A Sustainable Energy Policy

Issue date

26 Apr 2006


	A Sustainable Energy Policy
	TUC response to the Government's Energy Review 2006
	TUC Economic and Social Affairs Department

Contents

1 Introduction
2 Making a new energy policy
3 Security of supply
4 A sustainable energy policy
5 Industrial and employment opportunities
6 A sustainable transport network
7 Appendix: Congresss 2005 - Energy and climate change resolution

Section one

Introduction

The decisions facing Government at the end of its 2006 Energy Review must set the UK firmly on a course to tackle climate change and secure our energy supplies [1] . By common consent, the next 10-year period is crucial. The inevitable shift to a low carbon economy will have far reaching implications for the operation of the UK's liberalised energy market, and of our future industrial, employment and economic opportunities.

With the Government admitting that it is likely to fall short of its Manifesto commitment of a 20% cut in carbon dioxide emissions by 2020, the TUC believes that a step change is needed in the Government's approach.

There is a disjuncture between Government strategy and people at work. If climate change is indeed 'the greatest long-term challenge facing the human race [2] ', then our response must not only involve energy and industrial policy initiatives, but employee involvement, at the workplace, regionally and nationally. A new energy strategy should be accompanied by a new national climate change social partnership with Government, business and NGOs.

Dangerous climate change

Few days go by without some further troubling evidence of the accelerating rate of change to the natural environment - from the drought now threatening East Africa to the rapid melting of the Greenland ice cap. Predicted rises in sea levels threaten almost half of the world's cities with populations of over 1 million sited in coastal areas. The European heat wave in 2003 caused some 30,000 deaths, with $13.5bn direct costs.

Climate change poses a major challenge to world food security and population stability, especially the threat of falling agricultural yields in Africa. The Government was right to make climate change and Africa the twin themes of its G8 Presidency. As the Government's Stern Review [3] observed, there is a direct link between action to adapt to climate change and our international responsibility to promote development and fight poverty in the Millennium Development Goals, an issue in which the TUC has played a leading role.

The UK is responsible for just 2% of global greenhouse gas emissions. Our fundamental challenge is whether the UK, working with others, can meet the demanding targets to cut greenhouse gas emissions within a timeframe that does not risk irrevocable damage to the climate.

A 'balanced' energy policy - Congress 2005

Our starting point for this response to the Energy Review is a wide-ranging motion at Congress 2005 (see Appendix), calling for: 'Action at the highest levels to meet Kyoto and domestic emissions targets whilst also ensuring security of energy supply'.

Congress urged the Government to work with the TUC on climate change mitigation and adaptation strategies, recognising that the core interests of the trade union movement lie in securing future economic prosperity, and that this would mean moving rapidly towards a low-carbon economy with direct impacts on employment and skills.

Reflecting our balanced approach to energy supply, Congress called for 'incentives for investment in all lower-carbon generation technologies, including renewables, nuclear and clean coal, to ensure early progress in development of new generation capacity.'

Developing a truly low carbon economy meant developing a green industrial strategy, supported by:

sector skills agreements to deliver the new skills required;
increased support for the Government's in-house science capacity; and
'clear expectation of employers that they work in partnership with trade unions on this agenda'.

The industrial implications of shifting to a low carbon economy - in energy generation and consumption, transport and the domestic sectors - remain of central concern to the TUC in this response.

Energy Review - the DTI's questions

In Our Energy Challenge, the Government is seeking answers to the following five questions:

What more could the government do on the demand or supply side for energy to ensure that the UK's long-term goal of reducing carbon emissions is met?
With the UK becoming a net energy importer and with big investments to be made over the next twenty years in generating capacity and networks, what further steps, if any, should the government take to develop our market framework for delivering reliable energy supplies? In particular, we invite views on the implications of increased dependence on gas imports.
The Energy White Paper left open the option of nuclear new build. Are there particular considerations that should apply to nuclear as the government re-examines the issues bearing on new build, including long-term liabilities and waste management? If so, what are these, and how should the government address them?
Are there particular considerations that should apply to carbon abatement and other low-carbon technologies?
What further steps should be taken towards meeting the government's goals for ensuring that every home is adequately and affordably heated?'
Comments are also invited on potential of energy efficiency measures in the transport, residential, business and public sectors.

Rising carbon dioxide emissions - the past 60,000 years

Current level: 383 parts per million (ppm) graph

Source: Sir David King, presentation to TUC/CBI/The Carbon Trust conference, February 2006.

Section 2

Making a new energy policy

Meeting today's energy challenges

In the past two years, three developments have thrown into question the sustainability of the Government's liberalised energy policy: rising CO2 emissions; energy price shocks; and increasing fuel poverty.

The 2003 Energy White Paper, on which present policy is based, was itself a response to growing unease [4] . As well as seeking to eliminate fuel poverty by 2010, the Government had to provide a response to the Royal Commission on Environmental Pollution (2000), whose examination of climate change recommended a 60% reduction in the UK's carbon dioxide (CO2) emissions by 2050.

The Government's White Paper [5] set out four key objectives:

to cut the UK's CO2 emissions by 60% by 2050;
to maintain reliable energy supplies;
to promote competitive markets; and
to tackle fuel poverty - every home to be adequately and affordably heated.

The policy included targets to generate 20% of electricity supply from renewables by 2020 (10% by 2010), and achieve a massive 20% increase in domestic energy efficiency by the same date. Since abundant gas was available, the energy supply issue was of second order importance.

The nuclear option was left open, while domestic coal production was 'likely to continue to decline'. The liberalised energy market would determine the energy mix: 'We do not propose to set targets for the total share of energy or electricity supply from different fuels' (para. 1.21).

By 2005, the DTI's Second annual report on the implementation of the Energy White Paper [6] acknowledged that more needed to be done to reach national CO2 emissions objectives. High and volatile energy prices, exacerbated by uncertain gas supplies, were affecting both industrial and domestic consumers, and putting fuel poverty targets at risk. We next look at these issues in turn.

CO2 emissions are increasing

The Government appears not to be on track to cut our CO2 emissions by 20% by 2010.

To comply with our obligations under the Kyoto Treaty, the UK's target is a 12.5% reduction in total greenhouse gas emissions by 2008/12, compared with the Kyoto base year of 1990. There are six greenhouse gases [7] , of which CO2 is by far the greatest by volume.

The Government's more ambitious Manifesto commitment aimed for a 20% cut in carbon dioxide alone by 2010. But CO2 emissions fell by only 5.6% between 1990 and 2004, with DEFRA figures showing that they increased by 0.5% in 2003/04. emissions of greenhouse gases graph

In 1990, the base year for compliance with Kyoto Treaty targets, UK emissions by weight were about 161 million tonnes of carbon (MtC) - from the oil, petroleum, gas and coal consumed in electricity generation, industry, transport, domestic and other users.

Carbon dioxide is the main greenhouse gas, accounting for about 85% of the 'basket' of six greenhouse gas (GHG) emissions in 2004. Due to effective controls over other GHGs, total greenhouse gas emissions fell by 14.6% between 1990 base year and 2004. Increased CO2 emissions from road and air transport, gas and coal-fired power generation and domestic consumption are the main reason why we are likely to miss the 2010 target.

Our longer-term goal to cut the UK's CO2 emissions by 60% by 2050 follows a recommendation from the Royal Commission on Environmental Pollution. It recommended an upper limit of atmospheric concentrations of carbon dioxide at 550 parts per million (ppm) - approximately double pre-industrial levels. Globally, current concentrations are at 383 ppm (see chart p.x).

Limiting CO2 increases to 550 parts per million by 2050 is consistent with holding global average temperature increases to 2 below degrees centigrade.

Emissions from domestic and international air passenger and freight traffic, at about 10 MtC in 2004, are of increasing concern, as they are on a steep upward lift, and remain outside the scope of the Kyoto Treaty phase 1 targets.

UK carbon dioxide emissions by source: 1990-2004, million tonnes (carbon equivalent), by source

	Road transport	Energy industries	Other industries	Residential	Other	Total
1990	29.9	64.3	30.6	21.4	14.5	160.7
1997	31.9	51.1	29.2	22.8	14.4	149.4
2000	31.7	52.1	28.4	23.4	13.5	149.1
2001	31.7	54.8	28.9	24.3	13.6	153.3
2002	32.4	54.3	25.8	23.9	12.5	148.9
2003	32.3	56.6	26.5	23.8	12.9	152.1
2004	32.6	56.5	27.1	24.0	12.9	153.0

Source: DEFRA, 2006.

Scientific opinion

In February 2005, the UK hosted an international conference on climate change, where leading scientists described developed countries as using the atmosphere as an 'unpriced waste dump.' The official report of this conference [8] warned that: 'in many cases, the risks are more serious than previously thought . . . the heat-wave that affected Europe in 2003 is a prime example . . . delaying action would require greater action later for the same temperature target, and that even a delay of five years could be significant.' This next ten-year period is crucial.

The International Climate Change Taskforce reported in 2005 that: 'The vast majority of international scientists and expert reports affirm that climate change is a serious and growing threat, leaving no country, however, wealthy, immune from the extreme weather events and rising sea levels that scientists predict will occur unless action is taken.'

