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WSJ: Britain’s Better Energy Debate

Editorial, The Wall Street Journal

David Cameron signals a major reversal of his own policies.

Sometimes political necessity really is the mother of invention. So it was with David Cameron’s energy policies Wednesday.

Opposition leader Ed Miliband has been pasting the Prime Minister over consumer energy bills for weeks now, starting in September with an ill-advised but crowd-pleasing call for a government-imposed freeze. Utilities have since announced price hikes of between 8% and 10%, adding fuel to the ire.

And at the PM’s weekly Question Time Wednesday, Mr. Miliband confronted Mr. Cameron with former PM John Major’s recent suggestion to hit utilities with a windfall-profits tax. Mr. Cameron, needing something to come back with, promised to roll back environmental charges that, he said, cost consumers £112 a year, and which he blamed on Labour.

The idea is a good one. British households currently pay £8 a year toward the cost of Europe’s emissions-trading system, £5 for the U.K. government’s carbon-price floor and £7 to support the feed-in tariffs that subsidize small-scale wind and solar installations. On top of those there is another £30 a year that pays for large-scale wind and solar projects. About £60 of the £112 that Mr. Cameron cited goes to programs to help poor household either to pay their bills or make their homes more energy efficient.

What Mr. Cameron did not say is that more than half of these so-called green charges were introduced by his own government in its drive to live up to its ambition of being the greenest government ever. His coalition partners, the Liberal Democrats, remain committed to greening the U.K. economy, and seemingly heedless of the cost paid by households for their politicians’ supposed environmental virtue.

If Mr. Cameron means what he said, it would be a major reversal of his own policies. It also risks provoking a major rift within the government. Mr. Miliband has been right about one thing — rising energy costs are a serious pocketbook issue for British households and have the potential to be a political issue in the next elections, due in 2015. But his solution — a government-imposed price freeze while regulators figure out how to reorganize the industry to suit their own purposes — would lead to shortages and worse, as price controls invariably do.

This is an energy-policy fight worth having. Combined with the prospect of shale gas drilling in England and this week’s agreement on building Britain’s first new nuclear plant in decades, Mr. Cameron is inching toward an energy policy that is sensible and pro-growth. The shame of it is that he had to be forced into it by the political backlash against his own green agenda.

The Wall Street Journal, 25 October 2013