±«Óătv

Scary stuff - this guy looks a 'dead ringer' for Chris Morris...

...he looks nothing like Chris Morris!

Sounds like one for the next PMQs - "has the member for Dudley South changed his energy supplier yet?"

Justin,

I'm not convinced by your figures for the carbon savings from switching to a green electricity supplier - I'll use Good Energy as an example.

As I understand it, green electricity is over twice as expensive as normal (brown) power. Each MWh of green power comes with a ROC, which is worth about ÂŁ45/MWh. The wholesale price of brown power is about ÂŁ30/MWh, so green power is worth about ÂŁ75/MWh.

However, I see from the Good Energy website that they quote a price only about 10% above my standard supplier. I think I understand how they manage this, but the reason is rather subtle.

Each electricity supplier has an obligation to collect a certain number of ROCs every year, determined as a fixed percentage of the electricity they supply (this year it's 6.7%). If a supplier doesn't achieve this total then they pay a fine, which is distributed to all suppliers in proportion to their compliance (last year, the average supplier redeemed ROCs amounting to 70% of their obligation).

If your supplier buys only green power, then they can easily meet their 6.7% obligation. However, if all they do is sell the excess certificates to other suppliers, then they are not necessarily saving much additional carbon. They could just be buying green power the other suppliers would have bought anyway.

The only way Good Energy can guarantee to save additional carbon is by retiring the excess ROCs they receive. They do this, but only retire extra ROCs "up to an equivalent of 10%". I assume this means that this year they will redeem 6.7% of their ROCs (i.e. to meet their obligation), retire 3.3% and sell the remainder.

If we assume that the average supplier is 80% compliant next year, then buying your power from Good Energy saves 3.3 + (20% * 6.7) = 4.6% of your carbon emissions from electricity, compared to buying your power from an average supplier.

Since average annual household CO2 emissions from electricity are around a ton, this will save about 46 kg of CO2 - well under 1 ton.

This is quite a crude argument, so perhaps I'm missing something - I'd appreciate it if you or Prof Tim could clear this up.

This reminds me of a Phillip K Dick novel - The Zap Gun - about weapons designers who don't actually produce working weapons, but produce those for fashion (as a result of secret arms deals). In other words, this is a vacuous argument. We all ultimately get our energy from the same sources. I would appreciate it if the ±«Óătv would cease to connive with Labour Party policies and I would appreciate these arguements all the more if Govt ceased imposing punitive policies and instead actually devised R&D programs at least on a par with the USA.

Actually, I think there might be a simpler argument that comes to the same conclusion.

I've argued above that the ROCs which Good Energy sell (about 90% of the total they buy) might not be "additional". However, even if they are additional, I don't think that Good Energy can claim the associated carbon saving.

Since ownership of the ROC passes on to another supplier, ownership of the carbon saving should too. So even if these ROCs are additional, they don't belong to Good Energy. They should only claim savings for the ROCs they redeem or retire.

At least, that's my take. Where's an economist when you need one?

(Apologies - very long post)

REGOs are awarded to green generators for every kWh they generate, and collected by suppliers to verify the proportion of renewable generation in their fuel mix. They differ from ROCs in that all green generators qualify (e.g. large hydro doesn't get ROCs), and that REGOs aren't in themselves worth anything. Their only value lies in allowing suppliers to claim that their power supply is green - that's what they were designed for.

Under the REGO system, suppliers can calculate the CO2 emissions associated with their supply, based on some simple emission factors. Renewables are awarded zero emissions per kWh, so a supplier with a REGO for every kWh they supply can claim to have zero emissions associated with their supply.

This is how Good Energy can claim to be 100% green - they are using the REGO system as it is designed to be used, and I'm sure it's all 100% above board and kosher.

However, I'm not convinced that it follows that Justin has saved a ton of CO2 emissions simply by switching supplier.

From what I understand of the other actions Justin has taken, they have all resulted in a real reduction in CO2 emissions (other than the carbon offsets from that jaunt to Jamaica) - by which I mean that there's less CO2 in the atmosphere as a result of Justin's actions, compared to an alternative world where he took no action at all.

However, I do not think that switching suppliers has resulted in a 1 ton reduction in actual CO2 emissions, since I very much doubt that renewable output has increased to match Justin's electricity demand.

