Investing in low carbon energy generation could
lower future household energy bills and insulate the economy from
volatile fossil fuel prices, the government’s official climate
change advisor says. But only if the government commits to
implementing long-term climate policies.
A new report from the Committee on Climate Change
(CCC) assesses the impact of the UK’s low carbon policies on
consumer energy bills. It expects households to pay more to
decarbonise the UK’s energy sector in the coming decades, but says
that doing so should ultimately save people money as well as
helping the UK hit its legally binding climate goals.
The committee’s conclusion mirrors that of
government analysis earlier this month that showed energy bills
would rise significantly if the UK fails to implement climate
The government is legally obligated to cut the UK’s
emissions, the committee points out. Some policies to cut emissions
are paid for by households through a levy on their energy bills.
While such levies are set to increase, decarbonisation should lower
electricity prices in the long run and cut demand, meaning
households save money overall, the committee says.
Change Act of 2008 requires the government to cut emissions
80 per cent by 2050. With about
35 per cent of the UK’s emissions currently coming from the
energy sector, that means some pretty significant changes to how
the country generates electricity.
The government incentivises companies to build more
renewables, nuclear and carbon capture and storage technology by
offering subsidies through mechanisms such as feed-in tariffs or
contracts for difference. It can also implement policies to bolster
the carbon price, making fossil fuel electricity generation more
This graph shows how the committee expects household
energy bills to rise up to 2030, to pay for the policies. The solid
bars show how much a household may pay for each policy under the
CCC’s central scenario. The dotted boxes show how much they may
save as a consequence of the policies.
An average household on a dual fuel tariff could be
paying about £130 more to support decarbonisation in 2030 than
today, the committee projects. But the additional cost could be
more than offset by the money households save by using less energy
and paying less for gas as a consequence of the policies.
Energy efficiency policies could save an average
household on a dual fuel tariff £210 compared to today, the
committee estimates. The savings are even greater if gas prices
rise, and the government implements policies to ensure a strong
While the costs of supporting the government’s
decarbonisation policies are likely to increase, the government
needs to improve certain areas of its climate policy if households
are going to see the savings, the committee says.
The most significant improvements need to be made
around the UK’s energy efficiency policies, according to the
committee. For instance, the government needs to ensure all lofts
and cavity walls in the UK’s homes are insulated by 2022, with
another 3.5 million solid walls insulated by 2030.
The committee says the government’s current budget of
£1.4 billion for such measures would be enough to deliver this. But
that budget is
set to be cut by £600 million, which puts the policies at
The government also needs to ensure there is a strong
carbon price, the CCC says. A strong carbon price makes fossil fuel
power more expensive, and should accelerate the switch to
The UK’s carbon
price floor effectively tops-up the EU’s carbon price, which
has slumped to record lows in recent years. The policy is designed
to ensure fossil fuel power generators pay a minimum of £7 for
every tonne of carbon dioxide they emit in 2013, rising to £23 in
2020 and £76 in 2030.
But the policy is under threat. The government earlier
froze the carbon price floor at 2014 levels until 2020. It is
unpopular with industry and environmental NGOs alike, which see
it as an inefficient way to cut emissions. That means the
Conservatives may see it as the
most plausible green levy to cut in the run up to next year’s
But decarbonising the UK’s energy sector has other
benefits the government may be interested in, the committee says.
Supporting low carbon energy technologies can protect the UK from
volatile gas prices, which the government predicts will
rise between 2020 and 2030. If the government invests in
renewables now, it means there will be more cheap, low carbon
electricity available in the coming decades, restricting the impact
of rising gas prices on household energy bills.
Such scenarios are far from certain, however, and the
committee sounds a note of caution about putting too much faith in
“There is considerable uncertainty around these
projections, particularly relating to gas and carbon prices, and
the costs and deployability of low-carbon technologies,” it says.
Changes in the gas price could mean the government spends up to £6
billion more or less on low carbon support. Carbon price changes
could affect the projections to the tune of £4 billion.
Nevertheless, the committee’s report fits
with government’s own analysis that climate policies don’t just
have the potential to cut emissions, they could lower household
energy bills, too. That might seem counter-intuitive given the
current dynamic around bills, but it reflects how different the
energy system will be if the government’s decarbonisation project