A CLIMATE FOCUSED ELECTION IN THE UK? IT’S NOT HAPPENING.

Because that would mean confronting other difficult issues too.

Positive policies also bring with them more inconvenient truths. With climate, policies threaten entrenched ideologies[1]. Politicians are reluctant to talk honestly about costs at election time. But the biggest silence is around the fundamental implications for trade of any realistic global climate regime, and trade remains at the centre of the Brexit dilemma. 

It was widely supposed, only a few months ago, that climate change would be a major feature in the next UK election. This year has seen growing public concern over the threat of climate change as the most important challenge our society has to face. An eight country poll[2] revealed widespread alarm that the crisis is on the brink of spinning out of control, with 64% in the UK agreeing that “time is running out to save the planet”.  At least three-quarters of the public think there is a “climate emergency”, and of climate breakdown risk as “extremely dangerous”.

Climate breakdown was viewed as the most important issue facing the world, ahead of migration, terrorism and the global economy, in seven out of the eight countries surveyed. Only in the US did it come third, behind terrorism and (understandably given the US dismal ranking in international health comparisons) affordable healthcare. An overwhelming majority in each country – 74% in Britain – said they were already seeing the influence of the climate crisis in extreme weather events, such as heatwaves and floods, and around two-thirds described it as a direct threat to ordinary people in their country.

Moreover, the last few months have brought more extreme weather events across the globe, just as anticipated by the science, and a rising level of alarm over increasing carbon emissions and global governmental failure to take effective action. And we have also seen direct action protests from the Extinction Rebellion movement. Prima facie the public is “way ahead” of politicians in recognising the scale of the climate crisis.

But in the election campaign so far climate has been the dog that does’nt bark. All the major parties are committed to the zero carbon by 2050 target or earlier, but since they will never be held to account for failure on that timescale, what matters more is the credibility of their specific policies. The smaller parties have made the best efforts, but the current Prime Minister appears reluctant to debate the subject in front of the electorate, perhaps understandably given the climate sceptic history of many in his party. Labour has a better story to tell, not least with Blair’s ground-breaking 2008 Climate Act, but has preferred to concentrate on other issues.

So why is this critical subject getting so little attention.

The real reason for reticence on climate is that it would put a spotlight on trade, and raise difficult questions about Britain’s future post Brexit.

Both major parties are anxious to avoid any discussion whatsoever of the future for British trading relationships with the rest of the world. The Conservative government is promoting a “Get Brexit done!” message in the hope that it can avoid impossible to answer questions of exactly what benefits will flow from that, and in the certain knowledge that the actual outcome will be strongly negative if not disastrous. The Labour Party is also trying to avoid the subject altogether in its campaigning, in the vain hope of satisfying fundamentally opposed sections of the electorate, and moving on to what are (for Labour) “safer” subjects.

To see why the Conservatives are anxious to avoid scrutiny, we need look no further than the complications posed by their ambitions for a US trade deal. Since 2015, US Trade Representatives are bound by Congress not to include mention of greenhouse gas emission reductions in trade agreements and there are no prospects this ban will be lifted in the near future.[3]

Under any viable global regime climate, trade policy can be an important mechanism to incentivise and facilitate participation in global agreements to limit emissions. There are at least four potential approaches[4] that can impact on climate policies:

-       leakage and competitiveness issues, in which low carbon economies lose competitiveness in particular industries and “export” carbon emissions to potentially “dirtier” competitors who emit more carbon;

-       sanctions against non-participation in and non-compliance with international agreements ;

-       placing more of the cost of abatement on the responsible parties, whether in production or consumption; and

-       maintaining a free-trade regime that allows and encourages technology transfers.

Conversely dysfunctional trade agreements can have the opposite effect. It has been claimed[5] that the NAFTA agreement locks North America into continued exploitation of the dirtiest fossil fuels.

It is immediately clear why a US President, who considers climate science a hoax and wants an “America first” trade policy, and whose political base includes huge coal interests, would not want the subject mentioned in trade talks. The US still has substantial coal exports to Europe, and will not want to see any measures, such as international agreement on carbon pricing, or even a limited bilateral accommodation, that would reduce the competitiveness of its own industry. In addition the US has a longstanding interest, most evident in pharmaceuticals, in allowing greater opportunities to exploit intellectual property rights. In the climate policy context, this limits the rate of transfer of low carbon technologies to developing countries, generally those with the highest rates of growth in energy use and CO₂ emissions.

