Energy in a low carbon economy: new roles for governments and markets

David Newbery, EPEG Cambridge

EU climate policy comprises of the Emissions Trading Scheme (ETS) to price CO2, the 20-20-20 Directive to create a demand pull for renewables and the EU SET-Plan to double R&D spending. However there are failures with some aspects of these policies, such as the ETS CO2 price being volatile and too low and the Renewables Directive undermining the ETS as it can reduce the price of EUAs and prejudice other forms of low carbon generation (nuclear). UK energy policy seeks to ensure a secure, affordable and efficient, low carbon energy system and is based in part around the policy lead from the EU. However, the UK also needs to consider how policy can support the transition to low carbon and the wider goals for the energy system. This requires the development of certainty to ensure that timely investment comes forward, including: a need for quick clarity on energy policy; the reduction of unnecessary risk; the replacement of ROCs with tendered FiTs; underpinning and guaranteeing the carbon price; and reform of the market and transmission access.