Why have Tory MEPs rejected a free market solution to climate change?

By sabotaging reform of the EU Emissions Trading Scheme, Conservative MEPs have shown that they can't be relied upon to champion British interests in Europe.

It may surprise some on the centre left but there is nothing innate to conservatism that makes it less able to take pragmatic decisions in favour of sensible environmental policy. It has had a refreshing ability to acknowledge the intrinsic value of nature and stewardship even if it has become more conflicted about the means to deliver these outcomes. It is a broad church that spans from the one nation Heseltines to the radical free marketeers like John Redwood. But if there is one thing that unites them, it’s the belief that markets offer most of the answers. Which is why it is so baffling that Conservative MEPs voted down a measure that might have kept the European Emissions Trading Scheme alive. Trading is not the only way of tackling emissions but it’s the poster child of free market thinkers because it promises an economically efficient, non-regulatory solution to a giant supranational problem.

The back story is that, on Tuesday, the EU parliament voted against a minor technocratic fix that would have rescued the floundering European carbon market, which is struggling under the weight of too many pollution permits in the system. The fix would have involved 'backloading' the sale of some excess carbon allowances to 2019, so the number of allowances in the system would be reduced, increasing the price which has dropped as low as €3 per tonne of carbon in recent months. While more profound reform is required, it would have been a first step to putting the mechanism back on track. The vote failed by 19 votes. Twenty Conservative MEPs voted against it. In doing so, they failed their constituents and UK business.

A strong carbon price across Europe is directly in the UK’s interest. Its main benefit is to provide financial incentives for switching from coal to gas, with the costs being born by coal heavy countries like Poland and Germany and rewards flowing to those that have already made the switch, like the UK. One of  Thatcher’s less controversial legacies is an energy system which has less and less coal and a relatively high proportion of gas, so UK generators and fuel suppliers stood to gain significantly from the EU carbon market fix. By voting against it, Conservative MEPs have rewarded coal at the expense of gas and Germany at the expense of the UK. This will be the first of many negative consequences arising from the failure of EU emissions trading. At our Chancellor’s insistence, the government has also introduced a carbon price floor, which means we are paying higher carbon prices than our neighbours. It creates an attractive revenue stream for the Treasury but many British businesses will now feel aggrieved that it could now be at least a decade before there is a single carbon price across Europe.

This is part of a pattern of conflicting behaviour from different parts of the Conservative Party that should worry its leaders. There is no evidence that the British public sees climate or environment as a partisan issue. It is a 'valence' issue, like national security, in which voters expect any party of government to be competent.

Emissions trading may be too obscure for the public to notice but experts in business, NGOs and academia do and,  for many, this will be another worrying sign that the Conservatives are struggling to govern coherently on one of the big issues of our age. We’ve already seen this confusion with the Energy Bill, where the Chancellor agreed to spend £7.6bn a year on new low carbon energy (mostly renewables) but then opposed a decarbonisation objective for 2030 which would have ensured that much of the equipment required would have been built in new UK turbine factories.

The debate now moves on to what 2030 climate package the EU should adopt. The UK should be at the heart of the debate, fighting for an ambitious carbon goal that matches our own. But the prime minister has yet to get his ministers to agree a common position. Whether or not the British government takes a lead, the EU will adopt a new climate package at some point in the next 18 months under pressure from France and Germany. Yesterday’s action by Conservative MEPs has made it more likely that it will be focused on fiscal and regulatory measures, and less on trading. That may turn out to be a good thing, but Conservative MEPs have just shot themselves in the foot by making market trading solutions less attractive. They have also made it considerably more difficult for David Cameron to demonstrate that his party has championed British interests in energy and climate change effectively.

Matthew Spencer is director of Green Alliance

Exhaust rises from cooling towers at the Niederaussem coal-fired power station at Bergheim near Aachen, Germany. Photograph: Getty Images.
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North Yorkshire has approved the UK’s first fracking tests in five years. What does this mean?

Is fracking the answer to the UK's energy future? Or a serious risk to the environment?

Shale gas operation has been approved in North Yorkshire, the first since a ban introduced after two minor earthquakes in 2011 were shown to be caused by fracking in the area. On Tuesday night, after two days of heated debate, North Yorkshire councillors finally granted an application to frack in the North York Moors National Park.

The vote by the Tory-dominated council was passed by seven votes to four, and sets an important precedent for the scores of other applications still awaiting decision across the country. It also gives a much-needed boost to David Cameron’s 2014 promise to “go all out for shale”. But with regional authorities pitted against local communities, and national government in dispute with global NGOs, what is the wider verdict on the industry?

What is fracking?

Fracking, or “hydraulic fracturing”, is the extraction of shale gas from deep underground. A mixture of water, sand and chemicals is pumped into the earth at such high pressure that it literally fractures the rocks and releases the gas trapped inside.

