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UK Coalition Government Divided Over Osborne’s Gas Vision

Row between chancellor and energy secretary over onshore wind subsidies exacerbated by difference of opinion on gas

Fresh details have emerged about the deepening row between the chancellor and energy and climate change secretary over renewables subsidies, centring around the future role of gas in the UK energy mix.

George Osborne and Ed Davey have been at loggerheads over the subsidy rates that will be paid to renewable energy generators from April next year with the row having already forced the Department of Energy and Climate Change (DECC) to delay this week’s anticipated announcement on new support rates, prompting an angry response from the CBI and green businesses.

Reports in the Financial Times today suggest the disagreement centres around the chancellor’s desire to keep gas at the centre of UK energy policy.

Osborne is believed to be concerned that subsidies for renewable energy will prevent investment in new gas-fired power stations and as such is calling for deeper cuts to renewable energy subsidies than had been planned.

Davey supports cuts to onshore wind subsidies of no more than 10 per cent, but the chancellor is understood to be pushing for much larger reductions, which businesses fear may kill off the industry and make meeting the UK’s carbon reduction and renewable energy targets nigh on impossible.

BusinessGreen understands that Whitehall sources are deeply fearful the package of demands the Treasury is now putting forward would have a hugely debilitating effect on the renewables sector, low-carbon investor confidence, and the wider green economy if fully adopted.

Splits have emerged down party lines: while Liberal Democrats are concerned the coalition is drifting away from its pledge to be the greenest government ever, on the other side of the fence more than 100 Conservative MPs wrote to the prime minister earlier this year calling for cuts to wind farm subsidies.

Davey is said to accept that gas has an important part to play in the UK’s energy mix and has authorised the construction of a new wave of gas-fired power plants.

But he is understood to be determined to defy the Treasury’s calls for deeper cuts to renewable energy subsidies, and despite the involvement of prime minister David Cameron and deputy prime minister Nick Clegg, the stand-off is still yet to be resolved.

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