Green tax to hit gas bills

It came as Gordon Brown signalled taxes would have to rise to combat climate change.

A 37 per cent increase in gas tariffs would mean households paying £209 more a year on average. Electricity bills could rise by up to 15 per cent, or £53 annually.

Millions of homeowners are already paying a 14 per cent surcharge on electricity - and three per cent on gas - for government-led action on global warming.

But at an energy conference in London today, Mr Brown laid bare the spiralling cost of the switch from oil and gas to nuclear, wind, solar, and other technologies.

Despite rising world energy prices, he stressed he would not be deflected from taking action through higher environmental taxes.

He said: "The threat of climate change is a threat to the prosperity and the security of the whole world. No one should underestimate the scale of this endeavour. It will require real leadership from Government - being prepared to make hard decisions on planning or on tax for example, rather than tacking and changing according to the polls."

Business Secretary John Hutton added that the era of cheap energy was over - as food, petrol and mortgage costs also continue to rise.

He said: "Is the era of cheap energy over? We all know it is, and that presentsus with some pretty stark choices we have to make.

"This is the time to make a decisive shift to a low-carbon economy."

Gas and electricity prices are likely to start rising slightly from 2010 but to increase sharply after 2015 to subsidise major green developments such as wind and wave projects.

Meeting Britain's current target of producing 15 per cent of energy from renewables by 2020 is expected to cost £5 billion to £6 billion - knocking between 0.5 and one per cent off GDP. Petrol prices could rise by up to four per cent and diesel three per cent. But the final cost of completing the switch to green energy is put at £100 billion.

The government blueprint says an extra 4,000 onshore and 3,000 offshore wind turbines will be needed and hundreds of thousands of "green-collar" jobs would be created.

Today the consultation document on renewable energy predicted that by 2020, gas bills could rise by between 18 and 37 per cent, or £104 to £209, if the cost of a barrel of oil is $70 at that time. Electricity prices would rise by between nine and 15 per cent (£32 to £53).

If oil prices stay at their current peak of about $150 a barrel, the rise in energy bills would be reduced.

A strategy for large energy price increases in the future may test Mr Brown's resolve given that many voters balk at the cost of green measures. But Greenpeace has backed the strategy.