July 14, 2011 • 4:41 pm

Following the publication of the Electricity Market Reform White Paper on 12 July, the issue of subsidies to nuclear power resurfaced in the House of Commons as Chris Huhne addressed the Commons.

Labour MP Paul Flynn asked, “Can the Minister really say that he is going ahead without subsidy? He seemed to be saying today, “We’re going to have subsidies for all nuclear and new nuclear, but call them something else.”

Mr Huhne responded by saying “No, the hon. Gentleman is wrong on that. We are setting out a framework to discourage high-carbon activities and encourage low-carbon activities.”

The proposed floor on the price of carbon is what has led to charges that the Government are breaking the coalition agreement pledge prohibiting public subsidies of nuclear energy.

The carbon price floor will essentially make carbon-intensive energy more expensive for consumers, thus making low carbon energy – including nuclear energy – more competitive.

Mr Huhne has said he does not consider the price floor a subsidy. This is an issue of semantics – what is, and what isn’t a subsidy?

The Oxford Dictionaries Online definition of a subsidy is “a sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service low.” Since it is not a direct payment to low-carbon energy providers but rather a penalty imposed on carbon-intensive energy providers, it does not fit that definition.

But, according to Encyclopædia Britannica, price floors are considered “indirect” subsidies, which arise when governments, among other actions, “maintain higher prices through manipulation of markets”. Other forms of indirect subsidy include price ceilings, tariffs, and tax concessions.  

It is important to reiterate that the price floor doesn’t only benefit nuclear energy, but all low-carbon energy providers. Nuclear energy will benefit more than other low-carbon sources, though, because it produces more electricity.

 

 

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