Facing Up to the Climate Policy Backlash

One front page does not a crisis make. But the malcontent over climate change policy is growing and, with rising energy prices, can only become worse. Green campaigners shouldn’t be complacent about this because while the science and economics of climate change may largely be settled, the politics are not.

Last week’s Mail splash was a mash-up of two stories, both essentially from the same source; the Global Warming Policy Foundation. One part, which is of less interest, is based on a paper by Lord Andrew Turnbull, an economist and trustee of GWPF who served as Cabinet Secretary during the Blair years.

Turnbull’s is the tone of a climate sceptic. And while it would be a mistake to dismiss his views as irrelevant, there is strong evidence that recent controversies have had little impact on public confidence in climate science. But the other part of the Mail’s story should be of more concern, not least because it positioned right on the fault line between climate change policy and the state of the economy (or at least people’s experiences at the household level).

Using GWPF data, the Mail claimed that ‘cash strapped families pay an average of £200 a year in stealth levies to subsidise Britain’s massive expansion of wind farms, solar panels and ‘environmentally friendly’ heating schemes.’

This claim is at least partially debunked on fullfact.org and it’s worth noting that incentives for renewable heat are in fact funded from general taxation rather than by a levy on energy companies that is passed onto consumer in their bills (which makes a difference because the burden falls less on the shoulders of poorer households than had the policy been paid for energy consumers). But at a time when bills are rising – and rising dramatically – and household incomes are falling in real terms, the truth that a not insignificant proportion of people’s bills fund renewable energy is a hard fact to swallow.

There is also a kernel of political truth at heart of the Mail’s hyperbole. The same Cardiff University/Ipsos-MORI polling that shows public acceptance of climate science holding firm also sees 78 per cent of people questioned being ‘fairly’ or ‘very’ concerned that electricity will become unaffordable in the future. The lion’s share of future increases in people’s bills is almost certain to come from rising fossil fuel prices, but politicians may find it increasingly difficult to pile more climate policy costs onto domestic bill-payers; the Coalition has already backed off from doing this in the case of the RHI. But paying through taxation at a time when such stringent public spending cuts are being made also may be hard to sustain.

How then do we defend paying for renewable energy infrastructure at a time when the truth – or a somewhat distorted version thereof – is proving convenient for climate naysayers and fossil fuel lobbyists alike? There are three elements to this.

The first involves stressing the co-benefits. Unless economic growth in Asia grinds to a halt, demand for fossil fuels can only increase and even coal prices are likely to be high. Renewable energy will be essential in ensuring the UK has an affordable and secure supply of energy in future even if it is costly now. There are strong signs that after years of subsidy, solar power is now becoming competitive with fossil fuels; the cost of solar cells has fallen by 60% in the last 5 years, bringing solar to near grid parity at peak demand in the US.

The second involves innovation. In 1984, a well-known consultancy firm advised a well-know US telecommunications company not to bother developing wireless technology because there would never be a sizeable enough market. The same is now being said of some of the key renewables. And yet if we were to apply the same focus to new energy as we have to communications technologies, the costs may reduce much faster than has been the case with solar. In addition, the ability of economies to innovate is key to their future growth.

Finally, since renewable energy is highly capital intensive and running costs generally low, we should reduce the burden on current bill and taxpayers by borrowing to pay for energy infrastructure. Lest this should be dismissed as barking mad at a time when deficit reduction is the only game in town, then note that it is not only think tank wonks that are proposing this, but also avowed capitalists.

Faced with the green energy backlash, we can bury our heads in the sand, continue to incant the mantras about the long term risks of climate change or face up to the energy challenge and acknowledge that while most people are not in doubt about climate change, neither are they likely to prioritise spending money on climate change policy while their incomes fall.

An earlier version of this article was published on the Liberal Conspiracy blog.

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5 responses to “Facing Up to the Climate Policy Backlash

  1. Most discussions about climate policy have, up until now, failed to look into the distributional effects of climate policy – eg the impact of a rising carbon price on the public and therefore on the amount of political support.

    However, if the economy was run on the principles of ecological economics (instead of, as at present, environmental economics, which is a variant of mainstream thinking) then the task of policy would be: firstly to set ecological capacity limits within which the economy would have to operate; secondly distributional arrangements in regard to how income and resources are shared out and then, and only then “markets” and other free arrangements within and by communities would be allowed to sort out the rest. Rather than market based frameworks, framework based markets.

