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Beware simple answers?

These are times of profound challenges for the energy industry and for climate change policy both in the UK and globally – being able to keep prices low, dramatically reduce greenhouse gas emissions and avoid relying on unstable regions for our energy see

These are times of profound challenges for the energy industry and for climate change policy both in the UK and globally – being able to keep prices low, dramatically reduce greenhouse gas emissions and avoid relying on unstable regions for our energy seems an impossible combination. 

It did not always seem so difficult.  Throughout the 1990s, the UK had the luxury of being an oil and gas exporter.  The shift from coal to gas in electricity generation helped reduce UK greenhouse gas emissions and was perfectly timed to enable the UK to meet its Kyoto commitments, almost effortlessly.  Liberalised markets appeared to be able to deliver cheaper and cleaner electricity. 

Unfortunately, self-sufficiency in oil and gas ended between 2000 and 2010, as oil and gas production in the North Sea declined. Aggressive long-term targets of reducing emissions 80% below 1990 levels by 2050, supported by all major parties, appear challenging or, more likely, implausible. The accepted dominance of market liberalism combined with independent regulation in the electricity sector, for which the UK has long been known a world leader, has been challenged and cross-party support for the existing arrangements has eroded, driven by rising concerns over fuel bills. 

At the international level, the failure of the Copenhagen negotiations in 2009 has left a vacuum and a survey of major emitters offer only a few glimmers of hope.  Emissions in the US have reduced slightly in the face of economic troubles and the boom in shale gas, but US climate policy remains highly dysfunctional driven by sharp partisan divisions and mired in politicized debates over the science. 

Global CO2 emissions rose by 1 billion tons in 2011 and 720 million tons of that increase was from China. Some measures to address climate change have been enacted, but most of these are being done for good domestic reasons, such as developing indigenous industry and reducing ever-growing reliance on foreign sources of not only oil and gas, but also uranium and now coal – China already extracts 3 billion tons of coal a year, but within the last few years it has moved from being self-sufficient to the largest importer of coal in the world. 

For the EU, the current economic downturn (plus generous allocations to industry and built-in ‘hot air’ in the form of excess permits from eastern Europe available because of the collapse of their economies and emissions following the end of the Soviet system) has led to a collapse in the price of permits for CO2 in the EU Emissions Trading System.  Aside from a vanishing carbon price, calls for the EU to take further steps on emissions reduction led by the UK and Denmark have been stymied by internal divisions, with opposition led by eastern European member states. 

Two magic bullets tend to reliably emerge in these debates over how to ‘solve’ these problems – energy efficiency and innovation.  Both are, of course, essential as part of any serious effort to develop new domestic sources or reduce emissions and fuel bills via improvements in energy efficiency.  The dramatic rise in shale gas production in the US as a result of the diffusion of horizontal drilling technologies has halved the price of natural gas and decreased US reliance on foreign sources, but much like North Sea oil and gas for the UK, this offers America a temporary respite for perhaps a decade or two, but does nothing to alter the fundamental challenges.

On energy efficiency there are many ‘good news stories’.  The International Energy Agency, for example, finds that certain countries, such as Sweden and the Netherlands, have been particularly successful at reducing energy intensity by over 1% a year since 1990 because of energy efficiency, but this has been accomplished via an enormous suite of measures ranging from windows in buildings to industrial motors.  And yet, the EU will likely fail to meet its overall energy efficiency target.

Both innovation and efficiency are a combination of many different improvements (some large but mostly small) across numerous sectors and technologies. Most popular claims over both innovation and energy efficiency take little cognizance of the fact that enormous reductions in energy intensity are already built into greenhouse gas emissions projections and simply maintaining existing trends require enormous investments. Technology can deliver solutions, but it will not resolve these problems.

Given the need for tradeoffs, the answers unfortunately lie in the messiness of politics.  It may sound obvious, but the solution to reducing emissions lies in making carbon dioxide, and hence fossil fuels, more expensive.  Energy independence may sound alluring but speaks to a populist and dated desire to control our own resources in a highly globalised world.  Public concerns over higher prices, driven at least in part by the cost of supporting low-carbon options (and energy security), will create pressures on politicians to set aside or at least ease back from their environmental commitments.  Somehow reconciling these three competing objectives of affordability, security and environment will be the single major challenge for energy policy going forward.


Judge Business School

University of Cambridge

Getty Images.
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The Tories' aim is to put Labour out of business for good

Rather than merely winning again, the Conservatives are seeking to inflict permanent damage on the opposition. 

