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None of the pledges made by the Coalition upon coming to power in May 2010 were more striking than the following two:
The argument has raged amongst Conservatives about whether green jobs are the future of the economy and a path to economic prosperity, or the misguided policy of those following a bad science that damages Britain's hopes for financial recovery and heaps cost and misery on the bills of energy company customers all over the UK.
In the 2nd of the CPS' new Debate series, we offer the chance for two leading voices from either side of the argument - Tim Yeo MP and Lord Lawson - to set out their case.
Is there a valid economic case for ‘going green’ in an ‘age of austerity’? We want to know your thoughts!
Tim Yeo MP
Tim Yeo has been MP for South Suffolk since 1983. He was a member of the Thatcher and Major Governments and the Shadow Cabinet from 1998 until 2005. He was Chair of the Environmental Audit Committee from 2005 to 2010 and was elected Chair of the Energy and Climate Change Committee in 2010.
The economic imperative for “going green” was explained in the Stern Review in 2006: the cost of inaction on climate change will far outweigh the cost of shifting to a low-carbon economy. It is our responsibility to look beyond short-term interests and to make the case for long-term economic and environmental sense.
If “austerity” is used to justify not investing in green technology today the result will be higher costs and a less competitive economy tomorrow.
Convincing a stalwart sceptic about the risks of dangerous climate change in 800 words is challenging, so let’s start with what should be common ground: the UK needs a huge amount of investment in energy infrastructure in the next decade without which growth will be impossible. Our growth strategy must deliver reliable and affordable energy to consumers.
At a time of continued economic difficulty it’s tempting to abandon decarbonisation in favour of more coal, oil and gas consumption. These fuels will continue to contribute to our energy mix for the foreseeable future, but to delay Britain’s investment in low-carbon technology just when other countries are starting to accelerate theirs verges on the Luddite. Whether or not you agree with it, the international consensus—significantly most evident in the business community—is now committed to emissions reduction. In the next decade much of the most rapid growth will be in low-carbon markets. Furthermore despite discoveries such as shale gas, the price of fossil fuels will continue to rise. Even setting aside the environmental costs of inaction on greenhouse gas emissions and the high financial cost of the greater adaptation measures that would then be needed, investing in the low-carbon transition could save money and create opportunities.
In the short term the capital costs of low-carbon electricity generation are higher than those of conventional fossil fuel plant and will be borne by consumers. However in the medium term, if Britain does not take the low-carbon route, consumers would be exposed to the costs and uncertainties of a high-carbon future. Continued reliance on gas power exposes the UK to the short-term price volatility and energy security risks that have often hit consumers with punishing price increases. As the Committee on Climate Change has recently pointed out energy price increases are mostly caused by higher world prices, not by the cost of green policies. Against a background of rising world population and resumed economic growth there is only one way fossil fuel prices will move. By contrast the cost of many low-carbon technologies is falling, as the dramatic reduction of the cost of solar photovoltaic technology has illustrated.
The key is to set transparent, stable policies so that consumers and businesses can manage the transition to a low-carbon economy. Arguing against green investment only increases political uncertainty. As Chair of the Energy and Climate Change Committee I speak frequently with directors of the most energy-intensive industries in Europe and their message is clear: almost all of them are ready to go green if we can deliver the right framework and many are eager to help make the UK a world leader in low-carbon technologies.
In other words, we need to ensure that our businesses are competitive in the low-carbon world that is likely to prevail in the 2020s and thereafter. How nations adapt to carbon constraints will define their ability to compete. Every EU business considers its carbon liabilities and the governments of every EU country should do the same. South Korea and China are already investing billions of Euros to reinforce their infant low-carbon industries. Low-carbon investment grew to $243 billion last year, amounting to annual growth of 29% since 2004. The UK market for low-carbon technologies is the sixth largest in the world and DECC expects its green policies to create 250,000 jobs. Offshore wind and CCS technologies have huge export potential. Promotion of polluting industries could save money in the short term, but would lump us with heavy carbon liabilities for the future.
The world is unlikely to continue spending six times more on subsidies for fossil fuel consumption than for renewables for much longer. The latest International Energy Agency Outlook confirms that delaying investment in low carbon energy in this decade means that more than four times as much will have to be spent after 2020.