Against this background the EU, strongly influenced by the UK and France, and despite some of the weaknesses and limitations in its climate policies, has been one of a very small number of major economies taking the climate issue seriously.

So, on the one hand we have a Conservative government reluctant to admit that its break with the EU, and promised strategy of a US trade deal, will almost certainly reduce its international influence on climate, and seriously damage future prospects for successful global policies. On the other is a Labour party, alarmed by the prospect that too much focus on climate will spill over into the Brexit issues it is trying to avoid.

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[1] The biggest connection is that between neo-liberal orthodoxy, with its emphasis on a small state and deregulation, and its support for unsubstantiated denial of climate science.

[2] https://www.theguardian.com/environment/2019/sep/18/climate-crisis-seen-as-most-important-issue-by-public-poll-shows . The countries were UK, US, Canada, Brazil, Poland, Germany, Italy and France.

[3] This is referenced in the recent leaked documents on US/UK trade negotiations, and appears to be a well established US position.

[4]  Trade and Climate Change: The Challenges Ahead. 2010.. Jaime de Melo (jaime.demelo@unige.ch) and Nicole Mathys

[5] https://canadians.org/sites/default/files/publications/report-nafta-people-or-polluters.pdf
I have not tried to verify this claim.

GREENS WANT A HUNDRED BILLION A YEAR OF PUBLIC SPEND TO DECARBONISE. THE COMMITMENT IS WELCOME, BUT HOW MUCH IS NECESSARY?

The UK’s Green Party rightly treats climate change as the defining issue of our time, but what is the financial and policy credibility of its proposals?  We must be prepared to spend what it takes, but money is not necessarily the biggest obstacle. Focus needs to be on the practicalities.

The Green Party manifesto promises an annual budget of £ 100 billion to realise the decarbonisation of the UK economy. Some people may fear that this makes policies to “save the planet” unaffordable, but the spending and borrowing to achieve that  should not necessarily be seen as the main question.

If high levels of spending on decarbonisation are effective, they can be justified.  

The issue of climate change is rapidly becoming a major priority among the public. There is an increasing recognition by climate scientists that the world will, collectively, have to attain “net zero” carbon emissions in the not too distant future. The likely overshoot, together with any failure to fully decarbonise sectors such as agriculture and aviation, or policy failures in some countries, mean that the global economy will have to find the funds for direct extraction of CO2 from the atmosphere. Even the most optimistic views of the still undeveloped sequestration technologies for direct extraction find it hard to come up with future estimates that are realistically much below $200 per tonne[1].

This means that current CO2 emissions themselves represent a particularly insidious form of borrowing. It is borrowing that requires a future repayment in kind (ie carbon sequestration to deal with past carbon emissions). If, globally, we are already on track to be at or above sustainable targets compatible with avoiding catastrophic change, then the future burden will include the cost of removing much or even all of current emissions. In the end we will, collectively, be forced to pay what it takes to deal with the problems, or to face the even more expensive consequences.

With current annual GHG emissions in the UK running at close to 500 million tonnes of CO2 equivalent (465 in 2017), our current activity is, each year, potentially imposing a future "climate debt" of perhaps $100 billion on future citizens of somewhere who will have to pay for the clean-up. The disturbing nature of this debt is of course concealed by the fact that it remains unmonetized, and also that it simply forms part of a global pool, responsibility for which cannot easily be re-allocated to individual agents or countries.

On this basis the Green Party propositions for these extremely high levels of public spending, and the associated borrowing, are not intrinsically unreasonable or outrageous. Long term borrowing, in a non-monetised form, is what we are doing now. But that in itself does not prove the need for quite such a large public spend as the best policy now.

We shall not be forgiven.  (Charcoal drawing, Nina)

But is this a realistic or even a necessary proposition for public spending?

The first qualification to make is that the estimate of what can be usefully spent is higher than most previous estimates. The Stern Review, hugely influential in promoting the low carbon agenda, suggested that perhaps between one and two percent of global GDP needed to be devoted to decarbonisation and other measures to reduce GHG. That would be consistent with an annual spend in the £20-40 billion range. Stern argued, correctly, that this represented no more than a six to twelve month delay in reaching a given level of income by 2050.

