For years, fisherman Sami Uddin lived and worked on a small patch of coastal land in southeastern Bangladesh – until the site was earmarked for development including a new cyclone-resistant deep-sea port, funded by Japan in the name of climate change adaptation.
“The development is [meant to help us] all, but the reality is that it takes our homes, professions, and they are forcing us to be evicted from our village,” Uddin, 51, said close to the port site in Matarbari, adding that new fishing restrictions nearby have fuelled local people’s anger.
The deep-sea port – being built next door to a new coal-fired power plant, also financed by Japan – is a centrepiece of Bangladesh’s ambitions to develop a “Singapore-style” economic hub on its climate-vulnerable Bay of Bengal coastline, a low-lying belt of densely populated land, prone to deadly tropical cyclones and flooding.
Funded with a $726-million concessional loan, half of which was counted by Japan as climate adaptation finance, the port marks the biggest single climate adaptation project being funded by a wealthy country in 2023, according to an analysis by Climate Home News of the latest data compiled by the Organisation for Economic Co-operation and Development (OECD).
But like other foreign-funded projects classed as “climate adaptation”, Climate Home’s reporting raises questions about whether the port investment will help climate-vulnerable local communities cope with the effects of more extreme weather and rising seas.
Japan’s development agency said the resilience measures to protect the port are crucial to preventing economic shocks and the disruption of essential services in case of disasters, while some interventions could also keep local people safer when storms hit.
COP30 president warns of ‘dystopian scenario’
Climate adaptation is set to be a key theme at next month’s COP30 UN climate summit in Brazil, and calls are growing for rich nations to increase their support for projects to help developing countries that are bearing the brunt of worsening climate impacts.
COP30 president André Aranha Corrêa do Lago said last week that the UN talks should take concrete steps to help vulnerable people adapt to a warming world and avoid a “dystopian scenario” in which only the rich can afford to protect themselves from climate threats.
But with just a fraction of needs for adaptation funding currently being met, according to the latest UN estimates, climate campaigners told Climate Home News that mega-projects like Matarbari are not the best way to protect the world’s poorest people from climate change.
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They are also sounding the alarm about how a lack of uniform reporting rules and poor transparency in the data give countries free rein over what they label as adaptation finance.
Some donors “cheat” by focusing more on inflating numbers than on delivering real impact, said John Nordbo, senior climate advisor at NGO CARE Denmark and co-author of the annual “Climate Finance Shadow Report”.
“They label large projects with little or no adaptation component as ‘climate finance’,” he told Climate Home News. “It’s misleading – and when exposed, it undermines trust in the entire global climate regime.”
The $363 million provided by Japan for the Matarbari port was counted as adaptation finance under official data used to measure whether donors are meeting their promises on climate finance made at UN talks. It accounted for an estimated 15% of Japan’s total contributions to climate adaptation in 2023 – the latest year for which data is available.
“No one must be left behind”
When, at COP26, Japan committed to doubling its assistance for adaptation to $14.8 billion in public and private finance by 2025, its then Prime Minister Fumio Kishida told fellow world leaders “no one must be left behind as we confront the issue of climate change”. He added that investments would focus on disaster risk reduction.
Japan said the delivery of that pledge was “on track” in its latest assessment report for the UN earlier this year.
But Climate Home’s analysis of the data from the OECD – the main body tracking global climate finance flows from industrialised nations – found that in 2023 Tokyo channelled at least a third of its bilateral adaptation finance into large-scale infrastructure projects and broad health programmes that lacked clear climate adaptation objectives.
It counted loans worth hundreds of millions of dollars for the construction of mass rapid transit in Jakarta and the rollout of universal health coverage in Egypt as adaptation finance, for example. It offered no explanation in project documents of how either initiative would strengthen resilience to climate impacts.
