Environmental Audit Committee seeks external research analysis on energy subsidies

The OECD and International Energy Agency have published definitions of energy subsidy and calculated some figures. However, there may be other credible and relevant views. This is a potentially complex subject because ‘subsidy’ can be a loaded word, meaning different things to different people. For example, is the issue simply about subsidies on the price that the fossil fuel would otherwise have, or only where subsidies affect the price of fossil fuels relative to non-fossil fuels? Should the debate be about subsidies on generation or consumption of fossil energy, or both? Should subsidies be assessed and measured in terms of costs, carbon emissions or energy outputs? Should consideration of the level of subsidies take account of indirect benefits enjoyed by energy producers such as Government R&D or availability of Government finance/insurance? Should consideration of subsidies distinguish between whether they are paid for by Government, by consumers or by other countries, or even by future rather than current generations? Should interventions applied to all energy types in the UK, but not in other countries, be regarded as UK fossil fuel subsidies? Should subsidies be calculated not just against market-driven costs/prices but also against the value of any ‘externalities’ such as the ‘cost’ of climate change effects?

What we want

The terms of reference for the Committee’s wider inquiry are to look at the extent of any progress in reducing fossil fuel subsidies in the UK, examining:

(i) whether the Government has identified the extent of subsidies for fossil fuels production and consumption, and measured them;
(ii) how well any identification of subsidies by the Government matches up to best practice in how energy subsidies are defined and scoped;
(iii) the scale of fossil fuel subsidies in the UK (including if possible in comparison with other countries);
(iv) whether the Government has any plans or targets to reduce or eliminate fossil fuel subsidies;
(v) progress in reducing such subsidies, and how current energy policies and DECC’s ‘Energy Pathways’ for the mix of energy sources will influence the magnitude of any subsidies.

The commissioned external researcher’s input to our inquiry would provide a major part of the answers to issues ii and iii above. Specifically, they would:

(a) Review and analyse key reports on energy subsidies (from, for example, International Energy Agency, OECD and others) to identify: (i) the theoretical underpinning of what constitutes energy subsidy, and (ii) the range of views on what defines subsidy. The commissioned researcher would also where appropriate provide their own views/interpretations on these matters;

(b) Review available data from Government, International Energy Agency, OECD and others to identify, as far as the data allow, the extent of subsidy in each of the major energy sectors in the UK (oil, gas, renewables, nuclear, etc) in accordance with the main interpretations of ‘subsidy’ identified in (a) above; and

(c) Using results of (b) above, and as far as available data allow, compare the extent of UK energy subsidies with other countries.

The Committee wishes to receive a report with the results of (at the least) the analysis (a) and (b) above, and ideally for all three element (a)–(c). Sources should be fully referenced and any calculations explained. The report should be completed by 31 March 2013. It is likely to be published by the Committee in due course. Any detailed statistical information or tables may be annexed to the report and may also be published by the Committee. The researcher may be asked to attend a meeting of the Committee to brief Members about their report.

Responding to this invitation

Expressions of interest in this work should be sent by email or post to Simon Fiander (fianders@parliament.uk), Clerk of the Environmental Audit Committee (Room 123, 7 Millbank, London SW1P 3JA) to arrive by Tuesday 26 February 2013. That expression of interest should include:

• Evidence of your (or your organisation’s) expertise in undertaking work of this sort;
• Details of any relevant work done for Government and/or energy industries;
• If undertaken on behalf of an organisation, details of who would be responsible for the work; and
• The cost of the work (including all expenses, but excluding VAT), making it clear whether this is for tasks (a)-(b) or (a)-(c) above.
• Expressions of interest will be judged according to relevant experience and expertise (30%) as well as cost (70%).

Additional information

The Committee has previously obtained a ‘POST’ paper on the nature of nuclear energy subsidies, published in Budget 2011 and Environmental Taxes, HC 878-II, July 2011, page Ev w104  (PDF 984.88 KB)

There was a Commons debate on nuclear subsidies on 7 February 2013

Further Information

• About Parliament: Select Committees
• Topics: Environmental protection