Having both emissions trading and feed-in tariffs is a waste of time

Dan Box

12th March, 2010

The new feed-in tariffs are nothing if not controversial, but they also run the risk of conflicting with other, international, climate change policies

Government climate change champion Ed Miliband calls it a ‘local energy revolution‘; the Independent ‘a real green money-spinner‘ that will ‘ease your eco-guilt’.

What are they talking about? None other than the new ‘feed-in tariffs’, which mean that, from April 1st, power companies will pay you to generate electricity from solar panels or wind turbines on your roof.

Now, I like free money as much as the next man, and my eyes lit up when I first heard of this idea. Only on closer inspection did I establish the problem; that in terms of fighting climate change, feed-in tariffs are a nonsense.

One issue very well-rehearsed is that the Government’s plans will literally throw billions at promoting solar panels, which are a stupid way to generate electricity in this dark but windy country. Solar panels allow you to ease your eco-guilt expensively – they are effectively a fashion accessory, or eco-bling (there has been a fair ding-dong over this in the pages of the national press).

Another fault is that forcing power companies to pay person X for his solar power will provoke them to put up all our bills in return – Miliband estimates by about £50 a year, though expect it to be more – creating a merry money-go-round where we pay with one hand and take with another (or, worse, where person X gets paid by person Y, who can’t afford any eco-bling herself).

But, most seriously, feed-in tariffs simply don’t add up, for one good reason – the European Emissions Trading Scheme. Under the ETS, carbon reductions in one industry can be traded against increases elsewhere. The British launch lags an identical decision by the German government in 2000, a report on which published in the journal Energy Policy says feed-in tariffs ‘do not imply any additional emission reductions beyond those already achieved by ETS alone’.

Either have feed-in tariffs, or emissions trading. Having both is a waste of time. Miliband’s revolution may be a votewinner, but in terms of cutting Britain’s carbon emissions, it looks dangerously like multi-billion pound coup de theatre, nothing else.