Rather, Good Energy are now supplying renewable power that would otherwise have been bought by other suppliers (financed by selling ROCs, as I explained above). So the credit for renewable generation is shuffled between suppliers, rather than more renewable generation being brought on line.

This is all perfectly legitimate - we need some way to account for carbon emissions, and the REGO system has the benefit of simplicity. However, I think that the overall effect is misleading - 1 ton of CO2 emissions have not been *saved* as a result of Justin switching suppliers, they have mostly been *re-allocated*.

I've glossed over several points in this argument. For example, if the REGO system persuades sufficient customers to switch to green suppliers then the big utilities will start to take action. This will add a premium to green power which will result in more renewable generation being brought on-line. However I don't believe that this challenges the principal observation: that 1 ton of CO2 has not been saved by Justin switching suppliers.

That's my take, but I'm not an ecological economist, so I'd be happy if Hugo or someone else could prove me wrong.

Hugo - can I ask you a direct question, to keep it simple? Your website tells me that I can save 1046 kg of CO2 per year by switching to Good Energy (it managed this without asking who my current supplier is, which seems a little presumptuous, but never mind).

Let me construct two alternative scenarios:

(a) I stay with my current supplier for the next year
(b) Identical to (a), only I switch to Good Energy today.

Will scenario (b) result in approximately 1 ton less CO2 in the atmosphere in one year's time than scenario (a)?

Thanks Hugo, I'll take a look at that report.

However, you haven't answered my question - I'll repeat it here for clarity. Two scenarios: either

(a) I stay with my current supplier for the next year, or
(b) I switch to Good Energy today.

Will scenario (b) result in approximately 1 ton less CO2 in the atmosphere in one year's time than scenario (a)?

Hugo: "you pose a question that renewable generation has not increased to meet Justin’s demand - Of course it is increasing"

You misunderstand me - I didn't mean to imply that renewable generation isn't increasing.

I just don't believe that Justin switching to Good Energy caused renewable generation to increase by an amount equal to his electricity demand - and, more importantly, with non-renewable generation decreasing by an equivalent amount.

Also, while I'm glad to see that you're doing worthy work in the promotion of microrenewables, I doubt that the examples you mention above are representative of your typical supply.

I note from your 2005 environmental report (linked below, final page) that you sold almost 65,000 MWh of electricity to your consumers in 2004-05. How much of that came from generators with a capacity of under 1 MW?

Most comments refer to Good Energy. Ecotricity has a different model. It sells all its ROCs, but invests all its profits in new renewable energy generation. Next year it plans to double is generation capacity. It also guarantees to charge the same as your regional supplier so there is usually no cost premium.

www.ecotricity.co.uk

As all profits go into renewables you know that you are not helping to fund new coal and/or gas and /or nuclear which you may be if you are a customer with other main steram suppliers offerring a green tariff.

Hi Martin,

I'm glad that Ecotricity are investing in renewable energy, and that you're so happy to recommend them as a supplier - there's no better advertisement than a satisfied customer.

However, I'm not convinced that Ecotricity's model is much of an improvement on the one offered by Good Energy.

The Renewables Obligation (despite its faults) has created a market for green power by increasing the value of renewable electricity. This market is stimulating investment in new renewable energy generation.

While I'm glad that Ecotricity are investing their profits in this market, I don't see where they provide evidence that their investment is making a significant impact on new generation, and that they are not displacing funds that would otherwise have come from other sources. The question again is "additionality" - what is the *additional* effect of my changing supplier to Ecotricity?

This paper (posted by Hugo above) discusses the pitfalls of different options for green energy branding. The work was sponsored by Good Energy, but I think it's a relatively unbiased and intelligent analysis of the subject.

They rightly focus on additionality, and highlight the problems with both the Good Energy and Ecotricity model (you won't be surprised that they come out in favour of Good Energy, but you can come to your own conclusions).

Just as I don't believe that my switching to Good Energy will save a ton of carbon that wouldn't have been saved anyway, I don't believe that my (or a thousand people) switching to Ecotricity will cause a significant amount of investment in new green projects that wouldn't have happened anyway.

Note that I don't say that *no* carbon will be saved (though it's hard to estimate how much), and I don't say that *no* new green investment will occur. I'm sure that both companies are doing good work, and can trot off a long list of worthy projects they've helped to fund - they do provide *some* additionality.

