LONDON (Reuters) - Households could face big rises in their energy bills under plans to reduce the role of fossil fuels and cut planet-warming greenhouse gas emissions by more than a third by 2020, Britain's chief climate change adviser said on Monday.
The Committee on Climate Change said the price hike could push more than 1.7 million houses into fuel poverty, when families spend more than a tenth of their income on energy to keep warm.
Warnings of higher fuel bills come as Britain faces a deepening recession, with rising unemployment and plummeting house prices.
"I cannot deny that there will be higher electricity and gas prices," Committee Chairman Adair Turner told Reuters. "But that adverse impact can be offset by energy efficiency improvement subsidies."
Such subsidies could include discounted fuel bills for people on low incomes and grants to pay for energy-saving home improvements.
Bills would rise because companies have to invest significant amounts in renewable energy sources and meet higher carbon prices, Turner's first report to the government said.
Energy and Climate Minister Ed Miliband has already accepted the committee's proposal to sharpen a binding national target to cut greenhouse gas emissions by 2050, to an 80 percent cut from 60 percent.
He said he would study the report further before responding to its recommendations.
Brown set up the committee to advise ministers on what his government describes as the world's greatest environmental challenge. Britain and other countries say climate change will cause extreme weather, leading to food and water shortages, rising sea levels and flooding and outbreaks of disease.
The committee urged the government to cut greenhouse gas emissions by at least 34 percent from 1990 levels by 2020. That target should rise to 42 percent if a global deal on reducing emissions is reached.
Turner said there was a strong economic case for nuclear power and that new coal-fired power stations should only be built if they can be fitted with carbon capture and storage CCS.L technology by the early 2020s. CCS traps carbon dioxide emissions and buries them underground.
German utility E.ON AG (EONGn.DE) plans to build a new coal plant in Kingsnorth in Kent, southeast England, to replace its existing plant there.
E.ON on Monday would not say whether it will go ahead with the project, seen as a test case for new coal plants, saying only that the group is trying to give Britain the balanced, low carbon energy mix it needs.
Greenpeace said Kingsnorth will only be able to capture a small percentage of its emissions, while the committee demands full CCS.
"Assuming the government accepts the advice of its own climate change committee, Kingsnorth is dead in the water," said John Sauven, Executive Director at Greenpeace.
Environmental lobby group Friends of the Earth said it would be more difficult for the plant to go ahead now but it depended on how the committee's proposals are translated into a government decision.
The committee said CCS was costly but necessary to improve the carbon efficiency of fossil fuel electricity generation. It also said owners of coal plants without CCS could have their operating hours capped.
Turner told Reuters he was optimistic that CCS technology can be developed by 2020, saying that the government has to legislate on the assumption that CCS will be in place.
Editing by William Hardy