Energy price instability

Industry, especially energy intensive users, has been deeply concerned at the adverse impacts of high and volatile energy prices in the past 18 to 24 months. The key issue has been the turbulence in gas and therefore electricity prices as the UK has moved to net dependence on imported gas supplies, principally through the Interconnector.

The TUC has received a wide range of reports from affiliated unions, employers and their federations over the impact of gas and electricity prices on jobs, contracts and competitiveness. Sectors affected include: glass manufacture, paper, aluminium, steel, chemicals, building brick and aggregates industries, food manufacture and textiles. Two examples:

Paper manufacturer Kimberley Clark, with 500 employees at its Barrow plant, has operations in 8 EU countries with which to make comparisons on energy price changes. The company has seen its energy prices shift from about 34% of KC Europe average prices in 2000 (the lowest in Europe) to 150% in 2006 (the highest in Europe).
Unions report that companies such as Hanson Brick are linking energy price increases, particularly gas, to the current wave of lay-offs, plant closures and short-time working.

Our concerns are well founded:

Larger industrial consumers of gas have seen prices increase by one-third over 12 months (see table). Individual employers have faced increases at much higher levels.
Electricity price increases also reflect the rising price of gas - over one-third of electricity generation is from gas-fired power station.
The UK's decade of energy self-sufficiency came to an end in 2004, when we become a net importer of gas.
Gas exports fell by one-third in the third quarter of 2005 compared with a year earlier.
The UK has gas storage capacity for about 13 days' consumption, compared with over 90 days in Germany.

High UK gas prices clearly did not guaranteed gas supplies this winter. Most gas is bought in at short-term spot prices, currently demonstrating extreme price volatility. Commentators are now talking of a 'mid-Atlantic' gas market, with the diversion of ships carrying bulk liquid natural gas from one market to another. Meanwhile, higher gas prices have also encouraged a switch to higher CO2, coal fired generation, one reason for missing our CO2 targets.

We should question how far the dominance of overseas ownership of UK energy companies has regulated our domestic energy security.

The TUC and affiliated unions have taken various opportunities in recent months to comment on the impact of the UK's liberalised energy market on security of supply and energy prices. Our concerns reflect a wider disquiet over the general state of manufacturing in the UK, continuing to haemorrhage 100,000 jobs a year. The profligate use of gas to generate electricity has led to the faster depletion of UK gas reserves than may have been the case if we had ensured a better sense of the management of our natural reserves of coal and gas.

Energy price increases: 12-month increase to 3rd quarter 2005

Industrial sector	Fuel oil	Electricity	Gas
Small heavy consumers	57%	21%	24%-26%
Medium and large consumers	41%-47%	31%-43%	34%

Source: DTI Quarterly energy prices, December 2005.

The TUC nevertheless recognises that national governments have limited control over world energy prices, and that any external source of energy can be vulnerable to supply disruption. It is hard for the UK government to unilaterally offer direct short-term relief on the cost of energy to the worst hit industrial sectors within EU competition rules.

The Pre Budget report sets out some helpful short-term actions to ensure an adequate supply of gas, some of which the TUC and affiliates have already raised with Government, including:

increasing the capacity and monitoring the flow of gas via the Interconnector from Continental Europe;
providing additional Liquefied Natural Gas storage capacity at terminals; and
concerns over the operation of the EU gas market.

The Energy Review should set out what further measures could be put in place to cushion industry against sudden and unexpected energy price hikes. There is much the government has done to support energy efficiency in industry and among homeowners, but there is clearly scope to do more.

Eliminating fuel poverty

The fourth goal of the Energy White Paper goals is, 'To ensure that every home is adequately and affordably heated'.

Recent energy price increases have boosted the number of households in 'fuel poverty', ie spending more than 10% of their income keeping their house at a reasonable temperature. energywatch, the independent gas and electricity consumer watchdog, predicts 3 million fuel poor households by the end of 2006 - double that of 2003.

Since 2003 average domestic energy bills have risen by 63.3% for gas and 44.2% for electricity, confounding the Government's commitment to eradicate fuel poverty by 2010 [9] .

The Government has acknowledged that the total number of vulnerable households in fuel poverty is likely to have increased by around one million in England between 2003 and 2006, with a proportionate increase in the devolved administrations [10] . Even the one million figure is likely to be an underestimate. The DTI estimates that for each 1% increase in prices, 40,000 households are plunged into fuel poverty.

Whichever figure is used, the level of fuel poverty in 2006 is now greater than it was in 2001 when the Government's Fuel Poverty Strategy was published, and is moving back towards the levels seen at the close of the 1990s.

A key issue for the Energy Review is how to protect domestic consumers, particularly the most vulnerable in society.

Although greater energy efficiency is the most effective long term means of reducing fuel poverty - we welcome the extension of help for insulation to a further 250,000 homes announced in Budget 2006 - this offers little immediate protection against higher energy prices. It is imperative that the Energy Review directly addresses the issue of spiralling energy prices.

The TUC believes that to tackle fuel poverty, high priority should be given to:

A review of the Winter Fuel Allowances for the elderly, as we suggested in our 2006 Budget Submission.
A review of the link between fuel poverty and child poverty.
Smart meters and energy bills. Smart metering and billing could create a step change in energy awareness and see an end to estimated bills - one-third of all energy bills are estimates. The TUC welcomes the smart metering pilot project announced in Budget 2006.
A major increase in funding for domestic microgeneration and CHP district heating schemes. About 2 million households are not connected to the gas grid, and are dependent on expensive, CO2 rich sources of energy. Microgeneration technologies, widely deployed among these households, could both reduce fuel bills and emissions [11] . The £50 million announced in Budget 2006 for microgeneration installations in 25,000 schools and housing association properties is a welcome start, but much larger programmes are required.

Section 3

A sustainable energy policy

A new energy system

Clearly, recent events have exposed fundamental flaws in the current liberalised energy market. We would agree with commentators such as Dieter Helm who have argued that the scale of the new challenges requires a thorough rethink of the energy policy framework [12] . Climate change and energy security issues have transformed the energy landscape. Even as recently as July 2005, the DTI's assessment of the security of national energy supplies foresaw 'no problem for domestic consumers of gas' in the coming period.

Radical changes to the UK's energy supply system in the 1980s and 1990s saw the privatisations across the whole energy sector. New elements of competition transformed the successive disposals of our oil, then gas, then electricity, and now nuclear assets. Long-term, secure energy contracts were replaced by spot-markets and short-term contracts. Retail monopolies disappeared. The main focus was on cost reductions - the energy market was well designed to sweat assets, both physical and human - with massive job cuts across the energy sector.

As we turn to face the new energy challenges of climate change and security of supply, we find that the UK's liberalised energy market lacks the foundations on which to deliver the massive new investment required in low carbon and carbon-free energies. Up to 40% of the UK's base load power station capacity will have to be replaced in the next decade. The massive investment programme required comes at a 'turning point' in the investment cycle [13] , when much of the capacity built in the 1970s comes to the end of its life.

As Helm has pointed out, none of the technologies currently under consideration to address climate change - clean coal technologies, renewables, hydrogen cells - have thrived in the current market. The multi-decade time frames for new carbon capture or nuclear build are well beyond the perspective of the present energy market.

Energy markets and the national interest

The fundamental challenge now is to build a new relationship between the energy market and the wider national interest.

The Government is right to restate its commitment to the four main goals of the 2003 Energy White Paper. This recognises climate change and security of supply as the main drivers of energy policy.

The TUC's Budget Submission 2006 pointed out that the government's approach does not give sufficient acknowledgement of the shortcomings of competitive and liberalised energy markets as well as their advantages.

We argued that: 'A new approach is needed that retains the advantages of the current market based system but addresses some of the underlying weaknesses around security of supply; promotes long term investment in new low carbon energy capacity; and recognises the need to ensure a continued well balanced mix of coal, renewable and nuclear power generation, particularly drawing on indigenous energy sources.'

The Financial Times recently described the British energy liberalisation as 'extreme'. It appears to work poorly under stress, as recent increases in fuel poverty, CO2 and industrial disquiet shows. Historically, it prompted the dash for gas and the loss of coal mining capacity, and it has yet to create the kind of investor stability required to bring forward new power plant investment.

Although liberalisation has gone much further in the UK than the rest of the EU, 'liberalisation is a fact which is likely to remain in European energy markets for decades to come. The challenge is to design a policy and regulatory framework which promotes investment within the liberalisation context.'

The TUC is not here arguing for the abandonment of the liberalised energy market. But we would add that its limitations have been exposed at a crucial moment. If the main drivers of energy policy are climate change and security of supply, it follows that energy market interventions need to be designed to achieve these objectives, in the national interest. It is essential therefore to specify what our targets are in the following four areas:

To cut CO2 emissions.
To eradicate fuel poverty.
To secure energy supplies.
To provide affordable energy.

The Government needs to clarify whether these are aspirations or hard targets. The TUC believes that firmness of direction is essential to send the right signal to investors, employers, employees, consumers and other stakeholders.

A combination of supply and demand instruments is required to:

actively promote innovation and investment in new carbon-free/low carbon energy capacity;
ensure a continuing well-balanced mix of coal, renewable and nuclear power generation, drawing on indigenous energy resources; and
focuses hearts and minds on cutting energy demand, at work, at home, in the community.

