By Gerard Wynn
LONDON, July 26 Natural gas has strong political
support in Britain, shown by a tax break choreographed this week
to balance support for wind power, but it is also on a collision
course with the country's carbon emissions targets.
That pits the country's energy and climate change ministry
against the Treasury, and ranges arguments for a green economy
against affordability, splitting the coalition government and
suggesting doubt will continue to cloud the fossil fuel's
From Wednesday, some new gas fields in shallow waters will
be exempt from a 32 percent tax on oil and gas exploration on
the first 500 million pounds of income, the Treasury said this
The prospect of new shale gas reserves worldwide and
invigorated conventional production suggest natural gas will
remain competitive for decades, but its carbon emissions pose an
obstacle in Britain.
For years successive governments have endorsed a low-carbon
economy while gliding over the implications for fossil fuel
power plants which require far less upfront capital, presently
at a premium.
The previous Labour government passed a climate bill in 2008
which offered substance, however, requiring the country to slash
greenhouse gas emissions from 1990 levels by at least 80 percent
by 2050 and established statutory climate advisers to recommend
That set in motion a process which now presents the country
with three unpalatable choices: it must repeal the climate bill
to make it less ambitious; or force new gas power plants to
operate at a fraction of capacity; or to fit incredibly
expensive, untested carbon capture and storage (CCS) equipment.
Both Britain and the United States have already proposed
emissions limits which will force new coal-fired power plants to
fit CCS which will add more than $1 billion per plant to their
That will end the construction of new coal plants apart from
highly subsidised CCS pilots, not such a big sacrifice given
falling gas prices particularly in the United States.
It would take incredible political courage, or foolishness,
to ratchet emissions limits to end unabated gas, the world's
cheapest source of baseload power.
Finance minister, Conservative George Osborne, is leading UK
gas support with his tax break apparently timed on Wednesday to
undermine a show of support for more expensive wind power from
Liberal Democrat Ed Davey, energy and climate minister.
"Gas is the single biggest source of energy in the UK," said
Osborne on Wednesday. "Today the government is signalling its
long-term commitment to the role it can play in delivering a
stable, secure and lower-carbon energy mix."
The climate law committed the country to a binding target to
cut CO2 emissions by at least 80 percent by 2050.
There are only two ways to meet the 2050 target using gas.
First, gas power plants could be limited as back-up for
intermittent renewable energy, operating at about 10 percent
full capacity, according to data from the government's advisers,
the Committee on Climate Change (CCC).
That would brutally suppress natural gas demand.
Alternatively, Britain could tighten power plant emissions
limits to force gas plants to fit CCS, potentially pricing them
out of the market.
Wednesday's announcement failed to commit to either.
"We do not expect the role of gas to be restricted to
providing back up to renewables, and in the longer term we see
an important role for gas with CCS," the department for energy
and climate change said.
Various committees and advisers have ratcheted pressure on
the government to come to a decision.
In March, the chair of the CCC, Adair Turner said the
country's gas plan "carries the risk that there will be too much
gas-fired generation instead of low carbon investment."
He said that by 2030 the role of gas-fired generation should
be limited to balancing renewable energy.
Parliament's energy committee on Monday demanded clarity on
the emissions impact of new gas investment under the
government's electricity market reforms (EMR).
The CCC calculates the carbon emissions of Britain's power
grid now at nearly 500 grams of CO2 per kilowatt hour (kWh), and
says this must fall to 50 grams by 2030 to meet the country's
carbon goals - a seventh of the emissions of an average gas
plant and effectively ending the unabated use of fossil fuels.
The government's difficulty is understandable: its plans for
nuclear power are faltering and the private sector is reluctant
to fund offshore wind and unproven CCS, while biomass depends on
largely imported feedstock.
That leaves cheap, unabated gas as a vital baseload option.
The government will publish a gas strategy in the autumn
meant to clarify its role in wider energy plans.
Do not be surprised by continued hedging, however.
And the CCC will be disappointed in its central
recommendation, in its "Progress Report" last month.
"An appropriate objective would be to reduce the carbon
intensity of the UK power generation sector to a level of the
order of 50 gCO2/kWh by 2030."
"There should also be a clear statement that ... sufficient
low-carbon plant will be contracted to ensure that gas largely
plays a back-up role."
Only less likely is a proposal to weaken the country's
climate law, presenting a trigger to a powerful green lobby.