A second qualification is that this does not necessarily equate to this level of public spending. At least part of this spend will, eventually, take the form of spending by households and businesses as they adapt to the future. That may for example include personal investment in electric vehicles or in adaptation of domestic heating systems to conform to new low carbon standards.

A third qualification is that it may simply not be possible for us to spend, usefully and quickly, the amount of money suggested by the Green’s budget. Electric vehicles, heat networks, and heat pumps are all a long slog and it is unlikely that we have the labour or the skills to do all those things at the speed the Green Party programme implies.

Where Greens are right of course is that we and others need to be doing more, and faster. In particular we should be putting in place the institutions that will in due course facilitate the investments we need. Elsewhere I have proposed the idea of a National Heat Authority to promote and coordinate plans for carbon-free heat, and to initiate local proposals for (up to) city-scale heat networks which may in due course be managed and financed through local authorities. A very effective use of the money, too, if the political will can be found and successful project implementation assured, may well be to support some of the initiatives to promote climate compatible growth in the developing world.

There are plenty of feasible options available which are essential to accelerating our current downward trend in emissions, and may help postpone reliance on actual carbon sequestration. We certainly need to spend significantly more, but not necessarily, yet, in UK located investments, on the scale that the Green Party has proposed.

As a global community we should be taking action, to the practical limits, to mitigate climate change. And in its level of ambition the Green Party deserves our wholehearted support. Greta Thunberg is right. We shall not be forgiven if we fail. 

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[1] One major issue for costs is that not only does the CO₂ have to separated, it then has to be safely stored, either by a further process of combining with other elements to a solid state, or by the energy intensive process of pumping into deep oceans.

FRACKING WAS NEVER A SENSIBLE CHOICE FOR THE UK.

Perhaps carbon capture was a better bet and one that might have helped justify fracking.

Source: The Independent

The Fantasy of an Economy Transforming Pot of Gold

Perhaps Cameron and Osborne imagined that fracking could be a re-run of the enormous boost that North Sea oil gave to the UK economy of Margaret Thatcher. I recall the late Denis Healey predicting in the late 1970s that whichever party came to power when North Sea oil was about to come on stream would be in power for a generation. And so it proved. Mrs Thatcher came to power in 1979 just before North Sea oil came on stream, adding up to 10% to annual income (GDP) in the 1980s and 1990s. The revenues were even sufficient to finance the disastrous economic policies that resulted in the wholesale deindustrialisation of Britain in the 1980s and 1990s, and even to allow the pretence  that this was all due to successful economic policy.

So it’s easy to understand why the government of Cameron and Osborne should have looked at gas fracking not just as a potentially secure and indigenous source of what is currently still the dominant fuel in the UK economy, but as a macro-economic “get out of jail free” card, to offset some of the economic damage wreaked on the UK and world economies by an out-of-control financial and banking sector in 2008. The very real success of fracking operations in the USA clearly encouraged this idea.

Unfortunately “geography will out” as the government is now belatedly discovering. Sadly this was all too evident at the time. Writing in 2013, and early in the progress of UK fracking initiatives, Howard Rogers of the Oxford Institute for Energy Studies summarised fracking prospects[1] very succinctly as follows

“... the sobering conclusion is that UK shale gas, given its timing and perhaps modest scale in terms of production level, in no way changes the critical and pressing nature of UK policy challenges and decisions needed between now and the end of the decade.”

“Geography” in this case is a combination of geology, which determines a theoretical reserve and likely cost, and population density, which amplifies the problems of secure extraction without serious social and environmental costs. Unlike North Sea oil, the fracking boom was never set to repeat the 1980s oil boom.

The UK government remains muddled and inconsistent over whether or not to continue its support for fracking. It has, according to the recent National Audit Office report on Fracking for shale gas in England, no clear idea on how much it has spent supporting fracking, what the benefits would be and how much investment would be needed in future. Inter alia, the National Audit Office said ministers could also not explain who would pay for clean-ups if fracking companies went out of business.

The National Audit Office (NAO) report highlighted:

• risks of the self-reporting system of shale gas regulation
• unprecedented public opposition to fracking planning applications and falling national support
• slower than predicted development of the industry
• lack of progress on carbon capture usage and storage (CCS) needed for shale gas to meet climate objectives

The Environmental Case ?

