European energy giants EDF and E.ON gave evidence to the Environmental Audit Committee this week on “the role of carbon markets in preventing dangerous climate change”.
Watching from the public gallery, it was gratifying to see members of the cross-parliamentary committee citing Sandbag proposals in their questions. We gave evidence just a few weeks ago, and it seems Committee members have already taken some of our suggestions on board.
Both companies welcomed our proposals to tighten carbon caps under the EU Emissions Trading Scheme, but argued complementary mechanisms needed to be rapidly introduced in order to promote investment in low carbon technologies right now.
With EDF being a nuclear company, it was unsurprising to hear them promoting a tough Emissions Performance Standard, which would make nuclear competitive by preventing all but the lowest carbon-intensity power stations from being built. E.ON, which has a major stake in coal, explicitly opposed this, proposing a UK carbon tax fixed to, and amplifying, the EU ETS carbon price.
EDF argued that clear policy guidance was necessary within a year, as the UK power sector urgently needs to replace some 25 Gigawatts of capacity (around a third of current capacity) before 2020. This is not strictly true: considerable new gas plant has already been approved which will take up much of the gap, and the freshly announced Carbon Capture and Storage (CCS) demonstration plants together with new offshore wind will help out further. Again, given their energy portfolios, it’s not surprising that both companies are resisting a “dash for gas” which will advantage competitors like Centrica.
Still, both companies are right to point out that current market signals, which strongly favour gas, might fail to achieve the UK’s longer term carbon objectives. While a “dash for gas” would considerably lower the carbon emissions of the sector very rapidly, without policies in place to ensure new gas plant is designed for a CCS retrofit, we would be stuck with high emissions from these power stations until they come offline around 2050.
In relation to Copenhagen they were specifically asked whether they supported a global power sector emissions cap – our main campaign ask. Though they did not express strong views, they acknowledged it was an option being formally considered in the talks leading up to the event.
Overall, it was very encouraging to see representatives of the power sector recognising that the EU ETS needs to be tightened whilst supporting policies complementary with it. The power sector is the only sector with a challenging target and it must be frustrating for them that the lack of ambition elsewhere in the scheme is undermining the price signal. If they can be persuaded to join calls for a significant tightening of the cap and the removal of industrial hot air, it would greatly increase the chances of politicians taking action.