Energy Policy Needs Sensible Target

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Ahead of the publication of the Energy Bill, an increasingly heated and polarised debate is playing out about whether or not the UK should adopt a 2030 decarbonisation target as part of ongoing electricity market reforms.

This is a critical issue for manufacturing, which is integral to building a low carbon economy and has already made significant strides to cut emissions. Reforms need to strike a careful balance between driving investment in cleaner technologies and keeping energy prices affordable.

One side of the debate fears that without a stretching target hardwired directly into the legislation we won't get the investment we need in low carbon technologies.

Whilst the other is concerned that a target would risk damaging the economy by unnecessarily driving energy prices for hard pressed consumers.

There's an element of truth in both arguments, but we need to get away from an unnecessarily polarised debate. A middle ground which can address the concerns of both sides exists.

In keeping with our vision of industrial strategy, EEF believes that a clear statement of ambition and vision for the UK's energy system, in the form of a target, will help drive investment in low-carbon technologies and provide a yardstick against which to measure the success of government policies. That's why we called for a 2030 energy decarbonisation target in our December 2011 Green and Growth report.

But the wrong kind of target risks pushing the UK down a route that needlessly drives up electricity prices for households and businesses.

For example, should current assumptions about the development of carbon capture technology, the level of investment in nuclear power, the cost of offshore wind or the future price of gas prove wrong the UK could end up committed to an unrealistic and extremely costly target.

So retaining flexibility is paramount. Energy policy has to contend with a range of factors that are difficult to predict far in advance, such as the pace of technological change and the future price of fuels. A fixed target would make the UK and its households and businesses a hostage to fortune.

A well-designed target can strike the right balance between the needs of investors and consumers. The forthcoming Energy Bill should include a requirement to set a target, but the target itself should sit outside primary legislation, be grounded in robust analysis of what is achievable and affordable and subject to regular review like carbon budgets.

The Committee on Climate Change and the Energy and Climate Change Select Committee have recommended solutions along these lines. Now is the time for a constructive debate and balanced decision.

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