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Reforming UK Energy Policy to Live Within Its Means

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  • David Newbery

    (Energy Policy Research Group, University of Cambridge)

Abstract

The present pattern of taxation, charging, and providing support has accumulated over time in a haphazard way without the kind of strategic thinking that a long-term economic plan requires. This note sets out the sound economic and public finance principles that could guide the reform of energy taxes and supports primarily in the electricity sector. It argues for ending the RO and Feed-in Tariff schemes and replacing them by demonstrably successful CfD auctions which have dramatically lowered the cost of financing renewables. It argues for a state development bank to leverage cheap finance for low-carbon investments, reforming the form of the contracts, replacing the current alphabet soup of charges by the strandard rate of VAT on all energy and instead funding climate change policies from general taxation, thus exempting the productive sector from distortive charges, and allowing the Carbon Price Support to resume its trajectory, restoring fiscal sanity and balance. Ending all support for the cheapest renewable electricity (on-shore wind) makes no sense and it would be better to have a single auction for all renewables that create learning benefits – which would rule out any subsidies to tidal lagoons
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • David Newbery, 2015. "Reforming UK Energy Policy to Live Within Its Means," Working Papers EPRG 1516, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg1516
    as

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    File URL: https://www.jbs.cam.ac.uk/wp-content/uploads/2023/12/eprg-wp1516.pdf
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    References listed on IDEAS

    as
    1. Newbery, David, 2016. "Missing money and missing markets: Reliability, capacity auctions and interconnectors," Energy Policy, Elsevier, vol. 94(C), pages 401-410.
    2. AfDB AfDB, . "Annual Report 2012," Annual Report, African Development Bank, number 461.
    3. Mallika Chawla & Michael G. Pollitt, 2013. "Energy-efficiency and Environmental Policies & Income Supplements in the UK: Evolution and Distributional Impacts on Domestic Energy Bills," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Connor, P.M. & Axon, C.J. & Xenias, D. & Balta-Ozkan, N., 2018. "Sources of risk and uncertainty in UK smart grid deployment: An expert stakeholder analysis," Energy, Elsevier, vol. 161(C), pages 1-9.
    2. Luis R. Boscán, 2020. "European Union retail electricity markets in the Green Transition: The quest for adequate design," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 9(1), January.

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    More about this item

    Keywords

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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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