It also reported a $200-million grant to the global vaccine alliance, Gavi, to support its COVID-19 response as having “significant” relevance for climate adaptation. In an assessment of Gavi in 2024, the Multilateral Performance Network described as a “serious challenge” the fact that addressing climate change was not yet a core objective within the alliance’s strategy.
Md Shamsuddoha, a former climate negotiator for Bangladesh who now leads the Center for Participatory Research and Development, said Japan repackages “pure investment projects” for infrastructure development as climate finance to show it is meeting its commitments made under the UN climate regime.
“Japan should not do this, because that is no climate finance at all,” Shamsuddoha added.
Japan’s Ministry of Foreign Affairs and its overseas aid arm, the Japan International Cooperation Agency (JICA), were approached for comment on the adaptation relevance of these projects, but had not responded by the time of publication.
Roadbuilding and energy projects
Climate Home’s analysis found Japan was not alone among major donors in labelling funds for large transport and energy infrastructure projects, or broad health programmes, as bilateral climate adaptation finance, which tends to be provided in grant form or as highly concessional lending to the poorest nations.
France and South Korea have used a similar approach, according to our analysis of the data from the OECD.
The three countries’ bilateral funding for those projects totalled at least $4 billion in 2023, but South Korea and France do not disclose the exact portion they have counted as climate adaptation finance.
According to the OECD data, France described loans provided for energy projects in developing countries as having a primary objective of adaptation, without giving a clear explanation of how they would boost climate resilience. They include strengthening electricity grids in Pakistan and Argentina, a hydropower plant in Tanzania and work to develop decarbonisation plans in Uzbekistan.
South Korea is not part of the group of developed countries under the UN climate regime and is therefore not obliged to provide climate finance to poor nations. But, in recent years, the country – one of the world’s largest economies – has hailed its “significant” support to the Global South for climate adaptation interventions.
Transport projects made up a significant portion of South Korea’s adaptation spending in developing countries in 2023. It counted the construction of a railway bridge in Bangladesh, a major highway in Vietnam and road networks in Cambodia and the Philippines among its top adaptation projects.
Hanna Hakko, a senior policy advisor at think-tank E3G, said developing countries have a critical need to build new resilient infrastructure and climate-proof what they already have.
“However, there is a need for clarity and guardrails around what counts as resilient infrastructure and to ensure impacted communities benefit from these projects and environmental impacts are minimised,” she added.
The climate ministries of South Korea and France had not responded to Climate Home’s request for clarifications on their adaptation finance at the time of publication.
Limited transparency in reporting system
Other donor governments such as Denmark, Switzerland and Finland take a more conservative approach, only counting pure climate adaptation activities or funding donated as grants in their spending.
But limited transparency in the reporting system makes it difficult to tell how much money overall is directed at efforts that truly help the most vulnerable communities to better cope with the escalating impacts of climate change.
Countries disclose brief and vague descriptions of the projects, often failing to offer details on their relevance for climate adaptation, Climate Home found.
Foreign aid cuts put adaptation finance pledge at risk, NGOs warn
Some European countries, including Germany, France and Italy, did not even identify a specific project or recipient nation for non-concessional funding worth hundreds of millions of dollars that was tagged as adaptation finance.
Ian Mitchell, a senior policy fellow at the Center for Global Development, said the problem lies with setting international goals to provide a certain amount of finance without a broadly agreed definition of what that finance can consist of.
“It is a pretty damaging state of affairs because these agreements are reached to motivate other countries to undertake climate action,” he added.
Focus on plugging adaptation gap
At the COP26 climate summit in Glasgow four years ago, developed countries committed to doubling adaptation funding for developing nations from 2019 levels to reach at least $40 billion by 2025.
That promise now looks set to be broken. According to the latest UN Environment Programme Adaptation Gap Report, international public adaptation funding from wealthy governments stood at only $26 billion in 2023 – falling slightly from the previous year.
UNEP’s report, released on Wednesday, warns that this year’s target “will be missed if current trends continue”.
