LONDON (Reuters) - British 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.
Reaching its targets could lead to a 25 percent rise in electricity prices by 2022 and an 18 to 37 percent increase in gas prices by 2020, the committee said in its first report to British Prime Minister Gordon Brown’s government.
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 report said.
Emissions reductions will cost Britain less than one percent of its gross domestic product in 2020 and between one and 2 percent of GDP by 2050, the report 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 report comes as 190 countries meet in Poznan, Poland, in December 1-12 talks to review progress in a two-year drive to agree a new global climate treaty by the end of 2009.
Setting its first emissions targets, 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.
Aviation and shipping should not be included in the targets for now because of difficulties in allocating emissions between nations, the committee said.
Power sector emissions reductions of 40 percent below 1990 levels could realistically be reached by 2020, the report said. That figure depends on renewable energy being increased to 30 percent of the total.
Turner said there was a strong economic case for nuclear power and that new coal-fired power stations should only be built on the understanding that they would be retro-fitted with carbon capture and storage (CCS) technology by the early 2020s. CCS traps carbon dioxide emissions and buries them underground.
German utility E.ON AG plans to build a new coal plant in Kingsnorth in Kent, southeast England, to replace its existing plant there. E.ON has said it will build CCS there as quickly as possible.
The committee said CCS was necessary to improve the carbon efficiency of fossil fuel electricity generation. It recognized that adding CCS technology to coal-fired power plants would be costly, but that this was “modest,” in the range of 2 to 3 pence per kilowatt hour. 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.
The body also said the UK was “well-placed for CCS deployment” due to its large and now depleted offshore oil and gas fields.
The committee said nuclear power will play a significant role in decarbonization, but would not be a solution to the climate change problem by itself.
Wind farms had significant potential to cut emissions and could supply 20 percent of Britain’s current electricity demand by 2020, it said.
Editing by William Hardy