Rupert Darwall: Britain's Energy-Policy Time Warp

Last week the British government published draft legislation for its overhaul of the electricity market. The plan's aim, according to Ed Davey, the energy and climate change secretary, is to lock in predictability and stability. If implemented, Prime Minister David Cameron's proposals are guaranteed to do just the opposite. At some point, the oxymoron of a "planned energy market" will have to be dismantled because of its inherent contradictions.

 

The proposals are based on rigging the price of carbon dioxide via a new carbon tax, rising to £70 per ton of CO2 from £15.70 in 2013, on top of Britain's existing commitments in the European carbon cap-and-trade system. Long-term "contracts for difference" will be used to give renewable and nuclear power investors pricing certainty, although it is unclear who stands behind the huge liabilities if carbon prices plummet on the pan-European exchange, as they have done in recent years. The government will also, every five years, publish a strategy that will prescribe its goals for the electricity and gas sectors, all based on the assumption of continuous rises in energy prices.

 

Before pressing forward with the legislation though, Mr. Cameron might consider what happened to Jimmy Carter's energy plan for the U.S. in the 1970s. "Tonight I want to have an unpleasant talk with you," Mr. Carter told Americans in 1977, three months into his presidency. The next day, when he presented his plan to Congress, he said he wasn't expecting any applause.

 

He didn't get any...