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on Jul 27, 15 • posted by rhoggett •

New Thinking: What are we to do with this Government’s incredible energy policy?

What are we to do with this Government’s incredible energy policy?

Catherine Mitchell, IGov Team, 27th July 2015

Energy policy has been slowly changing over the last 30 or so years: two steps forward, one step back towards sustainability. But it has changed over that time and it has become more sustainable and better for GB’s innovation record. In 1984, with the miner’s strike, we had a state owned energy industry (both gas and electricity), with almost no customer input and minimal ability for independent action, no renewable energy policy, minimal energy efficiency action or thought, and no formal concern for the fuel poor. Slowly since then we have moved to a very different industry structure and energy policy with a Climate Change Act, with an 80% cut in carbon emissions from 1990 levels by 2050 at its centre.

But this change has not occurred as a result of anti-growth, anti-capitalist, proto-socialism factions, as Amber Rudd, the Secretary of State for Energy and Climate Change is reported to have said in her busy schedule last week. It occurred as a result of cross-party concerns and alliances during Tory, Labour and Alliance governments.

I wonder whether Amber Rudd’s political masters/mistresses are pleased with her? She has certainly hit the ground running. She appears to be trying to do two things: firstly, capturing the confidence of the electorate in the Conservative Party as the most responsible political party to care for the environment, as they have confidence in the Conservative’s steering of the economy. And secondly, as part of that, stating loudly that Conservative environmental policies preserve GB economic prosperity and security, by making sure that climate change action is pro-growth and pro-business with market based policies.

Both these points are rhetoric without reality but they do fit the current Conservative economic policy and austerity package and, importantly, they are part of a general (and well orchestrated) campaign for the Conservatives to be seen as the party best placed to sort out the economy, welfare, NHS and now the environment.

So far, as said elsewhere, we are witnessing a Government which is dismantling sustainable energy policies. The energy world is broadly going in one direction – and as said before that’s not the same direction as this Government. We will see what Government policies get put in place but let us make sure that those policies do what they say they will: let us ditch the rhetoric and focus on the policies which really lead to practice change; let us learn from the mountains of evidence around the world about what policies work, and why.

So, yes, let us be pro-business – but that means not putting in place policies which benefit a few incumbents to the detriment of other GB business and which undermines British innovation. Yes, let us be pro-business by ensuring real competition by having gas and electricity markets which have rules and incentives, codes and licenses which are open to any new entrant not de facto rigged for the benefit of those who will lose out in a sustainable future. Yes, let us ensure economic prosperity for GB by ensuring we have an energy efficient economy and have energy efficiency policies which reduce our total energy use – see Germany or Denmark which aim to cut their total energy use by 50% by 2050. Yes, let us have a secure energy policy, again by having an energy efficient economy – there is no better way to be secure than not to use energy. Ever increasing reliance on gas is not going to increase our security. It is not going to lead to lower prices, quite the opposite. Yes, let us put in place policies which harness investment with glide paths [ meaning a length of time before they stop]. This is not endless subsidies for one technology or sector (as currently represented by the nuclear industry) . Yes, let us have policies which encourage energy innovation so that GB does not find itself out of step with the world’s economy. Our British energy policy is the equivalent, say, of continuing a landline based telephone system rather than moving to mobile phones, never mind ‘smart’ phones.

And let us learn from evidence (and history). Let is stop using the phrase ‘market-based’ policies without understanding what it means. Supporting ‘market based’ policies does not mean using markets to get to the policy outcome. It means putting in place a regulation enshrined in law where the regulation has design details which try – but generally cannot succeed because they are regulations – to mimic markets. Probably the best known, and nearest to, a market mechanism is a carbon trading scheme which is a regulated policy with design details to establish a market for carbon. The carbon trading schemes have so far been spectacularly unsuccessful not particularly because of the market design details but because of the politics of setting the (low) value of carbon and initial (high) level of carbon outputs by country. Other ‘market mechanisms’, such as the renewable obligation, are similarly regulated policies, as any other regulated policy, such as the Feed-in-tariff. Because of their ideological routes, ‘market based’ policies tend to be unsophisticated and, generally, can be shown to be less successful and more expensive than pragmatic, focused regulations designed to do something in particular.

Let us also understand what we mean by economic growth. Growth based on an endless supply of cheap, fossil fuels in an energy inefficient, non-innovatory economy? Even if we wanted it, it can no longer happen as the latest Aviva announcement shows.

The wonderful thing about being a ‘small’ world is that we can know and understand what is happening around the globe and what policy is best practice, what works, what the broad direction of travel is and so on. A sustainable energy policy is generally a long term transformation from one system to another, and which has to have buy-in across the political spectrum so that long term investment can be attracted, and so that costs of policies are assessed, over a longer time period than the few years within one or two electoral cycles.

Who wants to join an alliance to have a ‘sensible’ energy policy which leads to economic prosperity and security for GB, which leads to overall lowest prices for consumers and which is sustainable? This is the opposite of the current very big step backwards of Government’s policy – whatever Amber Rudd may say. What can we – those concerned about the environment whatever our political views – do to take the necessary two steps forward to keep the slow momentum towards sustainability going?

One thing we know we cannot continue to do is what we have been doing over the last several years – clearly that has not been successful. We need a much stronger alliance and we need it to be related to everyday lives. Answers please….