The case for onshore wind

The Chancellor’s crusade against onshore wind, whatever the merits with his own backbenchers, is economically ill-judged.

In a straight political fight between George Osborne and Ed Davey, few pundits would have put their money on the Chancellor losing. Not only has the Department of Energy and Climate Change recently lost its Permanent Secretary, in what can only be described as strange circumstances, but a much-trailed cut in subsidy support for onshore wind was kicked into the long grass of the Parliamentary summer recess.

So how is it that when the extent to which subsidies would be cut was finally determined this week it was announced that it would be DECC’s 10 per cent cut rather than the Chancellor’s preferred cut of 25 per cent? There has been so much political debate around wind power that, perhaps, the economic case has been overlooked. Osborne’s case against onshore wind is simply this: wind does not blow all the time, so why should we subsidise a technology that is intermittent, cannot provide the base load of electricity supply and despoils some of the most beautiful landscape in the country which, incidentally, happens to be in Conservative-held seats?

The answer, of course, is that in the long-term we should not. Subsidies should never be a permanent feature of any market. They should be introduced only to address market failure and they should be withdrawn gradually as those distortions in the market are addressed. Treasury economists no doubt recognise the economic rectitude of such a position; whether they can square it with their ongoing subsidies to fossil fuels is entirely a different matter.

Last year, the OECD estimated that in 2010 the subsidies for coal, gas and petrol in the UK amounted to £3.6bn on top of which the Chancellor, in the 2012 budget, has announced further exploration and production subsidies of £65m to develop the West of Shetland fields. Quite what market failures these subsidies are being used to redress is unclear. On the contrary, it would appear that the fossil fuels has an entrenched subsidy culture where such taxpayer handouts are regarded as a right rather than a means of addressing what is an otherwise unlevel playing field. The total subsidy paid to onshore wind amounted to less than £400m in 2010-11 or £6 on the annual bill of the average household. This gives some better sense of proportion about the subsidy onshore wind currently enjoys against the £3.6bn in consumption subsidies that fossil fuels enjoy before the cost of carbon emissions is even factored in.

The real market failure is that the environmental, social and economic cost of greenhouse gas emissions is not properly factored into our fossil fuel price. The government has recognised this and has tried to attribute a price to carbon emissions through the EU Emissions Trading Scheme (ETS). Unfortunately the carbon price has neither been stable enough nor high enough to redress this market failure even for the 40% of the UK’s carbon emissions that are covered by the ETS. This means that fossil fuels are operating in a market that is tilted distinctly in their favour.  Renewables such as onshore wind, and which do not produce polluting carbon emissions, are perhaps entitled to claim therefore that there is a clear justification for being subsidised. Bringing new technologies to the market can be difficult and many technologies have died in the valley that lies between demonstrator prototype and full commercial development. If the UK is to develop world leading renewable technology the Government must be prepared to support them to market. The Renewable Obligation subsidy, brought in under Labour, was designed to do this - supporting new wind generation as technology is successively improved and economies of scale reduce production costs. It is worth noting that it is precisely the positive trajectory of onshore wind that led DECC to argue that the subsidy could be reduced by 10% in the first place.

This trajectory leads some in the industry to predict that onshore wind will be cost competitive with gas by 2020. For this reason the subsidy should progressively be reduced, but, at the same time, the gas sector should increasingly pay the full cost of its carbon emissions which it is currently failing to do. Even if average household electricity consumption remains unchanged (and we should all sincerely hope it reduces dramatically) and even if the subsidy remains unchanged (and it has already come down and will further) the additional cost to a household bill in 2020 as a result of the most optimistic growth forecast in onshore wind would still only be £13 per year. Yet gas produces significant carbon emissions and onshore wind produces none.

The Chancellor’s crusade against onshore wind, whatever the merits with his own backbenchers, is economically ill-judged. What compounds his mistake though, is that he has now demanded additional measures to subsidise gas. Should policy change to ensure we meet our carbon budgets, these investments will prove to be redundant as we will require electricity produced at approximately 50 grams of CO₂e per kilowatt/hour. Gas-fired power stations cannot achieve this. The Chancellor is using public money to subsidise investment in a technology that will be incapable of meeting the legal requirements of the UK’s climate Change Change Act.