Again, I'd be happy to be proven wrong, but I just don't believe that either company is quite as green as some of their adherents might think.

Justin, thanks for highlighting the contribution that switching to a green tariff can make to reducing our individual carbon footprints. As you say, it's also quite a straightforward process, and I've sent off my application for a green electricty tariff.

As your broadcasts have made clear, investments in energy efficiency can also make a substantial difference to a household's carbon footprint, whilst also cutting energy bills. I'd urge people to visit the Energy Saving Trust website (www.est.org.uk) to see what steps they can make too.

There's no telling on the internet, but I suppose this last post might just be from climate change minister Ian Pearson, who Justin mentions in the article.

If so, I'm sure he's a busy man, so I'm almost glad that he apparently hasn't had time to read Justin's other article, or the comments posted on this thread.

However, he'd be a good man to involve in the debate. Given the confusion, perhaps the government should consider developing an accreditation system for green energy suppliers, and an associated framework for personal carbon accounting.

Justin - you appear to have the man's attention. Strike while the iron is hot.

As author of the Environmental Change Institute report, I thought I'd add a few comments from our perspective.

First, I think it's important to note the difference between ROCs and CO2 emissions reductions. ROCs are a policy instrument designed to increase the proportion of electricity generated from new renewable sources. This is linked to CO2, but is dependent on other factors, notably overall electricity demand.

So, does buying green electricity reduce CO2 emissions beyond that which would have occurred anyway? The answer is - it depends.

If you switch to a green electricity supplier, you will be getting green electricity, but that means that someone else will be getting browner electricity if no additional capacity is built. So buying green doesn't reduce overall CO2 unless:

a) Customer demand for green electricity is greater than that demanded by the Renewables Obligation. Currently, green electricity is only about 1% of UK sales, whereas the Renewables Obligation demands 6.7% this year. But if demand for green electricity ran to, say, 10% of supply, then meeting that demand would result in additional capacity being built beyond that required by the RO. An individuals actions in switching to a green supplier would then directly lead to new capcity and reduced CO2. However, given that the Renewables Obligation is set up in such a way that the targets will not be met (due to buy-out clause) such a situation is unlikey to arise.

b) The green tariff being offered is additional. Tariffs that retire a percentage of their ROCs mean that more green electricity has to be generated in order to meet the Renewables Obligation. Therefore if 0.1% of all ROCs are retired, then 6.8% of generation will have to come from renewable sources to meet the 6.7% target. In this way buying green will result in additional CO2 savings that would not have occured otherwise. This is why our report values 'additionality' so highly - it makes the consumer demand count towards extra CO2 reductions.
Tariffs that are not additional (i.e. green funds) merely support capcity that has to be built anyway under the terms of the RO. In essence consumers pay a premium to help electricity companies meet targets they have to meet anyway.

(very long post from Prof Tim’s sick bed!)

Just to prove that a carbon guru is always on duty, Justin phoned me a couple of days ago in a rare moment of lucidity (mine not his) and asked me to take a look at Spartacus’s fascinating challenge on green electricity tariffs. It’s been a wonderful distraction from stomach flu' but don’t expect any easy answers. This is a really complex area. Spartacus calls for an economist. But a philosopher might be more useful!

At the heart of the challenge, according to Spartacus, lies a ‘straightforward’ question about the 'real' difference in carbon emissions between two alternative 'worlds':

World 1) Spartacus switches to Good Energy today;
World 2) Spartacus stays with his 'conventional' supplier for the next year.

Spartacus reckons that he should only be credited with any carbon savings if the carbon emissions associated with World 1 a year from now are lower than the carbon emissions associated with World 2. He also argues that there won’t be any difference between the carbon emissions in world 1 and world 2, because of the Renewables Obligation. And so, QED, consumers with green tariffs can’t claim zero carbon.

After several delirious nights of super-guru-esque cogitation (or it could just have been the fever) I reckon Spartacus is wrong on both counts, but may nonetheless have a very good point of principle.

