Trade Secretary, Alistair Darling, put demand reduction at the heart of energy policy in a major speech to the Fabian Environmental Policy Network.

Energy companies should not profit from selling as much energy as possible and must instead work with customers to reduce energy use if Britain is to meet its climate change targets, Trade Secretary Alistair Darling told the Fabian Society, making his first major speech on energy policy to mark World Environment Day at a meeting of the Fabian Environmental Policy Network.

"Demand reduction, not just energy efficiency, has to be our real goal', said Darling, signalling that the challenge of reducing energy use while enabling the economy to grow will be a major theme of the government's forthcoming energy review.

Pointing out that the average home is responsible for more carbon dioxide than the average car, Darling set out a range of ways to reduce energy use at home, including seeking to make all new homes carbon neutral. This would not just be a matter for individual action but would also require a radical shift in the regulatory and business model for energy.

'We need to transform the energy market. We need to turn conventional wisdom on its head', argued Darling. The government needed to provide 'a shared incentive between consumers and energy suppliers to reduce energy use' and show that GDP growth was possible while reducing energy use,

'Today companies have the incentive to sell as much as they can and our inefficiency unintentionally creates more demand for energy. So why not give producers incentives to reduce demand – get companies to insulate to make homes more energy efficient. We must look at how we can change from just selling units of electricity to providing energy services – heating and lighting homes – making it their business to increase energy efficiency and cut demand. If we're going to reduce demand we need to turn current thinking on its head and put the incentives on the power companies to reduce demand. Not just to supply your electricity, but perhaps to supply insulation, double-glazing or other things that save us from wasting energy .

'Energy supply companies that deliver outcomes such as heat and light and earn profits either through efficient supply of energy or reducing demand. It can be done. But the regulatory and business model needs to change'.

'We need to improve the information available to consumers', said Darling, foreseeing a greater role for 'smart appliances' which tell people about their energy use and carbon consumption.

'Real-time information on the amount of energy being consumed by appliances and the cost to the consumer are now available and we are looking at how real-time displays can be extended. We are also looking at the bills that consumers receive so that they can include information on how consumers are using energy and advice on how to make reductions'.

Darling said government should 'look at how we can move to all new homes becoming carbon neutral', pointing out that that this could make a major impact on emissions since 'over a third of the homes that will stand in 2050 have not yet been built'

The trade secretary acknowledged that energy efficiency 'on its own it is not nearly enough, but it is nonetheless essential', and also helped to 'move the climate change and energy debate away from International organisations to the choices we as individuals are making every day'.

Darling's speech indicated a number of other themes to be addressed in the forthcoming energy review including a commitment to making the renewables market a success and increased investment in microgeneration. On the controversial issue of new nuclear power stations, Darling said that 'nuclear cannot be ignored. It generates a substantial part of our electricity now – much of it baseload', while acknowledging problems with nuclear power, such as the issue of waste.

The trade secretary also argued for planning reform, calling for 'a grown up debate' about the issue 'accepting, for example, that electricity needs power lines to get to where it is consumed'.

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