A memo to Ed Davey from IPPR

Written by Total Politics has a free weekly Friday email bulletin. Follow this link to register. on 3 February 2012 in Diary
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Energy market reform needs to be at the top of the agenda for the new energy and climate change secretary, argue Will Straw and Clare McNeil

To: Ed Davey, Secretary of State for Energy & Climate Change

From: IPPR think tank

The deputy prime minister has singled out your ability to get on top of policy detail and your command of your brief as the reason you are right to replace Chris Huhne as energy and climate change secretary. You will need these skills in a job which carries important responsibilities for ensuring a cleaner, more secure and sustainable future for the UK, but also some demanding political challenges. 

With energy bills as the public’s number one financial concern, your predecessor missed a major political opportunity to accelerate the pace of energy market reform. The energy summit held last year with the prime minster resulted in a largely ineffectual call to consumers to switch to a cheaper supplier and did nothing to address one of the real injustices of the market – the continued overcharging of loyal (often poor and old) customers. Changes here could make a real impact on what has to be one of the coalition’s top priorities: easing squeezed incomes. Under your leadership, the government needs to have an answer beyond simply trying and failing to increase consumer engagement in the market.

Some of Chris Huhne’s most ambitious policies were also the most regressive. Under the Department for Energy and Climate Change's ambitious Green Deal energy efficiency programme, for example, far less money will go to tackling fuel poverty than under previous programmes. As energy bills continue to rise this will have to be tackled - further rises in fuel poverty are both socially and politically unsustainable. The misleading ‘green equals expensive’ charge is beginning to stick and more will need to be done to make costs fair and low.

In response to the Chancellor’s about turn on green policy, you should encourage firms which have business models dependent on the transition to a low carbon economy to be more vocal in public debates on climate change. Right wing think tanks and newspapers have been effective in in suggesting that rising energy costs are due primarily to green measures and that environmental regulations have a cost but no benefit. You must encourage other voices, especially from business, to come to the fore and make the case for the opportunity presented by reducing carbon emissions.

There is a growing consensus that active industrial policies have an essential role to play in harnessing and developing Britain’s comparative advantages. You should get your new department to develop robust analysis of the low carbon sectors where global demand is set to increase and Britain has an existing or potential comparative advantage. This should be twinned with an approach setting out whether market failures exist and, if so, what government interventions would be appropriate.

Finally, you should build on the excellent work done by your predecessor in Durban, building the case for legally-binding carbon reduction targets to be agreed by 2015. The challenge now is to turn words into actions since carbon emissions will have to peak by 2020 if the world is to limit a temperature rise to 2C. Ahead of the next meeting in Qatar this December, you should work with EU Commissioner Connie Hedegaard on a diplomatic charm offensive of China and India. Key to getting them to eventually sign up to a binding agreement will be understanding their concerns and red lines.

Will Straw is Associate Director and Clare McNeil is Senior Research Fellow at IPPR. Follow them on Twitter: @wdjstraw & @claremcneil1

Tags: Chris Huhne, Ed Davey, Energy and climate change

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