On a Warm Summer’s Evening – DECC Plays the Gambler

It was no lesser authority than Kenny Rogers who revealed in his 1978 country classic that ‘Every gambler knows; the secret to surviving is knowing what to throw away and knowing what to keep’.   It is a logic that has been whispered around card tables and hollered at barn dances from Kent to Kentucky ever since.  kenny-rogersPic

But today saw perhaps its most unusual application to date.  Forget the precautionary principle or sustainable development – the Gambler’s mantra appears to be the guiding principle behind the current UK climate change negotiation strategy.

Following Ed Davey’s announcement today that he would keep increased emissions reduction targets from the EU but will throw away any further renewables targets, the UK has well and truly shown its hand.  His argument is clear – escalating ambition to a 50% EU emissions reduction target by 2030 through UN negotiations will be the climate equivalent of a full house.  The mix of cards used to achieve it should be left up to each player, removing the need for a renewables target.

There are some risks:

1.  This statement is essentially a huge announcement of support for the EU Emissions Trading Scheme (ETS) as the principle driver of the EU’s transition to a low carbon economy.  The support is very welcome –  the EU ETS is on its knees as a result of over supply of allowances and economic contraction.

The UK has always been a strong advocate of ETS – amongst other things it is a way of squeezing a few more jobs out of the City.  But ETS needs major structural reform to provide any certainty that a carbon price will exist in the EU in 2030 at all, let alone be the key driver of investment in renewables.  Even Tory MEPs (whose government in the UK back the ETS) voted against the last attempt to make some important changes to boost prices.  Carbon Dioxide

By backing the EU ETS so strongly, the UK risks a showdown with Poland and her anti-ETS allies at a Commission level.  Without their support, the prospect of changes to the EU ETS taking place within the appropriate time-scale remains remote.

2. Arguably there is an environmental contradiction between pushing strong emissions reduction targets and the EU ETS while at the same time adopting the ‘dash for gas’ strategy set out at the end of 2012.   We are mandating emissions domestically while arguing for reductions globally.  Also the logical result of tougher emissions reduction targets is to make gas generation more expensive, increasing bills for consumers reliant on gas as a result of DECC’s Gas Strategy.   I’m persuaded that the Gas Strategy makes sense from a ‘keep the lights on’ perspective, but I’d be interested to see how DECC squares the circle on this one.       fa09a81bfb7581d0ed7e5d474392d69a

3.   One of the key lessons of the Copenhagen debacle was that the EU should not reveal its negotiating position before the final round of negotiations.  DECC may be buoyed by news that China is preparing to announce a target, but by kicking this debate off in public there is a danger that the EU will make the same mistakes and be left isolated as we approach the crucial UNFCCC conference in Paris 2015.

 

Overall, the move away from blunt targets for the renewable sector is to be welcomed.  A more dynamic combination of subsidy and rational national policy is required to allow the renewables sector to mature and flourish through to 2030.

However the move by Ed Davey and DECC to put forward such a clear position in advance of the negotiating getting underway is a bold one.  We have yet to see whether Davey will have ‘time enough for counting, when the dealing’s done.’

 

 

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