Politics
The government cannot leave energy policy to the market
Published 28 February 2008
The directors of Centrica have been wise to stay in hiding since the energy giant's British Gas subsidiary announced a 500 per cent leap in profits to £571m, after inflicting a 15 per cent price rise on customers. But the shareholder bonanza found plenty of apologists.
Britain is no longer self-sufficient in energy and must get used to being buffeted by global events, they argued; Britain is subject to wild price fluctuations because of its deregulated energy market; Britain's more regulated European energy partners do not always play fair (they put their own needs first). All of which is a way of saying that, when it comes to domestic energy needs, the market rules, a view more or less explicitly shared by government.
Such explanations leave the important questions unanswered: why British Gas passes its trading windfalls upwards to Centrica rather than downwards to customers and how a small, populous island can plan a rational energy future while at the mercy of Europe's volatile relations with Moscow and Gazprom (lucidly analysed by Misha Glenny on page 24).
In truth, for incontestable reasons, the government cannot leave energy policy at the mercy of the market. It has clear legal obligations on two fronts. First, it has commitments to vulnerable energy users under the Warm Homes and Energy Conservation Act 2000, reinforced by subsequent strategies to tackle fuel poverty. Second, it has binding international obligations to reduce greenhouse-gas emissions. Both require urgent action. Both have to be forced to work together in a rational energy policy. Cheaper fuel is not conducive to lowering carbon emissions.
The government's hopes of ending fuel poverty - defined as spending more than 10 per cent of income on heat and power - by 2016 are on course to be dashed if fuel prices stay high. The number of households now categorised as being in fuel poverty is increasing year by year. Since 2002 it has doubled from two million to roughly four million despite investment of between £4bn and £5bn. Meanwhile, its hopes of achieving carbon-emission targets depend on substantially decreasing household emissions, which currently account for 27 per cent of the UK's total.
The failure to square this circle leaves pressure groups, notably Friends of the Earth, questioning whether the government is spending its well-intentioned billions wisely. Two substantial government programmes were intended to acknowledge both ambitions. Warm Front aimed to ensure that those on benefits had access to energy-saving measures. The Energy Efficiency Commitment obliged suppliers to subsidise energy efficiency, particularly for the vulnerable. Neither has protected the poor from rising prices or made an impact on carbon emissions.
The coming Budget offers opportunities. The Chancellor could court instant approval by increasing winter fuel allowances to pensioners and extending their scope to all vulnerable households. This would be only a short-term solution. Fuel use would increase (as people spend money heating draughty homes) and, as prices rose, benefits would also need to rise. Meanwhile, household emissions would remain stubbornly high.
Or, Alistair Darling could be radical. A report recently released by Oxford University's Environmental Change Institute, Home Truths, argued that fuel poverty could be eliminated along with an ambitious programme of cutting carbon emissions. It called for a street-by-street approach to energy efficiency, arguing that an initial investment of £12.9bn a year for ten years could deliver 80 per cent cuts in carbon emissions, could eliminate fuel poverty and would pay for itself with permanent energy savings of £12.3bn a year. The average household would have energy bills cut by at least 66 per cent, equivalent to a £425 annual saving at today's prices.
But more is needed. We are too exposed to a far-from-rational energy market. Malcolm Wicks, the responsible minister, has recognised the need for major investment in sustainable alternative energy sources. The Chancellor must now provide the financial framework.
Opening a testing debate
The vigorous defence of animal testing mounted by Professor Colin Blakemore in our interview (page 28) will upset and anger many; others will agree, or possibly take an even more utilitarian view of animals. Do we not, after all, have "dominion over the fish of the sea, and over the fowl of the air, and over the beasts, and over every creeping thing that creepeth upon the earth"?
The purpose of our article is neither to support Professor Blakemore nor to oppose him. The NS's aim is to encourage debate on an issue on which opinions vary wildly, and which strikes a particular chord in a nation renowned for its concern for animals. Assumptions about where people stand are impossible. Keen hunters care little for the fox, yet expressed utter dismay about the packs of dogs that faced being put down when the hunting ban was put in place. As Blakemore points out, some vegetarians are supporters of animal research; for others, avoiding flesh is part of a belief that using animals for human purposes is wrong.
Do animals have rights? And if they do, are they innate or are they man-given? There are many shades of grey over our relations with our fellow members of the animal kingdom. Attitudes, such as to zoos or the wearing of fur, fluctuate from decade to decade. It is too easy for discussion to be hijacked by extremists. When we talk of rights, of life, and of what kind of life we consider to be tolerable, however, reason must never lose its place at the table.
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