We were naive to think a low-carbon revolution was coming

A long way from the shift.

In recent months, we have seen environmentalists in the UK jittery about policy direction in the government, US Republicans overtly hostile to renewables, the Japanese government abandoning nuclear energy (imports of oil and gas having surged since Fukushima, a trend now likely to continue) and the largest recorded melting of the Arctic ice caps.

All of this seems a long way from the vision of the "third industrial revolution", a concept based on a social enterprise-driven low carbon economy developed by American economist Jeremy Rifkin and enthusiastically endorsed by the European Parliament in May 2007.

"Paradigm shift", an over-used term famously coined by American scientist Thomas Kuhn 60 years ago to explain the progression of scientific thought, is now liberally scattered across all areas of human activity, not least in energy and the environment. But, despite its over-use, Rifkin felt it suited the transformation to a low carbon economy that he saw coming.

In his book, Rifkin argued that all industrial revolutions flow from simultaneous change in communications and energy technologies. We are, he said, on the brink of a third industrial revolution brought about by sophisticated IT, low carbon micro-technologies and breakthroughs in energy storage, which will turn buildings into power stations. He also thought this new paradigm would see a change in control of energy away from centralised, fossil-fuel based structures, which in turn would lead to a move towards new distributed and collaborative models. Europe, not the US, would be the social laboratory for this new revolution, where new energy technology would allow social enterprise to replace pure market principles and to become, in Rifkin’s words, "the dominant sector of the second half of the century".

Colleagues based in a country that depends on Europe for 80 per cent of its oil and gas exports asked me recently about the third industrial revolution. Having seen it apparently driving policy-making at the highest level, they naturally wondered how this was shaping the energy agenda in their biggest export area and what the implications were for their products which were supposedly about to be displaced.

But this is not the same world as 2007 and the third industrial revolution feels much more utopian – even naïve – now than it did back then. Whilst there is a lot that pushes us down the road to decarbonisation, there are some pretty big bumps in the road. It must be a very wide highway as well, because there is a lot of lane-changing going on at the moment.

If the green economy is strengthening, it is not for a single, dominant reason – for example, because policy is uniquely focused on the replacement of the old energy system with an entirely new one or because the sense of urgency on carbon dioxide (CO2) emissions is any greater than it was five years ago. Instead, there is a complex interaction between global concerns and some much more parochial worries about autonomy (interestingly, a key theme for the US Republicans), resilience and security of supply, as well as cost. It’s a messy landscape and in Europe these are operating at several levels.

Meanwhile, the power base of the energy industry shows little sign of radical change. While there are a lot of initiatives to try and make European cities more sustainable, a reality of buildings as power stations is a long way off. Solar PV, the most reliable current option to make this happen, is having a tough time. New district heating systems (as opposed to the ones that have built up over decades in some European cities) are more paper-based than real, whilst smart grid is just creating plenty of talking shops. The move away from the internal combustion engine is tentative, to say the least, and the transport sector is likely to be dependent on oil-derived products for decades to come, although if the twin problems of vehicle range and recharging can be resolved effectively, electric vehicles could become popular very quickly. Two sectors to watch are aviation, where a lot of research is going into biofuel replacements, and shipping, which uses a particularly dirty form of oil product and needs to clean up its act. However, none of this feels like the third industrial revolution is just around the corner, although to be fair, Rifkin was aiming for somewhere around 2050.

Is this what the time before a paradigm shift feels like? Before every tipping point there is an age of uncertainty where few, if any, can predict with certainty the timing of change or the new world order that will emerge. Decarbonisation is inevitable – fossil fuels are finite – but the chances of it happening quickly enough to prevent major climate change are looking increasingly slim; so the world is going to have to adapt to the consequences.

In the meantime, European economies will still demand a lot of carbon-based fuel for decades to come. Oil and gas exporting countries with viable reserves probably don’t need to worry just yet. It’s more a question of how countries with hugely valuable but finite reserves should put something aside for their fossil-fuel retirement, as Norway and Qatar appear to be doing so successfully.

Nathan Goode is the Head of Energy, Environment and Sustainability at Grant Thornton UK LLP.

Photograph: Getty Images

Nathan Goode is the Head of Energy, Environment and Sustainability at Grant Thornton UK LLP

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.