The EU is in the midst of multiple crises, some immediate, others more long term. At times like these, what is likely to happen to climate change policy?
The immediate Greek debt crisis seems to have been solved by Eurozone and IMF pledges of many billions of euros. In turn, this has renewed confidence that any similar crises in Spain, Portugal, Ireland or other member states would be tackled similarly and controlled. Markets have pulled back from the brink of panic, but the longer-term outcome may still be serious. German voters are already displeased by their government’s decision to bail out Greece and, in the absence of effective structural change to the indebted economies, the regular flow of funds could be necessary for many years to come.
An alternative would be for Greece and countries with similar problems to leave the Eurozone and devalue their currencies sufficiently to regain their competitiveness, but the end of monetary union would be a difficult political pill to swallow. In the meantime, the UK is experimenting with a fully-fledged coalition for the first time since the Second World War. Maybe this will be part of a major reform of their political system, but first the new government has to prove itself by getting a grip on the horrendous debt problem it has also inherited. Markets may stop worrying about the Eurozone, but could turn their attention again to the crisis across the Channel, with who knows what consequences. Confidence is a fragile thing.
The recession caused by the banking crisis has itself exposed the underlying weakness in the economic models of many developed countries. Fixing this will require a period of relative austerity of a kind which many Europeans have never experienced. But at the end, this does not mean that Europe will regain its international competitiveness, let alone meet the high aspirations of the EU as a bloc. China and other large emerging economies have accumulated large trade surpluses, while growing much faster than the currently industrialised world. European countries, while continuing to offer their citizens a very comfortable way of life, will almost certainly become much smaller players on the world stage.
This uncomfortable situation will hardly be improved by adhering to current plans to reduce carbon dioxide emissions by 20% by 2020, and by a much greater extent thereafter. Despite the relatively minor costs (about 1% of GDP) predicted by Stern and others, there are many economists who think that the cost of the current policy direction to curb carbon dioxide emissions is understated. And that is without considering whether or not the carbon market approach will even be effective at both reducing emissions and keeping the lights on.
The problem is that the currently favoured solutions to the climate change problem are not in themselves economically viable. They need government subsidy, which means they have to be paid for by taxpayers, via increased taxation (direct or indirect), cuts in public services, or in higher energy prices. Governments would prefer to see increases in energy prices rather than taxation but, although the link is less direct than for tax rises, voters will still know who is to blame for this.
In prosperous times, we might grumble and carry on, although this might become increasingly untenable unless public scepticism on the climate change issue was to be reversed. But the situation now is different, very different. To use the UK example, total government debt in 2009 was �950 billion, and the annual budget deficit was �159bn, equivalent to 11.4% of GDP. The new government is committed to cutting the deficit and debt by reducing public expenditure in real terms, but there will also inevitably be tax rises. Unemployment is high, which reduces the overall tax take while increasing benefit payments. Does this government - any government - really think it can convince the electorate that a policy which leads to significantly higher energy prices is justified at a time when there will need to be considerable belt-tightening for other reasons?
Although nearly all politicians across the EU talk the talk on climate change policy, they have yet to convert this into really significant action. Could it be that they recognise the political realities and are reluctant to push voters too far? After all, the Bank of England governor is reported to have said that the austerity measures needed to reduce the UK debt mountain would make the party in power ‘unelectable for a generation’. Increasing the pain will not make them more popular.
On a broader stage, we have seen Stephen Harper, the Canadian Prime Minister, refuse to make climate change the focus of the forthcoming G20 meeting, and Australian PM Kevin Rudd has had to put the country’s emissions trading scheme on hold following defeat in the Senate. After the damp squib of Copenhagen, few are now talking up the chances of significant progress in Cancun in December.
Against this backdrop, then, comes a timely new report, the Hartwell Paper, written by an international team of 14 experts, including Professors Gwyn Prins of the LSE and Mike Hulme of the University of East Anglia. In the context of the Kyoto protocol and efforts to negotiate its successor, their conclusions are radical, given that they agree that climate change is a real threat which needs to be addressed.
Professor Hulme has written a piece on the BBC’s Green Room web page and, to quote from this: “It is not possible to have a ‘climate policy’ that has emissions reduction as the all-encompassing and driving goal. . . . We advocate inverting and fragmenting the conventional approach: accepting that taming climate change will only be achieved successfully as a benefit contingent upon other goals that are politically attractive and relentlessly pragmatic.”
The authors propose three goals. The first is to ensure the basic needs of all the world’s population are met, which would include giving access to electricity for the first time to an estimated 1.5bn people. The second goal is to achieve this sustainably; although the concept is somewhat woolly and prone to capture by different interests, the idea of looking at longer term consequences of actions is certainly not a bad one. Thirdly, the report has a goal of resilience, ensuring that societies can cope with extreme weather or other events. This is where more prosperous societies score highly, as they have the resources to protect their citizens.
Putting access to electricity before dealing with emissions will seem to many to be heretical. Compounding the heresy is this line of thought: “If energy access is to be expanded to include those without access today while meeting expected growth in global energy demand in the rest of the world, the unit costs of energy will necessarily have to come down.” Rather than forcing the price of energy up by dictating the use of uneconomic renewable technologies such as wind and solar, the report proposes a flat carbon tax which would fund a large research effort aimed at developing alternative energy sources which can compete directly with fossil fuels.
This is a refreshing take on the issue, and one which sensible politicians will think long and hard about. It puts the needs of people - particularly the poorest - first, it shows confidence in human innovative capacity, and it proposes a simple and transparent way to fund the efforts and signal the need to move away from fossil fuel use in the longer term. It will, of course, produce howls of protest from those hitched to the global emissions reduction juggernaut and philosophically wedded to the ‘polluter pays’ concept.
Translating this into action would mean, in the short term, no more investment in expensive, intermittent off-shore wind around the UK, no repeat of Germany’s costly encouragement of solar power, and a further step away from Spain’s highly subsidised boom in renewables. Instead, the focus would be on developing generation systems which would compete directly with fossil fuels. They would begin to replace conventional power generation because they offer benefits and lower costs rather than because governments use taxpayers’ money to subsidise them. The renewable energy revolution would not be stopped forever, just delayed. The first European politicians to back this approach are likely to have their courage rewarded by strong public support.
The Scientific Alliance
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