The CBI's energy policy review (2005) touched on this issue when it argued that, 'government decisions are needed now to improve the fiscal and regulatory framework in which energy markets operate'.

All governments intervene in energy markets - the key questions are by how much, to what purpose and through which mechanisms. The Renewables Obligation (RO), introduced in 2002, with its defined shares for renewable power generation to 2015, has set a useful precedent for a clearly defined, stable and long-term mechanism directing the future energy market.

Recently, a first paper from the Stern Review on the economics of climate change argued that: 'The policy framework to manage demand and pull new technologies through to the marketplace is crucial'. This invites the Government to develop an industrial strategy capable of meeting the challenges of the Energy Review.

Up to 40% of the UK's base load power station capacity will have to be replaced in the next decade, bringing into play investment decisions in: a host of new technologies in such areas as clean coal and carbon capture; building new, distributed forms of renewable energy, such as wind, wave, tidal and microgeneration; and in the nuclear sector. The TUC urges the Government to industrialise our energy policy.

But equally, only the Government can protect and promote the public interest [14] . This means not only tackling fuel poverty, but ensuring strategic coordination and intervention in such areas as energy R&D, skills and training, promoting a green manufacturing strategy and energy networks renewal.

Key recommendations

The TUC believes that the following are the essential elements of a sustainable energy policy:

Firm, time limited targets acting as commitments to cut CO2 emissions and achieve secure, affordable energy supplies.
A balanced energy policy - that protects us from over-reliance on gas and draws on the great wealth of indigenous resources available in the UK - both material and human. The Renewables Obligation points the way forward - the Government must address market failings by defining what broad mix of energy sources it would e expect to see in 2010 and beyond. Although in its Energy White Paper the Government said: 'We do not propose to set targets for the total share of energy or electricity supply from different fuels' (para. 1.21), without a forward looking, balanced energy mix, it is difficult to see how other firm targets can be achieved by the market alone.
Market instruments attached to each target. This is the only sure way to bring forward investment in new, low carbon/carbon free energy supplies, and to drive innovation and energy efficiency in industry, transport (road and air) and the domestic sectors.
Renewed commitments to eliminate fuel poverty by 2010.
A new institutional arrangement, such as an Energy Commission, tasked with directing and coordinating energy policy. Perhaps modelled on the approach adopted by the New Zealand Government, (see box). The NZ Commission's principle objective is to 'ensure that electricity is produced and delivered to all classes of consumers in an efficient, fair, reliable and environmentally sustainable manner'.
A DTI-led industrial strategy to develop the employment, training and economic opportunities of the shift to a low carbon economy. We outline some of the key issues involved in sections 5 and 6, below. Crucial issues include coordinating and building our skills, training and science capacity.
A renewed international approach consistent with our Kyoto and Millennium Development commitments, but which ensured that all global emissions are brought within the policy framework, including international shipping and aviation.

New Zealand Energy Commission

Established in September 2003, the Commission regulates the operation of the electricity industry and markets (wholesale and retail) in accordance with government energy policy. The Commission's principal objective is to ensure that electricity is produced and delivered to all classes of consumers in an efficient, fair, reliable and environmentally sustainable manner.

It has extensive consultative and regulatory powers. It must operate in a manner that is consistent with the New Zealand government's Government Policy Statement (GPS) in three priority areas:

security of supply and reserve generation;
priority investment in the transmission grid ; and
hedge market arrangements and demand-side participation.

The Commission is governed by an executive chair and four other members appointed by the Minister of Energy. Board members have been appointed on the basis of their extensive knowledge of, or experience in, the electricity industry, electricity markets, regulatory processes and public policy.

Section 4

Security of supply

Avoiding dependence

To achieve security of supply objectives, a key concern is to reduce the UK's long-term dependence on imported energy, notably gas. Our increasing dependence on imported energy comes at a time of rising global demand, with energy prices higher and more volatile than in the past, and with an increasing share of energy imports from areas of the world likely to be politically unstable.

UK energy and electricity supplies, 2005

The UK is heavily reliant on fossil fuels for our overall energy supply. When burnt, fossil fuels release greenhouse gases. Natural gas provides about 40% of our energy supply.

breakdown of uk electricity generation 2005 graph uk energy supply graph 2005

Electricity plays a key role in this system: it is generated from a four key energies: coal (33%), gas (40%), nuclear (19%) and renewables (4%).

Electricity - forecasts to 2020

DTI forecasts [15] of the trend in electricity generation by fuel type (see chart below) show a much-reduced role for coal by 2015 and beyond, a sharply increased dependence on imported gas, and renewables hitting the Government's target of 10% of electricity generation by 2010.

electricity generated by type graph

Energy market interventions

The main market interventions impacting on electricity generation and supply are shown below. These policies are aimed at encouraging an investment shift towards low carbon/carbon free energy generation:

Climate Change Levy - a tax on electricity, gas and coal used for energy, with incentives to encourage energy efficiency.
EU Emissions Trading Scheme - EU Member States are required to set an emission 'cap' for all installations covered by the Scheme. The ETS covers 1,100 power and energy-intensive installations in the UK (12,000 sites across the EU). Carbon allowances are currently trading at about 27 euros a tonne [16] .
Renewables Obligation - requires licensed electricity suppliers to source a specific and annually increasing percentage of the electricity they supply from renewable sources. The current target is 5.5% for 2005/06 rising to 15.4% by 2015/16. The RO will provide £1billion of support per year by 2010.
Large Combustion Plants Directive - aims to control emissions of sulphur dioxide (SO2), nitrogen oxides (NOx), and dust from large combustion plants, including power stations, petroleum refineries, and steelworks.

The EU Emissions Trading Scheme in 2005 is set to play a key role in triggering investment in carbon-abatement projects.

The TUC welcomes the Government's commitment to extending the ETS beyond 2012, and to include transport emissions. Several longer-term policy initiatives need to be considered, including:

The full integration of aviation and road and rail travel into the EU ETS.
Ensuring that national carbon allocation 'caps' are sufficiently ambitious to bring down emissions and stimulate investment in low carbon technologies.
Longer-term carbon contracts and allowances with internationally agreed national carbon allocation plans.

The 'generation gap'

Concerns are emerging over the development of new power plant capacity, as electricity demand increases, as nuclear plant is retired, and as the Large Combustion Plant Directive impacts on coal plant closures. A 'generation gap' lies ahead, with various estimates pointing to the closure of about one-quarter of the UK's current electricity generation capacity (77 gigawatts [GW]), including 7GW of nuclear capacity and 11GW of coal-fired capacity [17] . The Energy Review [18] anticipates that 30% of baseload electricity capacity will need replacing by about 2020.

Next, we briefly comment on the main energy sources.

Growing reliance on gas

The UK is now a net importer of around 7% of our gas, with seasonal variations. Import reliance will increase, to 40% of total gas demand by 2010 and as much as 90% under current policy by 2020.

UK gas prices quadrupled to 250p a therm in early March 2006, following a serious supply shortage that should have triggered additional gas flow through the pipeline under the Channel from Europe, where prices remain at a third of that level.

A key issue of concern is the relative paucity of UK gas storage capacity. The closure of Britain's Rough storage facility in the North Sea was partly to blame, but even when this source is fully operational it can only provide enough gas to keep Britain running for 13 days if all other supplies failed. Other European countries have done much to ensure their security of supply: Germany has storage for 75 days (and is expanding its facilities), as does Italy, while France keeps 66 days' worth. The TUC welcomes the DTI's announcement, in early 2006, of measures to allow firms to store gas in undersea salt caverns.

A future for coal

The TUC welcomes the support of both DEFRA and DTI Ministers in establishing a Clean Coal Task Group, involving representation from Industry, the TUC, DEFRA, DTI and other interested stakeholders. It terms of reference are: To identify an appropriate policy framework and supporting economic instruments and regulatory framework that would take forward the research, development and promotion and initiation of clean coal burn and carbon capture and storage technologies.

Coal currently meets about 32% of the UK's electricity requirements. According to current DTI forecasts, this share is due to 'decline sharply' to around 15% to 20% over the next 10-15 years.

The TUC does not accept this presumption. Contrary to the pessimistic view taken in the DTI's consultation document on the quality and extent of UK deep mine reserves (Energy Review, p 60), resources at open and mothballed mines amount to a valuable 200-300 million tonnes. Indigenous coal supplies have much to contribute to wards our energy security and climate change objectives, given the right combination of technological progress and industrial investment.

UK coal reserves

The UK has extensive reserves of coal, while hundreds of millions of tonnes have now been sterilised. Many in the industry argued for mothballing rather than closing pits and filling in shafts. This was only rarely done, especially since privatisation of the industry.

Contrary to the pessimistic view taken in the DTI Consultation document on the geological quality and extent of UK deep mine reserves (p. 60) reserves at open and mothballed mines amount to a valuable 200-300 million tonne energy resource. Reserves at coalfields as yet untouched (such as at Witham in Lincolnshire) make up a similar amount.

