There can be few public policy initiatives, other than perhaps pensions reform, which are framed in such long run terms as the UK Government's present energy review.  The review, which hit the headlines earlier this year when the High Court in London quashed the 'consultation' on its nuclear component, is due to conclude in May, with the publication of a White Paper setting a framework for decades to come.

At the heart of the review lie two fundamental concerns: first, how to guarantee the UK's future energy needs and, second, how to deliver a low carbon energy mix. 

In many ways, these two concerns converge in the debate around the future commitment to substantial investment in nuclear power and the commissioning of a new generation of nuclear power stations.  Even ahead of publication of the White Paper, there can be little doubt of the present UK Government's intention to press ahead with the nuclear option, despite the procedural set-back in the High Court.   Whether the UK Government and Scottish Executive will be able to see eye to eye on this issue is much less clear, and is likely to remain so at least until after the Scottish Parliamentary elections in May.  The Scottish Executive wields a great deal of power in relation to new generation, whether nuclear or otherwise, via its devolved powers over planning matters.

In other respects, the UK Government is already taking the initiative.  In March, the Department of Environment, Food and Rural Affairs (DEFRA) published a draft Climate Change Bill for consultation.  The draft Bill proposes to establish a rolling system of five-yearly 'carbon budgets' for the UK, with the objective of reducing carbon emissions to 60% of 1990 levels by 2050.  DEFRA acknowledges the devolution settlement with respect to climate change policy is "complex", with elements of energy policy and international relations reserved to Westminster and matters such as environmental policy being devolved, to varying extents, to each of the Devolved Administrations.

The draft Bill also proposes a framework for further developing trading schemes (such as the current EU emissions scheme) for the purpose of limiting and reducing greenhouse gas emissions via market-based mechanisms.  It will be interesting to see how UK policy in this respect will dovetail with planned reform of the EU trading scheme and wider international developments in the area, such as the Kyoto Protocol.  It is likely that the forthcoming White Paper will help clarify the interaction of schemes of this sort with other existing incentive mechanisms (such as the so-called 'Renewables Obligation', which has already encouraged substantial investment in wind generation across the UK) and with new techniques for carbon capture.

At the level of the individual customer, the White Paper is likely to announce measures to ensure that energy producers and suppliers share more information regarding the carbon impact of their operations.  The Government will also seek to empower customers, through 'smart' metering technology, to take greater responsibility for their own 'carbon footprint' as it results from energy consumption.

Shepherd and Wedderburn will host a series of events to discuss the conclusions of the Energy White Paper next month. Please visit www.shepwedd.co.uk/seminars for further details.

Gordon Downie is a partner specialising in energy and utilities regulation with UK law firm Shepherd and Wedderburn
0131 473 5162

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