Barry Gardiner is the Labour MP for Brent North and Ed Miliband's Special Envoy on Climate Change and the Environment

The Whitelee onshore windfarm in Scotland. Photograph: Getty Images

Barry Gardiner is Labour MP for Brent North and shadow minister for Energy and Climate Change. 

Photo: Getty
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Labour will soon be forced to make clear its stance on Brexit

The Great Repeal Bill will force the party to make a choice on who has the final say on a deal withg Europe.

A Party Manifesto has many functions. But rarely is it called upon to paper over the cracks between a party and its supporters. But Labour’s was – between its Eurosceptic leadership and its pro-EU support base. Bad news for those who prefer their political parties to face at any given moment in only one direction. But a forthcoming parliamentary vote will force the party to make its position clear.

The piece of legislation that makes us members of the EU is the European Communities Act 1972. “Very soon” – says the House of Commons Library – we will see a Repeal Bill that will, according to the Queen’s Speech, “repeal the European Communities Act.” It will be repealed, says the White Paper for the Repeal Bill, “on the day we leave the EU.”

It will contain a clause stating that the bit of the bill that repeals the European Communities Act will come into force on a date of the Prime Minister's choosing. But MPs will have to choose whether to vote for that clause. And this is where Labour’s dilemma comes into play.

In her Lancaster House speech Theresa May said:

“I can confirm today that the Government will put the final deal that is agreed between the UK and the EU to a vote in both Houses of Parliament, before it comes into force.”

Later that day David Davis clarified May’s position, saying, of a vote against the final deal:

“The referendum last year set in motion a circumstance where the UK is going to leave the European Union, and it won’t change that.” 

So. The choice the Tories will give to Parliament is between accepting whatever deal is negotiated or leaving without a deal. Not a meaningful choice at all given that (as even Hammond now accepts): “No deal would be a very, very bad outcome for Britain.”

But what about Labour’s position? Labour’s Manifesto says:

“Labour recognises that leaving the EU with ‘no deal’ is the worst possible deal for Britain and that it would do damage to our economy and trade. We will reject ‘no deal’ as a viable option.”

So, it has taken that option off the table. But it also says:

“A Labour approach to Brexit also means legislating to guarantee that Parliament has a truly meaningful vote on the final Brexit deal (my emphasis).”

Most Brexit commentators would read that phrase – a meaningful vote – as drawing an implicit contrast with the meaningless vote offered by Theresa May at Lancaster House. They read it, in other words, as a vote between accepting the final deal or remaining in the EU.

But even were they wrong, the consequence of Labour taking “no deal” off the table is that there are only two options: leaving on the terms of the deal or remaining. Labour’s Manifesto explicitly guarantees that choice to Parliament. And guarantees it at a time when the final deal is known.

But here’s the thing. If Parliament chooses to allow Theresa May to repeal the European Communities Act when she wants, Parliament is depriving itself of a choice when the result of the deal is known. It is depriving itself of the vote Labour’s Manifesto promises. And not only that - by handing over to the Prime Minister the decision whether to repeal the European Communities Act, Parliament is voluntarily depriving itself of the power to supervise the Brexit negotiations. Theresa May will be able to repeat the Act whatever the outcome of those negotiations. She won’t be accountable to Parliament for the result of her negotiations – and so Parliament will have deprived itself of the ability to control them. A weakened Prime Minister, without a mandate, will have taken back control. But our elected Parliament will not.

If Labour wants to make good on its manifesto promise, if Labour wants to control the shape of Brexit, it must vote against that provision of the Repeal Bill.

That doesn’t put Labour in the position of ignoring the referendum vote. There will be ample time, from October next year when the final deal is known, for Labour to look at the Final Deal and have a meaningful vote on it.

But if Labour supports the Repeal Bill it will be breaching a clear manifesto promise.

Jolyon Maugham is a barrister who advised Ed Miliband on tax policy. He blogs at Waiting for Tax, and writes for the NS on tax and legal issues. 

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