Let’s tackle additionality first. Does Spartacus signing up for a green tariff lead to ‘additional’ carbon savings that wouldn’t have happened anyway? Our biggest problem here, believe it or not, is a philosophical one. At least one of the worlds we’re being asked to compare, doesn’t actually exist and never will. So we can never make a direct comparison. The best we can do is use a variety of simple models about what we believe might have happened if
 In simple systems, this process works well enough. In more complex ones, like the current renewable energy market, it’s incredibly unreliable.

In one simple model – what economists call a ‘perfect market’ – a unit of demand stimulates a unit of supply, and the answer to Spartacus’s conundrum is a straightforward yes. In another model constrained by a perfect 6.7% Renewables Obligation, the answer is a straightforward no. Both these answers are wrong.

The trouble is that even within the Obligation, companies aren’t ‘forced’ in any real sense to redeem ROCs equivalent to 6.7%. If they so choose, they can opt out of their obligation by paying into a ‘buy-out fund’. This buy-out provision makes the whole question of 'additionality' much harder to guess at.

Let's explore this complication by reframing Spartacus’s challenge in the following way:

If Spartacus signs up for a green tariff, does Caligula become a more or a less ethical man?

Who is Caligula and what does he have to do with Spartacus? Well, in this blog he’s the CEO of a ‘conventional’ electricity supplier labouring under the Renewables Obligation.

Caligula has nothing to do with Spartacus, has never even met him, but if he's a rational man, and discovering that Spartacus has signed up for a green tariff, he must now sit down immediately with a bank of economists and figure out if its in his shareholders’ best interests to continue with the company plan of buying X ROCs to cover his quota (so stimulating more renewable generation) or instead just to opt for slightly fewer ROCs and slightly higher buyout charges.

Though critical to the question of whether or not Spartacus's decision leads to additional carbon reductions, Caligula’s decision is almost impossible to arbitrate on. For a start there’s the relative costs of ROCS, of renewables, and of buyout charges. Then there’s all the ‘transactions costs’ associated with making these decisions. And then suppose that Caligula is neither rational nor ethical but makes his decisions based on how well he ate at breakfast or slept last night. And next factor in that Caligula’s company is not the only player in the game. And finally figure that Spartacus is not the only person signing up for green tariffs, but is part of a deluge of Newsnight viewers all anxious to follow Justin’s example! Suddenly constructing a counterfactual comparison of world 1 and world 2 becomes a carbon guru’s nightmare.

Of course this doesn’t mean you shouldn’t try it. [If anyone’s interested, this is called agent-based modelling and it’s all the rage these days.]

But what if Spartacus was wrong in the first place? What if the critical question isn’t about proving ‘additionality’ at all?

From a carbon guru’s perspective there are two important things to cover off. One is the ability to account systematically for all carbon emissions across the economy. For this you need a system which doesn’t over-allocate or under-allocate either carbon emissions or carbon savings. But this doesn’t exclude, in principle, a system in which people who sign up for green tariffs are allowed to claim the carbon-free nature of their purchase. As long as noone else in the same accounting frame is making the same claim. At one level this is just bean-counting.

But the second point – and ultimately, I suspect this is what Spartacus is getting at – is all about ethics. Is it FAIR to allow green tariff customers to claim the credit for having a green tariff? As things stand right now, with so few people signed up for green tariffs, this almost seems like a non-question, one we could quite happily answer yes to. If people have gone out of their way to make a clear statement about the kind of life they want to live and the kind of electricity they want to consume, and have a supplier who clearly provides it, you could say they have a strong claim – almost a right – to incorporate that decision into their personal carbon account. Particularly in a society in which most other people don’t give a damn.

But what if things changed? What if suddenly carbon was rationed and people’s lives and livelihoods depended on getting their personal carbon footprint down? Would it still be OK for people to claim carbon benefits from having green tariffs? And if green tariffs were in short supply, what would this mean for those who got there first?

I suppose you could think of it as a first mover advantage. ‘Hey, I saw this coming years ago and protected myself against it. Why should I care about your shortsightedness?’

But the question of fairness still won’t quite go away. The fact is, as Spartacus himself has pointed out, renewable energy tariffs are cheap right now for 'ethical' customers because they’re subsidised by the sale of ROCS on the market. In a sense, Justin has purchased his own ‘ethicalness’ at a knock-down price. This doesn’t much matter right now. But in a world in which everyone has a carbon ration, and carbon itself has an economic value, it wouldn’t really be fair for Justin to behave like that. And since he is ethical man – rather than simply low-carbon man – it is my sad duty to point this out. Grace a Spartacus.