The last of these observations, on the failure to progress carbon capture, is perhaps the most telling. Given that we are now targeting zero carbon, natural gas, in principle at least, is likely to be confined to a declining and transitional role[2]. Any environmental defence of further gas exploration was therefore dependent on assurances that it would not add to emissions, with carbon capture being one route to achieving this, at least in part.  It is therefore ironic that the Cameron government should also have pulled the plug on carbon capture for the UK, though only after the private sector had spent several hundred million on it, and at severe cost to the reputation of the UK in terms of its ability to follow through on commitments to energy industry investors.

Carbon capture is by no means an ideal technology, partly because of the energy inputs it requires and partly because it typically fails to capture 100% of CO2, a necessity in a zero carbon world. But at least it may have had more potential as a transitional technology, given the amount of fossil fuel based generation and other capacity that the world currently has.

Lessons to be Learned

This episode is perhaps an excellent illustration of what happens when governments take energy policy decisions not driven by any realistic appraisal of environmental, climate or energy policy needs, but by the impulse to gamble on a quick fix with a macro-economic and political pay-off. Expert opinion was always sceptical, and environmentalist opposition has been more than vindicated.

                                  

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[1] https://www.oxfordenergy.org/wpcms/wp-content/uploads/2013/07/UK-Shale-Gas-GPC1.pdf

[2] There are however possible options for synthesising gas as a means of chemical storage to overcome the seasonal imbalances between renewable generation and winter heating demands. But this is another story.

FINANCIAL SUPPORT FOR ENVIRONMENTALLY SOUND POLICIES IN POORER COUNTRIES MAKES SENSE FOR EVERYONE. THE CASE OF FIREWOOD, CHARCOAL AND DEFORESTATION.

 You tube presentation on this subject available at https://youtu.be/d81oGZzQaQ0

And it’s not just a matter of ethics or moral responsibility.


There is now near universal acceptance that human responsibility for greenhouse gas emissions constitutes possibly the greatest possible economic “externality” of all time, as activities which carry little cost for individual actors will have wider and global consequences that range from the very costly to the potentially catastrophic. Carbon emissions in one place (eg the USA, the UK, or any other country) have a global impact on climate, but, for a variety of reasons, there is currently no consistent or universal way to reflect the resulting climate costs back into individual and national choices and decision making on fuel burning[1]. 

This commentary will deal with one particular example, that of the use of firewood for cooking in rural societies, and the potential for substitution with rural renewable energy (RRE), to illustrate a wider set of principles that need both to be understood and to govern our discourse, particularly in relation to the value of energy sector development aid. Put simply the massive market failure that sits behind climate change should make such support a matter of vital self-interest for the providers of aid in the global community as well as an important resource for the recipients. Ultimately there can even be a financial pay-off.

Firewood is not always carbon neutral

Women carrying firewood| Photo source: Face2FaceAfrica.com

Wood burning is sometimes classed as use of a “biofuel” and regarded as nearly carbon neutral. This may be so, for example, with wood pellet[2] burning at Drax power stations in the UK.  But this neutrality assumes the wood is being harvested in a sustainable way. When the collection of the wood results in deforestation, as is currently the case on a large scale in many parts of the developing world, this biofuel is by no means a sustainable resource. Charcoal or wood burning reduces the carbon store of the forest, and adds substantial incremental CO₂ to the atmosphere; this is in addition to any other damaging consequences that it can and often does pose for a local and regional environment (soil degradation, habitat loss, and flooding risk).

The global or “planetary” benefit of enabling rural communities to reduce firewood consumption


Cost benefit analysis has a number of limitations in relation to assessing climate policy questions, not least being the conceptual and ethical difficulty of comparisons across low and high income economies, and a lack of consensus on even an approximate valuation of carbon emissions. This is compounded by the complexity of estimating both actual firewood or charcoal consumption, on the one hand, and multiple additional environmental consequences, on the other. However, it is possible to at least demonstrate the scale of some of the benefits compared to the costs, and in this instance the exercise provides a powerful message.

The first step is to estimate typical use. The World LP Gas Association estimates that cooking with wood requires typical per capita wood consumption of around 400 kg annually, and that this could be substituted by 36 kg of LPG; this is equivalent to about 500 kWh of electricity. Other sources confirm that this level of wood use for cooking is a very credible estimate. The very large weight difference compared to LPG reflects the much lower energy density of wood compared to LPG, the moisture content of wood, the “heat loss” inefficiency of wood burning, and its lack of controllability.

