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With the Budget looming, we need a plan to help the squeezed middle without adding a penny to the deficit. One way is to overhaul the myriad of tariffs and subsidies, introduced by Labour, that hike up energy bills. Effectively a tax on consumers, they are hurting hard-pressed families and businesses – and represent flawed environmental priorities.

Take the Renewables Obligation, the subsidy consumers pay energy companies to produce solar, wind and hydro-electric power. Figures from Ofgem, the energy regulator, reveal that the cost of the subsidy doubled in five years, and now stands at over £2 billion. Next year, the subsidy is the equivalent of hitting each household for £77, up from £40 three years ago.

To add insult to injury, the subsidy funnels money to the least-efficient energy sources. The justification has always been that this backdoor tax would make renewable energy sources more efficient over time. Yet, measured by “load factor” (the extent to which a plant operates at maximum capacity), onshore wind and hydro-electric power have got less efficient in the last three years, and solar no better.

It is a similar story with feed-in-tariffs (FITs), another subsidy paid by consumers to encourage smaller business and homes to generate their own renewable energy from solar panels, wind turbines and anaerobic digestion of sewage. While a small minority have cashed in on solar subsidies, projections by the Department for Energy and Climate Change forecast that the resulting annual FITs bill, picked up by the consumer, will quadruple in the next three years – hitting £790 million – despite their miserable track record on energy efficiency. Even with Coalition efforts to rein in solar subsidies, the total cost of FITs over the next four years will still be £1 billion more than originally budgeted for.

Given that fuel poverty has tripled since 2003, this toxic mix of tariffs and subsidies will hit low and middle-income families the hardest. So what should we do instead? The debate on climate change has shifted. While some still dispute the science, there is a consensus that we need to forge an environmental policy that makes wider economic sense. The Coalition has made key changes in the right direction. Eight new nuclear power stations are planned. Equally, measures to promote home insulation and energy efficiency will reduce carbon consumption and save money.

However, there needs to be a sharper cost-benefit analysis, and more honesty about what Labour signed the country up to. Take CO2 emissions. The Coalition inherited Ed Miliband’s pledge, when he was energy secretary under Gordon Brown, to push for a 30 per cent cut in EU emissions. But what analysis has been made of the economic cost of the UK’s share of that target? When the Taxpayers’ Alliance submitted a freedom of information request, it was told such assessments were contained in seven documents. But Mr Miliband refused to disclose them, claiming it might damage Britain’s climate change negotiations. This is ludicrous. Either the cost to Britain is high, in which case it would strengthen our leverage with other nations (but require explaining at home). Or the cost is low, in which case it is win-win. Whatever, the public should now be told the official estimates of the cost of such a major environmental target.

Next, the current tapestry of costly tariffs and subsidies needs to be torn up. Neither politicians nor bureaucrats are well-placed to pick potential winners – in the green sector, as in any other part of the economy. The argument goes that the private sector will not invest in taking innovative research ideas to market. There is some truth in that, but it reflects a bigger problem Britain has in attracting venture capital, not to mention the initial under-investment in bright ideas in the first place. Both need to be addressed. But the fact remains that despite massive investment and cost to the consumer, the current tariffs and subsidies are not making renewable energy more efficient.

This does not mean abandoning the green agenda. But a smarter environmental strategy would address the short, medium and long terms. For those who take climate change seriously, it is difficult to understand why we don’t invest more in adapting to the inevitable. We will spend as much on the Renewables Obligation next year as we will on managing flood risk and coastal erosion over four years. Strengthening the resilience of infrastructure should be a bigger – and more immediate – priority.

In the mid-term, the aim should be to wean Britain off fossil fuels and make the country less reliant on unstable energy supplies from Russia and the Middle East. Given the right regulatory regime, nuclear power is the most cost-efficient way to generate the volume of clean energy we need over the long term.

Perhaps renewables will come good in time. But we shouldn’t gamble billions in subsidies and tariffs speculating on such a poor bet. That doesn’t mean that no public money should be invested in green technology. Far from it. But it should be focused on research and development that drives genuine technological innovation over the long run. Last year, government spent a quarter as much on energy R&D as it did on tariffs and subsidies – less as a share of gross domestic product than in France, Germany, Canada, Japan and the US. Those skewed priorities must change.

Under Labour, Mr Miliband’s environmental policy was a giant boondoggle that is set to punish the squeezed middle. It won’t survive the scrutiny of austerity. We need an alternative that is green and lean.

Dominic Raab is Conservative MP for Esher and Walton

The Daily Telegraph, 19 March 2012