Transforming energy efficiency requires ending the waste of the anarchic market system
The British Chancellor [chief finance minister] George Osborne has announced that there will be massive tax breaks for firms involved in extracting oil and gas from shale rock, using a process known as fracking. The tax rate will be set at 30%, compared to 62% for new North Sea oil operations and 81% for existing fields. Osborne boasts that his will be the most generous tax regime in the world for shale gas.
Combined with his earlier announcement that he wants to see 40 new gas-fired power stations built, this marks the abandonment of the green rhetoric of the Tories and Liberal Democrats when they were in opposition. It also indicates a continuation of New Labour’s policy to base power generation on the use of the fossil fuels that cause global warming, but stripped of direct, although minor, subsidies for renewables and for energy saving that Labour introduced.
It is clear that it is Osborne who is setting the agenda for energy policy, representing the interests of big business directly, rather than Ed Davey, the Lib Dem minister theoretically in charge. Despite possible minor differences in emphasis between them, though, the main thrust is agreed, which is to give up any serious commitment to switching to renewable energy sources.
To try to cover this up, Michael Fallon, the Tory junior minister put into the Energy and Climate Change Department to keep an eye on Davey, resorts to Orwellian doublespeak. He told parliament on 18 July that the oil and gas sector “is a vital part of our economy and will remain so for decades to come even as we move to a low carbon economy”.
This reflects the official position that the dash for gas is an essential short-term step in the transition to a carbon free economy because gas emits less pollution than coal. As Guardian columnist George Monbiot commented, the government proposals are transitional in the sense that chocolate fudge cake is a transition to a low calorie diet. Davey’s Energy Bill being debated in parliament will allow gas plants to produce more carbon dioxide than today until 2045. Climate science is saying that emissions need to be cut by 40% by 2020 to have any chance of tackling global warming, a target that switching from coal to gas by 2045 could never come close to achieving.
It is even doubtful how serious the Con-Dems are in the dash for gas. Provisions in the bill impose no effective restrictions on the further expansion of coal-fired power generation. The only proviso is that, at some unspecified point in the future, coal plants must be able to demonstrate that carbon capture and storage technology could theoretically reduce their emissions by some unspecified amount.
The bill also replaces the small direct subsidies for renewable energy with obscure and complex market incentive mechanisms called ‘contracts for difference’ and ‘capacity markets’. Under this system, power generating companies will enter into long-term contracts to produce energy, but be paid above standard wholesale prices. How much they will get will depend on the ‘strike price’, which has yet to be agreed.
Similar schemes have been run in the USA based on ‘capacity auctions’, but the result was that energy efficiency projects received 30% of the payments available with existing fossil fuel generators getting 70%. Also, any money from these schemes will go to big infrastructure projects. Nothing will be available for households to improve energy saving. In fact, there is nothing in the bill to encourage energy saving by consumers and therefore reduce energy demand.
Green credibility?
It is highly unlikely that a market incentive system will result in a more rapid development of renewable energy than direct subsidies produced. Although pitifully small, the subsidies did lead to an expansion in wind and solar capacity. Another snag with the new approach is that nuclear power is included in the incentive system, giving it a central role in the fight against climate change. This is a big mistake since nuclear is dangerous and does not represent a green energy source. (See: Lib-Dem Environmental Sell Out, Socialism Today No.167, April 2013)
The government’s green credibility has been further undermined following its refusal to include targets for reducing greenhouse gas emissions in the Energy Bill. A backbench attempt to introduce such targets was narrowly defeated in the House of Commons. This follows lobbying by the Big Six energy companies, (EDF, Centrica, E.ON, npower, Scottish Power, SSE), revealed by a freedom of information request in the Guardian last year. The FOI also showed that Davey tried to block EU environmental legislation that was opposed by the Big Six which, in practice, meant anything that threatened their interests as fossil fuel or nuclear power generators.
In some respects, government energy and environmental policy is now a throwback to the 1950s and 60s. Rather than developing public transport, which would cut pollution, road building is again at the centre of future spending plans. In June, Danny Alexander, Lib Dem Treasury minister, announced schemes worth £28 billion for roads over the next five years. If implemented, they would be another nail in the coffin of attempts to reduce greenhouse gas emissions.
In an age of austerity, of course, it is not certain that this money will be deployed, but the intention is clear: the abandonment of any serious green policies. Osborne sees shale gas as central to a new non-green energy policy that has the potential to transform the British economy, but his enthusiasm could be premature. It is far from clear whether shale exploitation on a large scale is technically viable and there will be huge opposition to the environmental impact in rural areas, including from Tory supporters.
No need to wait for new technological discoveries
The new situation following the great recession has hit home to some in the establishment who, unlike Osborne, realise there is a climate emergency. The former government chief scientific advisor, Professor Sir David King, is quoted as saying: “The only way to save the planet is to enable bulk electricity to be produced more cheaply by solar energy than by fossil fuel”. (We Need a New Apollo Mission to Harness Sun’s Power, Financial Times, 2 August) As King says, the problem is that to make solar power cheaper than fossil fuels will require a technological breakthrough, which would mean vast sums spent on research and development.
King holds out the hope that Barack Obama’s administration, along with other governments in the OECD, will see this as a priority, similar to the Apollo moon landing – or the atom bomb project in the second world war – and divert sufficient resources. However, a cursory consideration of current economic and political conditions shows this is a desperate hope. As the only country with the resources to attempt this, the USA would have to lead such an initiative, but America is presently in the middle of a huge investment in shale gas, with the strategic aim of making the country energy independent by the end of the decade. It is inconceivable in these circumstances that Obama or any future president would see solar research as a priority, certainly not on the scale needed for a major scientific breakthrough.
There is no need to wait for new technological discoveries to tackle climate change. Use of existing renewable energy sources, combined with a programme to improve energy efficiency, would be enough to transform the situation. Part of such a programme would be the promotion of public transport and improving home insulation, etc. But central to transforming efficiency will be the elimination of the waste of the anarchic market system, such as the energy losses in the boom/bust economic cycle.
By the same token, as King acknowledges, renewables will never be introduced in sufficient quantity while the capitalist ‘rules of the game’ apply. Improving energy efficiency and converting to renewable energy sources can only be achieved in the framework of a democratically planned socialist economic system.
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