The Conservatives are numerically weak but politically strong – that is the peculiarity of their position. Their majority is the smallest of any single-party government since October 1974. Yet, to MPs at the Tory conference in Manchester, it felt like “2001 in reverse”: the year of Tony Blair’s second election victory. Then, as now, the opposition responded to defeat by selecting a leader, Iain Duncan Smith, who was immediately derided as unelectable. Just as Labour knew then that it would win in 2005, so the Conservatives believe that they have been gifted victory in 2020. David Cameron has predicted that the party’s vote share could rise from 37 per cent to a Thatcherite 43 per cent.

For Cameron and George Osborne, who entered parliament in 2001, this moment is revenge for New Labour’s electoral hegemony. They believe that by applying Blair’s lessons better than his internal successors, they can emulate his achievements. The former Labour prime minister once spoke of his party as “the political wing of the British people”. In Manchester, Cameron and Osborne displayed similarly imperial ambitions. They regard Jeremy Corbyn’s election as a chance to realign the political landscape permanently.

Seen from one perspective, the Tories underperformed on 7 May. They consistently led by roughly 20 points on the defining issues of the economy and leadership but defeated Labour by just 6.5 overall. It was their enduring reputation as the party of the plutocracy that produced this disparity. Those who voted for Labour in spite of their doubts about Ed Miliband and the party’s economic competence may not be similarly forgiving of Corbyn. To maximise their gains, however, the Tories need to minimise their weaknesses, rather than merely exploit Labour’s.

This process began at conference. At a dinner organised by the modernising group the Good Right, Duncan Smith, Michael Gove and the Scottish Tory leader, Ruth Davidson, affirmed their belief that, contrary to Thatcherite orthodoxy, inequality is a problem. Only the Business Secretary, Sajid Javid, an admirer of the libertarian heroine Ayn Rand, insisted that equality of opportunity was the defining metric.

George Osborne’s assured speech was most notable for his sustained appeal to Labour voters. Several opposition MPs told me how unsettled they were by the Chancellor’s declaration that Labour’s new leadership calls “anyone who believes in strong national defence, a market economy and the country living within its means” a Tory. He added, “It’s our job to make sure they’re absolutely right. Because we’re now the party of work, the only true party of labour.” The shadow minister Jonathan Reynolds told me: “We’ve got to be extremely clear that this is not business as usual. This is a real attempt by the Tories to put us out of business – possibly for ever.”

The Conservatives’ aim is to contaminate Labour to the point where, even if Jeremy Corbyn were deposed, the toxin would endure. For those opposition MPs who emphasise being a government-in-waiting, rather than a protest movement, the contrast between the high politics of the Tory conference and Corbyn’s rally appearance in Manchester was painfully sharp. They fear guilt by association with the demonstrators who spat at and abused journalists and Tory delegates. The declaration by a rally speaker, Terry Pullinger, the deputy general secretary of the Communication Workers Union, that Corbyn’s election “almost makes you want to celebrate the fact that Labour lost” was regarded as confirmation that some on the left merely desire to run the party, not the country.

But few Tory MPs I spoke to greeted Corbyn’s victory with simple jubilation. “It’s a great shame, what’s happened to Labour,” one said. “We need a credible opposition.” In the absence of this, some fear the Conservatives’ self-destructive tendencies will reassert themselves. The forthcoming EU referendum and leadership contest are rich in cannibalistic potential. Tories spoke forebodingly of the inevitable schism between European Inners and Outers. As the Scottish experience demonstrated, referendums are almost never definitive. In the event of a close result, the party’s anti-EU wing will swiftly identify grounds for a second vote.

Several cabinet ministers, however, spoke of their confidence in Cameron’s ability to navigate the rapids of the referendum and his pre-announced departure. “More than ever, he’s the right man for these times,” one told me. By this December, Cameron will have led his party for ten years, a reign exceeded in recent history only by Stanley Baldwin, Winston Churchill and Margaret Thatcher. That the Conservatives have so far avoided cataclysm is an underappreciated achievement.

Yet there are landmines ahead. An increasing number of MPs fear that the planned cuts to tax credits could be a foul-up comparable to Gordon Brown’s abolition of the 10p tax rate. Despite the appeals of Boris Johnson and the Sun, Cameron and Osborne have signalled that there will be no backtracking. At such moments of reflection, the Tories console themselves with the belief that, although voters may use Corbyn as a receptacle for protest (as they did Michael Foot, Neil Kinnock and Ed Miliband), they will not elect him. They also acknowledge that the current Labour leader may not be their opponent in 2020. The former paratrooper Dan Jarvis is most often cited as the successor they fear. As with Cameron and Blair, his relative lack of ideological definition may prove to be a strength, one MP suggested.

William Hague is fond of joking that the Tories have only two modes: panic and complacency. If the danger before the general election was of the former, the danger now is of the latter. 

George Eaton is political editor of the New Statesman.