All we're left with now is the problem of how to calculate Justin's new improved ethical carbon footprint. I think I may have come up with a solution that will keep the carbon savings without compromising the ethical principles. But I’m still too feverish to figure out if it’s workable or not. And besides I still have to persuade Justin to do it. We’ll let you know later


Typical - you wait days for an economist, then two come along at once. Thanks Chris and Tim, I think I'm beginning to understand this.

By the way, my motivation in pursuing this was Justin's claim that switching to a green supplier, "did more to cut the carbon footprint of our home that any of my other ethical exertions". I just couldn't see how this could be right, based on a couple of intuitive principles:

Other than large hydro, renewable electricity is more expensive than conventional generation - green tariffs wouldn't be cheap without ROC support. If Justin wasn't paying for his increased green-ness, then someone else had to be (I now appreciate that the argument is a bit more subtle).

But in particular, large hydro aside, renewable electricity is an expensive way to save carbon (though there are many other points to it's credit which I'm sure the customers with green tariffs value). It might be cheap for the individual, thanks to ROCs, but it's expensive for the UK. In terms of the UK's carbon footprint, I'm not convinced that encouraging more green power is the best use of our current resources.

Assuming a ROC price of ÂŁ45 and ~500kg of CO2 saved per MWh of green power, the RO costs ÂŁ90 per tonne of CO2. Compare that with energy efficiency measures, which can quickly provide a net *benefit*, rather than a net cost - i.e. a negative carbon price. Compare too with the Stern report's estimate of the social cost of carbon (which is much higher than other recent estimates) of about ÂŁ45/tCO2.

So that's my intuition; there's more to this than simple cost but, in the interests of resource efficiency, an ethical approach would tend to prefer the carbon savings that can be made at least cost to the UK economy, and at this point that's unlikely to mean green electricity (or micro-turbines, for that matter). Basically, it's about more than Justin just reducing his own allocation of the UK carbon budget.

However, Prof Tim has convinced me that this ethics business is trickier than I'd realised. I look forward to seeing what he comes up with for Justin's ethical carbon footprint (I'd be interested to see the same logic applied to the Ecotricity model, but that's a lot to ask of a man on his sick-bed).

The Green's really are incredibly naive if they think this government is going to do anything that makes us use our cars less.He simply derives such huge revenues both from those who sell petrol and those who buy it that public spending would collapse if he did.In fact they've done the reverse.They've persuaded us that motoring is so inherently dangerous that we all need huge gas guzzlers built like tanks to protect ourselves and traffic calming and forests of traffic lights are designed to create stop start driving in order to use more petrol and thus generate even more tax revenue.

It is quite ironic that the Green's actually campaigned for the introduction of traffic calming, even after I sent Friends of the Earth and others letters pointing out the extra pollution it caused. Most of the most pollution generating road " improvements " were introduced under the auspices of " road safety ", but the most obviously important policy for road safety annual eye-sight tests is never mentioned by many road safety groups. A new roundabout was installed at a cross-roads on one of my local roads after two serious accidents in two weeks. I know for a fact that the driver involved as the cause was practically blind at the time of the accidents, I knew his grand-daughter well.

To find out more about the environmental impact of traffic calming see

It would appear that wind farms are also not what they are cracked up to be by the green lobby. Perhaps the government subsidy is waste of money as it is just a vehicle for the rich to fool themselves that they are doing their bit for the environment whilst continuing to fly and run large cars etc.

Actually, I've had second thoughts about my argument above (#21).

I might believe that the RO is an expensive way to save carbon (though there are several other arguments in it's favour), but it exists whether I like it or not. In retrospect, I shouldn't have confused my doubts about the RO with the calculation of an individual's carbon footprint.

That said, I think my point about Justin's task amounting to more than simply cutting his personal allocation of the UK carbon budget still stands, but I'll wait to see what Prof Tim has to say.

There are a couple of interesting articles on ethical consumerism in this week's Economist. They focus on the fair trade, organic and local food movements, but many of the arguments are reflected in the comments above.