Green growth will avert climate disaster and create opportunity. Politicians must consider not just the short-term interests of the vocal few, but look to the long-term well-being of the UK and the world. We need to think not only about GDP this year and the competitiveness of entrenched industries, but about broader conceptions of economic success and the wealth of future generations. If we can do this in a way that puts us ahead of the curve in emerging industries, then we can reap economic rewards in the pursuit of long-term sustainability.
Lord Lawson was Chancellor of the Exchequer from June 1983 to October 1989 under Prime Minister Margaret Thatcher. He is Chairman of the Board of Trustees of the Global Warming Policy Foundation and author of the book 'An Appeal to Reason: A Cool Look at Global Warming".
It is sad that fashionable obsession can lead an intelligent man like Tim Yeo into such a farrago of factual error and economic illiteracy. The reason why there is no economic case for ‘going green’ is simple. It is that green energy is hugely more expensive than carbon-based energy, it always has been and is likely to remain so for the foreseeable future.
That, and no other reason, is why the world relies on carbon-based energy – coal, oil and, increasingly, gas.
And that is why to ‘go green’ requires either a heavy tax on carbon-based energy, to make it less competitive, or a massive subsidy for wind power and other forms of green energy, to make them more competitive – and probably both. Either way, these represent a huge economic cost and a burden on the consumer that bears especially hard in an age of austerity, but which would be unjustifiable at any time.
In his better moments Tim Yeo half-recognises this. Introducing, as its Chairman, the most recent Report of the House of Commons Energy and Climate Change Committee, he is quoted as saying “Taking action on our own will have no overall effect on emissions other than to outsource them…the price of carbon has to be increased at an EU level to kick-start investment in clean energy”.
I have news for Tim Yeo. There is a world outside the EU, including the fastest growing major economies on the planet, such as China and India. Unilateral EU action (which in any case looks increasingly unlikely in future) would also simply outsource industry - and thus emissions - from Europe to China (which is busily building a new coal-fired power station every five days) and the rest of the emerging world, which have not the slightest intention of burdening themselves with the massive economic cost of ‘going green’.
One of Tim’s more remarkable assertions is that “to delay Britain’s investment in low-carbon technology just when other countries are starting to accelerate theirs verges on the Luddite”. The trend is in fact in the reverse direction. Not only is the emerging world firmly committed to carbon-fuelled growth, but even in slower-growing Europe ‘green’ subsidies are being phased out. Spain, which went for wind power (in particular) in a big way, has decided to cut back drastically all its ‘green’ energy subsidies. In recent months, similar cuts have been announced in Italy, Greece and the Czech Republic. And Germany, Europe’s largest economy, is doing much the same. Meanwhile, in the United States, the solar power industry, once their renewable of choice, is mired in scandal and in a state of collapse.
I regret, incidentally, the use of ‘Luddite’ as a generalized term of economic abuse, since it does in fact have a precise meaning. It refers to the movement in the early days of the industrial revolution to destroy machines in order to protect jobs. It precise analogue today is the attempt by the Tim Yeos of this world to persuade the government to move from comparatively cheap carbon-based energy to much more expensive green energy in order to create ‘green jobs’.
This also underlines the fundamental point that even if the whole world were to be converted to costly ‘green energy’ – which is not going to happen – there would still be a heavy economic cost, not to mention the human cost in those countries where a slower rate of economic development means unnecessary poverty, disease, malnutrition and premature death for hundreds of millions of people.
Tim, of course, confidently tells us that this is merely a temporary burden that will soon pass, since “despite the discovery of shale gas, the price of fossil fuels will continue to rise”, presumably making green energy thoroughly economic. I wonder how he knows this. As a former Energy Secretary, some 30 years ago, I have watched fossil fuel prices rise and fall as confident predictions regularly bite the dust. What we do know is that in the US, which at the present time is leading the way, the shale gas revolution has caused the price of gas to plummet, and this is bound to spread to the rest of the world before too long.
One last point. The one essential resource for onshore wind power – the UK’s (or at least the unlamented Mr Huhne’s) green energy of choice - is large tracts of land. I am constantly surprised that politicians who like to think of themselves as progressive support such a massively perverse scheme of income redistribution: a scheme that takes money from the pockets of the people and pays it out in subsidies to wealthy landowners.
