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The Rising Cost Of The Climate Change Act

February 29, 2016

By Paul Homewood  

  

Lest anybody has forgotten just how much the Climate Change Act is costing us, this was the official projection published by the Office for Budget Responsibility last July:

 

2.7 Environmental levies

£ billion

Estimate Forecast

2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Carbon reduction commitment 0.6 0.8 0.7 0.6 0.6 0.6 0.5
Warm homes discount1 0.0 0.3 0.3 0.3 0.3 0.3 0.4
Feed-in tariffs1 0.0 1.1 1.3 1.5 1.7 1.9 2.1
Renewables obligation 3.1 3.9 4.7 5.3 5.9 6.1 6.3
Contracts for difference 0.0 0.1 0.3 0.6 1.1 2.3 3.1
Capacity market 0.0 0.0 0.0 0.0 0.6 1.1 1.3
Environmental levies 3.6 6.0 7.3 8.3 10.2 12.3 13.6
1 The ONS have yet to include Warm Homes Discount and Feed-in Tariffs in their outturn numbers.






Note: This is consistent with the ‘Environmental levies’ line in Table 4.5 of the July 2015 Economic and fiscal outlook.

 

http://budgetresponsibility.org.uk/efo/economic-fiscal-outlook-july-2015/

 

 

The costs are in nominal terms, ie not real prices. The OBR assumes CPI inflation of about 10% between now and 2020, so, at today’s prices, the figure of £13.6bn becomes about £12.4bn.

It was this forecast which forced Amber Rudd to make cutbacks in the subsidy regime last year, but it is difficult to see that she has done more than trim a bit of fat off the edges.

In the meantime, oil and gas prices have dropped further, meaning that subsidies are likely to be even higher than above.

The OBR will have to update their assessments after next month’s budget, so it will be interesting to see what they come up with.

 

Remember as well that these Environmental Levies don’t include all the costs involved, such as the Climate Change Levy, which will cost £2.0bn by 2020/21, or the Energy Company Obligations and Smart Meters, estimated by DECC at £1.7bn a year.

8 Comments leave one →
  1. Jack Broughton permalink
    February 29, 2016 1:14 pm

    Any idea as to how much of this cost goes to overseas companies who now control our power industry and seem to have the investment tied-up?

    The big effect of the CCA seem to me to be further reducing our industrial competitiveness and increasing our balance of payments deficit / costs.

  2. February 29, 2016 1:53 pm

    Hi paul,

    I followed your link to the table ” 2.7 Environmental Levies “, just ended up in a maze of docs, but none had that table ??? has it been disappeared !!

    As its a £61billion fraud/theft over 5 years I’d want to hide it.

    Can you give me the direct link to that table; thanks

  3. February 29, 2016 2:14 pm

    Costs of grid re-engineering and strengthening to cope with intermittent renewables do not seem to appear anywhere, but are passed on to the consumer. Costs are in the tens of billions.

    • manicbeancounter permalink
      February 29, 2016 6:34 pm

      Bill
      You beat me to pointing this out.
      Putting wind turbines in remote areas means many miles of extra power lines. Then there is the upgrading of existing power lines, such as from the North of Scotland all the way down to Lancashire. Also the costs of undersea cabling.

  4. It doesn't add up... permalink
    February 29, 2016 6:51 pm

    The estimated CFD subsidy is calculated against a gas price of 47.7 p/therm (Table 4.1 p 82 OBR review). With prices now around 20 p/therm lower, and gas/CCGT the marginal price setting form of generation, the projected subsidy will increase the next time they estimate it. FiT subsidies are also likely increased for the same reason, and it could well increase the cost of capacity market subsidies too.

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