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Coalition plans to introduce an Emissions Performance Standard (EPS) – to limit emissions from power stations – are necessary to meet the UK’s carbon budgets and develop new technology, but are likely to increase energy prices, according to a new report by MPs on the Energy and Climate Chamge Committee.

The Committee warn that existing policies will not deliver adequate investment in new low-carbon electricity generating capacity for the 2020s -2030s – and risk locking us into a costly high-carbon energy system.

Emissions Performance Standards can provide certainty to investors that there will be a future market for low carbon electricity, helping to lower the cost of capital investment in green technology – and stimulating the development of carbon capture and storage (CCS) systems.

Tim Yeo MP, Chair of the Energy and Climate Change Committee said:

 “A change in the law to require cleaner power stations is needed to ensure the UK doesn’t get left behind with an antiquated, expensive and highly polluting energy system.

 Energy prices may rise in the medium term as a result of a new emissions performance standard, but it will help Britain blaze ahead with world leading low-carbon technology.”

Meeting our climate change targets will become a lot more expensive in future if we don’t act to decarbonise our electricity market now.” 

The report raises concerns that a poorly designed EPS could have a range of unintended consequences. A badly structured EPS – including gas power stations too early on, for instance - could undermine investment in new capacity needed between now and 2020, potentially leading to a generation gap. 

Alternatively, if emissions limits were too lax the EPS could spark a new ‘dash for gas’,  encouraging large scale deployment of unabated gas power stations with long term negative consequences – reducing energy security and making our climate change targets higher to meet.

The MPs conclude that the policy framework as it currently stands is grossly inadequate and will not deliver adequate investment in new low-carbon generating capacity for the 2020s and 2030s. 

Reforms to the electricity market are urgently required in order to ensure sufficient investment is made now to deliver infrastructure for the 2020s. 

The Government must not delay in conducting its consultation and delivering a White Paper in Spring 2011.  Any slippage of the timetable will jeopardise climate change and energy security objectives.