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Energy Crunch: Energy round-up: why the government should stick to its carbon budget

Photo credit: bryanburke/flickr. Creative Commons 2.0 license

Three things you shouldn't miss this week

  1. Cost savings fear if greenhouse gas targets are scaled back -  Watering down the UK’s efforts to tackle global warming would risk wiping out at least £100bn in cost savings even if shale gas production takes off.
  2. New shale gas drilling areas to be revealed as communities promised £100,000 benefits for fracking -  Large swathes of UK to be opened up for shale drilling, with communities where fracking takes place to receive £100,000, even if no gas is produced.
  3. IEA projection of global all-liquids production to 2035. The ‘New Policies’ scenario takes into account policy commitments and plans that have already been implemented, as well as those that have been announced.

    Source: IEA 2012 World Energy Outlook. Paris, France: International Energy Agency.


Weakening the UK’s Fourth Carbon Budget has no legal basis and would be economically damaging. A review of the targets by the Parliamentary Committee on Climate Change released this week found no significant evidence that UK carbon policies risked business investment, and confirmed that sticking with current targets would both build energy security and bring significant savings compared to having to pick up the pace of emissions reductions after 2027.
The announcement lines up a potential clash between UK climate policy and the government’s new gas strategy. This strategy, unveiled by Chancellor George Osborne, includes a scenario in which gas could play a more extensive role – “should the Fourth Carbon Budget be revised upwards...this could lead to a need for investment in up to 37 GW of new gas capacity by 2030.” It suggests there could still be a legal challenge to the Carbon Budget despite widespread support elsewhere - this week a coalition of more than 100 organisations, including business heavyweights Sainsbury’s, Asda, Ikea, O2, Sky, Aviva and Unilever, called on the government to stick with the targets.
Shale gas got a boost in last week’s Autumn Statement, with confirmation of a generous reduction in tax on profits from 62% to just 30%. “We don’t want British families and businesses to be left behind as gas prices tumble on the other side of the Atlantic,” declared the Chancellor, a statement at odds with earlier comments by Chairman of Cuadrilla and government advisor Lord Browne that “unless it is a gigantic amount of gas, it is not going to have material impact on price.”
In other news, Dong Energy welcomed the government’s announcement of higher than anticipated support for offshore wind - starting from £155/MWh in 2014 - by setting itself a goal of competing without subsidies by 2020. The announcement on renewable subsidies saw onshore wind support fall below the £92.50/MWh strike price for the Hinckley nuclear power station.
With all the focus on keeping the lights on, does anyone remember peak oil? A special edition on the future of oil supply from the Royal Society revisited the issue, asking ‘Were they crying wolf?’ The short answer is no, not at all. The IEA foresees a fall in oil from currently producing fields from 68.5 million barrels in 2011 to 26md/d by 2030, and filling the gap requires some fairly heroic assumptions. Editors Steven Sorrell and Richard Miller suggest prioritisation of demand-side reduction strategies as the route to energy and climate security.

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