What should the government’s energy policy focus on? This was the question posed to a small group of regional business leaders by Dr Neil Bentley, the CBI’s director of the business environment. The dinner, generously hosted by Irwin Mitchell, is part of the CBI’s process for listening to businesses across the country to inform its own views and lobbying.
1. Is the energy market working?
The main topic of debate was whether the market in energy and government policies and subsidies are achieving the goals of secure and low carbon energy at competitive prices . Concern was expressed about the extent to which government policy was leading UK energy suppliers to pursue projects that may turn out to be against the broader economic interests of the country. If the UK takes a stronger environmental position than our overseas competitors, funded by public subsidy or higher future fuel bills, then the ability of industry to compete internationally could be eroded.
2. Localism could exacerbate energy problems
There was also concern expressed over the government’s strong drive towards localism. Given the political pressures on local governments and the potential lack of an over-arching national framework, the consensus around the table was that this was likely to exacerbate energy policy problems. Overall, strong support was expressed for a balanced national energy strategy, driven more directly – but not exclusively – by a market based approach.
3. Sustainability and climate change are not the same
What I noticed in the discussion was the tendency to somewhat conflate the terms “sustainability” and “CO2 reduction”. My own reading of the political and societal position, though, is that while “sustainability” is gaining ever more public credence, “climate change” as a driver for policy is starting to decline. As evidence for this, I would note that President Obama did not refer directly to the term “climate change” once, in his most recent State of the Union address while today’s Daily Mail shows that public scepticism is on the rise.
There are, potentially, three reasons for this. First, it may reflect the fact that, with more pressing economic concerns, this is temporarily on the back burner (no pun intended). Second, following two very snowy winters in the Northern Hemisphere, there may be some confusion between “weather” and “climate” in the public’s mind. These are both, potentially, short-term issues that will have little impact on longer-term energy policy. What I think is of more concern is that, since Climategate, the uncertainty over the science of climate change is becoming much more broadly recognised, including by the government’s own chief scientific advisor.
4. What will the public pay to prevent catastrophic climate change?
This raises the question as to how much the public will be willing to pay to stop potential catastrophic climate change even when there is great uncertainty. It seems to me at least possible that the political consensus will change over this within the next decade, particularly if we have more cold winters and more uncertainty about energy security. “Sustainability” as a policy driver is set firm, but “CO2 reduction” as the primary way of achieving that looks, to me at least, more uncertain politically.
Should this turn out to be the case, then this will have important consequences for a number of current initiatives, most notably, perhaps, carbon capture.
5. Where should energy investment be focused?
A further question that arose was the extent to which energy policy should balance investment in proven energy sources with significant economic or environmental costs, against a more speculative investment policy in new energy technologies. The energy nirvana is for low cost, highly sustainable and secure energy supplies and, occasionally, there is some scope for optimism here.
For example, this week, two scientists in Italy claim to have a commercial ready cold fusion reactor. While there is, rightly, much scepticism expressed over the ability of this fuel source to be a realistic answer to our energy problems, the US Navy has been actively researching into cold fusion for many years.
Is the UK Government doing enough to encourage speculative research in this area – and where should their focus be?