Aside from the fact that green levies make up just a fraction of the cost of an average energy bill, there are a number of reasons why you should be suspicious of David Cameron's latest move on green energy.
Nick Clegg is right: David Cameron is panicking. Labour leader Ed Miliband has been visibly getting the better of the Tory leader in recent weeks, and Cameron has responded with an ill-thought out and reactive proposal to cut ‘green taxes’.
Aside from the fact that green levies make up just a fraction of the cost of an average energy bill (as we explain here), there are a number of reasons why you should be suspicious of anything Cameron says about green energy.
Here are five:
1. David Cameron introduced 60 per cent of the green levies he now wants to get rid of
Policies introduced by Cameron have added £67 to annual bills. The Energy Companies Obligation (ECO) was introduced in January 2013; the Carbon Price Floor came in in April 2013; the Warm Home Discount was introduced in April 2011; Smart Meters were announced in May 2013; and Feed-inTariffs were re-launched in June 2011. David Cameron has been Prime Minister since May 2010 if I remember correctly.
2. Cameron has previously called for an increase in green taxes
In opposition David Cameron said the following:
“We’ve said publicly, we’ve committed that we think green taxes should take a bigger share of overall taxes.” – BBC2 Newsnight, 3 October 2006.
“I think Green taxes as a whole need to go up.” – BBC1 The Politics Show, 29 October 2006.
In office Cameron also pledged to lead the ‘greenest government ever’: “I want us to be the greenest government ever – a very simple ambition and one that I’m absolutely committed to achieving.” – speech at the Department of Energy and Climate Change, 14 May 2010.
George Osborne also argued in 2007 that a ‘green tax shift’ would be ‘right for the environment’ but also make ‘economic sense’: “There is going to be a green tax shift which is right for the environment and by the way also makes economic sense.” – Today Programme, 3 September 2007.
3. Cameron’s energy Minister says it’s ‘nonsense’ to blame green levies for energy costs
Earlier this month, Tory energy minister Greg Barker said that blaming government levies for pushing up the cost for consumers was ‘nonsense’.
Martha Kearney: “We were hearing earlier in the programme from the company itself and in effect they were blaming government levies for pushing up the cost for consumers.”
Greg Barker: “Well that’s nonsense. I don’t want to pretend that there isn’t a cost to investing in the grid and for the programs that we run to help keep people warm in their homes but the lion’s share of this increase comes from other costs.” – BBC World At One, 10 October 2013.
4. Cameron’s rejection of the 2030 decarbonisation target has cost the UK jobs
Andrew Buglass of the Royal Bank of Scotland (RBS) said in a sitting of the Energy Bill Committee earlier this year that a 2030 target “is absolutely critical from the conversations I have with potential supply-chain investors because they quite rightly point out that it is very difficult for them to take investment to their board if they really only have visibility on three or four years-worth of work”.
In March, six of the largest supply chain investors wrote to the chancellor, the secretary of state for Business, Innovation and Skills and the secretary of state for Energy and Climate Change to register their support for the decarbonisation amendment tabled by Tim Yeo MP and Barry Gardiner MP.
They wrote that “Postponing the 2030 target decision until 2016 creates an entirely avoidable political risk. This will slow growth in the low carbon sector, handicap the UK supply chain, reduce UK R&D and produce fewer new jobs.”
5. The government’s inconsistency on how to respond to climate change has put up the cost of capital for new investments
The UK will need over £200 billion of investment by 2020 if it is to meet its climate change and renewable energy targets. The cost of investor capital is set based on the risks associated with the energy infrastructure projects in question.
Investors are (naturally) cautious, given that we are talking about new technologies with an unproven track record; but the coalition government’s zig-zagging over green energy is exacerbating the problem and further increasing the price of investment capital due to a lack of certainty – crucial for any long-term investment.
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