Time to look at all £9bn of energy policy support
Taxpayers and consumers provide some £9bn in support for energy policies. Might this be the moment to rebalance the national debate on energy subsidies by including fossil fuels and civil nuclear power in the mix, as well as renewables? Big jobs losses lie ahead if the government persists with its narrow focus on cutting so-called “green taxes”, in domestic energy efficiency, for instance. Already, 7,000 home insulation jobs have disappeared since the start of the year, according to the National Insulation Association. Our graph below shows UK fossil fuel subsidies ….
There is no clear definition of energy subsidies, as evidence to the Environmental Audit Committee (EAC) inquiry into Energy subsidies in the UK shows. But the overall total looks like about £9bn, a ratio of perhaps 3:1 against renewables.
This fossils graph (source OECD) includes consumption and production taxes and incentives.
The TUC supports a balanced portfolio of low carbon and carbon free power generation as a means to achieve our energy decarbonisation targets.
On fossil fuels, the OECD estimates that government policies provided £4.3 billion of support in 2011 (the latest available data), up £510 million on the year before. The OECD bases its estimates on how much financial benefit fossil fuels receive from a wide range of government energy policies. Plus, the Chancellor is announcing new tax breaks for shale gas fracking and North Sea oil and gas exploration.
As for gas, most public support for gas consumption comes from the lower VAT rate that domestic consumers pay for fuel and power – an effective tax break on energy. The standard rate of VAT on most goods and services is 20%, but domestic consumption of heating fuel and power is only taxed at 5% (the EU minimum). Coal also receives this tax break – meaning there was £592 million of support for both fuels in 2011, according to the OECD.
Friends of the Earth submission to the EAC inquiry shows that the total value to the industry over five years of the 28 Oil & Gas field allowances awarded in 2012/13 is £1.952 billion.
Regarding nuclear subsidies, Oxford Energy’s evidence to the EAC shows that the Nuclear Decommissioning Agency (NDA) is currently working on an annual budget of around £3 billion, of which £2.3 bn is provided by the UK government via DECC’s budget. Nuclear power provides about one-fifth of our baseload, carbon free energy. The NDA has responsibility for radioactive waste management and decommissioning, and for nuclear legacy sites. Apparently, the NDA’s undiscounted provision for the lifetime cost of the decommissioning of Sellafield up to 2120 is around £67.5 billion.
By comparison, the government’s budget for low carbon energy support is some £2.35 billion via consumers’ bills under the Levy Control Framework (LCF) in 2012-2013, with that set to rise to £7.6 billion in 2020.
Although our figures are not strictly like for like, they provide an overall comparison of government support.
Meanwhile, globally, government subsidies to fossil fuels reached $523 billion in 2011, up almost 27% from 2010, according to the latest data available from the International Energy Agency (IEA) . That figure reaches $620bn with subsidies for production added in. Compare that to IEA’s estimate of $88bn for renewables in 2011. That means policy makers give fossil fuels a 6-fold support compared with renewable energy.