Since 2023, widespread cuts to aid budgets amid geopolitical tensions and fiscal pressures have likely put the Glasgow goal further out of reach. Least-developed countries (LDCs), meanwhile, are pushing for a new goal to be set at COP30 to boost adaptation finance to about $100 billion a year by 2030.
Brazil’s COP presidency also wants to elevate climate adaptation, which has long missed out on political attention and funding directed instead to efforts to cut greenhouse gas emissions.
The renewed focus on adaptation in Belém could also increase scrutiny of how donor countries are allocating climate finance in countries like Bangladesh, and whose interests they are serving.
Climate-friendly coal plant?
Japan’s investments in Matarbari, for example, come as the country seeks to develop its economic ties with Bangladesh and counter China’s growing influence in the region.
Even the 1,200-megawatt coal-fired power plant, which JICA has financed with loans worth more than $2 billion, was counted by Japan as climate finance. It said the technology installed by Japanese firms made the plant more efficient, leading to a reduction in emissions compared to a conventional station.
The plant is expected to spew into the atmosphere nearly 7 million tonnes of carbon dioxide a year – equivalent to the total annual emissions generated by a small country like Mauritius.
As ships needed to deliver coal to fuel the plant, the developers built a port and a navigation channel connecting it to the ocean. Those facilities are now being expanded with the construction of the neighbouring deep-sea commercial port, which Japan agreed to fund in 2023 with a $726-million concessional loan.
Expected to be completed in 2029 by Japanese companies, the project aims to increase Bangladesh’s ability to handle cargo and spur economic activity in the area.
Takahiro Okamoto, who oversees the project at JICA’s Bangladesh office, said the inclusion of protections, like breakwaters, retaining walls and raised embankments, will shield the port and its access road from the impact of storm surges and cyclones.
“By allowing larger, more efficient ships to dock directly, the project reduces the country’s reliance on smaller, vulnerable ports and trans-shipment hubs in other countries, which might be more susceptible to disruptions from climate change and other factors,” Okamoto added.
Loss of salt and shrimp farms
Amid the bustle of construction activity, local residents in the area were sceptical about whether the development will make them better prepared for tidal surges or more frequent and severe storms.
Even if it does, they said the cost to their communities has been too high.
Over a third of the salt and shrimp farms in the area would be lost as a result of the construction, an impact assessment carried out by JICA found, adding that the mega-project would affect an area inhabited by almost 800,000 people.
Habibur Rahman, an unemployed 24-year-old man, said the development was not offering stable job opportunities for locals, while the coal power plant was causing growing pollution and damaging fishing activities.
“The [port] authority did not take a single project to develop our lives,” Rahman said.
Chittagong Port Authority and the Shipping Ministry did not reply to requests for comment.
JICA’s Okamoto said contractors are encouraged to employ local residents “as much as possible”, while 500 people have so far been trained under a programme that supports alternative income-generating activities.
He added that embankments built along the access road to the port to protect it would also serve as evacuation routes in disasters and that further protective measures may be considered as part of a separate plan being worked on by the Bangladesh government.
In the meantime, rising sea levels and stronger tidal flooding continue to chip away at the coast and swallow homes in the area, local media have reported.
“In no way [is] this an adaptation or resilience project,” Shamsuddoha said of the Matarbari development, saying it did not represent “resilient livelihoods” that would support coastal communities.
While developed countries pour their money into headline climate investment projects, the human dimension of adaptation is “completely missing”, he added.
The post Business-as-usual: Donors pour climate adaptation finance into big infrastructure, neglecting local needs appeared first on Climate Home News.
Climate Change
Maryland Passes Energy Bill That Delivers Short-Term Relief, Locks Ratepayers into Long-Term Nuclear Subsidy
Advocates say Maryland lawmakers passed consequential energy proposals without adequate analysis or public debate during the 2026 session.
Maryland lawmakers’ new solution for rising utility bills reduces a surcharge funding an effective energy-efficiency program, offers rebates by raiding the state’s clean energy fund and includes subsidies for nuclear power that advocates say may prove costly over time.
