Davey: climate change policies could halve negative impacts of energy price shocks
18 May 2012
The negative impact that spikes in global oil, gas and coal prices have on the UK could be reduced by over 50% in 2050 as a result of climate change policies, energy secretary Edward Davey claims. The analysis, produced by Oxford Economics shows how the UK’s sensitivity to oil and gas price shocks could be reduced by using low-carbon power generation from renewables, new nuclear and Carbon Capture and Storage (CCS), and through increasing energy efficiency.
Edward Davey said: “Every step the UK takes towards building a low-carbon economy reduces our dependency on fossil fuels, and on volatile global energy prices. Only last year, the impact of the Arab Spring on wholesale gas prices, pushed up UK household bills by 20%. The more we can shift to alternative fuels, and use energy efficiently, the more we can ensure that our economy does not become hostage to far-flung events and to the volatility of market forces."
Energy prices have been trending up over the past decade and are becoming increasingly volatile. The government believes that, once the UK has established a low-carbon economy, the negative impacts of energy price volatility will be halved, with direct positive impacts on households, businesses, inflation and unemployment levels.
Out to 2050, as the UK economy becomes less energy-intensive through improved energy efficiency and through reforms to the electricity market, the analysis concludes that these impacts will be more than halved.
Next week, the Government will publish the draft Energy Bill which will set out in detail how the UK’s electricity market can be reformed. It will also propose ways in which the UK can attract the £110bn of investment required to build new low-carbon plant. These reforms are expected to help the UK meet its climate change targets - an 80% reduction in emissions of greenhouse gases by 2050.
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