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WCI Policy Briefing – UK DECC Annual Energy Statement

Wednesday, July 28th, 2010

The UK Department on Energy and Climate Change has issued its first Annual Energy Statement, which outlines the Coalition Government’s proposed energy policy. These statements are to be presented to Parliament each year in an effort to make Government energy policy increasingly transparent.
The Energy Statement covers all aspects of energy policy, from home energy efficiency improvements through to the provision of low carbon grid electricity and international action on climate change. A key message is the Government’s intention to press the European Union to increase its emissions reduction target for 2020 from 20% to 30%. The push for the 30% target, which the UK has launched in partnership with Germany and France, has received a significant amount of media coverage in recent weeks.
CCS is included as an important element of the Government’s strategy to provide secure low carbon energy in the UK, which would presumably contribute significantly to the proposed 30% EU target. Much of the information included on CCS in the Statement confirms policy actions that have already been announced during the Coalition’s first three months in power. These include the commitment to continue with public sector investment in four CCS demonstration projects (including the winner of the CCS competition) and the intention to implement a CO2 emissions performance standard on new coal-fired power plants.
As with last week’s report from the UK Committee on Climate Change (CCC), the developments on CO2 EPS are of concern, particularly given that DECC’s Energy Statement also places great faith in the ability of a reformed EU Emissions Trading Scheme to deliver a carbon price that would support CCS development and deployment.
DECC has pledged to engage with industry on the selection process for the publicly funded CCS projects and will launch a CCS Development Forum to hold the department to account on delivery of its CCS commitments. The UK Government has now clearly decided that a combination of incentives and penalties (i.e. carbon pricing/public funding and EPS respectively) is the correct policy strategy towards achieving those commitments. The Statement highlights DECC’s intention to develop a CCS Roadmap and it will be interesting to observe whether this covers the intended impacts of the policy tools that the Government has chosen to use.
Despite these concerns over the introduction of an EPS to drive CCS domestically, it is welcoming to see acknowledgement of the potential for the UK to promote the technology overseas as part of the Government’s international strategy on climate change. Both DECC and the CCC believe that the UK holds a relative advantage in CCS development and infrastructure and that this should be exploited quickly. DECC’s statement outlines the Government’s commitment to work on enhancing assistance, joint project development and international financing for technologies such as CCS through collaboration in multilateral policy for a such as the G8, G20 and UNFCCC.
(Ref 1537)

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