As Burns said, ‘The best-laid schemes o' mice an' men gang aft agley’. This universal truth should be translated into all official languages and displayed prominently in the corridors of power in Brussels and all EU Member State national capitals. Nowhere does it apply more than to current energy and climate change policy.
Ever since distributed electricity and gas supplies have been available, governments have generally tried to make them accessible to all citizens and assure security of supply to both domestic and industrial users. An affordable, secure energy supply has made lives considerably more comfortable and has been essential for economic growth. It has also, of course, been a considerable source of tax revenue.
However, as global warming has seized the attention of governments, energy policy has increasingly been driven by the perceived need to ‘decarbonise’ rather than simply to provide a reliable and low-cost supply. The appropriate role of government in shaping generation and supply networks is debatable, but both public and private sectors are now obliged to meet overall targets set and agreed by Member States at EU level.
The European Union is a lumbering and uncoordinated beast at the best of times (the ongoing eurozone fiasco, for example, certainly does not present an edifying picture to the outside world) but when decisions are made they often include headline-catching targets which tend to give Brussels-watchers a sinking feeling. Over-optimism, hubris even, seems to be the order of the day, and failure feels inevitable.
So it was with the ill-fated Lisbon agenda, which aimed to make the EU "the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion", by 2010. And so it is now turning out to be for the present climate and energy package, oh-so-neatly encapsulated in the 20-20-20 targets: a 20% reduction in greenhouse gas emissions, a 20% share of energy consumption from renewables and a 20% improvement in energy efficiency (all by 2020, of course).
There are two prime rules of policymaking: make it realistic and make it simple. By prescribing unnecessary subsidiary targets (use of renewables and increased efficiency) to reduce emissions and by putting in place a range of complex measures (including the ETS cap and trade system), the Commission and national leaders comprehensively shattered both rules. The best-laid plans may ‘gang aft agley’; bad plans are guaranteed to.
What policymakers did not allow for was what Harold MacMillan called ‘events, dear boy, events’. The EU economic slump means that the price of emissions set via the carefully-crafted Emissions Trading System has followed suit. This makes the price signals to generators and big energy users so weak that there is no incentive to reduce emissions. This is compounded by the second ‘event’, the drastic reduction in US energy costs from the greater exploitation of national energy resources, particularly shale gas and oil. The fall in energy prices has been so dramatic that the reindustrialisation of parts of America seems perfectly realistic.
The far greater use of gas has resulted in a rather more effective (and much more economic) rate of decarbonisation of the American economy, at a time when costs on this side of the Atlantic are being remorselessly driven up by government policy. One consequence of this is a big drop in the use of coal in the US. This has made larger quantities available on the world market and pushed down the price. Not surprisingly, European generators have been quick to see the opportunity.
A result of these disruptive events (unforeseen by politicians) is that Germany, having encouraged the installation of thousands of wind turbines and one of the world’s largest concentration of photovoltaic panels, is now building a number of coal-fired power stations to replace nuclear reactors, which are all due for closure (in a knee-jerk reaction to the Fukushima disaster). Most of these will burn locally-mined lignite, one of the most polluting fuels available. In the UK, the Environment Agency has pointed out that, at 40%, the share of electricity generated from (largely imported) coal is the highest since 1996, thereby threatening the achievement of emissions reduction targets (Cheap coal ‘threatens UK pollution targets’).
Meanwhile, the subsidies paid to operators of wind turbines and solar panels remain sufficiently generous to make renewable energy one of the more profitable ways to invest money at present, whatever their neighbours may think. The increased use of coal is driven by market forces, but renewable energy sits in a bubble protected from the market. If policy was rational and joined-up, the push for wind and solar energy would be questioned in light of what is happening elsewhere in the system and, perhaps most importantly, in competitive economies outside our influence.
Fortunately, there are finally signs that some rationality is creeping back. There have been public squabbles between Commissioners regarding the importance of supporting industry rather than blindly following the path of localised emissions reduction, regardless of cost. There have also been hints that a more enlightened approach to energy policy was being discussed at the recent EU summit, although nothing concrete has emerged.
Parts of the policy seem to be on their death-bed. Political enthusiasm seems to be waning, in line with increasing public disenchantment. Meanwhile, zombie-like, the march of renewables continues, producing no effective gain for society but guaranteeing an escalating and ongoing cost for consumers and industry. Surely it is time to get a grip and move back towards an energy policy which makes economic sense. Life is, after all, about priorities.
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