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Osborne accused of derailing UK.gov's green dream

Energy law 'will only work if Treasury stumps up cash'

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The UK Treasury is accused of dropping an oil slick in the way of the government's Energy Bill, a draft law to lower carbon use and make Blighty more energy efficient.

MPs on the influential Energy and Climate Change Committee said the proposed legislation was "unworkable" because the country's penny counters have refused to underwrite contracts to provide low-carbon electricity to the nation.

"The government is in danger of botching its plans to boost clean energy, because the Treasury is refusing to back new contracts to deliver investment in nuclear, wind, wave and carbon capture and storage," said committee chairman Tim Yeo in a canned statement on Monday.

His criticism fuels an ongoing row over what's being seen as attempts by Chancellor George Osborne to water down eco-friendly energy plans to keep Tory backbenchers happy.

The draft bill, which the select committee is scrutinising, drags the country into a shiny new future in which Britain burns less fossil fuel, meets its EU climate-change target and secures energy supplies.

To do this, the bill proposes "contracts for difference" or CfDs, for which the Treasury is supposed to guarantee the price for the energy wrung out of the planet in a low-carbon manner.

The CfDs therefore remove the risk for investors backing nuclear power station builds or wind farm construction, but the MPs argue that will only happen if the government acts as a guarantor for the prices that the power companies receive.

The latest draft of the law wants to spread the liability from the contracts around the energy companies but the committee said that was "too complex and possibly not legally enforceable".

On top of that, the Treasury is also talking about putting some sort of a cap on green levies, which would ration the number of energy contracts in the first place.

"Nobody wants to see a blank cheque written out for green energy," Yeo said, "but the government must provide investors with more certainty about exactly how much money will be available."

The committee also had issues with how the bill was worded. The MPs said that the Department of Energy and Climate Change (DECC) hadn't put any explicit carbon targets into the legislation.

"We believe that an explicit reference to the carbon budgets in the bill, as well as making the Committee on Climate Change a statutory consultee on the delivery plan, would help to create greater certainty about the UK's commitment to meeting its statutory obligations," the committee said in its report.

The draft bill will also make the six biggest energy firms even more dominant, according to the MPs, by reducing competition and stopping new entrants to the market. The committee said the government should incentivise power companies to reduce the public's demand for energy. ®

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