30 June 2021

The way Britain weaned itself off coal offers hope for a clean energy future

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Few things have permeated Britain’s national political discourse like coal. Miners strikes threatened premierships at various points throughout the 20th century and many communities tied their identity to the pits, even long after the industry had gone. Nor are such battles over. This year, Cabinet ministers traded blows through press briefings over plans to open a new mine in Cumbria.

Even so, the end of coal’s political relevance is drawing ever closer. Unabated coal-fired power generation in the UK was due to be phased out by October 2025. Today, the Government announced that date would be pulled forward a year. The fuel which powered the Industrial Revolution will be side-lined from our electricity grid for good by 2024.

Should we be worried? In a word, no. In the last ten years, the UK has weaned itself off one of the dirtiest hydrocarbon fuels with staggering results. In 2012, nearly two-fifths of electricity was generated by burning coal. Last year, it mustered a mere 1.8%.

The collapse in coal has been offset by the rise of renewables, with fossil gas and bioenergy also ramping up the amount of energy they provide. A fall in the overall demand for electricity has helped too. And while these explain how coal has been driven off the grid, they don’t necessarily explain why.

For that, we need to go back a few years – to 2013 to be precise. This was the year when the UK first levied the ‘Carbon Price Support’, which is effectively a carbon tax on emissions from electricity generation. For every tonne of carbon dioxide emitted, the offending company must stump up a little over £18.

After this, the incentives shifted. For many energy users, coal was simply not economically viable and less polluting forms of electricity generation became more attractive – namely fossil gas. Granted, gas still involves some pollution, but it only produces about half the emissions coal does per unit of electricity provided. Of course, zero-emission generators – be they wind, solar or nuclear – licked their lips at the prospect of being able to avoid the tax entirely.   

Economists have long stressed the power of carbon taxes to meaningfully and effectively shift the economy in a greener direction. The experience of Britain’s electricity supply vindicates them – with the average carbon-intensity of the grid now around two-thirds of what it once was prior to the Carbon Price Support coming into play.

It wasn’t just the Carbon Price Support though – there are some other key factors to bear in mind.

In 2015, before the General Election, Messrs Cameron, Miliband and Clegg all agreed that regardless of who won, they would commit to a coal phase-out date. Following a surprise Conservative victory, the then Energy Secretary, Amber Rudd, reaffirmed the pledge and set in motion a process which would eventually arrive at the (now former) deadline of 2025.

Renewables were also subsidised handsomely. Schemes like Contracts for Difference have guaranteed fixed returns to insulate them from the possibility of a crash in the wholesale price of electricity. Defenders of this policy might argue that subsidisation was necessary to begin with, and that we are now reaping the benefits of cheap and bountiful offshore wind power.

Finally, as already mentioned, Britain is consuming much less electricity today than it was previously – thanks largely to more efficient gadgets in our homes and offices. (In fact, electricity demand peaked all the way back in 2005.) 

Nevertheless, it is hard to look past the Carbon Price Support as the critical intervention which tipped the balance and really got Britain on a cleaner track. It ensured that every single marginal unit of electricity produced had to give consideration to its carbon consequences.

For fans of market-based policy making, this ought to be encouraging. It suggests that steers provided by price signals genuinely do make a big difference in effecting change. So let’s learn the lesson of 2013, and look to where we might be able to apply similar policies to drive decarbonisation elsewhere. 

The most obvious contender would be domestic heating, where fossil gas attracts very little in the way of paying for the emissions it creates, while electric systems already have to factor in the Carbon Price Support. This creates an economic disparity, and is making the shift to clean electric heat pumps a less enticing financial proposal.

Certainly, we shouldn’t just go around slapping levies on anything and everything. The Government should offset tax increases in one instance with cuts elsewhere to ensure that, overall, the shift to pricing more of our emissions doesn’t end up being regressive. Alternatively, it could rebate revenues raised by new carbon taxes directly to households, with poorer ones getting back more than they put in.

Given the uncertainty about how we are actually going to get to Net Zero, it’s incumbent on politicians to be open-minded about possible solutions. Failure to embrace market-based solutions such as carbon taxes would be a big mistake. The alternative route, of command-and-control interventions, risks being ineffectual while committing us to a more expensive, more disruptive future.  

Britain should be immensely proud of its record on electricity decarbonisation. Sensible policies and the ambition to see them through have delivered staggering results over a fleeting timeframe. But perhaps best of all, it gives us a blueprint for getting on with decarbonising the rest of the economy. The Government should be minded to use it. 

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Eamonn Ives is the Head of Energy and Environment at the Centre for Policy Studies.