What would happen if Britain had no carbon price support?

Drax commissioned research for its Electric Insights index to examine what impact a decision to scrap the £18 per tonne of CO2 carbon price would have on the nation’s energy mix and carbon emissions.

The research, produced independently by Imperial College London academics, found that carbon emission would have increased by 16 million tonnes in 2016 to 92MT. In comparison, doubling the carbon price support to £36 per tonne would have decreased 2016 emission levels by 10%.

The energy mix would also be skewed if the carbon price support was removed. The research found that coal generation would have increased by 102% to 56TWh and the carbon intensity of grid would have increased by 20% as a result.

Imperial College London’s Dr Iain Staffell, the research lead, said: “If the government had abolished all carbon pricing, we would probably have seen a 20% increase in the power sector’s carbon emissions.

“Removing the Carbon Price Support would have the equivalent environmental impact of every single person in the UK deciding to drive a car once a year from Land’s End to John o’Groats.”

In the recent Spring Budget, the Chancellor reaffirmed the Government’s commitment to the current carbon price support, which runs until 2021. Drax has benefitted from the support, introduced in 2011, after converting three former coal stations into biomass plants.

These conversions can reduce Drax’s station-based emissions by at least 80% and means that the company can generate a greater share of the UK’s energy grid, as coal’s share of the mix declines year-on-year.

The analysis warned that Britain “risks going back in time”, specifically to 19^th Century levels, if it removes carbon price support too soon. This would create a knock-on effect, the analysis notes, of coal stations staying open for longer, creating a risk to security of supply through a “cliff edge” of coal closures scheduled for the mid-2020s.

What if … Britain had no carbon price support?https://t.co/nGz1JzMHTX pic.twitter.com/MIUSYf73gq

— Drax (@Draxnews) March 13, 2017

Double or nothing

Subsequently, the analysis also presented what 2016 would’ve looked like if the carbon price support had been doubled to £38 per tonne of CO2. Figures suggest that coal generation would have fallen by almost 50% and carbon emissions would’ve decreased by 10%. In total, the carbon intensity of the grid would be 9% lower.

Both scenarios were only modelled on the impact of carbon price support on nuclear, coal and gas supply, and was unable to examine impacts on energy technologies that operate under the Renewables Obligation (RO) or imports and storage.

Research from the World Bank has suggested that if policymakers can embed a carbon price within “complimentary” green legislation, then climate change mitigation costs could fall by almost a third by 2030.

Arguments have been made that scrapping the carbon price support would help in securing the long-term stability of Britain’s energy-intensive companies, which have had to battle against cheap imports.

Critics of the support are also quick to highlight that scrapping the carbon price would save consumers and non-domestic bill payers money. However, Staffell claimed that extra taxes, renewables support measures and transmission and balancing charges would create around a 1p/kWh reduction in tariffs, despite the 21% increase in emissions.

Matt Mace