Alarmed by what Lord Stern famously described as “the biggest market failure in history”, the European Commission has been prolific in producing policies to force the reduction of greenhouse gas emissions, in particular carbon. The EU “20-20-20” Directive demands that by 2020, 20 per cent of energy comes from renewable sources, emissions are 20 per cent lower (compared with 1990 levels) and energy efficiency reduces demand by 20 per cent. The UK's individual target is 15 per cent renewable energy, which means that the fraction of electricity supplied by renewables must more than triple to 35 per cent. Since the general election in 2010 the Coalition has continued with plans to decarbonise the economy, beginning with the largest carbon emitter, energy generation. This paper argues that the Coalition's emphasis on rewarding increases in capacity without a corresponding improvement in performance and a reduction in costs is at the expense of technological innovation, R&D and a skilled workforce.
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