Following the recent U.K. general election, which yielded a hung parliament for the first time since 1974, the new U.K. Coalition Government formed by the Conservative and Liberal Democrat parties has now released a copy of its summary Coalition Agreement. A full and final Coalition Agreement will follow but the summary agreement sets out various key areas of policy agreement between the Conservatives and the Liberal Democrats, including energy policy. The election manifestos of the two parties clashed in a number of areas and this agreement attempts to reconcile those differences.

One area of energy policy on which the two parties disagreed was nuclear energy. The summary coalition agreement allows the Conservatives to press ahead with proposals for nuclear energy on terms laid out in their manifesto but allows the Liberal Democrats to voice their disagreement. The Liberal Democrats have, however, agreed to abstain from a vote on a nuclear policy statement/national planning statement in Parliament. There remain some areas of relevant planning policy which will need to be clarified in the full Coalition Agreement.

The summary agreement says the following with respect to energy policy:

“The parties agree to implement a full programme of measures to fulfil our joint ambitions for a low carbon and eco-friendly economy, including:

1. The establishment of a smart grid and the roll-out of smart meters.

2. The full establishment of feed-in tariff systems in electricity - as well as the maintenance of banded ROCs [Renewables Obligation Certificates].

3. Measures to promote a huge increase in energy from waste through anaerobic digestion.

4. The creation of a green investment bank.

5. The provision of home energy improvement paid for by the savings from lower energy bills.

6. Retention of energy performance certificates while scrapping HIPs [Home Information Packs].

7. Measures to encourage marine energy.

8. The establishment of an emissions performance standard that will prevent coal-fired power stations being built unless they are equipped with sufficient CCS [Carbon Capture and Storage] to meet the emissions performance standard.

9. The establishment of a high-speed rail network.

10. The cancellation of the third runway at Heathrow.

11. The refusal of additional runways at Gatwick and Stansted.

12. The replacement of the Air Passenger Duty with a per flight duty.

13. The provision of a floor price for carbon, as well as efforts to persuade the EU to move towards full auctioning of ETS [Emissions Trading Scheme] permits.

14. Measures to make the import or possession of illegal timber a criminal offence.

15. Measures to promote green spaces and wildlife corridors in order to halt the loss of habitats and restore biodiversity.

16. Mandating a national recharging network for electric and plug-in hybrid vehicles.

17. Continuation of the present Government's proposals for public sector investment in CCS technology for four coal-fired power stations; and a specific commitment to reduce central government carbon emissions by 10 per cent within 12 months.

We are agreed that we would seek to increase the target for energy from renewable sources, subject to the advice of the Climate Change Committee.

Liberal Democrats have long opposed any new nuclear construction. Conservatives, by contrast, are committed to allowing the replacement of existing nuclear power stations provided they are subject to the normal planning process for major projects (under a new national planning statement) and provided also that they receive no public subsidy.

We have agreed a process that will allow Liberal Democrats to maintain their opposition to nuclear power while permitting the government to bring forward the national planning statement for ratification by Parliament so that new nuclear construction becomes possible.

This process will involve:

(a) the government completing the drafting of a national planning statement and putting it before Parliament;

(b) specific agreement that a Liberal Democrat spokesman will speak against the planning statement, but that Liberal Democrat MPs will abstain; and

(c) clarity that this will not be regarded as an issue of confidence.”

The implementation by the new U.K. Coalition Government of policy in this area (and indeed in other areas) is awaited with great interest.

This article was prepared by Andrew Hart (ahart@fulbright.com or +44 0 20 7832 3660) and Philip Woodruff (pwoodruff@fulbright.com or +44 0 20 7832 3677) from Fulbright's Energy Practice Group.