Page last updated at 23:23 GMT, Wednesday, 16 December 2009

The road to a low carbon future

By Sam Laidlaw
Chief executive, Centrica

With Gordon Brown and other fellow world leaders addressing climate change in Copenhagen this week, it is clear that the UK prime minister has already put more on the table than most.

Members of Oxfam wearing masks of world leaders British Prime Minister Gordon Brown, French President Nicolas Sarkozy, US President Barack Obama, German Chancellor Angela Merkel, Spain's Jose Luiz Rodriguez Zapatero and Italian Prime Minister Silvio Berlusconi
Ambitious targets by world leaders will need a plan for how to deliver

While emerging economies and the US are under intense pressure to match future cuts in greenhouse gas emissions already made law by European Union (EU) member states, the UK can count itself one of a small clutch of countries that has embraced a more ambitious target - a legally binding target to cut emissions by 80% by 2050.

But setting a target is one thing, delivering against it is another.

What we have at present is a combination of both aspirational and legally binding milestones for Europe and for individual member states.

To make them real, we all have to act now as well as plan for the future.

If the world is working towards more efficient use of energy, and reducing its reliance on fossil fuels, then for energy providers this requires a massive shift in how we source our energy and how we encourage customers to consume it.

Low carbon sources

Homes and businesses will need to use their energy better and energy companies, including Centrica, can do much to help.

What we need is... a legislative and regulatory framework to enable us all to achieve the targets while ensuring energy security
Sam Laidlaw, chief executive, Centrica

We are uniquely placed to help customers in the UK, in the US and other markets we operate in to grasp the initiative on more efficient use of energy to reduce carbon emissions and save money.

But energy efficiency alone will not meet Britain's ambitious targets.

Investment in low carbon sources of energy is key.

Power generation is responsible for 37% of all emissions in the UK, more than any other sector, although all sectors will have to contribute to the challenge.

When we build for the future, we need to build low-carbon generation.

Decarbonising electricity is a critical enabler for other sectors of the economy to meet with CO2 targets, for example enabling the switch to electric vehicles or emission-free heating for homes and offices.

The right price

If there is concord in Copenhagen, the EU's emissions reduction target would rise from 20% by 2020 to 30% - but the UK's would leap from its current 34% to 42% by 2022.

Dungeness Nuclear Power Station
Nuclear decisions must be taken for plants to be constructed in time

Given that there is a wide gap between UK and EU emissions cuts targets, as well as a current environment of low carbon prices, how are we to achieve this?

The EU emissions trading scheme must remain the cornerstone of our strategy, but weak carbon prices constrain investment.

For example, investment decisions have to be made by 2011, to build nuclear plants due to come on line to replace older power stations that are due to close.

Across Europe low carbon prices might mean an economic incentive to continue with high carbon emitting coal power plants at the expense of wind and nuclear options.

The ethos of Kyoto, and in all likelihood Copenhagen too, is "the polluter pays".

But if the price to be paid is small - that is, carbon prices remain depressed - where is the incentive to stop polluting?

Legal and regulatory framework

At the other end of the energy market, an even stronger focus is required on household and business energy efficiency.

A critical enabler here is the installation across the country of smart meters and this week's announcement by the UK government that this rollout will be supplier led is welcome as it will accelerate their deployment.

Smart meters will cover consumption, enable customers to install low carbon microgeneration and benefit from daily changes in energy pricing, as well as enabling the generators to finely tune capacity for the best economic and environmental fit.

For now, all eyes will be on Copenhagen.

Even though a binding global agreement there looks like a very big step, whatever the outcome the UK will remain among a small group of those nations doing most to address the issues of climate change.

What we need is to back this up with a legislative and regulatory framework to enable us all to achieve the targets while ensuring energy security.

Momentum is vital, and that must be maintained both to help drive investment and economic recovery as well as to protect our environment.

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