Balancing sustainability with low cost energy - what are the priorities for UK business?

By | February 2, 2011

balancing sustainability2What 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?

About Mark Freeman

Mark joined the School of Management in 2006, following previous full-time academic appointments at the Exeter Centre for Finance and Investment (University of Exeter) and the University of Warwick. He has held visiting academic positions at the Kellogg Graduate School of Management (Northwestern University), the University of California, Irvine, and the University of Technology, Sydney.

Before becoming an academic, he worked as an equity research analyst specialising in the brewing and distilling industries for stockbrokers Savory Milln and James Capel, in London. He also has corporate finance experience with United Distillers in Scotland.

Specialties: Economics of climate change, Long term funding of nuclear power, Pension funds - long term deficits

5 thoughts on “Balancing sustainability with low cost energy - what are the priorities for UK business?

  1. Lewis Larsen

    A group of interdisciplinary academic scientists closely connected to the Santa Fe Institute in Santa Fe, New Mexico, just published an excellent 8-page, peer-reviewed paper as follows:

    “Energetic Limits to Economic Growth”
    J. Brown et al.
    BioScience 61 pp. 19 – 26 (January 2011)
    Source URL (free copy) = http://www.aibs.org/bioscience-press-releases/resources/Davidson.pdf

    A key graph showing the central result of their work is found on page 20: “Figure 1. The relationship between per capita energy use and per capita gross domestic product (GDP; in US dollars), plotted on logarithmic axes, from 1980 to 2003.”

    In an interesting subsection on page 22 titled, “Increased energy supply,” Brown et al. make an intriguing remark about what might happen in the event of a huge breakthrough in low-cost nuclear energy technology; they mention ‘hot’ fusion, no doubt because they were unaware of the possibility of low energy nuclear reactions (LENRs); quoting directly, “A breakthrough in nuclear fusion, which has remained elusive for the last 50 years, could potentially generate enormous quantities of energy, but would likely produce large and unpredictable socioeconomic and environmental consequences.”

    Interestingly, the results published by Brown et al. strongly support a key Figure and many of the conclusions contained in a 15-page extract from Lattice’s April 12, 2010, white paper titled, “Commercializing Low Energy Nuclear Reactions (LENRs): Cutting Energy’s Gordian Knot — A Grand Challenge for Science and Energy;” a free public copy of the excerpt is available at:
    http://www.slideshare.net/lewisglarsen/cfakepathlattice-energy-llc-white-paper-excerptapril-12-2010

    Lewis Larsen, Lattice Energy LLC

  2. Nick Palmer

    In answer to your question 5, I would say no. People have been fooled by the anti-global warming pundits. There is legitimate uncertainty and genuine grey areas in the science but these are are not what are being used to fool the public. Instead crafted rhetoric, misleading ideas and disinformation are being marshalled by ideologically/politically motivated people. Following these, there are genuine sceptics who want to see greater certainty and I understand that, but far too often the pseudo-sceptics are massively skewed inasmuch as they disbelieve anything from conventional climate science, no matter how robust, yet lap up anything, no matter how insubstantial from the “denialist” side if it supports their views. That is not scepticism, it is prejudice.

    I sort of straddle the fence on “cold fusion”. I am very much an environmentalist – see my blog “Sustainability and Stuff according to Nick Palmer” – but have been following the developments in LENR since 1989. I am convinced that there nuclear effects take place in metal lattice environments that conventional theory does not accept. The Italian announcement is too dramatic in terms of energy released to be a mistake. I think it must be either fraud or legit. Here’s is a link to an article I did a long time ago for a magazine that covers these matters

    Cold Fusion and New Energy—An Environmentalist’s Perspective

    The article is my ideas on the environmental implications of a new source of energy which may not depend on a huge infrastructure to generate and supply it.

  3. Finn

    Actually the speculative energy research is more suppressed by people who believe in climate change than those who do not. The top climate blogger, former Clinton administration member Joe Romm is very hostile towards energy miracles /silver bullets.

    Many seem to think they are just an excuse to delay the implementation of present green tech. Also the Vice President’s top science adviser is a cold fusion critic and US Secretary of Energy Steven Chu also dissed BLPs Mills on one statement.

  4. Nick Palmer

    Finn, Romm, and no doubt the others too, is hostile to impractical castles-in-the-air miracles like hot fusion being used to suggest to people that a miracle will come and they don’t need to do anything else, thereby slowing down vital action that is needed now. In short, misleading propaganda. Real miracles would probably be welcomed.

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