Osborne's budget should freeze UK's carbon tax & introduce a 2025 phase out of dirty coal

Ahead of the budget next week new modelling from IPPR shows that energy consumers would save money with a new, improved policy to end the use of unabated coal in the UK by 2025. UK over-reliance on coal-fired power stations is driving up the costs of energy security and threatening our ability to meet our carbon commitments. A new report published today by IPPR calls for a fresh approach that freezes the carbon price floor, introduces a targeted emissions performance standard and phases out unabated coal use in the UK by 2025.

The report sets out how this plan would save householders an average of £8.41 on their electricity bills each year. The report shows how the UK could reduce carbon pollution and deliver greater energy security at a lower cost than the government's existing approach of pursuing a high unilateral carbon price.

The report shows that electricity generated from coal has risen since 2009, as the cheap price of coal relative to gas has made coal power profitable. Our over-reliance on polluting coal-fired power stations is -

• Harming the investment case for new gas capacity and demand side measures
• Threatening the UK's ability to meet carbon targets - while there are only 10 coal power stations currently open in the UK they emit a fifth of the economy's total carbon pollution
• Causing air pollution which damages peoples health and has caused 1,600 premature deaths each year
• Continuing our reliance on Russian imports – 45% of coal imported for power stations comes from Russia.

The report highlights that the government's current plan for the UK's carbon price floor, which was introduced in the 2011 budget, is to hit £78 by 2030, up from £14 at the start of 2015. A unilateral carbon price of this level would damage British industries' competitiveness and hit family budgets hard. It would mean that the difference between the carbon price in the UK and the price in the rest of Europe would effectively quadruple from £9.55 at present to £38 in 2030.

IPPR's report recommends that the UK carbon price should be brought back into line with the rest of Europe by holding the current domestic price steady at £23 until the European price rises above £23.

To avoid coal use increasing due to a lower carbon price, the report recommends that government should introduce an Emissions Performance Standard (EPS) to phase out of coal generation by 2025. This would save householders £8.41 per year on average, and encourage a manageable and deliverable build rate for new gas. It would result in foregone Treasury revenues of £716 million over the course of the next parliament which could be recovered by re-examining policies to support energy-intensive industries which would no longer be necessary.

Jimmy Aldridge, IPPR Research Fellow, said:

"Without additional policy intervention, coal generation poses an unacceptable threat to Britain's clean energy targets, harms investment in new capacity, perpetuates the UK's reliance on imported Russian coal, and harms people's health.

"Explicitly phasing-out coal generation is a necessary step in the wider process of decarbonising and securing an affordable supply of electricity. IPPR sets out a 'no regrets' option for achieving that goal by freezing the carbon price at its current level and introducing an emissions performance standard that would phase-out unabated coal by 2025.

"This would ensure that coal generation does not prevent the UK from achieving sustainability goals, and provide a clear international signal of the UK's leadership on tackling climate change."

Notes to Editors

The new report – Scuttling coal: How ending unabated coal generation can stimulate

investment, cut bills and tackle carbon pollution -– will be available from Thursday 12 March from http://www.ippr.org/publications/scuttling-coal-ending-unabated-coal-generation

The report has a joint cross-party forword by Greg Barker MP, Lord Teverson and Alan Whitehead MP. They state that:

"Coal is the dirtiest fuel used in power generation: it is more than twice as polluting as natural gas. As well as the impact it has on climate change, burning coal releases vast quantities of harmful air pollutants that damage people's health and have an unacceptable cost to the UK economy"

"The cross-party commitment to end unabated coal generation is to be greatly welcomed. However, in the second half of this decade we will need a more detailed plan to ensure that it actually happens, and that includes being more proactive in encouraging greater investment in gas"

"IPPR's analysis is compelling, and should be considered very carefully. The government took powers in the Energy Act 2014 to put in place an emissions performance standard for 'new coal'. In the next parliament, those powers must be extended to 'old coal' too."

The report shows that coal generates approximately one third of UK electricity.

And that the Department for Energy and Climate Change's current policy for limiting coal will rise to £78 by 2030. The costs of this policy will fall onto consumers and drive up costs for UK businesses.

The report recommends that the carbon price (including the UK-only and European prices) is held at £23 until the European price exceeds that level, and that a strong Emissions Performance Standard (EPS) is introduced.

An EPS sets an annual limit on the carbon pollution that is permitted from any given coal power station. Some states in the US, including California, have adopted a similar approach as a means of reducing carbon pollution, and the UK already applies an EPS to any proposed new coal-fired plant.

A strong EPS would deliver the following:

" Phase-out coal generation by 2025. This would not only ensure that the UK stays on course in relation to its existing commitments to reduce carbon pollution, but would also demonstrate international leadership on climate change with a 10-year plan to end the use of unabated coal for electricity generation.

" Save householders an average of £8.41 on their electricity bills each year.

" Reduce revenue for Treasury by £716 million over the next parliament - there would be no reduction until 2017/18, and nearly two thirds of this shortfall would come in the final year of the parliament (2019/20).

" Require that the construction of new gas power stations is front-loaded in the period to 2025, but at a manageable and easily deliverable rate in order to hit the government's target of 15GW.

Contacts

Sofie Jenkinson, 07981 023 031, s.jenkinson@ippr.org