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It’s Green Taxes That Are Driving Up Our Fuel Bills

Chris Huhne cuts a rather pathetic figure alongside Admiral Nelson but he does share one thing with our greatest naval hero: a talent for looking down the wrong end of the telescope. In a week when householders learned their gas and electricity bills will rise by 20 per cent it is pretty galling to see Mr Huhne on television assuring us that “we have some of the lowest energy prices in Europe”.

True, with the pound low and with taxes taken into account, British consumers are – in Euro terms – currently paying less for their energy than those in Germany, Italy and Spain. We are, though, paying significantly more for our electricity than are French consumers and we are paying more than half as much again as those in the US.

What Mr Huhne doesn’t bother to tell us is that energy prices in Britain are going to rise sharply over the next few years – and far more so than in other countries – as a direct result of the Government’s unilateral commitment to reduce carbon emissions by 80 per cent by 2050.

According to financial analysist UniCredit, the recent hikes in energy prices are just the beginning of a long upward ratchet which could see bills double by 2015.

According to Ofgem, the Government’s own energy market regulator, four per cent of our gas bills and 10 per cent of our electricity bills this year will be made up of environmental levies. But you won’t find mention of them on your bill.

Many people are completely unaware of them. The average household will pay £48 towards something called the Carbon Emissions Reduction Target – a Government scheme which compels energy suppliers to subsidise loft and cavity-wall insulation.

We are also paying an average of £13 towards the EU Emissions Trading Scheme (ETS), which obliges energy companies to buy permits, or “credits”, to burn fossils fuels. Another £16 goes towards the Renewables Obligation, which currently forces energy companies to buy 11 per cent of their energy from more expensive ‘green’ sources such as wind farms and solar panels.

All in all, green levies this year will add nearly £100 to our bills. But this is just the beginning. The proportion of energy which suppliers must buy from pricey green sources is due to rise progressively and the number of carbon permits available under the ETS will fall, forcing up the price.

By 2020 we will be each pay around £250 a year in green levies. Our politicians know full well that these levies are a large part of the story behind rising energy bills. All but a handful of MPs who were in Parliament before the last election supported the Climate Change Act 2008 which committed the UK to cutting carbon emissions by 80 per cent by 2050.

And yet still they feign outrage every time that prices go up. None of them, however, make the jaw drop quite like Ed Miliband, who last month told the Prime Minister to “stop sitting idly by” and tell Scottish Power to “get prices down”.

Miliband, in case it should be forgotten, was secretary of state for energy in Gordon Brown’s cabinet and was personally responsible for getting the Climate Change Act through the Commons.

Green levies might be worth it if they were genuinely going to help cut global carbon emissions, but there is no prospect of that. Britain accounts for just two per cent of global carbon emissions.

For every tonne of carbon dioxide emissions avoided here, several more tonnes will be emitted in other countries, none of which have committed themselves to so draconian a reduction in emissions as we have.

Much of the political debate on the Government’s energy policy has focused on the effect on consumers, but no one should forget that high energy prices have a big impact on industry, too.

All that our unilateral efforts to reduce carbon emissions are going to achieve is to force our remaining manufacturing industry abroad. For the past decade factories have moved to developing countries in search of cheaper labour, but now there is another incentive for them to do so: lower energy prices.

Moreover, shifting production to Asia allows companies to cash in on carbon credits. Close down a factory in Britain and you can sell your credits. Reopen your factory in the Far East and you don’t have to buy any credits at all because there is no equivalent of the ETS in Asia.

In the aftermath of the banking crisis all the main political parties were agreed: Britain had to start making things again so that it would be less reliant on financial services. Yet the Government’s energy policy is achieving exactly the opposite.

But there is one group which is doing very nicely indeed: spivs in the City. The City of London dreamed up a carbon trading system in the first place and lobbied hard for it. Gordon Brown, with his eyes on the tax revenues it could raise, acceded to their demands.

Indeed, in 2007 he quoted the fortunes of the City of London as one of the reasons for expanding the ETS around the world. For the traders the market in carbon credits was worth $148billion last year, a slice of which is creamed off by the banks.

While consumers face another long winter wondering whether they can afford to turn on the heating there will be a big cloud of carbon emissions emanating from London’s Porsche and Lamborghini dealerships, where a proportion of the extra money on our bills will end up.

Daily Express, 12 July 2011