Coal output and employment

Of the 50 large mines still producing in 1992, most were highly productive and could still be working today. In 1997 there were 22 mines, of which several were mothballed. Their shafts or drifts remained open but not the underground workings. Now, in 2006 there are only six large mines currently working:

UK Coal mines: Kellingley and Maltby in Yorkshire (with Rossington being mothballed); Thoresby, Welbeck in Nottinghamshire (with Harworth being mothballed), Daw Mill in Warwickshire;
Tower Colliery (miners' buyout) in South Wales; and
Hatfield Colliery, Yorkshire (R J Budge) mothballed but due to re-open, with new financial backing.

In 2004, deep mine output was 12.5 million tonnes; open cast output was 12 million tonnes, taken from around 40 sites.

Principally under the stewardship of UK Coal, employment in the deep-mined coal sector fell by around 1,000 jobs over the two years to March 2005. There are around 4,400 miners in deep mines, including about 100 in small licensed mines, and a further 3,500 working in opencast production. UK Coal's interim report to June 2005 shows that deep-mined coal production fell by more than a quarter over this period, to just 11 million tonnes.

Production costs: domestic and imported coal prices

Current production costs at UK Coal's mines are £1.26 per gigajoule [19] , although they were higher in 2005 as a whole, during a 'difficult' year. This compares with the delivered price of imported coal at an inland power station of £1.65 per gigajoule. For the next few years the imported coal price is likely to stay at this level.

UK coal demand

Coal consumption in 2004 was 60.6 million tonnes, of which 36.2 was imported. In 2005, coal imports rose to 43.8 million tonnes.

In the electricity industry, given recent difficulties with gas supply, coal stations were brought on line to meet nearly 50% of demand during the winter, compared with a previous average of 40%. Twelve coal-fired stations out of the 17 available have now signed up to the sulphur limits required under EU law, having either already installed desulphurisation equipment or planned to do so. This means that coal will not be constrained out of the system, but it does not guarantee UK coal will be burned, of course.

Meanwhile, in South Wales the steel maker, Corus is assessing the possibility of sinking a coking coal mine at Margam. Elsewhere, R J Budge has plans to re-open Hatfield Colliery in Yorkshire and building a clean coal plant on the pithead.

EU Financial support

Under the EU state aid rules for the coal industry the Government has provided investment aid, although not operating aid to current production. The UK Coal Investment Aid scheme was launched on 16 June 2003 with a budget of £61 million to be spent by 2008.

Coal mining and power

Currently, around 5,000 staff are directly employed by the UK's current network of 17 coal-fired power stations. Combined with secure contracts for indigenous coal, these technologies offer considerable employment potential in construction, power generation and mining, allied to significant manufacturing export potential to emerging, coal-dependent economies such as India and China. The successful development of technologies associated with clean coal/carbon capture and storage offers a significant short-term solution to CO2 and security of supply challenges, but with a vital role in the longer-term energy mix. Twelve coal-fired stations out of the 17 available have now signed up to the sulphur limits required under EU law, having either already installed desulphurisation equipment or planned to do so. This means that coal will not be constrained out of the system, but it does not guarantee UK coal will be burned, of course.

Coal-fired power stations, 2005.

Power station	MW
Kilroot	520
Lynemouth	420
Eggborough	1,960
Drax	3,870
Cottam	2,008
West Burton	1,972
Kingsnorth (+oil)	1,940
Ironbridge	970
Ratcliffe	2,000
Rugeley	1,006
Aberthaw B	1,455
Tilbury B (+oil)	1,029
Didcot (+gas)	1,940
Ferrybridge C (+biomass)	1,955
Fiddler's Ferry (+biomass)	1,961
Cockenzie	1,152
Longpannet	2,304

Source: Digest of UK Energy Statistics, 2005, table 5.11.

Cleaner Coal Technologies - the way forward

As yet none of the cleaner coal technologies available have been installed in the UK. The Government has, however, put up a grant of £35 million to demonstrate carbon abatement technologies. These will be available for fossil fuel operations generally.

The task group may be timely, in that independent forecasts from France's Alstom and Germany's Siemens, reported in the Financial Times [20] , reveal that about 40% of orders for electricity turbines for the next decade will be for coal-fired units. The shift is reportedly triggered by technological changes that reduce the amount of pollution from coal firing, and by concerns over rising gas prices.

Supercritical boilers - Supercritical variants of the traditional coal-fired power station were first developed in the USA during the 1960s. According to one estimate, over 85% of new coal-fired capacity that was commissioned globally between 1997 and 2000 used supercritical technology but there are none in the UK. New or retrofitted plants in the UK would operate with a maximum efficiency of 44-45%, 20% higher than the best conventional coal station.
Integrated Gasification Combined Cycle (IGCC) - The Integrated Gasification Combined Cycle (IGCC) is an outgrowth of the gas-fired Combined Cycle Gas Turbine (CCGT), the technology that has dominated the UK market since electricity privatisation. The basic difference between these two technologies stems from the presence of a gasifier and gas clean up equipment in an IGCC. This allows it to burn synthetic gas (or syngas) produced from coal. Thermal efficiency of IGCCs is over 40%, with very low sulphur and NOx emissions. There are none in the UK but some in the US have been running for 10 years.
Carbon Capture and Storage Technologies - CO2 emissions can be captured and stored in under sea gas and oil fields. The most common technology for capture is based on IGCC technology. As in an IGCC plant, coal is reacted with oxygen in a gasifier to produce a synthetic gas (syngas) consisting mainly of carbon monoxide and hydrogen. The gas is cleaned, and most of the sulphur contained in it is removed. However, before this gas is burned in a gas turbine (as it would be in an IGCC), the carbon monoxide is removed by reacting the syngas with steam to form carbon dioxide. The carbon dioxide is then separated. Some or all of the hydrogen gas is then burned in the gas turbine, with any remainder being used for other applications (e.g. industry or transport).
Oxyfuel combustion is more speculative and experimental that pre- or post-combustion capture. It involves burning the coal in an oxygen and CO2 rich mixture rather than air. This produces a waste gas stream rich in CO2 from which the CO2 much easier to capture. Its main drawback is the need for an expensive, energy intensive air separation unit. There are proposals for oxyfuel schemes that do not require such a unit, but these are radical and untested.

The EU is moving towards inclusion of clean coal in the seventh framework programme and a Zero Emissions Fossil Fuel Power Plant (ZEFFPP) Technology Platform has been established to look at both research and deployment of these technologies.

Incentives and other Support Mechanisms

The TUC favours an overall incentive scheme for the production and use of lower carbon and zero carbon energy.

Examples of support mechanisms relevant to coal are:

Market obligations modelled on the Renewables Obligation to generate a defined amount from a particular fuel. This could be relevant to the development of clean coal technology and carbon capture and storage technologies.
Carbon credits for designated technologies. These could take the form of purchase of carbon credits by the state or contracts for differences guaranteeing a carbon price beyond the timescale of the existing EU ETS. Most new coal-fired plant is being built in Germany because of the more stable environment for investment.
State Aids - such as EU support for coal (restructuring, operating and investment aids) or the 15% direct subsidy limit for a country's overall energy portfolio. Of considerable importance here, the EU is currently carrying out a stakeholder consultation.

Coal - recommendations

The UK coal industry can make a vital contribution to the UK's energy security for decades to come.
We welcome the Government's support for the Clean Coal Task Group.
We also welcome the Chancellor's announcement in March 2006 of a consultation on the barriers to commercial deployment of CCS in the UK and the potential role of economic incentives in addressing those barriers.
Regulatory uncertainty is preventing new, cleaner generation capacity from being built. The market for coal in power stations in the UK has grown by 27% since 1999 and generators have committed hundreds of millions of pounds to flue gas desulphurisation capacity.
Other markets can also be expanded and supplied by deep mine coal, such as the coking coal market from a new mine at Margam, South Wales.
The TUC welcomes the commitment made by the Energy Minister, Malcolm Wicks, at the Coal UK Annual Conference in February 2006 to hold discussions with coal industry stakeholders on the extent of available deep mine reserves. There are several hundred million tonnes available via both operating and mothballed mines and many more hundreds of millions in as yet unaccessed reserves, such as the Witham Prospect in Lincolnshire.
The DTI' s review supports an overall incentive scheme for the production and use of clean, lower carbon and zero carbon indigenous energy. This should also have a security of supply component built into it.
The question of the future ownership structure of the industry should be kept under constant review. Any decision to bring the industry back into the public sector must be based on the stewardship record of the private countries producing coal: is the nation's energy security being properly defended?

A future for nuclear power

TUC policy supports incentives for 'investment in all lower-carbon generation technologies', including nuclear, to ensure early progress in development of new generation capacity.

Our reliance on nuclear power

Nuclear power provides around 19% of our electricity generation, or 8% of our total energy needs. Nuclear's share of electricity generation would fall to around 7% by 2020 under current plant closure programmes.

Electricity generated from nuclear power currently displaces about 14 million tonnes of carbon a year [21] , or about 9% of total UK emissions in 2004.

The 12 nuclear plants currently employ around 38,000 staff at all grades. Unless there are further plant expansions beyond that announced for Dungeness B, three further stations will cease operation by 2008, within the following closure programme:

Nuclear plant closures, 2006-2035

Plant	Final operating year	Capacity, megawatts
Sizewell A	2006	420
Dungeness A	2006	450
Oldbury	2008	434
Wylfa	2010	980
Hinckley Point B	2011	1,220
Hunterston B	2011	1,190
Hartlepool	2014	1,210
Heysham 1	2014	1,150
Dungeness B	2018	1,110
Heysham 2	2023	1,250
Torness	2023	1,250
Sizewell B	2035	1,188

By 2020, around 20% of total electricity production in nuclear will have been retired or close to retirement. Even if renewables reach the 20% target by that date, it will only have substituted for nuclear and made no net additional contribution towards the 2050 CO2 reduction target.

