Cheap coal and carbon drive both emissions and profits in the UK energy sector

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Jonathan Lane, GlobalData’s Head of Consulting for Power & Utilities.

As found across Europe, the UK’s carbon emissions are on the rise. DECC’s provisional estimates indicate a 4.4% rise in carbon emissions in 2012 compared to 2011 little of which has been driven by an improving economy. Indeed, 50% of the rise, or 10 million tonnes came from the power generation sector despite a 1% fall in generation. The other major contribution was an increase of 8 million tonnes from the residential sector as Q4 2012 was on average 2.30C colder than Q4 2011, causing the nation to turn the heating up. Interestingly, emissions from transport fell for the fifth consecutive year in 2012, with high prices at the pump and flat growth in the economy dampening demand.

Cheap coal and even cheaper carbon credits are the main reason behind the growth in emissions from the electricity generation sector, with electricity produced from coal rising from 109TWh in 2011 to 143TWh in 2012. Correspondingly generation from natural gas, which proved expensive in 2012, fell from 147TWh in 2011 to 100TWh. Generation from renewables (including hydro but excluding biomass and biogas) increased to 33TWh (or 9% of total generation) from 27TWh in 2011.

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