Budget: Comment on energy, climate measures

Commenting on the Spring Budget, Richard Black, director of the Energy and Climate Intelligence Unit (ECIU) said:

On carbon pricing:

“The Chancellor’s statement on carbon pricing indicates that the government is preparing for a Brexit scenario in which the levers driving decarbonisation are pulled entirely nationally. If we come out of the European Emission Trading System, which is likely, a UK carbon price will be essential. But ministers need to say fairly soon what the price will be, because energy companies are already signing power contracts for 2021.” 

Levy Control Framework

“The Levy Control Framework was a blunt instrument, and few people will be sorry to see it go. Its worst aspect was that it seemed to make renewable energy more expensive when bills were going down – and logically, that is the time to be investing, when people can most afford it. Whatever replaces it needs to lead the UK towards the smart, flexible power network that, according to the National Infrastructure Commission, will lop £8bn off our national energy bill – which means incentivising things like energy storage, demand-switching and interconnectors.”

North Sea oil and gas

“Regarding the North Sea, we await the details but it’s clear from the Chancellor’s words that the official aim is still to extract ‘every last drop’ or oil – an aim that’s going to get harder and harder to realise unless the price rises and remains high. The reality is that what used to be a cash cow is becoming a drain on national coffers. A more realistic strategy would be to admit that the basin is in terminal decline, and establish a plan to manage a transition to industries with good long-term prospects, including oilfield decommissioning, offshore renewables and carbon capture and storage.”