Left Foot Forward has obtained a copy of an email from the CBI to MPs. They are lobbying against including a plant-level emissions performance standard in the Energy Bill.
The CBI oppose an amendment tabled by Alan Simpson for Labour, Simon Hughes for the Liberal Democrats, and Peter Ainsworth and Greg Clarke for the Conservatives.
Here we reproduce the CBI’s full email and fisk their claims:
In advance of the Energy Bill’s report stage in the House of Commons I wanted to set out the CBI’s concerns on proposals for an Emissions Performance Standard.
There is currently an amendment tabled for report stage which proposes the inclusion of a plant-level emissions performance standard (EPS) in the Bill.
The CBI is opposed to this proposal.
The commercialisation of Carbon Capture and Storage (CCS) will be vital to the decarbonisation of the power sector
The CBI’s 2009 energy report, Decision Time, supported the Committee on Climate Change’s (CCC’s) view that to achieve our legally binding carbon reduction targets, UK electricity generation must be largely decarbonised by 2030, with substantial progress made by 2020. Of equal importance is retaining our security of supply during the transition to low-carbon generation, which we believe can only be achieved through a diverse range of generating technologies and fuels, including fossil fuels. However, to ensure that the continued use of fossil fuel, and in particular coal, is compatible with our carbon targets, the demonstration and commercialisation of CCS is crucial.
To this end, the CBI supports the government’s current position on coal: funding 4 demonstration projects through a CCS levy with the possibility of extending the levy to fund future retrofit; prohibiting the development of new unabated coal plants; and the requirement for all new fossil-fuelled power stations to be Carbon Capture Ready.
The CBI have changed their tune. It wasn’t more than a few months ago that they were leading opposition to Ed Miliband’s proposals.
An EPS would add no carbon savings beyond those already guaranteed under existing policy
Emissions of CO₂ in the power sector are determined by a tightening cap under the EU Emissions Trading Scheme (EU ETS).
Emissions of the power sector are determined by the amount of fossil fuel burned! Also, the CBI has a contradictory position. It argues both that an EPS is not necessary because the EU Emissions Trading Scheme is designed to tighten the cap on emissions and that tightening the cap on emissions would be damaging to energy security.
Therefore setting an EPS for the electricity sector will add no environmental benefit further to this existing policy.
This is completely untrue. If badly polluting power stations are not built and therefore are not emitting millions of tonnes of carbon dioxide, there is a clear environmental benefit.
The CBI believes that the EU ETS should remain the principal policy instrument to deliver absolute reductions in carbon emissions by providing sufficient incentive for market participants to direct their investments towards low-carbon energy generation.
Lord Stern and the Committee of Climate Change have detailed why the Emissions Trading Scheme alone won’t deliver decarbonisation of the power sector and energy security. The government accept that – they just argue that they should work out the regulation later.
Furthermore, we believe that, once technically and commercially proven, CCS will effectively become the Best Available Technology for new coal power stations, and an EPS would therefore be an unnecessary additional measure.
It is precisely because this technology remains unproven at a commercial scale that we need a backstop policy to ensure power plants cannot emit indefinitely.
What happens if CCS proves not to be feasible technically or economically? Will we be left with a highly polluting power plant for decades to come? Will tax payers be forced to bail out big German energy companies who have been left with stranded assets because of a poor decision?
An EPS could deter investment in CCS which would have an adverse impact on energy security
This isn’t true. BP and Rio Tinto in a partnership called ‘Hydrogen energy’ pulled out of a coal plant development in Peterhead, Scotland before the finance in the Energy Bill was on the table.
They have now invested in California where both EPS regulation and finance are available making an attractive investment opportunity.
Introducing an EPS risks the unintended consequence of diverting investment away from UK clean coal, and towards CCS projects in countries where the risk profile is lower.
A number of companies have privately said new emissions performance standards would not deter them from investing in CCS in the UK because the finance package proposed by Ed Miliband provides such an incentive.
Substantial investment is needed in low-carbon power generation in the next 20 years and, given the constraints on public finances, this is likely to come from global capital markets.
The energy bill provides for substantial billions from energy bills to help companies pay for CCS research and development. The EU is also investing substantial amounts in the technology.
Investors and companies with global options require a stable policy and regulatory framework. Therefore the imposition of an arbitrary EPS may in effect act as a barrier to investment. A reduction in this critical flexible capacity may result in a narrower generating base, thus having significant implications for energy security.
This policy does provide certainty for investors – that’s one of the main reasons it is so attractive. The amendment to introduce emissions performance standards allows a full 12 months for Ministers to consult widely and bring proposals back to Parliament for green standards with a suitable framework and set at a manageable level. Since all party front benches support the introduction of an EPS as a safeguard at some point, investors need the certainty of having this regulation agreed and set out clearly now rather than risk the goal posts moving at some unknown point in the future only muddying the water and adding a new element of risk.
Independent research from the energy consultancy Poyry showed that if the UK hit its renewables and efficiency targets for 2020, there is no energy gap. But the reality is that it is highly likely that other fossil fuel capacity will come online. This is just pure scare mongering by the CBI.
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