24 February 2014: Coalition subsidies to keep the coal fires burning

In the 20th century, the British political party which supported the coal industry was Labour. The relationship between the Tories and the miners was confrontational. A miners’ strike contributed to Edward Heath’s loss of power. The miners then tried to bring the Thatcher government down in 1984-5. However, 30 years on it is a Conservative-led coalition that is planning to keep coal power stations open through public subsidy – supported by the Liberal Democrats in an apparent retreat from their longstanding climate commitments. And Labour is opposing subsidies to coal without carbon capture and storage technology (CCS), despite its leader and shadow energy and climate secretary having constituencies in Doncaster, a historic coal community.

In 2012, 39% of the electricity generated in the UK came from coal. Coal power stations are twice as damaging to the climate as gas stations are. To protect the climate and lessen the risk of more extreme weather, coal stations without  CCS (which has yet to be demonstrated at scale) should be closed down as soon as possible. Yet, the government intends to pay them to stay open, as back-up to intermittent wind power.

The 2013 Energy Act legislates for capacity payments to fossil fuel power stations to remain available, to generate to meet peak demand or when wind and other renewables are not producing enough electricity. Wind does need back-up, at least until the UK has much greater interconnection with the continent and much greater electricity storage capacity. But back-up shouldn’t be coal. Gas power stations are more efficient for this, as they can be turned on and off more quickly. And they emit half the pollution. Labour tried to amend the legislation to prevent money for coal under the capacity payments, but was unsuccessful.

Capacity payments will have to be cleared by the European Commission as being consistent with state aid rules. There has been much speculation on whether the Commission will find that contracts for nuclear or renewables are compatible with state aid. Climate campaigners should also focus on coal subsidies. The Commission is in the process of updating its guidelines for state aid rules for energy and environment payments. Its consultation paper recognises the inconsistency between capacity payments and climate action:

“… the aid to generation adequacy may contradict the objective of phasing out environmentally harmful subsidies notably for fossil fuels”.

At the G20 summit in 2009, the EU promised to end such subsidies. Gas is less bad than coal, so some subsidies for gas should be allowed. But the Commission should prevent new coal subsidies. This would reduce climate pollution not only in the UK, but also in Germany, which is increasing coal burning in response to closing its nuclear power stations, and is considering capacity payments.

The coalition has a bad approach to coal subsidies, but good policies on new coal power stations and on carbon pricing. No new coal stations will be allowed in the UK unless they have CCS. And a price floor has been set for the EU’s Emissions Trading System, so that polluters have to pay more. However, these policies would be much more effective if they were Europe-wide. George Osborne has said that the UK should not be ahead of other EU countries on climate policy. The CBI and Greenpeace UK both argue that a UK price floor makes little sense. Therefore, the coalition should use all its influence in Brussels to get UK climate policies rolled out across the continent.

But what influence does the UK have in Brussels? Do we have any left? It is true that since David Cameron’s speech last January proposing an in-out referendum, British influence has decreased. But William Hague has been pragmatic as foreign secretary, so it would not be impossible to rebuild alliances. And many Conservatives, even otherwise eurosceptic ones, accept that climate and energy policy cannot be done effectively by the UK acting alone. Margaret Thatcher recognised this in her 1988 Bruges speech: there are things European nations “can do better together than alone”. And exactly a week after Bruges, Thatcher – a trained scientist – gave a historic speech to the Royal Society. She pointed out that:

“we have unwittingly begun a massive experiment with the system of this planet itself”

and went on to note that it was necessary:

“to consider the wider implications for policy—for energy production, for fuel efficiency, for reforestation”.

The Dutch government is one of the UK’s potential allies in Europe. It has carried out a subsidiarity review, asking what should be done by the EU and what by The Netherlands. This is similar to the UK’s balance of competences review. The Dutch concluded that there were indeed some environmental issues in which Brussels should do less – including flood defence, in which the Dutch are experts. But there were also green issues on which Brussels should do more, including energy and climate change.

The British government should line up with the Dutch, and the Danes and Swedes, in pushing for stronger European climate policies, particularly on coal. This alliance should push for five policy changes:

  1. There should be no subsidies to keep existing coal stations open.
  2. No new coal stations should be allowed unless they have CCS.
  3. Subsidies for coal stations with CCS should be increased.
  4. The Emissions Trading System should be turned into an effective market mechanism through the creation of a price floor.
  5. Money from the EU structural funds should be spent in coalfield communities.

Coal played a major part in Europe’s economic development.  Coalfield communities have a right to expect assistance in training and redevelopment, so that they can take advantage of a low-carbon future.

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