Climate measures ‘have cut emissions without raising domestic energy bills’

Household energy bills have fallen since the 2008 Climate Change Act was passed, despite action to tackle climate change and improve energy efficiency, according to new analysis by the Committee on Climate Change (CCC) in a report: Energy prices and bills – impacts of meeting carbon budgets.

Indeed, while government measures to deliver a cleaner, low carbon electricity system added around £9 a month to the typical UK household energy bill in 2016, this was more than offset by a cut of over £20 per month due to reduced energy demand, mainly from more efficient lights and appliances, says the report.

In 2016, low carbon policies made up around 9% of an annual ‘dual fuel’ household energy bill of around £1,160, says the CCC, while the majority of the typical household bill resulted from wholesale, transmission and distribution costs.

The CCC set out these conclusions its fourth independent assessment of the impact of carbon budgets on energy bills. It finds that, for households, typical dual fuel houses, which use gas for heating and hot water and electricity for lights and appliances, paid (in real terms) £115 less per year for their energy in 2016 than in 2008. The total bill includes a little over £100 annually to support the UK’s transition to a cleaner, more efficient energy system but also reflects lower energy demand, largely due to more efficient appliances.

Improvements in energy efficiency have saved the typical household around £290 per year since 2008 as demand for electricity and gas has reduced, adds the CCC.

For the future, the gradual shift towards low carbon electricity could add a further £85–£120 per year to a typical bill by 2030 if further policies to meet climate objectives are put in place. But further improvements in energy efficiency have the potential to deliver significant savings for households in future (around £150, or more if wholesale costs continue to rise), which will more than offset the cost of shifting towards low carbon sources of energy, adds the CCC.

Meanwhile, UK electricity prices for businesses are higher than those in comparable countries such as France and Germany, but gas prices are lower than those in comparable European countries. Higher electricity prices are largely explained by higher UK wholesale and network costs, according to the report, and the Committee has called for more detailed study of the different costs of electricity supply across Europe.

Effects on consumers are very small, says the report. If all climate-related policy costs on businesses were passed on to consumers through higher product prices, this could have added up to 3 pence to the average £10 basket of goods and services in 2016, which could rise to about 6 p by 2030. Some energy-intensive manufacturing sectors do face higher costs from climate policies, but those deemed most at risk are largely compensated for those costs, adds the CCC.

The CCC also points to the range of opportunities for business arising from the transition to a low carbon economy, which already makes up 2–3% of GDP and employs hundreds of thousands of people. Its direct contribution to the economy is the same as the oil, gas and coal extraction sectors put together.

CCC Chairman Lord Deben said: ‘Action to deliver a cleaner, more efficient energy system is already delivering benefits for households and businesses. UK emissions are falling – down 38% from 1990 to 2015 – while GDP has risen by almost 65% in the same period. Meanwhile, the typical household energy bill has fallen in real terms since 2012.’