“Hidden green taxes now make up a fifth of every household’s gas and electricity bills, energy campaigners warned last night.
Daily Mail, 9 June 2011
“Families hit by £200 green tax in energy bills – Britons are being hit by secret green taxes that make up a fifth of all home energy bills, it emerged last night.”
Daily Express, 9 June 2011
The hike in prices announced by Scottish Power this week have renewed the focus on how much we are all forking out on energy bills.
But are the prices being inflated by the effect of Government climate change initiatives? This was the assertion in today’s Mail, also repeated by the Express.
So how much extra are we really paying to tackle climate change?
The £200 estimate is based on the estimated effect of climate change policies on energy bills offered by the Director of the Global Warming Policy Foundation, Dr Benny Peiser, as part of a call for these costs to be spelt out on bill
Dr Peiser stated that “so-called green stealth taxes are already adding 15-20 per cent to the average domestic power bill”.
The Mail and Express have, by taking the higher point of this estimate and figures for annual electricity and gas bills of £424 and £608 respectively, arrived at their figure or £206 (i.e. 20 per cent of the combined bill).
But where does this 20 per cent estimate come from? To get to the bottom of the figures we contacted Dr Peiser who referred us to the an assessment produced by the Department for Energy and Climate Change (DECC) last year.
The estimates produced by the Department are produced in the table below:
This would mean that, using the bill estimates offered in the reports (both of which are slightly lower than the 2010 estimates given by DECC), the impact on bills would be just over £100, half the figure in this morning’s papers.
But the DECC analysis claims that the impact on the actual level of bills has been much less pronounced, at 4 per cent.
This is because, according to DECC: “bills are a combination of prices and energy usage, and therefore include the impact of a range of policies which improve energy efficiency by helping households and businesses reduce energy consumption, lessening the overall bill impact.”
So because other factors can influence actual levels of bills it seems that the change on domestic energy prices give a clearer picture of the impact of the policies.
But with the impact on electricity prices in 2010 being 14 per cent and that on gas being 4 per cent, we are left with figures well short of those reported this morning.
We put this to Dr Peiser, who argued that changes in the situation since 2010 could have served to increase the impact.
“One of the significant factor that has changed since 2010 is the price of carbon which has risen sharply in recent months, is likely to rise even further and has a direct effect on electricity prices,” he said.
“Given that the EU Emissions Trading Scheme accounts for perhaps 2/3 of the climate policy burden that’s a substantial factor that hasn’t been factored in by government estimates that are based on a lower cost of carbon.”
Full Fact contacted the Department to try and obtain more recent figures and were told that though the figures are updated annually, and this year’s figures are not yet available.
Until these figures are available it will be difficult to say with complete certainty that the impact on prices will not be as great as this morning’s reports suggested.
However the decision of the papers to use work from the upper end of the 15-20 per cent estimate for the sake of headllines only increases the disparity between the two figures analysed here.
While the impact on electricity prices is not too far removed from the estimates provided by the papers, the gap in assessments of the current impact on gas prices is more challenging.
After all, the DECC estimates suggest that even by 2015 the impact on gas prices will still be 10 per cent rather than between 15-20 per cent.
So even if bill were altered to include the costs of climate change policies, the costs stated may not be the same as those offered in the press today.