The energy bills crisis: what’s the elephant in the room?

What is the problem?

Average household energy bills will increase by around £600 (roughly 50%) in April, to nearly £2000 – pushing an estimated 6m households into fuel poverty, according to Greenpeace. This is happening alongside rising inflation, stagnating wages, and, coming up soon, increased National Insurance contributions. The combined impact on the cost of living will be severe, and will hit the poorest households the hardest (see The Guardian).

Why is this happening?

The immediate cause is a massive hike in the global price of natural gas. Nearly 90% of the rise in domestic energy prices is due to the rising cost of natural gas – caused by a rapid rebound in demand following Covid lockdowns, and by Russia reducing its supply of gas (see Carbon Brief).

The government would like us to think the price rises are unavoidable, and couldn’t have been predicted. However, there are other underlying causes of the crisis which they are choosing not to talk about – and the ‘elephant in the room’ is the connection between the energy crisis and the climate and ecological emergency.

1. The UK’s millions of leaky older homes, and inadequate energy efficiency standards for new houses mean domestic heating uses more energy, and costs more, than it should

  • An estimated 14 million homes have missed out on home insulation over the last decade due to the failure or abolition of government schemes (Guardian, 28th Jan).
  • In 2015, David Cameron’s government scrapped the proposed Zero Carbon standard for new homes. People living in newbuild houses are paying on average £200 more per year in energy bills than they would have if the standard had been maintained.
  • Overall UK energy bills are an estimated £2.5 billion pounds higher than they would have been as a result of this and other policy decisions made by Cameron’s government (Carbon Brief again).

2. The UK’s continued reliance on fossil fuels for domestic heating and electricity generation, at a time when we should have been switching to renewable sources of power.

  • The UK government has given the fossil fuel industry £12.6 billion in subsidies since the Paris Agreement was signed in 2015 (see The Independent).
  • If we had moved more quickly to renewables, rising gas prices would have had a smaller impact.
  • The government says it is serious about net zero targets, but has just approved a new North Sea oilfield and the expansion of Bristol airport. It has failed to rule out permission for new or expanded coal mines in Cumbria and Wales.
  • Fossil fuel companies are raking in huge profits as a result of soaring gas prices. BP and Shell are on course to make combined profits of around £40 billion this year – yet neither company has paid ANY corporation tax on it’s North Sea oil and gas income in the last three years (see The Guardian). 
  • These companies are also getting tax breaks and subsidies from the government. The chief financial officer of the oil and gas company BP, Murray Auchincloss, told investors this week: “It’s possible that we’re getting more cash than we know what to do with.” (see The Guardian).

A group of Conservative MPs are trying to claim that the energy price crisis is a result of ‘green policies’. According to Fatih Birol (executive director of the International Energy Authority) on LinkedIn: “Unfortunately, we are once again seeing claims that volatility in gas and electricity markets is the result of the clean energy transition. These assertions are misleading to say the least. This is not a renewables or a clean energy crisis; this is a natural gas market crisis.”

What could the government do to solve the problem?

1.  Provide better financial support for families facing fuel poverty – including those on Universal Credit. The support offered so far will not be enough to protect the poorest households from the impact of the new price cap, let alone the other cost of living pressures.

2. Put in place a funded programme to insulate and retrofit the entire UK housing stock (this would also create thousands of jobs) and insist on net zero standard for all new houses, with immediate effect. This is the best way to keep domestic energy bills low in future, and insulating old, draughty houses also makes them warmer and healthier places to live (see calls for policies along these lines from charities and architects here and here).

3. Stop issuing new licences for fossil fuel extraction, and rapidly speed up the transition to sustainable, secure, zero carbon energy sources. The UK has some of the best renewable energy sources in the world, and developing them will ensure reliable energy supply in future and reduce our susceptibility to future price shocks.

4. Immediately end all subsidies and support for fossil fuel companies, and instead impose a windfall tax on their unprecedented profits. This tax could be used to fund some of the above policies. (See also XR’s immediate demand – no new fossil fuel licences, no new fossil fuel investment, end fossil fuel subsidies now.)

TACKLING THE CLIMATE CRISIS WILL ALSO HELP SOLVE THE ENERGY CRISIS

Many Conservatives agree with the need to guard against future energy price shocks by moving quickly to net zero and providing support for energy efficiency measures: see this article by two Tory MPs.

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