In considering the replacement of all or a substantial part of our current nuclear capacity, the Review will have to resolve three key questions:

Economic and timing issues

The long-term economics of nuclear new build have to be resolved, taking in account security of supply and climate change objectives. A 2004 study by the Royal Academy of Engineering into the comparative costs of energy generation found that nuclear was at that time cheaper than other options and closely competitive with combine cycle gas turbine plant. Since then, recent gas price increases have shifted in favour of nuclear generation.

The Government has made it clear that any new future plant 'would be built and run by the private sector, within the regulatory framework set by the Government'. In terms of construction costs alone, the key economic issues centre on capital costs, the financial discount rate used and the build time. By far the greatest proportion of total cost of nuclear plants lies in the construction phase, with relatively long time scales involved in planning stages and then in capital commitment during construction without return. There is the added problem of the lack of recent European or American experience of nuclear new-build. Were a new fleet of power stations to form part of the UK's future base load energy mix, significant economies of scale would derive through a standard plant design [22] .

Similarly, while the Sustainable Development Commission's recent review opposed, on balance, a new nuclear programme, its report recognised the potential economies of scale that would arise from a programme of essentially identical reactors (para. 5.2.1).

Market framework

The industry's need for long-term stable market framework - favouring carbon-free or low carbon generation and pricing carbon through trading or tax regimes - is similar to other capital-intensive energy projects like clean coal and carbon sequestration plant, and mass-scale wind generation. Nuclear power provides baseload energy, and while it runs most efficiently at peak plant loads, has the limiting disadvantage that it cannot follow daily peaks and troughs in national energy demand.
The industry appears to be confident that it can play a part in the future electricity mix. Clearly, it must demonstrate the viability of a costed programme of standardised designs, with transparent forecasts of prices to consumers, showing how this income stream will fund the major long-term investments required, based on private sector finance.

Nuclear waste

A viable waste disposal strategy that commands public confidence is also, of course, essential. A future nuclear replacement programme providing one-fifth of electricity generation - perhaps eight stations - would add at most 10% to existing stocks of high and intermediate waste, and about 5% of low level materials [23] . But safe storage of long-term radioactive waste in a manner that secures public confidence is required irrespective of a new build programme. We have to identify and implement solutions for the current waste legacy of radioactive materials from medical, defence and other sources.

Most low-level waste is currently disposed at the national facility at Drigg, Cumbria. The UK currently has no long-term policy for the management of intermediate and high level radioactive wastes, although the Committee on Radioactive Waste Management is likely to make recommendations in mid-2006.

Of course, the key challenge of much nuclear waste is the period of hundreds of thousands of years over which it must be effectively isolated from people and the environment. The overall costs of an accelerated programme of decommissioning existing sites is estimated at around £70 billion.

Provided satisfactory answers can be provided on the long-term economics and waste issues, TUC policy supports that at least some of existing nuclear capacity be replaced, as part of a low carbon energy mix.

We note that replacing existing capacity would add marginally to the existing legacy of radioactive waste. Nonetheless, it is absolutely essential that the Government implements a robust radioactive waste disposal strategy, if public support for new nuclear build is to be secured.

Renewable energy

Renewable energy plays a direct part in tackling climate change and security of supply issues. Currently, about 4.3% of electricity is generated from virtually carbon-free renewable sources [24] - wind, hydro, biomass, wave and tidal power and micro generation - and by 2010, this is likely to double to around 8%, close to the Government's 10% target by that date. Around half of this (6,000 megawatts; 5% of electricity) is likely to come from onshore wind [25] , enough to power 3.3 million homes.

According to the BWEA, 6,000 megawatts of onshore wind power will be drawn from around 3,500 wind turbines, avoiding at least 6 million tones of CO2 emission from fossil fuels.

Renewables advantages include:

Security of supply:

Price security - renewables have no fossil fuel costs, reducing price volatility and reliance on international markets. Renewables are now likely to be competitive with gas prices long-term.
Resource security - there is no reliance on international sources or infrastructure to ensure energy flow.
Operational security - backup will be required with or without renewables in the overall energy mix.

Climate change:

Lower carbon emissions, reduced fossil fuel demand; immediate benefits as sites come on stream.

The industry has identified a number of barriers to rapid deployment - planning issues, building grid connectivity, Government support for emerging technologies.

The TUC urges the Government to support the Renewables Advisory Board's target of 30% of electricity from renewable sources by 2030; develop supporting institutional arrangements for the planning regime; and extend the Renewables Obligation.

Similarly, a successful microgeneration strategy could contribute help reduce emissions by 15% by 2050 (see below).

Section five

Industrial and employment opportunities

The Energy Review consultation does not explicitly tackle the industrial, employment and skills consequences of meeting its energy goals. But managing major cuts in carbon emissions, achieving secure energy supplies and a successful fuel poverty strategy requires strategic coordination by Government of the many stakeholder interests involved.

Here, we briefly cover three key issues involved in developing an industrial policy consistent with a sustainable energy strategy:

Greening the workplace.
Industrial and employment opportunities.
Skills and science capacity.

Tackling energy demand: Greening the workplace

The Energy Review asks for views on managing energy demand as well as supply.

Industry is responsible for about one-fifth of energy consumption, yet a workplace focus is missing from the Energy Review. The TUC has argued in its response to the climate change review consultation, and in the TUSDAC report, Greening the workplace (2005), that developing sustainable workplaces should be a key priority area for action. The report encourages far greater workforce involvement in energy and resource efficiency initiatives at work, using joint union/management agreements to develop sustainable workplaces. In the battle for hearts and minds, workplaces are an excellent place to start.

Trade unions have an important part to play in making the link between tackling climate change and workplace behaviour.

In 2006, TUSDAC submitted a proposal to DEFRA for strengthening the rights of Trade Union Environmental Representatives through appropriate enabling amendments to the ACAS Code of Practice, Time of for Trade Union Duties and Activities. We urge the Government to consider what more can be done to support joint workplace initiatives.

Sustainable public procurement

The government at all levels has a key role in taking the lead in promoting energy efficiency in public buildings and good practice in public sector workplaces, taking forward the achievements already delivered. Trade unions across the public sector are already involved in sustainable workplace initiatives, and the TUC calls on the government to take further steps to strengthen this engagement. Public procurement also has a key role in promoting environmentally sound practices in the private sector, taking forward the role of the Government's sustainable procurement task force.

Industrial and employment opportunities.

There is significant employment and economic potential to be drawn from a low carbon economy. The UK has already demonstrated that it is possible to decouple economic growth from energy use. The TUC's industrial strategy [26] (2005) argued that: 'Manufacturing, like the rest of the world, cannot stand still . . . It is often assumed that the increased focus on an environmentally sustainable future will involve the erosion of some areas of manufacturing; that may be true, but the green challenge will offer enormous possibilities as well.'

Whilst UK manufacturing has been losing 100,000 jobs a year, there is nevertheless abundant evidence of the emerging strength of the UK's low carbon economy. Government figures [27] suggest that the environmental technology industry enjoys a turnover of £25 billion a year, with 400,000-strong workforce employees.

Here, we outline industrial and employment possibilities in some emerging sectors. Regional Development Agencies and the devolved administrations are involved in a wide range of energy initiatives. Getting these developments onto a national footing requires a strategic and coordinated approach across government.

Wind and wave power

Many thousands of jobs will follow the successful development, manufacture, installation and maintenance of large-scale wind and wave-related technologies - estimates range from between 10,000 and 45,000 jobs in the UK by 2010 [28] . In Scotland [29] , 7,000 direct jobs could be created in a diverse marine industry, supported by sustainable research development and skills bases. Marine energy [30] capacity could contribute up to 10% of Scottish energy, as well as supplying major international export markets. In 2004, 3.6 per cent of electricity was generated from renewable sources, enough to power around 2.5 million households.

At present, the UK is the world-leader in wave and tidal power technology, and while a number of experimental systems are in place in the UK, the industry remains concerned at the relatively low level of initial government support. One company, Ocean Power Delivery, not only has a prototype called Pelamis (with 90 per cent UK content) operating in the Orkneys, but an order for three full sized plants in Portugal, with an option on more. However, in the absence of UK orders these additional units may be manufactured in Portugal.

Meanwhile, in Denmark, 29,000 people already work in the renewables sector. After 15 years of investment, wind power contributes 16.7% of energy generation; wind technology is a major export industry (29). In Germany, 30,000 people work in wind generation, with renewables contributing nine per cent of energy needs, against a national target of 12.5% by 2010. Overall, 150,000 people now work directly or indirectly in the renewable energy sector, with an annual turnover of 12 billion euros.

Microgeneration

Currently in the UK, about 275 installers employ 600 people in the microgeneration sector (small wind turbines, solar panels, ground source heat pumps, ceramic fuel cells, etc). While potentially millions of households and small businesses could take up these technologies, there are currently just 82,000 microgeneration devices installed in the UK.

