Thursday, February 17, 2005

Our advice remains the same

Lending substance to our charge that the Kyoto agreement is economic suicide comes a piece in today’s Telegraph (business section) which reports that the troubled emissions trading scheme could add 20 percent to our power bills.

This is according to analysts from the investment bank UBS, who have been trying to assess its impact, and these rises will follow a 30 percent increase in wholesale electricity prices across Europe by 2013.

UBS's research suggests that the impact of emissions trading on electricity prices will become as important as the impact of oil prices and interest rates. Over the next two to three years, the analysis say, there will be no significant additional price pressures caused by the trading scheme, as the price of carbon will remain at current levels.

However, from 2008, the price of CO2 is then expected to increase gradually, forcing wholesale electricity prices up. From 2008 to 2012, the key price drivers will be the availability of allowances from Russia and Ukraine – which will be trading emissions under the Kyoto Protocol. But, from 2013, those countries which have been granted more generous allocations because of their reliance on coal – the UK and Germany – will see these cut back.

From then, prices will be determined by the costs of switching from coal-fired plant to gas and by relative fuel costs and the oil price.

Furthermore, that is not the end of it. With the UK aiming for a renewable energy target of 10 percent by 2010, which costs up to three times more than conventional generation, plus the considerable but so far unquantified costs of renewing the national grid to accommodate the dispersed and fluctuating supply, and we could be seeing an additional ten percent or more on our energy bills.

For those who believe that this is an acceptable price for "saving the planet", perhaps they should look at this site. As for this Blog, our advice remains the same.

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