    What that would mean in this case is this: (a) one would ban the sale of climate toxic fuels without a permit for the greenhouse gas content of those fuels when later burned and, using a limit on the number of permits, set a no-nonsence reducing ceiling on the amount of fossil fuels that could be sold. (Note – a ceiling on sales of fuels – an upstream arrangement, NOT, as in most carbon trading, on downstream purchasers and users of fuels). (b) Arrangement would ensure that the bulk of the revenues from these permit sales to fossil fuel suppliers went to the public.

    The (b) in this arrangement would take the sting out of the arrangement for most people and provide an answer for the dilemma in your article. Sure, fuel prices and electricity prices would rise as the carbon price rises, but a substantial proportion of the carbon permit revenue would go back to the public. Indeed in a strict per capita arrangement quite a few people would gain on balance, at least at first. If they have a carbon intensity to their lifestyle which is below the average lifestyle carbon intensity – the extra that they paid out through rising prices would be more than compensated for by the carbon permit revenues that they received.

    It is striking that this idea was ever even considered when carbon trading was first designed. What is happening in carbon trading is the creation of an artificial, adminstratively created scarcity in the use of the earth’s atmosphere for burning fossil fuels into. This is a source of economic rent – and surprise surprise – the rent revenue has gone to energy corporations and to the state in the ETS. Indeed in the ETS you have a pay the polluter principle. It is a disgrace that officials and corporate lobbyists never even considered that the earth’s atmosphere belongs to us all – not to them.

    Or, rather, we all have a responsibility for the earth;s atmosphere – it is a global commons – so we could say that the carbon rents (from permit sales) should go to people to help them pay for their responsibilities to invest in energy saving equipment for example. You could pay individuals or communities tokens for investment in energy saving – that would be complicated but its another variant – and the principle is similar. If you want to make climate policy more palatable then the carbon revenues need to be going to the people – not the polluting companies and not the state.

    That’s the principle of Cap and Share by the way….

    • Joe

      “Indeed in the ETS you have a pay the polluter principle . . . If you want to make climate policy more palatable then the carbon revenues need to be going to the people – not the polluting companies and not the state.”

      I’m not sure the producer vs. people distinction is the best way of drawing the lines of responsibility for pollution. Isn’t my personal consumption of electricity the direct cause of emissions by energy companies?

  2. hank

    All this and you’ve not yet mentioned the fear of businesses threatening to relocate over EU carbon policies and the potential for massive job losses. In regards to public support for Climate policy, it’s going to get much worse before it gets better. We really need to look at the reality here!

  3. Brian Davey

    The point here is not solely one of responsibilities it is also one of rights. To whom does the earth’s atmosphere actually belong? The earth’s atmosphere is a global commons and it is by no means self evident that it belongs to companies or the state. What is happening in policies like the ETS is an enclosure process, though it is not being recognised or acknowledged as such:

    “Who should own the revenue generated from the trade in permits? The answer is usually “governments,” since it is governments that create permits through joint action
    in the first place, and it is governments that receive payments for permits sold. But from a commons point of view, it is undoubtedly humanity that holds the biosphere in trust:
    all citizens equally share in the trusteeship of a commonly-inherited patrimony. It follows from this line of thought that the revenue gained from issuing user rights
    belongs to all citizens: neither corporations not governments are, as a matter of course, entitled to appropriate the sky rent…..

    …….Parcelling out shares of the global atmospheric commons to be exchanged among trading partners appears to be strikingly similar to the enclosure of communal forests in 18th century Europe. Just as the enclosures put in place both property rights and forestry protection, denying access for common people, the assignment of emission permits ensures protection by granting property rights, eliminating unregulated use by any player involved.”
    Hermann E. Ott and Wolfgang Sachs, Ethical Aspects of Emissions Trading, Wuppertal Institute, Germany, September 2000.

    As regards the responsibility bit of trusteeship – investment at the household level to decarbonise lifestyles (e.g building energy efficiency, more cycling, walking and public transport as well as electric cars, greater local and even self grown food etc) is also necessary and needs resources and investment funds. The share in cap and share would channel the carbon rent to the base of the economy, among ordinary people – and help to make that a lot easier.

  4. Pingback: Link Loving 20.06.11 « Casper ter Kuile

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