Tim Yeo MP
Fossil fuels may be superficially cheap, but they actually come at a heavy price. It is extraordinary that you cite the costs of slower economic growth, but ignore the much greater human, economic and ecological costs of climate change. The fact that we ignore these costs is the world’s greatest market failure. If we were to price in the true costs of CO2 pollution, even expensive low-carbon generation would look attractive.
The cost of many low-carbon technologies seems higher than fossil fuel generation, but fossil fuels continue to receive over $400 billion in subsidies each year and have been supported by governments for over a century. Let us not pretend that they compete in a free market.
True, the ill effects of Nigel Lawson’s dirty diet of oil and coal may not be immediately apparent; the temptation to feed our addiction to cheap conventional energy is hard to break. But in the long term, creating a low-carbon energy mix is a much healthier option. Investing in renewables, CCS and nuclear will not only improve the UK’s energy security and guard against rising fossil fuel prices, it could also help to rebalance the economy and create jobs if we can create the right conditions for low-carbon companies to flourish.
So let us consider the opportunities. You helpfully remind me that there is a world outside the EU, but you seem to imagine that countries like China are doing nothing. On the contrary, the Chinese consider the green economy a chance to make a technological leapfrog and capture the markets of the future.
My Committee has just returned from China, where investment in a low-carbon economy is growing at lightning speed. We saw efforts in energy efficiency, low-carbon generation, clean buildings and green vehicles. The expansion of coal continues, but this is a country that plans a much greener future.
So why are the Chinese investing so much? Partly it’s because climate change is a risk, but mostly because they believe that growth depends on a low-carbon economy. For now, British companies are at front of the pack, helping to build that future. By keeping our own green development on track we can lead the world in the race for a green future, rather than be left looking back at the smoggy glory of our polluting past.
If going green is a fashion, then I would much rather be a trend-setter than a behind the times.
As President of the Renewable Energy Association, described on its website as “The voice of the renewables industry in the UK”, it is obviously difficult for Tim Yeo to be objective. Nevertheless, I regret that he has not addressed any of the key points I made in my opening statement in this brief debate.
Instead, he bangs on about what China is doing to create “a much greener future”. So let us look at what China is really doing, rather than what he tells us it is doing.
According to the International Energy Agency (IEA), some 87 per cent of China’s energy output comes from fossil fuels, chiefly coal. The bulk of the rest comes from biomass, with renewables such as wind and solar accounting for less than a tenth of 1 per cent. Nor is this going to change significantly in the years ahead. China is investing heavily in fossil fuel resources around the world, in particular oil and gas, to fuel its future growth. As a result, the IEA reckons that by 2020 China’s carbon emissions will have quadrupled since 1990, the pathetic Kyoto agreement’s base date.
No wonder the Chinese government is adamant that China will not accept any binding emissions reduction target – which makes Tim Yeo’s policy worse than futile, as energy-intensive industry locates in China to cut fuel costs..
So what is China up to with its renewables industry? The answer of course is exporting, to countries in the West that are foolish enough to wish to saddle their industry and their people with inefficient, high-cost, energy. In 2010 China produced half the world’s solar panels, while having only 1 per cent installed in China. The story is little different with wind turbines. And the West (as well as China itself) is actually subsidising the country’s exports of renewables.German official development aid to the Chinese renewables industry already exceeds €100 million.
Tim closes his statement with a rhetorical flourish : “We can lead the world in the race to a green future, rather than be left looking back at the smoggy glory of our polluting past…I would much rather be a trend-setter than behind the times”. Alas, Trendy Tim shows that he understands neither the science, nor the economics, nor the history. Carbon dioxide is a colourless, odourless, non-polluting substance which, so far from causing smog, is essential for plant life. And wind-power, so far from being the future, is an ancient and unreliable source of energy which was sensibly abandoned over 150 years ago when technological development made possible the industrial revolution.
We cannot know what the fuel of the distant future will be. But we do know that the fuel of the foreseeable future will be gas, thanks to the technological breakthrough in the extraction of gas from shale, which exists in abundance throughout the world, including the UK. And we also know that it will not be wind power and the like, whatever the Renewable Energy Association likes to say.