[holding answer 1 May 2008]: UK energy policy is based on a market approach. With rising fossil fuel (oil, gas and coal) prices, which also feed into the price of electricity, there is every incentive for businesses to reduce their dependence on fossil fuels themselves without Government intervention. However, in the context of our climate change policy, the Government are taking a large number of actions that will reduce the UK’s dependence on fossil fuel-based energy. These include:
De-carbonising the electricity mix through EU emissions trading system (ETS);
Renewables obligation, carbon capture and storage (CCS) demonstration, and the nuclear policy framework;
Providing funding and support to emerging non-fossil-fuel technologies in the transport, electricity and heat sectors, for example, via the Environmental Transformation Fund;
Reducing use of fossil-based transport fuels through the renewable transport fuel obligation (RTFO);
Installation of smart meters in businesses thereby allowing them to have more direct control over the energy spending and therefore dependency on fossil fuels; and
Carbon reduction commitments (CRC)—starting in January 2010—which commit large business not in the EU ETS to reduce their carbon emissions and thereby their use of fossil fuels.
Climate change levy acts to encourage use of renewables—as businesses can be exempted from the levy (levy exemption certificates) if they install renewables. The Carbon Trust was set up to encourage business to reduce their carbon footprint.