Climate Change
To avoid COP mistakes, Santa Marta conference must be shielded from fossil fuel influence
Rachel Rose Jackson is a climate researcher and international policy expert whose work involves monitoring polluter interference at the UNFCCC and advancing pathways to protect against it.
Next week, dozens of governments will gather in the Colombian city of Santa Marta for a conference on transitioning away from fossil fuels.
The conference is a first of its kind, in name and in practice. It’s a welcome change to see a platform for global climate action actually acknowledge the primary cause of the climate crisis – fossil fuels. This sends a clear message about what needs to be done to avoid tumbling off the climate cliff edge we are precariously balancing on.
The agenda set for governments to hash out goes further than any other multilateral space has managed to date. Over the week, participants will discuss how to overcome the economic dependence on fossil fuels, transform supply and demand, and advance international cooperation to transition away from fossil fuels.
Alongside the conference, academics, civil society, movements and others are convening to put forward their visions of a just and forever fossil fuel phase out. The conference can help shape pathways and tools governments can use to achieve a fossil-fuel-free future, particularly if the dialogue begins with an honest assessment of “fair shares.”
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This means assessing who is most responsible for emissions and exploring truer means of international collaboration that can unlock the technology, resources and finances necessary for a just transition.
Fossil fuel-driven violence is spiraling in places like Palestine, Iran, and Venezuela. Climate disasters are causing billions and billions of dollars in damage annually with no climate reparations in sight. All of this remains recklessly unaddressed on account of corporate-funded fascism.
We know the world’s addiction to fossil fuels must end. Is it surprising that a global governmental convening chooses now to try to tackle fossil fuels? It shouldn’t be, but it is.
COP failures
By contrast, meetings of governments signed up to the longest-standing multilateral forum for climate action—the United Nations Framework Convention on Climate Change (UNFCCC) – took nearly three decades before it officially responded to the power built by movements and acknowledged the need to address fossil fuel use at COP28 in 2023.
Even then, this recognition came riddled with loopholes. It may seem illogical that a forum established by governments in 1992 to coordinate a response to climate change should take decades to acknowledge the root of the problem. Yet there are clear reasons why arenas like the UNFCCC have consistently failed to curb fossil fuels decade after decade.
What would the outcome be when a fossil fuel executive literally oversaw COP28 and when Coca-Cola was one of the sponsors for COP27?
How can strong action take hold when, year after year, the UNFCCC’s COPs are inundated with thousands of fossil fuel lobbyists?
And how can justice be achieved when there are zero safeguards in place to protect against the conflicts of interest these polluters have?
Colombia pledges to exit investment protection system after fossil fuel lawsuits
Justly transitioning off fossil fuels cannot be charted when the very actors that have knowingly caused the climate crisis are at the helm—the same actors that consistently spend billions to spread denial and delay.
Unless platforms like the UNFCCC take concerted action to protect climate policymaking from the profit-at-all-costs agenda of polluters, the world will not deliver the climate action people and the planet deserve.
The impacts of climate action failure are now endured on a daily basis in some way by each of us – and especially by frontline communities, Indigenous Peoples, youth, women, and communities in the Global South. We must be closing gaps and unlocking pathways for advancing the strongest, fairest and fastest action possible.
Learn from mistakes
Yet, as we chase a fossil-fuel-free horizon, it’s essential that we learn from the mistakes of the past. We do not have the luxury or time to repeat them. History shows us we must protect against the polluting interests that want the world addicted to fossil fuels for as long as humanly possible.
We must also reject their schemes that undermine a just transition—dangerous distractions like carbon markets and Carbon Capture Utilisation and Storage (CCUS) that are highly risky and spur vast harm, all while allowing for polluters to continue polluting.
Fossil Free Zones can be on-ramps to the clean energy transition
We get to a fossil-fuel-free future by following the leadership of the movements, communities and independent experts who hold the knowledge and lived experience to guide us there.