Assuming a 50% carbon content for the wood, the associated per capita CO₂ emissions[3] will amount to about 730 kg. On the basis of the equivalence assumed above, 1.0 kWh of renewable electricity can substitute for 0.8 kg of wood and hence eliminate 1.47 kg of CO2 emissions.  Bringing electric cooking to 10 million people would on this analysis reduce CO₂ emissions by over 7 million tonnes a year.

Putting a value on carbon emission reduction

Deforestation in the Amazon. The Weather Channel.

The environmental or climate related cost of emissions, or the value of emissions reduction, is the next element in the calculation. Levels of carbon tax, or carbon prices within “cap and trade” regimes, where they exist, have so far failed to provide market valuations of carbon emissions that provide a realistic reflection of the human and environmental cost associated with climate impacts.[4]  More realistic numbers are presented in some Committee on Climate Change scenarios, usually based on estimates of the prices necessary to induce sufficient low carbon investments to achieve targets, ranging up to $ 100 per tonne or more.

Arguably more realistic estimates also stem from the increasing recognition that globally we shall have to move to a “net zero” world and that this, if achievable at all, will very probably require direct removal of carbon from the atmosphere, an extremely expensive operation. Estimates of the current cost of this operation have been put at around $600 per tonne, although some experts claim this might conceivably be reduced to about $ 200 or less.  If this view of the future is adopted, a conservative estimate of the “true” cost of current emissions might be as high as $ 200 per tonne.  Inevitably this cost burden would have to fall disproportionately on countries most able to pay.

These numbers suggest that, if we take the cost of direct extraction as being between $100 and $ 200 per tonne, then every kWh of electricity used in RRE cooking will ultimately result in the global community having to spend between 14 c and 28 c less on removing carbon from the atmosphere, similar to the kWh retail tariff rate in many developed economies. We compare this with estimates of the unit cost of delivered electricity under RRE schemes, for which the World Bank’s ESMAP estimates that the unit cost could fall to $ 0.22/kWh, or 22 c, by 2030.

Of course, the real world is much more complex than this simple comparison suggests. The marginal cost of low load factor cooking load may be significantly higher than our projected average or unit cost of 22 c/kWh. Much of the benefit could be achieved, possibly more cheaply, with LPG[5]. Other economic, social and local infrastructure issues  will be relevant. RRE is only sustainable with a wider range of uses. And the difficulties inherent in implementing successful RRE programmes should not be understated. On the other hand there are multiple benefits that accrue from RRE in terms of economic development, income generation, health, and the local environment, which have not been enumerated above. And there is evidence that RRE households will themselves be able to pay on tariffs that cover most if not all of the total cost. Firewood collection is not free, not least in terms of the time of women[6] and families who may do most of it; nor is charcoal. So electric cooking can provide a win-win both for global environment and for immediate benefit to RRE communities.

Taking a long term and global perspective

This analysis demonstrates that development aid in the energy sector can, ultimately, come close to paying for itself even from a “selfish” donor perspective, and make a major immediate contribution to reducing carbon emissions. In practice aid funds will usually need to provide only a part of the capital finance and very little of the ongoing costs of RRE. Reducing wood burning and deforestation should be a huge priority, as one of the lower cost ways of meeting global targets and avoiding environmental degradation.
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Further comments from readers

One important additional fact is that the rapidly growing use of charcoal amplifies the problem, as it results in even more emissions and deforestation than firewood. This is in large part a result of urbanisation, where firewood is no longer an option for households.

Brian has also pointed out that it is far cheaper to look at green carbon sinks (e.g. planting trees) or avoiding emissions in the first place (i.e. more renewables quicker). so the economic tradeoff for a green investor isn't as simple as direct air capture vs eliminating firewood.

The counter, though, is that almost all the alternatives are supply limited in one way or another - green carbon sinks are constrained by the availability of land for example. If those constraints are reached then the marginal cost of CO2 removal becomes the most expensive direct extraction technology. It is of course far cheaper to replace firewood with electric cooking, or even more so for charcoal, and that is the key point. Unfortunately that seems unlikely to be enough on its own.

