CBI warning over renewables subsidies

The government’s wholesale cuts to renewable energy subsidies are sending a worrying sign to investors, says employers' group, the CBI.

The head of the group, John Cridland, said firms must be given confidence that ministers really mean to tackle climate change.

The government cut subsidies in the summer because the £7.6bn budget had been exceeded.

Ministers say they are committed to protecting the climate.

They said they would announce replacement renewables policies soon.

Critics say new policies can’t come quickly enough. Mr Cridland said: "The green economy is an emerging market in its own right, brimming with opportunity.

"Yet, with the roll-back of renewables policies and the mixed messages on energy efficiency, the government risks sending a worrying signal to businesses.

"We need all countries to pull in the same direction at the Paris Climate Summit (in November) to give firms the certainty and confidence they need to invest in the green economy for the long run".

Tax deterrent?

The former Treasury chief economist Lord Stern warned: “The test is coming. In the coming few months, will policies be put in place that take account of the great cost of emissions and air pollution?

"If there are not policies, that would be deeply worrying... we are subsidising hydrocarbons big time.”

Critics are also complaining that recent tax changes will actually deter people from taking decisions that help the climate.

The chancellor, for instance, shifted Vehicle Excise Duty (VED) so a Porsche pays as much as a Prius – a decision the AA said would lead to drivers using more polluting cars.

He also placed a £3.9bn carbon tax – the Climate Change Levy – on wind and solar power and biogas, which emit no net carbon.

Lord Stern told BBC News it was “potty” to put a carbon tax on renewables.

His Stern Review in 2006 found that cutting CO2 emissions immediately was far cheaper than paying later to solve problems in a heating world.

The author has since concluded that he underestimated the costs of burning hydrocarbons because he did not include the health costs caused by air pollution from vehicles and industry.

He said the case for low-carbon development taking climate and air pollution into account was “inarguable”.

Optimal system

A Treasury spokeswoman said: "Our support has already driven down the cost of renewable energy significantly. As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies."

She said any loss UK renewable generators faced would be small compared with other financial support they received from government.

Defending the decision to impose a carbon tax on green energy, she added that it was right to incentivise the efficient use of renewable power as it would supply 30% of UK electricity in 2020.

Prof Richard Tol, from Sussex University, told BBC News that Lord Stern’s idea of calculating the costs of air pollution alongside the costs of climate damages was appealing – but the sum was simply too complicated, with too many imponderable judgements and values involved.

He said: “A switch from petrol to diesel, for instance, is good for carbon dioxide emissions but bad for particulate emissions. Filters and scrubbers on power plants are good for acid rain but bad for climate change.

“A switch from traditional biomass to fossil fuels is good for indoor air pollution but bad for greenhouse gas emissions. Dearer energy is good for the environment but bad for development.

“Unfortunately, taking a holistic view of energy is not how we organise policy and certainly not how we organise research. We can confidently say that the current energy system is sub-optimal, but we cannot begin to answer the question what the optimal energy system would look like.”

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