UK Energy Company Succumbs To Net Zero Derangement Syndrome
The debate about ‘net zero’ is hotting up and its promoters are losing the argument. The Conservative promise to scrap ‘carbon’ taxes on electricity generation if they come to power at the next election has sent promoters of ‘renewables’ like Energy UK into paroxysms of fear and rage
It seems rational energy policy has the same impact on them as sunlight on vampires.
In a classic example of Net Zero Derangement Syndrome, on March 7th, Energy UK produced a report claiming that ‘carbon’ pricing was important to the UK economy.
This was so bad, it has prompted today’s bonus article.
At the beginning of the Executive Summary they say:
“While early debates in the 1990s and 2000s raised concerns that mechanisms like carbon pricing could constrain economic growth, the UK’s experience has demonstrated the opposite.
Emissions have fallen by over 50 percent since 1990 while GDP has grown by 69 percent, demonstrating that decarbonisation and economic growth can go hand in hand.”
We can rebut that claim straightaway by looking at overall energy consumption and electricity generation as in Figure 1 (from Our World in Data).
Figure 1 – UK Primary Energy Consumption and Electricity Production form 1990 (Source – OWID)
Since peaking in the mid-2000’s, both the UK’s energy consumption and electricity generation have been on a downward trend and this has had a negative impact on economic growth as shown in Figure 2 (again from OWID).
The UK has reduced energy consumption by 2.4 percent per annum. This is more than Canada, the EU27, Japan and the United States.
As a result GDP per capita has virtually stagnated, growing at just 0.4 percent per annum, lower than the EU27 and all the other G7 countries except Canada.
By contrast, world GDP per capita has been growing at close to two percent per year and energy use per person has increased by about 0.5 percent per annum. Asian countries like South Korea and China have increased energy use even faster and have accordingly grown much faster.
The Energy UK report then goes on to make some extraordinary claims about the impact of abandoning the UK Emissions Trading Scheme (ETS), see Figure 3.
Their first claim is that removing the UK ETS, which mainly applies to energy intensive industries and gas-fired power generation, would increase gas demand and emissions by up to 25 percent.
They do not show the workings for this calculation, but according to Energy Trends ET 4.1, we used 188,812GWh of gas for electricity in 2025, or about 27.8 percent of total gas demand.
They are essentially saying that removing the ETS will almost double amount of gas used for generation or increase the gas used by industry by many times.
This seems implausible at best, but if it were to happen it would be a strong indication of a very welcome industrial renaissance. No wonder Energy UK are worried.
The second claim Energy UK make is that an increase in gas demand would cause a rebound effect on UK gas prices, negating almost half the saving from the ETS.
However, at the end of April, the very same Energy UK was saying that increasing drilling in the North Sea would not reduce energy bills as the UK price largely mirrors that on international markets (see Figure 4).
In effect, they are saying increased demand will increase prices but increasing supply will not reduce prices.
They simply cannot have it both ways.
Their third claim is that cutting the ETS will reduce wholesale electricity prices and will therefore increase CfD subsidy payments. First, this somewhat contradicts their earlier point about cutting ‘carbon’ taxes increasing gas prices.
However, the point about CfD subsidies is true in a very narrow way. All it means is that CfD generators would receive the same amount as before – the strike price of their contracts – but more of their revenue would come from subsidies rather than the market.
There would be no impact on consumers.
The point that Energy UK missed, perhaps intentionally, is the impact that removing the ETS would have on generators subsidised by Renewables Obligation Certificates (ROCs).
ROC-funded generators get the market price, plus their certificates on top. In effect, ‘carbon’ taxes are a hidden subsidy for these generators. Cutting the ETS (and Carbon Price Support) would cut their market related revenue by about a third.
This would have a significant impact on the economics of these generators, and could be devastating to the asset value of several of the ‘renewables’ investment funds.
Their final point is that if we keep the ETS and align it with the EU ETS, then that will reduce the UK’s exposure to the EU’s Carbon Border Adjustment Mechanism (CBAM) if we join.
CBAM is effectively a ‘carbon’ tax on imports into the EU, allegedly to ‘protect’ domestic industries.
First, we import a lot of primary materials like steel and aluminium that would be subject to CBAM taxes, increasing domestic costs.
Second, the price of ‘carbon’ in the EU ETS is consistently higher than the UK, see Figure 5 (from Trading View).
Aligning UK and EU ‘carbon’ prices would increase UK electricity prices, further damaging industries, businesses and people’s purses.
Overall, an extremely poor effort from Energy UK.
This shows that when the absurdities of ‘net zero’ are exposed to the disinfectant of sunlight, the arguments for high ‘carbon’ taxes and high energy prices evaporate.
‘Renewables’ advocates like Energy UK are panicking and clearly suffering from a bad case of Net Zero Derangement Syndrome.
See more here substack.com
Bold emphasis added
Header image: Energy UK