We succeed by protecting against those who have a track record of prioritising greed over the sacredness of life.
And we arrive at a world liberated from fossil fuels by doing all of these things from day one, before the toxicity of the fossil fuel industry’s poison takes hold.
If this gathering in Santa Marta can do this, then it can help set a new precedent for what people-centered and planet-saving climate action looks like. When everything hangs in the balance, there can be no if’s, and’s, or but’s. There’s only here and now, what history shows us must be done, and what we know is lost if we do not.
The post To avoid COP mistakes, Santa Marta conference must be shielded from fossil fuel influence appeared first on Climate Home News.
To avoid COP mistakes, Santa Marta conference must be shielded from fossil fuel influence
The UK government has announced a series of measures to “double down on clean power” in response to the energy crisis sparked by the Iran war.
The conflict has caused a spike in fossil-fuel prices – and the high cost of gas is already causing electricity prices to increase, particularly in countries such as the UK.
In response, alongside plans to speed the expansion of renewables and electric vehicles, the UK government says it will “move…to break [the] link between gas and electricity prices”.
Ahead of the announcement, there had been speculation that this could mean a radical change to the way the UK electricity market operates, such as moving gas plants into a strategic reserve.
However, the government is taking a more measured approach with two steps that will weaken – but not completely sever – the link between gas and electricity prices.
- From 1 July 2026, the government will increase the “electricity generator levy”, a windfall tax on older renewable energy and nuclear plants, using part of the revenue to limit energy bills.
- The government will encourage older renewable projects to sign fixed-price contracts, which it says will “help protect families and businesses from higher bills when gas prices spike”.
There has been a cautious response to the plans, with one researcher telling Carbon Brief that it is a “big step in the right direction in policy terms”, but that the impact might be “relatively modest”.
Another says that, while the headlines around the government plans “suggest a decisive shift” in terms of “breaking the link” between gas and power, “the reality is more incremental”.
- Why are electricity prices linked to gas?
- What is the government proposing?
- What is not being proposed?
- What will the impact be?
Why are electricity prices linked to gas?
The price of electricity is usually set by the price of gas-fired power plants in the UK, Italy and many other European markets.
This is due to the “marginal pricing” system used in most electricity markets globally.
(For more details of what “marginal pricing” means and how it works, see the recent Carbon Brief explainer on why gas usually sets the price of electricity and what the alternatives are.)
As a result, whenever there is a spike in the cost of gas, electricity prices go up too.
This has been illustrated twice in recent years: during the global energy crisis after Russia invaded Ukraine in 2022; and since the US and Israel attacked Iran in February 2026.
Notably, however, the expansion of clean energy is already weakening the link between gas and electricity, a trend that will strengthen as more renewables and nuclear plants are built.
The figure below shows that recent UK wholesale electricity prices have been lower than those in Italy, as a result of the expansion of renewable sources.
The contrast with prices in Spain is even larger, where thinktank Ember says “strong solar and wind growth [has] reduced the influence of expensive coal and gas power”.
The share of hours where gas sets the price of power on the island of Great Britain (namely, England, Scotland and Wales) has fallen from more than 90% in 2021 to around 60% today, according to the Department of Energy Security and Net Zero (DESNZ). (Northern Ireland is part of the separate grid on the island of Ireland.)
This is largely because an increasing share of generation is coming from renewables with “contracts for difference” (CfDs), which offer a fixed price for each unit of electricity.
CfD projects are paid this fixed price for the electricity they generate, regardless of the wholesale price of power. As such, they dilute the impact of gas on consumer bills.
The rise of CfD projects means that the weeks since the Iran war broke out have coincided with the first-ever extended periods without gas-fired power stations in the wholesale market.
This shows how, in the longer term, the shift to clean energy backed by fixed-price CfDs will almost completely sever the link between gas and electricity prices.
