U.K.’s Low-Carbon Policies Hurt Companies More Than Households

U.K. carbon pricing and subsidies for renewable energy will add more to companies’ energy bills than rising gas prices through 2020, while for households the reverse is the case, a government adviser said.

Emission charges and support for renewables, nuclear power and carbon capture will account for more than half the predicted increase in commercial and industrial energy bills from 2011 to 2020, the Committee on Climate Change said today in a report.

“Low-carbon policies are already pushing up prices significantly and are set to escalate going forward,” Steve Radley, director of policy at EEF, a manufacturing lobby group, said in an e-mailed statement. “This is a major threat that needs to be addressed now as we cannot continue to load industry with costs which are in excess of our competitors.”

The government last month laid out planned legislation to boost renewables and nuclear energy and generate the 110 billion pounds ($177 billion) of investment it says is needed by 2020 to replace aging power plants and upgrade the grid. A day earlier, it announced measures to exempt energy-intensive industries from the additional costs.

“The best insurance against energy price rises is a diverse energy mix that includes renewables, new nuclear and carbon capture and storage, alongside a continuing role for gas,” the Department of Energy and Climate Change said in an e- mailed response to the committee’s report.

Business Bills

Commercial energy bills are set to climb by an average 40 percent to 42 percent by 2020 from 2011 levels, with low-carbon prices accounting for 25 percent to 26 percent, according to the report. For industrial users, bills will rise by 36 percent, including 21 percent attributable to climate policy.

The committee said that because energy costs represent “only a very small share” of total costs for commercial and industrial users, the impact of the climate policy-related increases will be “very small.”

It’s preparing a separate study on the impact that such increases may have on competitiveness, which is due to be published in the U.K. spring.

Rising gas prices are predicted to add more to consumer bills than carbon pricing and support for clean energy, today’s report found.

The increase in wholesale gas prices will add 130 pounds to the bill of a typical household by 2020, from 2011 levels, the committee said. That compares with 100 pounds for measures supporting clean power and carbon capture, including a 25-pound price on carbon emissions.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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