Energy companies in the UK are asking the government to sign up to clearer targets on carbon emissions reduction.
In what, at first, seems a rather self-sacrificing move, energy firms have voiced concern over badly defined long-term energy policy. Their problem is that lack of guarantees on government policy makes it difficult to plan for the future. Energy suppliers are conscious that they must come up with a blueprint for future expansion that takes into account any losses incurred by carbon reduction policy. Very much a case of ‘better the devil you *do* know’.
Industry executives argue that obtaining clearer objectives on policy is not merely about damage limitation but allows companies to properly plan their investment in green technology. The recent Doha talks have not arrived at any agreement beyond 2020. The World Energy Council, charged with representing energy firms on the political stage, argues that eight years is not long enough to be of much use in the future planning of investment in energy.
Investment is vital to any industry, the energy sector being no exception. Countries with clearly defined energy policies are likely to be more attractive than those without, particularly if those policies span a good generation and include reliable figures. Yet the UK government did not put a carbon reduction target into its recently announced Energy Bill, leaving energy companies with little more than existing EU and Kyoto target figures available as information for their own internal planning.
The Chancellor of the Exchequer, George Osborne, insists that a strict carbon reduction policy in the UK would be bad for business, putting the country at a competitive disadvantage to those countries with no such domestic policy. Osborne has already pledged £250 million towards industry to help it reach existing targets imposed by Europe and Kyoto. This money should go towards initiatives aimed at making the sector less energy intensive – but that is enough progress for now, according to the Chancellor.
Energy firms may have no choice but to incorporate heavy risk management. Consultants within the energy sector should have an idea of how high targets could be by 2030, this information would at least give the energy industry the figures it needs to loosely prepare for the future. Yet it is the Chancellor who holds the cards here and energy companies know it.
Osborne had better be careful how guarded his figures become or the energy sector may turn the card-table around – they could introduce higher prices in order to tempt the government into defining better the rules of business.
The UK government is being asked for clearer figures on its objectives, not at all an unreasonable request, and a rare one at that considering the reputation of some energy firms. George Osborne would do better in revealing some of his plans for future energy policy and thereby calm the sector down, otherwise tension within the industry could lead to rather less polite petitions from companies in the future.Tweet
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