Buildings (domestic, industrial, commercial) account for about 47% of CO2 emissions. Microgeneration has the potential not only to cut emissions but also to encourage individuals to change behaviour.

Householders seem genuinely interested [31] in making a difference to the environment, with than a quarter (28%) saying they are willing to install a domestic wind turbine. A recent Energy Savings Trust study [32] revealed that microgeneration could reduce carbon emissions by up to 15% by 2050, or sooner with the right package of support.

The Government has an opportunity to tackle the barriers to the development of a microgeneration industry: legislation - for an equal price for electricity bought from and sold through the grid; high unit and installation costs (eg £6,000 for a domestic wind turbine); the level of subsidy and VAT still payable; and consumer awareness.

The TUC welcomed the announcement in Budget 2006 of a further £54 million for DTI's Low Carbon Buildings Programme, aimed at boosting the manufacture of micro power units, leading to lower costs. While this will help fund the installation of microgeneration technologies in a range of buildings (schools, social housing), the scale of this programme is small by some EU comparison:

In Germany, a market incentive programme granted funding to 300,000 applications for solar panels and other small installations.
In Sweden, 10% of all households use ground source heat pumps.

A new biofuels industry

The TUC welcomed the Transport Secretary's announcement in November 2005 of plans to introduce the Renewable Transport Fuel Obligation (RTFO). This would require 5% of all UK fuel sold on UK forecourts to come from a renewable source. We would urge the government to move rapidly to implement this measure. With carbon emissions from transport now 10% above 1990 levels due to increases in car usage and road freight, there is a strong case to bring forward the planned implementation date of 2010, along with the duty incentive, currently 20p a litre.

The RTFO is predicted to save around 1 million tonnes of carbon dioxide emissions in 2010, equivalent to taking 1 million cars off the road. Its successful implementation will support a new UK industry, employment growth and cuts in emissions. The TUC welcomes the announcement of a possible enhanced capital allowance (ECA) scheme for the cleanest biofuels production plant, subject to state aids approval.

Skills and science capacity

Workforce planning and skills issues are of central importance in developing a green manufacturing base, renewing the electricity network, and building new power systems. The Government has a key role to play in coordinating the different skills requirements of each sector. Equally important is sustained investment in scientific capacity. An overall strategy will not emerge if left to the SSC's separately.

These are just some of the current skills, training and science issues involved.

Nuclear industry

Two-thirds (63%) of nuclear industry employers report skills gaps in critical areas of business, recruitment difficulties and an ageing workforce, according to a skills audit by Cogent, the Sector Skills Council for the Chemical, Nuclear, Chemical, Oil & Gas, Petroleum and Polymers industries. Prospect, Amicus and TGWU are represented on the Board.

This significantly unionised industry employs about 56,000 workers in all grades, with around 42,000 in scientific, engineering and technical roles. A forward-looking Sector Skills Agreement in the nuclear industry is now in progress, leading to an action plan with industry to deal with skills issues in the short to long term - including skills needs as decommissioning work come son stream. In an employers survey in 2005, a majority (72%) of companies reported skill gaps, including: project management (39% of respondents); and technical & practical skills (22%). Employers have responded with increased training (61%).

workforce demand projections graph

The development of a comprehensive skills strategy is constrained by various factors: that the DTI's consultation document makes no mention of skills; the lack of clarity on the future role of nuclear power; and therefore the difficulty of planning the next 15 years' worth of manufacture and construction activity.

Source: Cogent, 2006.

Microgeneration

In microgeneration, the Energy Savings Trust's industry analysis concluded that one the main barriers to increasing the uptake of new microgeneration devices is the 'shortage of appropriate skills and training courses' for each of the emerging microgeneration technologies. The Energy & Utility Skills Council [33] also suggests that occupations such as plumbing and electrician may come under pressure as demand increases.

National electricity network

Too few skilled staff are available to service and develop the national electricity network, prompted by a reduction in the number of academic centres offering engineering as a mainstream course. A The Trade and Industry Select Committee report [34] rightly anticipated that the pace of construction and infrastructure replacement would increase, not least to accommodate a growing renewables sector, inevitably creating shortages at craft and graduate levels (Report, para. 116).

Similar concerns arise in considering the development of clean coal and carbon capture and storage technologies, while elsewhere, in the UK's indigenous coal mining industry, clear signals are required from Government to secure employment and increasingly scarce skills in both the deep-mined and opencast sectors.

Developing science capacity

The Energy Review makes little mention of the importance of a strong science base to lead the development of new, low carbon technologies. The Government is sending contradictory messages. Budget 2006 announced a new energy and environmental research institute, with public and private sectors together raise finance of £1 billion. Yet as Prospect [35] has shown 660 posts in public science laboratories have been lost since the year 2000, despite an inescapable need in today's society for government to make scientifically informed decisions. The UK's R&D spending is below the EU average.

Neither the Energy Review nor the Government's new Climate Change Programme mention skills, so that, despite the Treasury's welcome initiative to set up an Energy Institute, there remains a worrying sense of disconnection between energy and industrial policy.

Section 6

A sustainable transport network

The Energy Review seeks views on, 'The long-term potential of energy efficiency measures in transport and how best to achieve that potential.'

Here we comment on:

Initiatives to tackle rising CO2 emissions from transport.
The sustainable case for rail investment.
Tackling aviation emissions through trading schemes and Air Passenger Duty.

Rising carbon emissions from transport

The road transport sector currently emits about one-fifth (21%) of our CO2, and is the second largest emitter of CO2 after energy industries (37%).

Since 1990:

road transport emissions rose by 9%;
domestic emissions increased by 12%; but
energy industry and other industries each reduced their emissions by 12%.

The future contribution of transport towards climate change targets is therefore a crucial issue for the Energy Review.

This problem is not unique to the UK. The European Environment Agency [36] reported a 23% increase in greenhouse gas emissions from transport (excluding aviation and maritime modes) since 1990, largely offsetting emission cuts from other sectors . 'This now makes it difficult to meet the Kyoto targets', the Agency concluded.

Decoupling transport from economic growth is a central aim of EU transport policy, which supports changing the modal balance in favour of rail. Across the EU, the share of aviation in total passenger volumes increased by 12% in 2002 (latest available figure). While there is a desire for economic growth 'the negative impacts of transport and extremely undesirable', the Agency says.

Carbon dioxide emissions by source: 1990-2004

	Road transport	Energy industries	Other industries	Residential	Other	Total
1990	29.9	64.3	30.6	21.4	14.5	160.7
1997	31.9	51.1	29.2	22.8	14.4	149.4
2002	32.4	54.3	25.8	23.9	12.5	148.9
2003	32.3	56.6	26.5	23.8	12.9	152.1
2004	32.6	56.5	27.1	24.0	12.9	153.0

Source: Carbon dioxide emissions by source: 1990-2004, DEFRA, January 2006: www.defra.gov.uk/environment/statistics/index.htm.

In the UK, how best to tackle transport emissions 'encapsulates the Government's problem of balancing economic and environmental concerns [37] '. The Government clearly does not want to discourage the movement of people or goods, so its polices are directed towards increasing the efficiency of cars, the development of new fuels (biofuels), and (Budget 2006) varying Vehicle Excise Duty to discourage the purchase of high-consumption vehicles.

Transport CO2 emissions, UK, 2004

	MtCe	%
Road transport	38.3	75.5
Civil aviation	0.7	1.3
International aviation	9.1	17.9
Railways	1.5	3.0
Shipping	1.1	2.2
Total	50.7	100

Sources: Transport statistics, Great Britain, 2005, table 3.8, DfT. Digest of Energy Statistics, 2005, table 1.1, DTI.

Environmental transport policies

A new biofuels industry

In our Budget submission 2006 [38] , the TUC welcomed the Transport Secretary's announcement in November 2005 of plans to introduce the Renewable Transport Fuel Obligation (RTFO). This initiative would require 5% of all UK fuel sold on UK forecourts to come from a renewable source, saving around 1 million tonnes of carbon dioxide emissions in 2010, or equivalent to taking 1 million cars off the road.

The renewable fuels obligation will support a new UK industry - one EEDA-commissioned independent report estimated 12,000 new jobs in biofuels manufacture and associated activities. The TUC welcomes the announcement of enhanced capital allowance (ECA) scheme for the cleanest biofuels production plant, subject to state aids approval.

A number of EU member states are well ahead of the UK in biofuel production. Biofuels make up 1% of all road transport fuel consumption across the EU: Germany is the main biodiesel producer (54% of production), while Spain produces two-thirds of the EU's bioethanol.

The TUC urges the government to move rapidly to implement the renewable fuels obligation. With carbon emissions from transport now 9% above 1990 levels due to increases in car usage and road freight, there is a strong case to bring forward the planned implementation date of 2010, along with improving the duty incentive, currently 20p a litre.

Vehicle Excise Duty

The efficiency of new cars bought last year was worse than in previous years, as the Energy Savings Trust has shown. More private car buyers are opting for 4x4 "gas guzzlers". The decision in Budget 2006 to raise Vehicle Excise Duty for the most inefficient cars by £40 to £210 (the price of half a tank of diesel) is too small to change consumer behaviour.