The story appeared on the front cover of early issues, but was bumped by the Baker report. It's available online here (subscription required):

Their view is that these movements don't do as much good as their adherents might think, and in some cases can actually do harm. Given the source, you won't be surprised by these conclusions ("The answer is free trade - now what was the question?"), but I think they are right to shine a light on the likely impacts of good intentions.

They widely quote FT contributor Tim Harford, author of a popular book on economics. The extract linked below gives a flavour of the argument, by examining what happens to the price premium you pay for fair trade goods (and how the retailers get away with it).

you don't have to pay more for Green electricity. Npower will supply you with Green energy at the smae price as their brown energy, just sign up for their Juice product!

David Milliband has reheated the idea of personal carbon credit accounts.

This brings us a little closer to the world described in post 20, where we all have a personal carbon ration.

Perhaps I'm the only one, but I'm still looking forward to seeing what Prof Tim comes up with for calculating Justin's ethical carbon footprint.

Any advance, Professor?

Green tariffs were in the news last week, with a report by the National Consumer Council examining products currently in the market.

The report concludes that many green tariffs are oversold, and that it's "easy for consumers to be confused and misled". They press for clear, minimum standards and independent auditing of claims. Hear, hear.

No supplier escapes criticism, though Good Energy fare better than most. The authors are less impressed by Ecotricity, and slam some of the offerings from large suppliers, including NPower's Juice tariff.

The report is generally very good, though Prof Tim's response has made me question their (and my earlier) strict definition of carbon savings. They take a hard line here, requiring that suppliers retire ROCs in order to claim additionality. Under this definition, "even the better tariffs on offer will only reduce CO2 emissions by around 100 kg a year". (The calculation is similar to the one in my first post above - see footnote 18 in the report.)

Ofgem are apparently due to issue revised Green Supply Guidelines in the near future. It's possible that this report will be influential in guiding Ofgem's thinking, so if anyone has any issues with the analysis then I recommend raising them quickly. (It would be nice to see some of the arguments developed in this blog, but that's probably a bit much to ask.)

The report is available here:

It generated some press response, e.g.:

We've signed up to a green electricity tariff (NPower Juice) and we're thinking of having a wind turbine installed, but in the meantime we've decreased our annual use of electricity by 30% (from 2900 to 2000 kWh). We'd always had half a dozen compact fluorescent lights in the house and didn't leave the TV on standby, but were surprised by the savings that came from installing even more energy-saving lamps and not leaving the stereo and the DVP player/digital receiver on standby. This has saved far more in electricity this year alone than we've spent on the new lamps, partly due I'm sure to the psychological effects of not taking electricity for granted and turning things off when they are not needed! As for CO2 accounting, we've saved about 450 kg of CO2 per year (based on the average for all of NPower's UK generation).

Dear Ethical Man. In view of your advisors view that renewable sourced electricity can be counted as reducing your carbon emissions, would it not be true to say that if we were to run our cars on renewable sourced fuel (ie bio fuel) our carbon emissions would also be reduced? In that carbon emissions from the combustion of bio fuel are equal to the carbon extracted from the atmosphere during the cultivation of the plants that are used to make bio fuel, the net carbon addition to the environment is zero. If this argument is valid, then if the government were serious about reducing carbon output from the UK, then would it not be relatively simple to increase the duty on fossil fuel by something drastic, and subsidise bio fuel correspondingly. At a stroke, the UK carbon contribution from combustion of fossil fuel could be reduced and all the targets hit. I guess it wouldn't take the chemists long to come up with an aviation grade bio fuel either, given enough incentive. I guess this policy would not be too popular with the directors of BP and Shell amoung others, so call me a cynic, but it seems pretty clear who is pulling the strings.
By the way, any diesel car will run on ordinary kitchen cooking oil with a very minor modification, so if you and your family want your car back, you know what to do!

In a related note, Ofgem (who administer the RO) have come out strongly against the Renewables Obligation, criticising it as "very costly" and inefficient. They're not impressed by the government's planned changes either.

"The cost per tonne of carbon saved under the RO is, at ÂŁ184-481, higher than the costs of other policy measures such as the EU Emissions Trading Scheme at ÂŁ12-70 a tonne, the Climate Change Levy at ÂŁ18-40 a tonne and the Energy Efficiency Commitment which ranges from bringing a benefit to a cost of ÂŁ60 a tonne."

Here's the Ofgem press release:

.. and some press response: