A fatuous obsession: The Coalition's absurd energy policy is damaging industry and adding hundreds of pounds to every family's fuel bills.
Last weekend, some 52 (for the most part little known) economists signed a letter to the Observer newspaper calling on the Government to retreat from its commendably firm determination to reduce substantially, during the lifetime of this Parliament, the appalling budget deficit it inherited.
I am reminded of my own time as a Treasury Minister when, in March 1981, no fewer than 364 (rather better known) economists signed a letter to the Times claiming that ‘present policies will deepen the recession, erode the industrial base of our economy and threaten its social and political stability’ and should be abandoned forthwith.
In fact, from that moment, the economy embarked on eight years of uninterrupted growth.
I have no doubt that Chancellor George Osborne will, rightly, ignore the bad advice of the 52, just as we did of the 364. And indeed the International Monetary Fund has sensibly encouraged him to stand firm.
The economy is already recovering, slowly but incontrovertibly, from the recession.
However, there is a threat to that recovery — and the bitter irony is that this is of the Government’s own making.
It is not the very necessary reduction and eventual elimination of the budget deficit. It is the Government’s so-called climate-change policy of ‘decarbonising’ the British economy — the replacement of carbon-based energy with substantially more expensive non-carbon energy, in particular wind power.
The ostensible purpose of this policy is to prevent what is customarily described as catastrophic global warming.
Now, there are at least two major problems with this.
The first, as more and more eminent scientists are finding the courage to point out (the most recent being the distinguished physicist Professor William Happer of Princeton University), is that it is far from clear that there is a serious problem — let alone a catastrophic one — of global warming at all.
My think-tank, the Global Warming Policy Foundation, has just published a devastating analysis by the former Head of the Civil Service, Lord Turnbull, demanding that politicians ‘stop frightening us and our children’ about the threat of global warming. He calls on Whitehall and ministers to consider the damaging economic impact of blindly following the ‘climate-change agenda’.
While it is scientifically established that increased emissions of carbon dioxide into the atmosphere from the use of carbon-based energy, such as coal, oil and gas, can be expected to warm the planet, it is uncertain how great any such warming would be, and how much harm, if any, it would do.
The second major problem with the British Government’s policy is that even if it were thought to be desirable to cut back drastically on carbon emissions, this can have an effect only if it is done globally.
For the UK, responsible for 2 per cent of global emissions, to go it alone is futile folly.
And the complete failure of the UN-sponsored environment jamborees — in Cancun last year and Copenhagen the year before — to achieve a global decarbonisation agreement clearly shows that this is not happening and, in my judgment, is not going to happen.
China, the biggest global emitter, has made it clear that it will not accept any restraint on its use of carbon-based energy, as has India. (The annual increase in China’s emissions, incidentally, is greater than the UK’s total emissions.) And the U.S., the second-largest emitter, has made it clear that without China and India on board, there is no prospect of the U.S. signing up to anything.
The plain fact is that the world relies on carbon-based energy simply because it is by far the cheapest available source of energy and is likely to remain so for the foreseeable future.
The major developing countries, in particular, are understandably unwilling to hold back their development and condemn their people to avoidable poverty, by moving from relatively cheap energy to relatively expensive energy.
Yet this is precisely what the present UK Government is committed to.
Alone in the world, we have on our statute book a Climate Change Act. This commits us, unilaterally, to a legally binding process which is already well under way. And eventually — by 2050 — we will have near-total decarbonisation, by switching to an ever more expensive mix of ‘green’ energy sources.
To achieve this, the Government has introduced a range of measures, notably the renewables obligation, which requires electricity suppliers to buy a proportion of their power from renewable sources, chiefly wind power, at huge cost, which is then loaded onto all electricity bills.
Then there are the so-called feed-in tariffs, under which a greatly inflated price is paid to wind-farm owners and others who supply renewable energy to the grid — and again loaded onto our electricity bills.
On top of this, there are a number of other price-inflating measures, such as the so-called ‘carbon floor price’ (a commitment to ensure that the price of conventional energy stays high and goes higher, by means of a government levy on firms generating electricity based on the amount of CO2 they produce), which are yet to take effect.
What is doubly unacceptable, however, is that the public is being made to pay for this by stealth. This is why, in the cause of proper transparency, our electricity suppliers should be made to reveal in our utility bills the extent of this hidden tax element, which is costing families an average of £200 more a year.
This price increase would be economically damaging at the best of times; and these are not the best of times. And the damage is all the more serious when other countries are not doing the same.
In recent weeks, spokesmen for both the Engineering Employers’ Federation and the Energy Intensive Users’ Group have warned of investment and jobs going overseas, where energy costs are lower.
They have been joined by spokesmen for the chemical industry and the UK head of Tata Steel (Britain’s largest steelmaker, the former British Steel), which has already announced substantial lay-offs in the UK, partly for this reason. And this week the CBI, at long last, voiced its deep concern.
It is curious, to say the least, that a government that came to power saying it wished to rebalance the economy to rely less on financial services and more on manufacturing should be determined to impose the most anti-manufacturing energy policy of any government in British history.
This policy, incidentally, will also greatly exacerbate the problem of ‘fuel poverty’ (officially defined as the number of people who are obliged to spend more than 10 per cent of their household income on fuel), as the charity Age UK has pointed out.
The Government needs all the political support it can get to carry through its economic policies. Its disastrous ‘green’ energy policy can only undermine that support.
The Coalition likes to boast, as did its Labour predecessor which initiated this damaging policy, that the UK is the only country in the world to impose severe and legally binding carbon reduction requirements on its economy.
While this claim is well-founded, ministers might do well to ask themselves why the UK is the only country to do this. The answer, of course, is that no other country has the slightest intention of incurring such pointless and self-inflicted economic harm.
If there is one crumb of comfort, it is that this unilateralism could at last be partially modified.
When the latest set of carbon reduction commitments were announced, the Government conceded, at the insistence of an increasingly worried Treasury, that the matter would be reviewed in early 2014 in the light of what the rest of Europe is doing on this front.
But as the CBI this week pointed out, that is not good enough. First, because a great deal of damage can be done to our still-fragile economy between now and 2014; and, second, because it is not just the rest of Europe that matters but the rest of the world — notably China, the U.S. and India.
The only sensible course would be to suspend this damaging policy, here and now, until such time as a legally binding global agreement has been secured. Meanwhile, as opinion polls show the British people becoming increasingly sceptical of climate-change alarmism, ministers have started to advance two other justifications for this highly damaging policy, both of them entirely bogus.
They claim, first, that policies to promote the replacement of carbon-based energy by (substantially more expensive) renewable energy, notably wind power, will bring great benefit to the British economy and in particular create millions of so-called ‘green jobs’.
This is economic illiteracy of the worst order. As the great 19th-century French economist Frédéric Bastiat pointed out, if jobs are your yardstick, you might as well go round breaking windows so as to create jobs for glaziers.
All the Government is doing is creating uneconomic jobs that require an ever-increasing subsidy at the expense of genuinely productive jobs requiring no subsidy at all.
To engineer, at great cost, a switch from the production of relatively cheap carbon-based energy to very much more expensive renewable energy, may arguably be justified (although I disagree) on climate-change grounds.
But it cannot possibly be justified on either employment or broader economic grounds.
The second additional justification the Government gives for abandoning carbon-based energy is ‘energy security’, either on the grounds that the world is fast running out of fossil fuels, or that it would be strategically unwise to depend on an unstable Middle East or an unreliable Russia for our energy needs.
Both these reasons are baseless, and always have been; but this has never been clearer than it is today. I remember when I was Energy Secretary, 30 years ago, being solemnly told by the bosses of Shell and BP that there were only 40 years of commercially extractable oil left in the world.
Yet, 30 years on, we are still being told that there are only 40 years of commercially extractable oil left. There always are, as that is the industry’s planning horizon.
The new development, however — and it is the biggest technological breakthrough to have occurred in the energy sector since the advances that enabled oil and gas to be extracted from the North Sea — concerns the extraction of gas from shale.
Shale is a rock formation which occurs throughout the world and has always been known to contain vast reserves of oil and gas, but extracting it was uneconomic.
So far as shale gas is concerned, that technological problem has been cracked; as a result, the world is now awash with commercially extractable gas — and no longer over-dependent on the Middle East or Russia for its energy supply.
Indeed, the only ‘energy security’ problem we have is caused by the Government’s determination to make us heavily dependent on that most antiquated of energy sources, wind power.
Not only is there the inherently unreliable nature of wind, which sometimes blows and sometimes does not, but it is doubtful if it is practically possible to build and install wind turbines on the massive scale required to meet our energy needs, quite apart from the heavy economic and environmental costs of doing so.
The plain fact is that the Government’s highly damaging decarbonisation policy, enshrined in the absurd Climate Change Act, does not have a leg to stand on.
It is intended, at massive cost, to be symbolic: to make good David Cameron’s ambition to make his administration ‘the greenest government ever’. My dictionary defines green as ‘unripe, immature, undeveloped’. It is time this government grew up.
* Lord Lawson is a former Tory Chancellor and chairman of the Global Warming Policy Foundation.
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