A flexible pricing policy has helped important green initiatives in the past, notably lower petrol duties on 4-star and diesel, but VED is unlikely to achieve much at present rates as it is such a low proportion of purchase price. The company car tax regime provides a significant incentive to purchase lower emissions vehicles. Serious new measures are needed to get the UK back on track to achieve its target of 10% of new cars purchased with emissions of 100g/km or less by 2010 [39] . A more concerted effort is needed to change consumer behaviour, not only for cars, but also vans and lorries.

Rather than reallocating the revenue to reduce other car owners' rates of VED, the TUC believes that the VED income generated should be used to fund road transport energy saving initiatives.

The sustainable case for rail investment

The TUC welcomes the Transport Secretary's recent statement [40] on a long-term strategy for rail, with its recognition that 'we will come under more and more pressure to meet our environmental obligations in transport - and rightly so.' He cited initiatives such as low emission engines and an examination of the merits of high-speed lines in the UK.

Government figures [41] show average CO2 consumption per passenger travelling from London to Edinburgh:

by rail, the passenger average is 12 kilograms of CO2 by electric-powered train;
by car, 70 kgs; and
by air, 100 kgs of CO2.

A study by the Commission for Integrated Transport shows that short-haul air journeys have higher CO2 emissions per passenger kilometre than high-speed rail. For journeys from city centre to city centre, additional emissions are involved because of the location of airports outside urban areas.

Paradoxically, road transport emits six times more carbon dioxide per passenger mile than rail, but motoring costs have fallen in recent years. Meanwhile, rail is far more carbon efficient, but rail fares have increased steeply.

The TUC supports a publicly owned, publicly accountable, environmentally friendly rail network. Opinion polls consistently show that a great majority of the travelling public want rail back into public ownership.

It is unclear as to how PSA targets to reduce carbon emissions are fully integrated into transport infrastructure projects and plans [42] . In 2004, the Government's Public Service Agreement for transport set the target of reducing greenhouse gas emissions by 12.5% below 1990 levels by 2010, and 20% for CO2 by the same date. This should include the high level output specification for rail, due for publication in 2007; new road building plans; and the ODPM's sustainable communities plan.

In a contribution to the Government's climate change review, TUSDAC [43] argued that the Government should make the environmental case for rail, light rail and tram investment more forcefully, and resists any proposals for rail replacement that fails to take full account of the environmental and social impact. Measures in the 2005 Railways Act may lead to cuts in regional and branch routes, or substitute bus services, to the detriment of the government's environmental targets.

The TUC believes that the Government should urgently review the potential for rail expansion, especially in planned growth areas such as the Thames Gateway, the development of a high-speed rail link between London and Scotland, and offer further support for new rail freight facilities.

Aviation and emissions trading

Emissions from the aviation industry are, like maritime shipping, excluded from the Kyoto Protocol [44] .

co2 of international aviation and shipping

However, DEFRA figures show that between 1990 (the Kyoto base line) and 2004, CO2 emissions from international aviation to and from the UK more

Source: e-Digest of Environmental Statistics, 2006, DEFRA.

than doubled to 9.1 MtCO2. Taken together, with domestic emissions of just under 1MtCO2, aviation emits about 10.6 MtCO2.

Clearly, there are unresolved tensions between the Government's energy and aviation policies. In 2003, the Energy White Paper set the UK on a course to cut CO2 by 60% by 2050. The 2003 Aviation White Paper provides for a huge expansion in air traffic, from 180 million passengers per annum (ppa) to 476 million ppa by 2030. Its framework to satisfy future demand includes options for five new runways and other facilities. The challenge for Government now is to manage this industry in the coming 10-year period in a manner consistent with our overall climate change obligations, working with our EU partners.

Aviation is a successful, dynamic and integral part of the UK and EU economies. Between 1997 and 2004, the UK's aviation industry carried 47% more passengers and 22% more freight. Both passenger and freight air traffic have recently been expanding at about 7% to 8% a year.

What are the implications for the UK's climate change programme of the continued expansion of the aviation industry? A recent assessment by the Tyndall Centre [45] highlights the implications of continued aviation growth .

Tyndall's predictions assume:

Aviation grows at current rates until 2015, then more slowly.
Limiting CO2 increases to 550 parts per million by 2050 (consistent with the UK's emissions strategy).
Average aircraft fuel efficiency increases of 1.2% per year.

On this basis, aviation would emit about 32 million tonnes of carbon by 2050, or 50% of total UK emissions at that date (see table p.45). If the UK followed emerging scientific consensus that that a lower CO2 stabilisation level is required of 450ppm, requiring even deeper cuts in CO2, then the aviation alone would account for the entire UK quota by 2050.

A similar conclusion was reached by the House of Commons Environmental Audit Committee [46] . The Committee compared the DfT's forecasts for aviation emissions for 2030 with our target level of total emissions. 'By 2030, aviation could account for over 70% of the Government's carbon target of 65 million tonnes. In its memorandum, the DfT has accepted the order of magnitude of our figures', (Report, para. 40).

By 2030, this is equivalent to aviation emitting about 45 MtC, as against a total UK target of 99MtC.

Why aviation emissions have 2.5 times as much impact on global warming

Aircraft engines give rise to various emissions - CO2, water vapour, NOx (nitric oxide and nitrogen dioxide), and particulates.

The combined impact of aviation emissions at high altitude are in the order of 2 to 4 times greater than that from carbon dioxide alone (Intergovernmental Panel on Climate Change, 1999).

Some of these emissions at altitude also contribute to global warming through the formation of contrails and high altitude clouds. While it is difficult to evaluate the effects with certainty, HM Treasury and the House of Commons Audit Committee apply a 'radiative forcing factor' of 2.5 to CO2 emissions from aviation.

Royal Commission and aviation emissions

In 2002, a report from the Royal Commission on Environmental Pollution [47] concluded that: "Emissions from aircraft are likely to be a major contributor to global warming if the present increase in air traffic continues unabated.' RCEP was concerned that the government showed little sign of having recognised that action to reduce the impacts of air transport was just as important as action in other sectors contributing to climate change. If no limiting actions were taken, the rapid growth in air transport 'will proceed in fundamental contradiction to the government's stated goal of sustainable development.'

'Short-haul passenger flights, such as UK domestic and European journeys, make a disproportionately large contribution to the global environmental impacts of air transport and these impacts are very much larger than those from rail transport over the same point-to-point journey. A shift away from the use of air transport over such distances could reap considerable environmental benefits as well as relieving pressure on major airports.'

RCEP said that rail transport is demonstrably more sustainable than air transport. 'The fact that rail transport cannot compete at present, at least in the UK, is a consequence of several factors, but these certainly include a failure to invest in a rail infrastructure and a failure to reflect environmental externalities in the cost of air transport.' Instead of encouraging airport expansion and proliferation, it was essential that the government should divert resources into encouraging and facilitating a modal shift from air to high-speed rail for internal UK travel and some intra-European journeys.

Trading aviation emissions

The TUC believes that a viable air transport industry is vital for growth and jobs. To maintain our competitive position internationally, while making substantial efforts to reduce our greenhouse gas emissions, international agreements must secure a level playing field, through the EU Emissions Trading Scheme and the wider Kyoto Protocol mechanisms.

Key industry players, such as British Airways, acknowledge the importance of addressing climate change and the industry's wider environmental impact. BA is committed to increasing the fuel efficiency of its aircraft and buildings, targeting a 30% improvement in aircraft fuel efficiency between 1990 and 2010 and a 2% per annum reduction in energy consumption in its buildings. BA wants to see aviation join an international system of emissions trading for greenhouse gasses.

Nevertheless, projected increases in demand will easily outstrip any technological improvements in engine efficiency and better environmental for several decades to come. Key factors are continued long-term reliance on kerosene; long design periods; and longevity of aircraft fleet now in service or planned.

The TUC supports the Government efforts to fully capture EU aviation emissions within the EU Emissions Trading Scheme by 2008, and believes that this should occur at the earliest opportunity. We acknowledge that including aviation emissions into the ETS under current aviation growth and efficiency trends is likely to have a major impact on the ETS itself. Unlike the participation of other sectors of the economy, the aviation industry would enter the ETS as a long-term net purchaser of carbon credits.

Such concerns prompted the Environmental Audit Committee to question whether 'any emissions trading system could generate sufficient credits to allow aviation to expand as forecast, while at the same time delivering carbon reductions of the order needed. The price of carbon could, in such circumstances, go through the roof - provided there was sufficient political will to maintain targets and enforce penalties,' (Report, para 45).

Air Passenger Duty

APD is levied on each passenger taking off from UK airports, ranging from £5 for short-haul to £40 for first class/long-haul flights. The lower rates were reduced in Budget 2000, more than offsetting the 35% rise in passengers since that date, so that APD tax revenues have fallen from £930 million to £856 million [48] .

The Chancellor has to be mindful of the important contribution air transport makes to the economy. Changes to APD in 2001 reduced the average rate of APD from £13.06 per passenger in 2000 to £8.88 in 2004. A freeze in the duty is, in effect, a tax cut in real terms. TUC policy [49] supports that 'tax raised through the APD is used to mitigate the industry's environmental costs'. But the TUC argued in response to Budget 2006 that the decision to freeze Air Passenger Duty for a further year 'may send the wrong environmental signals to the industry'.

