the Emissions Trading Scheme and that the UK remains on course to meet its 2020 reduction targets.

The International Energy Agency warned earlier this year that we are in the last moments in history for us to take action to avoid heading towards a 5°C increase in average global temperature and the most catastrophic of those scenarios predicted by the last Intergovernmental Panel on Climate Change (IPPC) report.

In the last two weeks we have heard warnings from other impeccable sources. Richard C.J. Somerville, Distinguished Professor Emeritus and Research Professor at the Scripps Institution of Oceanography issued his warning last week, saying that "if the world as a whole continues to procrastinate throughout the current decade, allowing emissions to continue to increase year after year, then it will almost certainly have lost the opportunity to limit warming to 2 degrees Celsius."

But Defra's scientific adviser, Prof. Sir Bob Watson, a former chair of the IPCC, went even further on 23 August by saying that any hope of restricting the average temperature rise to 2°C was already "out the window".

"If we carry on the way we are there is a 50-50 chance that we will get to a three-degree rise," he said, and he called upon the Chancellor, George Osborne, to reconsider his opposition to tough measures to reduce carbon dioxide emissions. He said that we should instead “demonstrate to the rest of the world that we can make significant progress here".

“We need more political will that we currently have," he concluded.

Well, Coalition Government, as you put the final touches to the Energy Bill, there is still time for you to demonstrate that leadership.

No comments: