Our best is not good enough

Such is our dependence on oil, we face a shock that will dwarf any crisis of the past. It's a good j

Worried about your energy levels now you're back at work after a holiday? Console yourself that you're a very small part of a huge and far more threatening energy crisis facing Britain and the world. In one blow, Hurricane Katrina showed that two things are capable of bringing rich, sophisticated nations to their knees - fuel price crises and natural disasters - and that the two can be linked. Now we're set for more of both.

Climate change and a looming crunch in the supply of our principal energy source, oil, are set to revolutionise energy systems. The choices we make in the next few years will either set us on a path to economic and environmental chaos or lay the foundations of a resilient, sustainable and sociable way to meet our energy needs.

At present, nearly half of Britain's total energy use depends, one way or another, on oil. Yet at recent rates of consumption, the world's known conventional oil reserves will be exhausted in 37 years' time at most, according to figures from BP. The future for natural gas is little better, with about 60 years left. Rising oil demand will accelerate depletion. Prices, already rocketing as high as $70 a barrel, will enter the economic stratosphere at some point in the next decade, as demand rises and global production peaks and declines.

A snapshot of British energy use shows how acutely exposed we are to problems with oil supply. Transport, almost totally dependent, accounts for one-third of our energy use. Households use slightly less energy at 28 per cent, industry takes 20 per cent, while the commercial sector and other uses consume the rest. In terms of our fuel sources, petroleum products account for 46.5 per cent, while natural gas and electricity account for 34 and 17 per cent respectively. Electricity comes mainly from burning natural gas and coal, which generate just over one-third each, while nuclear provides just over one-fifth. Surprisingly, given Britain's huge endowment of natural renewable energy, these sources provide less than 3 per cent, mostly from hydropower and biofuels. This will change, however, if the objectives laid out in the government's energy white paper are pursued.

In 2003, it set four aims for policy: environmental protection; a reliable energy supply; delivering affordable energy to the poorest (the government estimates that around three million people suffer fuel poverty); and creating competitive energy markets. The Prime Minister, Tony Blair, hosted the G8 summit in July with a commitment to reduce Britain's fossil-fuel-related greenhouse emissions by 60 per cent by the year 2050, and to generate one-fifth of our electricity from renewables by 2020. So far, however, the omens for the first three aims are inauspicious, while problems with the last aim prevents progress on the others.

Instead of falling, emissions in 2005 are expected to rise to their highest level since the UN Framework Convention on Climate Change was signed at the Earth Summit in 1992. Hurricane Katrina was an example of the extreme weather set to become more common with climate change. Its disruption of US oil production in the Gulf of Mexico was the most ironic event since an eruption of tornados and thunderstorms flattened the town of Carbon Hill in Alabama in 2002. By pushing prices up, it provided a foretaste of what will happen when the world passes the point of peak oil production. After all the false alarms, senior industry figures think that point could finally be upon us.

The oil peak is described by the US Department of Energy as "a reservoir's maximum oil production rate, which typically occurs after roughly half of the recoverable oil in a reservoir has been produced". The arcane description belies the almost unimaginable impact of such an event on oil-dependent economies. Awestruck and running short of adjectives, they call it an "unprecedented risk management problem . . . as peaking is approached, liquid fuel prices and price volatility will increase dramatically, and . . . the economic, social and political costs will be unprecedented".

Colin Campbell, a former vice-president of the oil company Fina and chief geologist of Amoco, suggests that oil will peak as soon as 2006. In 2004, the otherwise obscure US Office of Naval Petroleum and Oil Shale Reserves pointed out that no major new oilfield discoveries have been made in decades, and that "world oil reserves are being depleted three times as fast as they are being discovered". According to them, no predictions of oil peak go beyond 2020.

It's an economic shock to dwarf the 1973 oil crises. Back then both Britain and the US, concerned about fair distribution, turned to rationing. A leaked Department of Trade and Industry report shows that the British government retains contingency plans for rationing today. This is fortunate because, ultimately, there will be no return from the crunch.

The other great danger globally is that governments will respond by exploiting even more polluting fossil fuels. Oil shales (which are abundant in North America) and low- quality "brown coal" (abundant in China) are alternatives that belch far more greenhouse gases into the atmosphere for every unit of energy they produce.

So what about nuclear power in Britain or elsewhere? The industry is promoting itself as a solution to climate change and an answer to energy security. Can it save us? First, remember that after half a century of trying and uncounted billions in financial support, nuclear power provides only around one-fifth of Britain's electricity needs, which in turn accounts for less than one-fifth of our total energy use. The stock of nuclear power stations is also ageing and will progressively close over the next two decades. But that's just the start of its difficulties.

The waste problem is still unsolved, and the cost of building a new series of reactors in Britain is likely to be much higher than currently admitted. Judging by construction cost estimates from the International Energy Agency, and making other, more realistic assumptions, it would be nearly three times more expensive to generate electricity from new nuclear capacity than the industry claims.

But even those costs do not include wider risks. The 11 September attacks on New York and Washington pointed to the potential vulnerability of nuclear installations to assaults. There is also fear of proliferation. Hundreds of tonnes of high-grade nuclear material already exist for which there is no international inventory, and designs for nuclear equipment are available on the black market. More reactors mean more radioactive material sloshing around, making unplanned proliferation and nuclear terrorism almost inevitable. If Britain restarted an aggressive nuclear programme, it could hardly argue convincingly against states such as Iran developing their own.