Tyndal Centre - forecast aviation emissions and the UK's CO2 target

		Millions of tonnes of carbon (MtC)
	CO2 missions	1990	2000	2030	2050
A	Aviation	4.6	8.8	17.7	17.4
B	Aviation plus a radiative forcing factor of 2.5 [line A x 2.5]	11.5	22.0	44.3	43.5
C	Total UK excluding aviation	164.8	147.0	98.7	65.8
D	Total UK + aviation [line A+ line C]	169.4	155.8	116.4	83.2
E	Total UK + aviation with 2.5 radiative forcing factor [line B + line C]	176.3	169.0	143.0	109.3
F	Aviation with radiative forcing as % of domestic UK [line B ÷ line C]	7%	15%	45%	66%
G	Aviation with radiative forcing as % of total UK [line B ÷ line E]	7%	13%	31%	40%

Source: Aviation and Global Warming, DfT, 2004.

Section 7

Congress 2005 - Energy and climate change

Congress welcomes the priority being given to climate change during the UK's presidencies of the European Union and G8. Concerns on global warming and climate change are growing. Action is urgently needed at the highest levels to meet Kyoto and domestic emissions targets whilst also ensuring security of energy supply.

Recognising the core interest of the trade union movement in future economic prosperity and that moving to a low-carbon economy will directly impact on future employment and skills requirements, Congress calls on Government to work with the TUC on the development and implementation of climate change mitigation and adaptation strategies.

These must include:

1. a clear long-term policy framework, based on hard-headed analysis of progress made since publication of the 2003 Energy White Paper and safeguarding against the current danger of becoming increasingly dependent on imported gas;

2. incentives for investment in all lower-carbon generation technologies, including renewables, nuclear and clean coal, to ensure early progress in development of new generation capacity;

3. development of a strategy to deliver a green future for manufacturing;

4. sector skills agreements which support skills transition and protect individuals whose jobs are adversely affected;

5. increased support for the Government's in-house science capacity to ensure effective monitoring of progress and maximise potential for scientific discovery and innovation; and

6. clear expectation of employers that they work in partnership with trade unions on this agenda, including through the establishment of a sustainable development fund and rights for environmental representatives.

Congress notes that the last government White Paper on energy deferred some important medium to long term strategic issues to the current parliamentary session. In light of the election these issues are now the subject of further debate and consideration in advance of decisions being taken.

Congress agrees that the Government's broad energy objectives of secure and diverse supplies at competitive cost are the right ones against the backdrop of the need to deal with the environmental issues raised by climate change.

Congress notes that globally most predictions envisage coal use increasing as developing countries establish electricity grids. Congress strongly believes therefore in the development of clean coal technology (CCT) and carbon capture storage (CCS) as an essential response to climate change.

The UK is well placed to develop such technology and the Treasury should introduce appropriate financial instruments to facilitate clean coal technology in the next generation of coal-fired power stations.

Congress notes that indigenous coal currently provides an important bulwark in terms of security of supply and believes that this should be maintained into the future.

Congress seeks to assist the Government in achieving its targets as well as those set out in the Kyoto agreement. Congress calls on the General Council to organise a working group, which would include representatives from the Government, whose remit would be to research, develop and promote the use of clean coal burn technologies in Britain using British deep mined coal.

The General Council are instructed to report to Congress 2006 on progress towards these objectives.

Mover: Prospect; Seconders: National Union of Mineworkers; BACM-TEAM

Trades Union Congress

Congress House

Great Russell Street

London WC1B 3LS

contact:

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[1] A copy of Our Energy Challenge is available at: www.dti.gov.uk/energy/review/energy_review_consultation.pdf

[2] Climate change: the UK programme, HM Government, 2006

[3] What is the economics of climate change? Stern Review, January

[4] A new British energy policy, Dieter Helm, The Social Market Foundation, 2005.

[5] Our energy future: creating a low carbon economy, DTI, 2003

[6] DTI, July 2005.

[7] The Kyoto treaty covers a basket of six greenhouse gases: Carbon dioxide - carbon emissions from burning fossil fuels (coal, oil, petrol, natural gas). Methane - the principal component of natural gas. Nitrous oxide - a propellant in aerosol cans and a booster to fuels. Hydrofluorocarbons - substitutes for CFCs, and used as solvent/cleaning agents, refrigerants, and air conditioning fluids. Perfluorocarbons - by-products of aluminium production. Sulphur hexafluoride - used in the electronics industry as insulation in switchgear and circuit breakers.

[8] An overview of dangerous climate change, Stephen H. Schneider and Janica Lane, chapter 2 in Avoiding Dangerous Climate Change, Cambridge University Press, 2006.

[9] Fuel Poverty and the Energy Review, energywatch, February 2006.

[10] Parliamentary answer, House of Lords, 25 Jan 2006: Column WA169.

[11] Power from the people, DTI microgeneration strategy, 2006

[12] A New British Energy Policy, Dieter Helm, Social Market Foundation, November 2005.

[13] European Energy Policy: securing supplies and meeting the challenge of climate change, . Dieter Helm, Paper for the UK Presidency of the EU, October 2005.

[14] Our Energy Challenge, Prospect submission to Government, March 2006.

[15] Second annual report on the implementation of the Energy White Paper, p.16, DTI 2005.

[16] http://www.pointcarbon.com

[17] Clean coal technology and the Energy review, MistuiBabcock, response to the Energy Review, 2006.

[18] Our Energy Challenge, p.40.

[19] A gigajoule (GJ) is a metric term for measuring energy use. 1 GJ is equal to 278 kWh of electricity; 27m³ of natural gas; or 26 litres of heating oil.

[20] Financial Times, 16.01.2006.

[21] The role of nuclear power in a low carbon economy, Sustainable Development Commission, 2006. para 2.1.2.

[22] Keeping the lights on: nuclear, renewables and climate change, submission to the Environmental Audit Committee, Prospect, September 2005.

[23] Radioactive wastes in the UK, NIREX, October 2002.

[24] Renewables Advisory Board, 2006.

[25] Onshore wind: powering ahead, British Wind Energy Association, 2006.

[26] An Industrial strategy for the UK, TUC, 2005.

[27] Securing the Future: Delivering the UK Sustainable Development Strategy, DEFRA, 2005.

[28] Exploring the skills requirements of the UK Renewable Power Industry, Electricity Association, 2004.

[29] Harnessing Scotland's Marine Energy Potential, Forum for Renewable Energy Development in Scotland's Marine Energy Group (MEG), 2004.

[30] Going for green growth: a green jobs strategy for Scotland, Scottish Executive, 2005.

[31] ICM Opinion Survey, 22.02.06.

[32] Potential for microgeneration - study and analysis, Energy Saving Trust, 2005.

[33] www.euskills.co.uk.

[34] Resilience of the national electricity network, Trade and Industry select Committee, Third Report, 2003/04.

[35] Who's looking after British science? Prospect, March 2006.

[36] Transport and the environment: facing a dilemma, European Environment Agency, report no. 3/2006: http://reports.eea.eu.int/eea_report_2006_3; See also European transport policy for 2010: time to decide, European Commission, 2001.

[37] The Burning Question: is the UK on course for a low carbon economy? Catherine Mitchell and Bridget Woodman, IPPR 2004.

[38] TUC Budget Submission 2006: A Budget for fairness, TUC.

[39] Climate commitment: meeting the UK's 2010 CO2 emissions targets, IPPR, 2005.

[40] Speech to the national rail conference, March 2006.

[41] House of Commons, Parliamentary Question, 5 July 2004

[42] RMT Submission to the Environmental Audit Committee inquiry: Reducing Carbon Emissions from Transport, March 2006.

[43] Review of the UK Climate Change programme: A TUSDAC response to the Government's Consultation paper; tusdac@defra.gsi.gov.uk

[44] Under the guidelines agreed for UNFCCC, reporting emission from international aviation and shipping are not included in the UK's emissions, but estimates are reported in national greenhouse gas inventories.

[45] Decarbonising the UK: energy for a climate conscious future, Tyndall Centre, 2005.

[46] Pre-Budget Report 2003: Aviation Follow-up, Environmental Audit Committee, Report of Third Session 2003-04, Volume 1.

[47] The environmental effects of civil aircraft in flight, Royal Commission on Environmental Pollution, 2002.

[48] Select Committee on Environmental Audit, Fourth Report, 2006, para. 17.

Congress 2003.

[49] Keep Britain Flying, motion 58, Congress 2003.

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A Sustainable Energy Policy

TUC response to the Government's Energy Review 2006

Introduction

Dangerous climate change

A 'balanced' energy policy - Congress 2005

Energy Review - the DTI's questions

Meeting today's energy challenges

CO2 emissions are increasing

Road transport

Energy industries

Other industries

Residential

Other

Total

1990

29.9

64.3

30.6

21.4

14.5

160.7

1997

31.9

51.1

29.2

22.8

14.4

149.4

2000

31.7

52.1

28.4

23.4

13.5

149.1

2001

31.7

54.8

28.9

24.3

13.6

153.3

2002

32.4

54.3

25.8

23.9

12.5

148.9

2003

32.3

56.6

26.5

23.8

12.9

152.1

2004

32.6

56.5

27.1

24.0