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When is a subsidy not a subsidy?-When it’s for the Nuclear Industry 28.05.10
Chris Huhne- and a rather radioactive tie
The negotiations around the policies of the new ConDem Government were always going to be interesting, and nowhere more so than around Energy Policy. In a nimble piece of semantic two stepping Chris Huhne has managed to combine the Conservatives pro-nuclear Energy Policy with the Lib Dems opposition. The solution, while lucrative for the Energy companies and their financial backers is a financial black hole for the UK Taxpayers argues Natural Choices editor Peter Shield
To start with let’s looks at where the two sides started from, well sides may be overstating it but there are a few differences.
According to their Manifesto “A Conservative government will take immediate action to give Britain leadership in a low carbon world. We will cut carbon emissions and promote low carbon energy production. We will safeguard our energy security and make it easier for families to go green.”
On the other hand: “The Liberal Democrats are the only party in British politics that can and will put the environment at the heart
of government. We will set – and stick to – ambitious targets for a zero-carbon future. We’ll set an example at
home and show leadership abroad too. We’ll begin creating our new, green economy on day one by investing
in green technologies, energy efficiency and public transport, creating tens of thousands of new jobs that last.
And we’ll protect our natural environment, promoting biodiversity and making sure everyone has access to
clean air, clean water and open spaces.”
The Conservatives Energy Policy is basically the same one as proposed by the big 6 energy companies- development of Nuclear power, coal plus token, and heavily subsidized , experimentation with Carbon Capture and Sequestration, Gas, a Smart Grid, well Smart for the Energy companies anyway as it will improve their billing systems, and a bit of wind and other renewables thrown in to keep the running dogs of Brussels at bay. Feed in tariffs/subsidies for middle class greeny home owners- most certainly. Yes there is some conservation measures thrown in, paid for by consumers. So business as usual for big business, and some nice paying consultancies thrown in as well.
The Liberal Democrats on the other hand are cuddlier, Smart Grids-yep, energy conservation at home-yep, massive increase in renewables, particularly offshore wind power- yep, feed in tariffs/subsidies for middle class greeny Liberal Democrat voting home owners- most certainly, nuclear- nope, thrice nay, over our dead bodies..no..never.
So throw the two together in Government, shake it all up a bit and what falls out? Well an Energy Policy that looks vaguely, no scrub vaguely, very similar would be a better, to the outgoing industry inspired one that was hashed together by New Labour after they decided that eminently sensible one they were elected on would not get them invited to all those good parties the energy industry throw.
Cynical? Unfair? Well maybe, because of course there is one huge difference. This time round the Lib Dems have their man, Chris “No Nuke” Huhne in the driver’s seat, and Chris has said nope, thrice nay, over our dead bodies..no..never. to subsidising the nuclear industry.
So that’s dead in the water then? As we all know the nuclear industry has to be mainlined not by a constant drip of tax payers money but a positive river of green. If the day to day support we all pay isn’t enough there is an indemnity insurance which means, Gaia forbid, we have an nuclear accident the industry is responsible for the first £140 million, after that its us fellow tax payers who bear the load. Indeed one of the time bombs left for the new Government by the outgoing administration was a tidy £640 million nuclear waste decommissioning bill that someone had misplaced amongst the taxi expenses.
So without this support the £70 billion investment programme necessary for the new generations of nuclear power will not go ahead, no private sector company could deal with the uncertainty and risks involved. No responsible Board of Directors would approve such a hazardous stratgy, no Annual General Meeting approve it, and of course none of our highly responsible finance houses would lend the vast amounts of money necessary to implement such a strategy.
Well you would have thought so, but EDF UK’s CEO Vincent de Rivaz thinks differently. EDF are lined up to build 4 new reactors at Hinkley Point in Somerset and Sizewell in Suffolk , which according to The Guardian “would generate enough power to light 40% of Britain’s homes or the equivalent of 13% of all UK electricity” at a beginning price of £20 billion, this could rise just ask the Finns about that one.
Vincent it would appear has been seeing more of Chris Huhne in recent days than his children. So much so that at a recent conference on the future of nuclear power he was able to say "The commitments from the coalition government envisage a proper role for nuclear and have reassured us at EDF, as we contemplate the very serious investment we are proposing to make in nuclear power in the UK,"
This new found acquaintanceship seems to have been forged over an interesting re-definition of what a subsidy is and what it isn’t.
The solution they have come to is an interesting one, and potentially a hugely expensive one for the UK taxpayer and very lucrative for EDF and their fellow Energy companies- a floor price for carbon emissions.
Carbon pricing, that product of the Kyoto has had a strange life in Europe. Very effective business lobbying both in Brussels and in member states has lead to a massive over allocation of free emission permits in Phase 1 of the EU ETS, this over supply of the right to pollute continued into Phase 2 and looks very likely this week to continue into Phase3 despite the Commission’s ever optimistic spin on the scheme. Sandbag, a campaigning organisation, recently estimated that to achieve the Commission’s stated goal of a 30% emissions deduction by 2020 2.3 billion permits need to be removed from the scheme. The present proposed system is in effect a €18 billion to the most polluting industries across Europe.
That figure of €18 billion is based on the very low prices that carbon gets in the present system where the rights to pollute supply way exceeds the demand to buy polluting rights. The markets quite rightly set a price based on the yawning gap difference between supply and demand.
Now the UK is proposing to set a minimum price in one country for one industry. Aside from the actual practicality and legality of doing such a thing, hasn’t the recent history of financial market based solutions and the somewhat dubious ethical nature of the financial institutions taught us nothing? If you create a profitable loophole in a weak market, such as the carbon market, unscrupulous actors won’t creep through it, they will charge through it. . It may not be called a subsidy, indeed most subsidies have little things like a budget, this one is not a subsidy in the traditional sense of the word, it is a black hole. Chris Huhne may be offering the energy industry and their financial backed an open check and who will foot the bill of the banks and energy companies profits? The UK tax payer, once again.
Chirs Huhne is no idiot however, he’s a deeply impressive economist, and fully able to work out the risks involved. However coalition politics can make fools out everyone involved, and rounding the square of the deep contractions between the Tories Energy Policy and the Lib Dems could yet see him dressed up in a clown’s costume.
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