Expensive accidents also remain a risk, even with improved designs. Twelve years after the Chernobyl disaster, Ukraine estimated that it had cost it between $120bn and $130bn. The fallout still affects the hill farmers of Wales today. In north Wales alone last year, restrictions on livestock remained in force at 359 farms. Swiss Re, one of the world's largest insurance companies, concludes: "One of the most perilous shortcomings in traditional property insurance and reinsurance concerns inadequate nuclear risk exclusions."

Even a sustained programme of nuclear new-build is highly unlikely to tackle climate change or bridge the energy gap. Recent research from the Massachusetts Institute of Technology shows that to increase nuclear power's share of world electricity by just 2 per cent by 2050 would require nearly trebling nuclear capacity - an additional 1,000-1,500 new large nuclear plants worldwide. Margaret Thatcher planned ten and managed to build only one. Anyway, such a programme would rapidly exhaust known supplies of uranium, which at recent rates of use will not last much beyond 2080.

So we are left with just three lights at the end of the tunnel not attached to an oncoming train: a shift to renewable technologies ranging from micro to large in size; reducing overall energy consumption; and decentralising the way we generate and supply energy.

The potential of renewable energy in Britain is still under-estimated. Wave power could realistically meet 15 per cent of electricity demand, and tidal power an additional 6.5 per cent. Solar cells are capable of providing at least 5-10 per cent of the UK's electricity needs, with solar thermal units providing around half of a UK household's annual hot water requirements. Then there's wind. In theory, Britain has enough to meet its electricity needs eight times over. Even with the current, limiting structure of the national grid, a combination of offshore and onshore wind could provide at least 35 per cent of the country's electricity. Given the likely future for oil and nuclear, it's impossible to believe fuel poverty will be eradicated without the shift to renewables.

Crucially, with the right policy framework and incentives, huge breakthroughs stand to be made at the level of micro- generation, on which the DTI launched a public consultation in June this year. The makers of the Swift wind turbine were this year presented with the prestigious Ashden Award for Sustainable Energy for producing a generator capable of providing up to 80 per cent of a household's electricity. If around one-third of the UK's electricity customers installed 2kW microgen PV (solar) or wind systems, it would match the capacity of the nation's nuclear programme.

But a sustainable energy future is blocked by our current, highly inefficient, centralised power system. According to the regulator Ofgem, power lost as heat on the grid costs Britain nearly $1bn each year. A recent report from Greenpeace claims that energy wasted at power stations and along the grid is equal to the entire water and space heating demands of all buildings in the UK - industrial, commercial, public and domestic. There are staggering potential benefits from decentralisation. According to Leonie Greene, the author of the Greenpeace report, Woking Borough Council has deployed decentralised energy in con- junction with energy-efficiency measures to cut associated emissions by over 75 per cent. A significant move to decentralise how we generate power could be our only hope. But small-scale energy producers currently face a thicket of regulatory and planning problems that fail to recognise their benefits. To them, the notion of an open, competitive energy market is a chimera.

Different technologies have different cultural and political implications, too. The insecurities of nuclear power demand a culture of secrecy, centralised control, permanent armed security and restrictions on personal freedom. By contrast, a decentralised system of energy generation, rooted in clean renewable sources, promises greater peace and security, reliability born of diversity, and leaves open environmental space for the rest of humanity.

Whatever Britain does, it will have to succeed in a world of growing carbon constraints imposed by global warming and increased, often violent competition for finite fossil fuels. It's also a world of widening "energy inequality", in which fossil fuel use is still powerfully linked to national income, and in which Britain is committed to reducing global poverty. For example, Britain emits per person 149 times more carbon dioxide than Ethiopia, a country on the vulnerable front line of global warming. Such unsustainable consumption, and untenable disparity, represents a huge ecological debt that will have to be reconciled in any credible global plan to solve climate change. Over the past century, industrialised countries became dependent on energy imports while so-called less developed countries began producing more than they consumed. Measured by the exotically named "World Energy Gini Coefficient", global inequality in energy consumption increased in line with a long historical trend.

Climate change needs a global solution or it will be derailed by high-polluting, free-riding nations. Any agreement that will follow the Kyoto Protocol in 2012 must attract the likes of India, China and Brazil. To gain their support, the historical trend must be reversed. In carbon terms, an expanding, diverging global economy will need to do the opposite. Emissions will need to be capped at safe levels globally on the basis that everyone is entitled to a logical, equal share of the global commons of the atmosphere.

But what upper limit of carbon dioxide should Britain and the world aim for? The most recent estimate from the Blair-sponsored International Climate Change Task Force is that, to prevent catastrophic global warming, the concentration of carbon dioxide in the atmosphere needs to be stabilised at 400 parts per million by volume (ppmv). Currently, it stands at around 380ppmv, rising by two parts a year. To achieve that stabilisation, compatible with Britain not exceeding fair per capita shares of global emissions, will require a much bigger cut than Blair has previously committed to - 90 per cent by 2050 instead of 60 per cent.

In planning terms, this means acting yesterday. So far, the government is already missing its inadequate annual target. Oil has become hard-wired to conflict, and nothing short of the effort of a war economy is likely to stop climate change. As Winston Churchill said: "It is no use saying, 'We are doing our best.' You have got to succeed in doing what is necessary."

Andrew Simms is the author of Ecological Debt: the health of the planet and the wealth of nations, just published by Pluto Press at £12.99, and policy director of the new economics foundation

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