Opponents claim that the side effects include earthquakes, polluted ground water, and noise and traffic pollution. The image the industry would least like you to associate with the process is this clip of a man setting fire to a running tap, from the 2010 US documentary Gasland

Advocates dispute the above criticisms, and instead argue that shale gas extraction will create jobs, help the UK transition to a carbon-neutral world, reduce reliance on imports and boost tax revenues.

So do these claims stands up? Let’s take each in turn...

Will it create jobs? Yes, but mostly in the short-term.

Industry experts imply that job creation in the UK could reflect that seen in the US, while the medium-sized production company Cuadrilla claims that shale gas production would create 1,700 jobs in Lancashire alone.

But claims about employment may be exaggerated. A US study overseen by Penn State University showed that only one in seven of the jobs projected in an industry forecast actually materialised. In the UK, a Friends of the Earth report contends that the majority of jobs to be created by fracking in Lancashire would only be short-term – with under 200 surviving the initial construction burst.

Environmentalists, in contrast, point to evidence that green energy creates more jobs than similar-sized fossil fuel investments.  And it’s not just climate campaigners who don’t buy the employment promise. Trade union members also have their doubts. Ian Gallagher, Secretary of Blackburn and District Trade Unions Council, told Friends of the Earth that: “Investment in the areas identified by the Million Climate Jobs Campaign [...] is a far more certain way of addressing both climate change and economic growth than drilling for shale gas.”

Will it deliver cleaner energy? Not as completely as renewables would.

America’s “shale revolution” has been credited with reversing the country’s reliance on dirty coal and helping them lead the world in carbon-emissions reduction. Thanks to the relatively low carbon dioxide content of natural gas (emitting half the amount of coal to generate the same amount of electricity), fracking helped the US reduce its annual emissions of carbon dioxide by 556 million metric tons between 2007 and 2014. Banning it, advocates argue, would “immediately increase the use of coal”.

Yet a new report from the Royal Society for the Protection of Birds (previously known for its opposition to wind farm applications), has laid out a number of ways that the UK government can meet its target of 80 per cent emissions reduction by 2050 without necessarily introducing fracking and without harming the natural world. Renewable, home-produced, energy, they argue, could in theory cover the UK’s energy needs three times over. They’ve even included some handy maps:


Map of UK land available for renewable technologies. Source: RSPB’s 2050 Energy Vision.

Will it deliver secure energy? Yes, up to a point.

For energy to be “sustainable” it also has to be secure; it has to be available on demand and not threatened by international upheaval. Gas-fired “peaking” plants can be used to even-out input into the electricity grid when the sun doesn’t shine or the wind is not so blowy. The government thus claims that natural gas is an essential part of the UK’s future “energy mix”, which, if produced domestically through fracking, will also free us from reliance on imports tarnished by volatile Russian politics.

But, time is running out. Recent analysis by Carbon Brief suggests that we only have five years left of current CO2 emission levels before we blow the carbon budget and risk breaching the climate’s crucial 1.5°C tipping point. Whichever energy choices we make now need to starting brining down the carbon over-spend immediately.

Will it help stablise the wider economy? Yes, but not forever.

With so many “Yes, buts...” in the above list, you might wonder why the government is still pressing so hard for fracking’s expansion? Part of the answer may lie in their vested interest in supporting the wider industry.

Tax revenues from UK oil and gas generate a large portion of the government’s income. In 2013-14, the revenue from license fees, petroleum revenue tax, corporation tax and the supplementary charge accounted for nearly £5bn of UK exchequer receipts. The Treasury cannot afford to lose these, as evidenced in the last budget when George Osborne further subsidied North Sea oil operations through increased tax breaks.

The more that the Conservatives support the industry, the more they can tax it. In 2012 DECC said it wanted to “guarantee... every last economic drop of oil and gas is produced for the benefit of the UK”. This sentiment was repeated yesterday by energy minister Andrea Leadsom, when she welcomed the North Yorkshire decision and described fracking as a “fantastic opportunity”.

Dependence on finite domestic fuel reserves, however, is not a long-term economic solution. Not least because they will either run out or force us to exceed international emissions treaties: “Pensions already have enough stranded assets as they are,” says Danielle Pafford from 350.org.

Is it worth it? Most European countries have decided it’s not.

There is currently no commercial shale-gas drilling in Europe. Sustained protests against the industry in Romania, combined with poor exploration results, have already caused energy giant Chevron to pull out of the country. Total has also abandonned explorations in Denmark, Poland is being referred to the European Court of Justice for failing to adequately assess fracking’s impact, and, in Germany, brewers have launched special bottle-caps with the slogan “Nein! Zu Fracking” to warn against the threat to their water supply.

Back in the UK, the government's latest survey of public attitudes to fracking found that 44 per cent neither supported nor opposed the practice, but also that opinion is gradually shifting out of favour. If the government doesn't come up with arguments that hold water soon, it seems likely that the UK's fracking future could still be blasted apart.

India Bourke is the New Statesman's editorial assistant.