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2nd November 2006. Published in the International Herald Tribune By David Howell and Carole Nakhle (Lord Howell is a former UK Secretary of State for Energy. Dr. Nakhle is Energy Research Fellow at the University of Surrey.)
Stern Warnings and High Hurdles
The Report by Nicholas Stern to the British Government on the Economics of Climate Change has created quite stir. It appears to accept broadly the warnings about carbon emissions (mostly from burning fossil fuels) and climate change, but also to bring hard economic analysis to bear in an area so far dominated by arguments amongst scientists and by some chilling predictions of disaster, such as those rehearsed by US Vice President Al Gore in his film and book ‘An Inconvenient Truth’. But there are other and more immediate inconvenient truths to face. The first is that the struggle to control the climate – by far the biggest and most ambitious mission ever undertaken in human history – has to be totally global to have any effect. The biggest source now of greenhouse gases is America, but the biggest sources in the future will be China and India, with a third of the world’s population. Even now, if the UK closed all its power stations, the carbon emissions saved would be equivalent to no more than a year’s increase in emissions in China. What the billions living in poverty need to lift themselves into better lives is cheap energy and plenty of it. The hunt for energy to fuel growth is turning the developing countries towards still more reliance on burning coal , of which India, China and America have about half the world’s enormous reserves - enough to last for centuries. Yet it just happens that coal is the most carbon-intensive and the dirtiest of all energy resources – unless it can be cleaned and the massive carbon emissions be captured and stored . But who is going to pay for that?
The second awkward reality is that, while appeals to higher moral instincts may have resonance amongst policy-makers and the more comfortably off, for the vast majority of humankind choices have to be based on hard financial and economic considerations. The ‘global catastrophe’ message is not nearly enough to persuade people to change their lifestyles, or businesses to re-organize their energy intake, or government round the world to change their policies radically. A much more compelling story has to be devised and much more powerful motives and incentives have to come into play. A third stumbling block in the campaign to cut greenhouse gases is that the timescales are out of line. Energy needs are immediate, and the threats to world energy supply , whether from terrorism or political upheaval, are immediate. But the outcomes of actions to cut carbon have a hugely long lead time. In the words of the Stern Report ‘What we do now can only have a limited effect on the climate over the next forty or fifty years’. In the second half of the twenty-first century all the efforts now to cut carbon emissions will, so scientists increasingly agree, have some benefit. They may prevent the tipping point where the weather finally turns against humanity in a rage of destructive floods and freezes and boiling heatwaves. But meanwhile price, cheapness and reliability will be the deciders of the world energy mix.. Somehow the future has to be brought into the present and the motives and fears which move people and nations now harnessed to the longer term goals. A fourth awkward truth is that the investment decisions required to transform the energy supply and demand patterns of the globe necessitate immensely long term commitment and therefore a degree of both policy continuity and price predictability. Yet not only do most governments come and go, with politicians inevitably living, and trying to survive, in the very short term, but the energy scene is fraught with extreme volatility. The oil price, which is the key to energy prices, soars and then slumps, taking the gas price with it and confounding capital investment calculations . When oil prices drop, as they will in the future, people tend to give up on energy efficiency , energy saving and alternative energy investment and go gratefully back to cheap oil (and gas and coal), thus undermining the climate warming struggle.. They did so last time (in the 1980s when the oil price fell precipitately), and they could do so again. This time round it ought to be possible to combine the urgent needs for energy security with the long run fight against global warming. Together the twin goals of energy security and climate security ought to provide a truly motivating world-wide story which the prophecies of disaster alone lack the persuasive power to convey or turn into action.. The requirement is long overdue to combine both the opportunities and current dangers in the global energy supply pattern with the popular environmental concern about climate change. Harnessing these two causes – of energy security and climate security – would be to create a grand unity of purpose which the world so conspicuously lacks at present. This would be the synthesis of argument and objectives to set the world firmly on the road to the energy transition, meaning the transition in all our lives and labours, which is still only hesitantly under way. If schemes for pricing carbon, and thereby presenting consumers with the true cost of the energy they consume can somehow be established world-wide, and win confidence, then the process of real change could at last be triggered. Clever juggling of the taxes, although not an overall increase in the tax burden, may be part of the new policy mix. Whatever the methods consumers everywhere would start to pay the full and true cost of fuel and make their decisions accordingly. But the ‘ifs’ are very big, the track record so far is not inspiring. And it has to be remembered that Governments and institutions which create carbon prices, via permits etc, are made up of mere humans who can change their minds or easily be replaced .
Nonetheless, these messages are the ones which should be at the top of government agendas and should ride together – that the world wants energy which is both secure and leads to lower carbon emissions. Otherwise, without real economic incentives to save energy and invest in cleaner alternatives the long term hopes for climate change could easily be undermined. Short and medium-term crises would then capsize longer-term hopes. ENDS
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