Because coal-fired power stations are so obviously bad for the environment and electricity so profligately used, governments have been quick to hand out environmentally friendly regulations to its generators and suppliers.
An integrated power company in the UK must now, by law,
a) increasingly source its power from renewable energy
b) undertake a certain level of activity to improve energy efficiency in households,
c) pay a fixed reward to consumers producing their own renewable electricity (so-called 'feed-in' tariffs) and d) ensure their total emissions stay within a fixed cap (or buy in emissions reductions from elsewhere to compensate).
Soon they will also be required to collect a levy to be spent on capturing and storing carbon underground. It may not be long before they are also obliged to go nuclear.
All this regulation is absolutely essential for driving investment in climate solutions but it makes the act of choosing an electricity tariff considered 'greener' than average almost impossible. The good news is that by the time electricity reaches us it's already got all the legal green obligations priced into it. So we are all doing our bit via our bills already. But if you don't think the government's obligations are going fast or far enough and want to exercise your consumer power to go further, it quickly gets complicated trying to work out if that thing you want done is really additional or just meeting a legal requirement.
Ofgem's new trademarked label for green electricity tariffs is a welcome step forward. Help is at hand for the consumer seeking to navigate this carbon policy jungle.
A new panel of auditors has taken Ofgem's guidelines, issued last year, and scrutinised proposed green tariffs wishing to bear the new trademark – those that have passed will be announced today. The crucial test: is this product doing something that wasn't required of the electricity company already? Broadly, three things qualify – investing in (but not owning) community renewables projects too small to be part of the renewables obligation (point a. above), paying for energy efficiency projects that do not qualify for the existing requirement, and buying and cancelling emissions permits that would be otherwise used to allow pollution to carry on.
Of these, by far the easiest to audit and most clear in terms of doing something new, is the last: permit cancellation. The Environmental Audit Committee report, issued yesterday, clearly recommended that caps on emissions, in the UK and Europe, be significantly tightened. This must ultimately be achieved by changes to the policy at EU level but it can also be helped along by action by member states and by consumers.
Fewer permits in circulation mean less pollution. So tariffs that cancel them are good. More investment in renewable power and electrical energy efficiency unfortunately cannot be guaranteed to do the same unless some of the fixed supply of pollution permits are also cancelled. If they are not, they will be sold to someone else who will use them to pollute.
This fact has long been ignored in Europe though it has been the subject of intense debate in Australia, where the government is trying to introduce caps on emissions, and has already been addressed in the existing US regional cap and trade scheme. This has to change.
The Ofgem guidelines go a long way towards untangling the many overlapping climate policies that now exist. They are not perfect and there is still a long way to go to increase awareness and make the distinction clear between cancelling pollution permits and the much-criticised use of 'carbon offsetting', which is not the same thing.
If this can be achieved and more policies and products be aligned so that we get the number of permits in circulation down, then this new scheme will be an efficient way to harness green consumer power.
Reference: Bryony Worthington; director of Sandbag.org.uk campaigner for tighter caps on pollution.
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