Emissions Performance Standards

Memorandum submitted by EEF (EPS 20)

Summary

An Emissions Performance Standard for coal-fired power stations would deliver no environmental benefit could undermine energy security, reduce the competitiveness of electricity prices and slow deployment of carbon capture and storage

Introduction

1. EEF is the representative voice of manufacturing, engineering and technology-based businesses with a membership of 6,000 companies employing around 800,000 people. A large part of our representational work focuses on the issues that make a difference to the productivity and competitiveness of UK manufacturing, including regulation, investment, innovation, skills and tax issues.

2. This memorandum is a submission to the Environmental Audit Committee’s inquiry into the pros and cons of Emissions Performance Standards (EPS) for coal-fired power stations.

Environmental Benefits

3. Total carbon dioxide emissions from UK power generation are already capped and regulated under the European Union Emissions Trading System (EU ETS). Therefore introducing power station level limits through an EPS would deliver no additional carbon savings or environmental benefits.

4. The environmental logic for an EPS only exists in jurisdictions, such as California where it has been pioneered, where no industry level cap exists.

Risks and Unintended Consequences

5. Whilst delivering no environment benefits, a poorly implemented EPS could have a number of negative and unintended consequences.

6. Firstly, by removing the option of investment in coal-fired power stations an EPS could undermine energy security. Without the option of coal, utilities are likely to turn even more than they already are to investment in gas-fired power stations for flexible base-load plant (which will be increasingly necessary in a world with more intermittent generation). This will only serve to exacerbate the already considerable risks associated with rising dependence on imported natural gas.

7. Secondly, by removing the option of investment in coal-fired power stations an EPS runs the risk of unnecessarily increasing electricity prices. Utilities will have less flexibility to develop balanced portfolios of plant with which to deliver secure and low carbon energy supplies for their customers.

8. The government, through the renewables target, is already making a major intervention in the market to specify where utilities should source a significant portion of their electricity. Prohibiting coal-fired without CCS plant will remove the option of using one of the most widely available, flexible and cost-effective power generation fuels. This would limit even further their investment options and as result could increase the cost of both decarbonising the UK economy and providing secure supplies of electricity.

9. Finally, by removing the option of investment in coal-fired power stations an EPS runs the risk of delaying deployment of CCS in the UK. If CCS develops into a commercially viable abatement option, it is likely to be deployed first on modern coal-fired power stations (the additional cost CCS will impose on power generation means that it is unlikely to be viable to deploy on older and less efficient coal plant). So without state of the art coal plant the UK will be unlikely to be in a position to quickly roll out and take advantage of CCS.

Conclusion

10. The logic for introducing an EPS for power generation in the UK is difficult to fathom – it will deliver no environmental benefit but could have a number negative unintended consequences. Furthermore, policies that deliver no environmental benefit but undermine energy security and price competitiveness could have the unfortunate consequence of undermining support for action on climate change.

11. Limits on emissions whilst essential, are more effective when they are applied at the portfolio level where they give power generators flexibility over how to provide customers with a reliable supply of low carbon energy.

September 2010