Thread by @James_BG

The Net Zero ‘Scrutiny’ Group’s proposals for dealing with the gas price crisis are so absurdly partial their inadequacy becomes clear within the first five paragraphs of a story they themselves have briefed. A hopefully shortish thread…

Let’s leave aside the question of whether pressure can be ‘piled on’ by ‘backbenchers’ when those backbenchers number just 19 of the usual suspects while a far larger number of backbenchers are thinking much more seriously about this challenge, and instead look at their proposal.

The main idea is to ‘scrap green taxes’ that make up a quarter of electricity - but not gas - bills and axe the 5% VAT rate on energy bills.

But article acknowledges axing ‘green’ levies will save £200/year on average bill. Scrapping VAT may save another £60 or so. Let’s be generous and say £300. But global gas prices have risen so sharply bills will rise by much more than £300 this year. Some say they could double.

Their plan will ease cost of living pressure a bit, which is why energy industry is calling for much the same thing. But it won’t solve the problem.

It also wilfully fails to define what is a ‘green levy’ and what ‘axing’ them means. These levies fund contracts between government and clean power producers, energy efficiency schemes, and fuel poverty grants for pensioners and others.

So, we’re either talking about breaching contracts and scrapping energy efficiency funding, etc, or moving these costs into general taxation (which the industry wants, arguing rightly it’s more progressive taxation).

The latter proposal is sensible (if risky given the Treasury’s inconsistent support for decarbonisation) the former would be disastrous for the net zero transition. And remember the Net Zero ‘Scrutiny’ Group insists it does want to see a cost effective net zero transition happen.

So pausing VAT on energy and shifting levies into general taxation is a sensible way of easing pressure on bills, if you can convince the Treasury, which is what the energy industry is trying to do. BUT…

Arbitrarily ‘scrapping’ levies would be disastrous for investment, jobs, decarbonisation, long term competitiveness, and, in the long term, bills as they'd be fewer energy efficiency upgrades.

Plus it doesn’t even fully solve the problem of soaring bills.

So, what would work? Well, this is a really challenging situation. There are no easy answers. But in the short term, the only feasible way to fully ease upward pressure on bills is likely to be…

… a combination of direct support for most vulnerable and loans to energy firms to spread cost of this price spike (perhaps funded through windfall tax on gas giants, who are currently in printing money mode).

And in the long term the best solution is the most obvious one - and the one the NZSG don’t mention - USE LESS GAS.

Properly fix the UK’s appallingly inefficient buildings and you get lower energy bills, increased energy security, reduced emissions, and a massive economic boost.

Run a half decent public information campaign to encourage people to save energy and you might even get some benefits now.

Accelerate the switch away from gas for power by ramping up renewables and nuclear investment and you can reduce electricity bills and boost energy security.

In contrast, what is much less likely to have any serious long term impact is the NZSG’s proposal to ramp up domestic gas exploration, including shale gas.

Assuming you can get these projects past planning and get investors to back them at a time when clean tech is booming and economies decarbonising (look at Shell and Cambo), they aren’t big enough to move global gas prices.

Is this group of free market, free trade lovers really proposing gas project nationalisation and export bans?

And how on Earth do they square digging up more fossil fuels with their supposed support for tackling climate change and reaching net zero emissions? It could lead some to suspect they are really just a bunch of climate sceptics. businessgreen.com/blog-post/4035…

In summary, the NZSG’s plan isn’t properly explained or budgeted, won’t stop bills rising, ignores the one guaranteed way to reduce energy bills in the long term, and completely fails to set out an alternative route for achieving the net zero goals in their own manifesto.

Apart from that, well done all.