Rethinking energy supplies

With the double shock (to most) of the UK vote for Brexit and the election of President Trump across the pond, many people predicted a further series of political upsets this year. That’s the way people’s minds work – we tend to expect a continuation of a trend – and it’s one reason why predictions are so difficult to make about almost anything.

In fact, the political ground across Europe has shifted comparatively little, with the notable exception of the UK, where the Labour Party leadership apparently has a death wish, believing that the country is ready to accept its hard left agenda. There’s certainly a case of false consciousness there, but not on the part of British voters. Across the North Sea, on the other hand, the insurgent Geert Wilders failed to make a breakthrough, albeit nudging Dutch politics slightly to the right in the process.

France looks in little danger of electing Marine Le Pen; her position in the run-off reflects the historical strength of more extreme parties in France (we tend to forget the appeal of Euro-communism a few years ago). Emmanuel Macron, seemingly on course for the Elysée Palace, is only an outsider in the sense of having no established party machinery behind him. As a graduate of two grandes ecoles and former Socialist minister, he is very much of the Establishment. And in Germany, Angela Merkel looks set for a fourth term as Chancellor. Even a surprise win by Martin Schultz would provide a large measure of continuity.

So, plus ça change, perhaps, but the realities of Brexit are likely to have long-term implications, not just for Brits, but for all their current co-members of the EU. One ostensible reason for the referendum result was the dislike of Brussels-made regulations, particularly given successive UK governments’ willingness to implement and enforce them rather more vigorously than some other Member States. And one area of competence (in the legal sense) for the EU is environmental policy.

This includes climate change and, to an extent, energy policy. Although member states can run very different energy networks, they are governed by overarching instruments such as the Large Combustion Plant Directive and agreed national targets on energy efficiency, emissions reduction and renewable energy generation.

There is an apocryphal (but believable) story that some heads of government agreed to a 20% contribution of renewables to total energy use in the mistaken belief that this referred to electricity rather than total energy.  Politicians are often happy to make policies which capture the headlines, without necessarily thinking of the consequences. A blind adherence to a renewables target fits into that category as, in the particular case of the UK, does the passing of the Climate Change Act.

In two years’ time, the British government may have the freedom to make its own energy policy again, without the need to conform to EU goals. Of course, there will still be plenty of constraints, not least the moral pressure to adhere to the (weak and non-binding) principles of the Paris agreement and the campaigning and legal challenges that will doubtlessly be brought by well-funded activist groups. There is also the threat that the remaining 27 EU member states will require the UK to adhere to its previously agreed policies on climate change as part of the divorce deal, although that is surely part of the necessarily hard-line starting position for negotiations.

In practice, France or Germany is unlikely to discriminate against a non-EU neighbour across the Channel because Parliament decides to make its position on renewable energy more flexible (or, in an ideal world, repeals the Climate Change Act). After all, the USA has for many years failed to participate fully in international efforts to mitigate climate change, and yet has cut its emissions quite significantly and at effectively zero cost to taxpayers by replacing coal by shale gas. The country’s failure to ratify the Kyoto Protocol did not lead to trade sanctions or diplomatic incidents. Neither have China’s rising annual carbon dioxide emissions, albeit tempered by the window dressing of a commitment to them peaking before too long.

The prescriptive energy policy obligations under current EU membership are little more than virtue signalling. If a country wants to reduce emissions as a precautionary approach to the potential dangers of global warming, it makes far more sense to set a minimum number of high-level targets and allow companies, public organisations and individuals to decide for themselves the best action to take. The apparently self-interested actions taken by individuals more often than not do more good collectively than any number of well-intentioned prescriptions, as Adam Smith so wisely pointed out. The current reappraisal of the sense of encouraging people to buy diesel cars is an excellent lesson, should anyone need it.

What could a UK energy policy look like, freed from the constraints of EU targets? Let’s assume that there is still an appetite for cutting CO2 emissions and that the Climate Change Committee continues to produce carbon budgets for the time being. Cutting energy use must come top of anyone’s list; ignoring emissions reductions, anything that saves money is likely to be welcomed. On the other hand, the ill-considered and expensive roll-out of ‘smart’ meters is of much more benefit to utility companies than consumers, so a more flexible approach is needed.

Energy efficiency could be encouraged via a ‘carbon tax’ if necessary and this would also be a simple and effective way to drive low-cost emissions reduction. Forget pouring money into never-ending subsidies for renewable energy or struggling to demonstrate that carbon capture and storage can ever be implemented on a large enough scale to be of any significance.  A technology-neutral tax would encourage development of new technology which could, for example, eventually provide an economic way to store the vast amounts of energy necessary to allow wind and solar farms to provide a reliable supply of electricity.

In the meantime, the focus would surely turn to the one safe, proven, despatchable source of low-carbon energy available: nuclear.  And, who knows, in not too many years, the UK may find itself a world leader in energy technology once again.

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