The National Energy System Operator (NESO) estimated that the government’s target for clean power by 2030 could see the share of hours with prices set by gas falling to just 15%.
What is the government proposing?
For now, however, about one-third of UK electricity generation comes from renewable projects with an older type of contract under the “renewables obligation” scheme (RO).
It is these projects that the new government proposals are targeting.
The government hopes to move some of these projects onto fixed-price contracts, which would no longer be tied to gas prices, further weakening the link between gas and electricity prices overall.
When RO projects generate electricity, they earn the wholesale price, which is usually set by gas power. In addition, they are paid a fixed subsidy via “renewable obligation certificates” (ROCs).
This means that the cost of a significant proportion of renewable electricity is linked to gas prices. Moreover, it means that, when gas prices are high, these projects earn windfall profits.
In recognition of this, the Conservative government introduced the “electricity generator levy” (EGL) in 2022. Under the EGL, certain generators pay a 45% tax on earnings above a benchmark price, which rises with inflation and currently sits at £82 per megawatt hour (MWh).
The tax applies to renewables obligation projects and to old nuclear plants.
The current government will now increase the rate of the windfall tax to 55% from 1 July 2026, as well as extending the levy beyond its previously planned end date in 2028.
It says it will use some of the additional revenue to “support businesses and households with the impacts of the conflict in the Middle East on the cost of living”. Chancellor Rachel Reeves said:
“This ensures that a larger proportion of any exceptional revenues from high gas prices are passed back to government, providing a vital revenue stream so that money is available for government to support businesses and families with the impacts of the conflict in the Middle East.”
The increase in the windfall tax may also help to achieve the government’s second aim, which is to persuade older renewable projects to accept new fixed-price contracts.
Reeves made this aim explicit in her comments to MPs, saying the higher levy “will encourage older, low-carbon electricity generators, which supply about a third of our power, to move from market pricing to fixed-price contracts for difference”.
(This is an adaptation of a proposal for “pot zero” fixed-price contracts, made by the UK Energy Research Centre (UKERC) in 2022, see below for more details.)
As with traditional CfDs, the new fixed-price contracts would not be tied to the price of gas power. Instead of earning money on the wholesale electricity market, these generators would take a fixed-price “wholesale CfD”. In addition, they would be exempted from the windfall tax and would continue to receive their fixed subsidy via ROCs.
The government says this will be voluntary. It will offer further details “in due course” and will then consult on the plans “later this year”, with a view to running an auction for such contracts next year.
It adds: “Government will only offer contracts to electricity generators where it represents clear value for money for consumers.”
(It is currently unclear if the proposals for new fixed-price contracts would also apply to older nuclear plants. Last month, the government said it intended to “enable existing nuclear generating stations to become eligible for CfD support for lifetime-extension activities”.)
What is not being proposed?
Contrary to speculation ahead of today’s announcement, the government is not taking forward any of the more radical ideas for breaking the link between gas and electricity prices.
Many of these ideas had already been considered in detail – and rejected – during the government’s “review of electricity market arrangements” (REMA) process.
This includes the idea of creating two separate markets, one “green power pool” for renewables and another for conventional sources of electricity.
It also includes the idea of operating the market under “pay as bid” pricing. This has been promoted as a way to ensure that each power plant is only paid the amount that it bid to supply electricity, rather than the higher price of the “marginal” unit, which is usually gas.
However, “pay as bid” would have been expected to change bidding behaviour rather than cutting bills, with generators guessing what the marginal unit would have been and bidding at that level.
Finally, the government has also not taken forward the idea of putting gas-fired power stations in a strategic reserve that sits outside the electricity market.
Last year, this had been proposed jointly by consultancy Stonehaven and NGO Greenpeace. In March, they shared updated figures with Carbon Brief showing that – according to their analysis – this could have cut bills by a total of around £6bn per year, or about £80 per household.
However, some analysts argued that it would have distorted the electricity market, removing incentives to build batteries and for consumers to use power more flexibly.
What will the impact be?
The government’s plan for voluntary fixed-price contracts has received a cautious response.
UKERC had put forward a similar proposal in 2022, under which older nuclear and renewable projects would have received a fixed-price “pot zero” CfD.
(This name refers to the fact that CfDs are given to new onshore wind and solar under “pot one”, with technologies such as offshore wind bidding into a separate “pot two”.)
In April 2026, UKERC published updated analysis suggesting that its “pot zero” reforms could have saved consumers as much as £10bn a year – roughly £120 per household.
Callum McIver, research fellow at the University of Strathclyde and a member of the UKERC, tells Carbon Brief that the government proposals are a “big step in the right direction in policy terms”.
However, he says the “bill impact potential is lower” than UKERC’s “pot zero” idea, because it would leave renewables obligation projects still earning their top-up subsidy via ROCs.
As such, McIver tells Carbon Brief that, in his view, the near-term impact “could be relatively modest”. Still, he says that the idea could “insulate electricity prices” from gas:
“The measures are very welcome and, with good take-up, they have the potential to insulate electricity prices further from the impact of continued or future gas price shocks, which should be regarded as a win in its own right.”
In a statement, UKERC said the government plan “stops short of the full pot-zero proposal, since it will leave the RO subsidy in place”. It adds:
“This makes the potential savings smaller, but it will break the link with gas prices. The devil will be in the detail, but provided the majority of generators join the scheme, most of the UK’s power generation fleet will have a price that is not related to the global price of gas.”
Marc Hedin, head of research for Western Europe and Africa at consultancy Aurora Energy Research, tells Carbon Brief that, while the headlines “suggest a decisive shift” in terms of “breaking the link” between gas and power, “the reality is more incremental”. He adds:
“In principle, moving a larger share of generation onto fixed prices would reduce consumers’ exposure to gas‑driven price spikes and aligns well with the direction already taken for new build [generators receiving a CfD].”
However, he cautioned that “poorly calibrated [fixed] prices would transfer value to generators at consumers’ expense, while overly aggressive pricing could result in low participation”.
In an emailed statement, Sam Hollister, head of UK market strategy for consultancy LCP, says that the principle of the government’s approach is to “bring stability to the wholesale market and avoid some of the disruption that a more radical break might have caused”.
However, he adds that the reforms will not “fundamentally reduce residential energy bills today”.
Johnny Gowdy, a director of thinktank Regen, writes in a response to the plans that while both the increased windfall tax and the fixed-price contracts “have merit and could save consumers money”, there were also “pitfalls and risks” that the government will need to consider.
These include that a higher windfall tax could “spook investors”. He writes:
“A challenge for policymakers is that, while the EGL carries an investment risk downside, unless there is a very significant increase in wholesale prices, the tax revenue made by the current EGL could be quite modest.”
Gowdy says that the proposed fixed-price contracts for older renewables “is not a new idea, but its time may have come”. He writes:
“It would offer a practical way to hedge consumers and generators against volatile wholesale prices. The key challenge, however, is to come up with a strike price that is fair for consumers and does not lock future consumers into higher prices, given that we expect wholesale prices to fall over the coming decade.”
Gowdy adds that it might be possible to use the scheme as a way to support “repowering”, where old windfarms replace ageing equipment with new turbines.
On LinkedIn, Adam Bell, partner at Stonehaven and former head of government energy policy, welcomes the principle of the government’s approach, saying: “The right response to yet another fossil fuel crisis is to make our economy less dependent on fossil fuels.”
However, he adds on Bluesky that the proposals were “unlikely to reduce consumer bills”. He says this is because they offered a weak incentive for generators to accept fixed-price contracts.
The post Q&A: How the UK government aims to ‘break link between gas and electricity prices’ appeared first on Carbon Brief.
Q&A: How the UK government aims to ‘break link between gas and electricity prices’
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