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[1] The Clean Development Mechanism, defined in the 2007 Kyoto protocol, has been one such scheme, created with the intention of providing wealthier but high carbon economies with a means to reduce emissions by supporting low carbon initiatives outside their own borders, particularly where this would be more cost-effective.

[2] Drax uses imported wood pellets from sustainable sources, although this claim is sometimes disputed.

[3] 1.0 tonnes of carbon translates to 3.67 tonnes of CO₂

[4] The EU emissions price is currently around 25-30 euros per tonne, after many years languishing in single figures, according to Sandbag data

[5] If this were so then LPG might be considered as a “second best” option, for a transitional period, if it were demonstrably capable of more rapid deployment.

[6] One of the notorious weaknesses of cost benefit analysis is that it struggles with non-monetised or only partially monetised activities and economies. This is often particularly relevant to matters affecting the role of women in certain societies..

A BREXIT ELECTION OR A CLIMATE CHANGE ELECTION? THE BATTLE LINES ARE THE SAME.

There can be no doubt about which issue is of greater importance for our future, but the “usual suspects” (our politicians and the commentariat) largely divide along the same lines on both. And in each case trade should be a crucial element in the policy mix and the political arguments. 






Brexit may be a forgotten issue in twenty years’ time (although it might not be wise to put money on that), but we can guarantee that climate  change will still be with us, most likely with ever more serious manifestations in terms of extreme weather and disruptive droughts and floods, but also with less time left to avoid climate catastrophe. We can also guarantee that under these conditions it, or rather the politics of mitigation and adaptation, will be climbing steadily higher on the political agenda.

So there is a strong case for arguing that climate issues should be the primary focus of our big political choices. The contrary case of course is that climate change is a global problem and requires global solutions. UK commitment to zero carbon targets is of little value unless it is widely matched across the world. (Hence the importance of the Paris Agreement). In consequence the decisions that will have the biggest near and medium term consequences, in terms of employment, income and general well-being, will be those that relate to our trading relationships with our nearest neighbours in Europe, in other words the Brexit debate.

But these two issues have, in the context of British and US politics, become inextricably linked together by the motives and ideologies of the main protagonists in the debate.

I wrote extensively on this subject inJuly 2016.

“Predictably, in the light of the Brexit vote, Nigel Lawson’s Global Warming Policy Foundation has called for a de facto reversal of UK policy in relation to climate issues.  This is wholly unsurprising given that so many of the moving spirits in the Leave campaign – Lawson himself, Redwood, Rees Mogg, together with several of the small band of Brexit economists, and the Institute for Economic Affairs, have for many years engaged in passionate denial of both the climate evidence and the climate science.

The reasons for the correlation are clear. Commitment to and support for neo-liberal views of unfettered free markets and a minimal state are threatened, both by a Europe that does not always share those views and by a global danger whose resolution depends on global cooperation. Should this further attempt to advance the neo-liberal agenda be a cause for any concern?” 

I argued, correctly in the event, that the Lawson pitch would not be heeded. “The answer is almost certainly not. The costs of Brexit for the power sector may be high, but the climate policy imperatives are likely to be unchanged.”

The historic link between support for Brexit and climate science denial is however indisputable.  It has extended not only to many other Conservative MPs, but to Farage and UKIP (forerunner of the Brexit party), to Donald Trump and even to Brexit voting Labour MPs such as Graham Stringer, given his close association with Lawson’s Global Warming Policy Foundation. Also indisputable is the connection, in ideological terms, between promotion of Brexit and small state, minimal regulation, low tax, free trade ideologies.

What is interesting now is the speed with which the Conservative party is abandoning, or pretending to abandon, most of the electorally inconvenient elements of this ideology. It is now committing itself, belatedly, to the kind of strong commitments on climate – zero carbon by 2050 for the UK – pioneered by Tony Blair in the 2008 Climate Act. But it is also, at least in its promises, committing to much higher levels of public spending, and an enlarged public sector, which are equally incompatible with the neo-liberal vision of the world.

For those of us who recognise the overwhelming imperatives for action on climate issues, it will be important to recognise the impact of Brexit on UK energy and climate policies, including some of the conflicts with other cherished beliefs and policies. Brexit would not necessarily have an immediate impact on UK freedom of action on climate related measures, other than through its almost inevitable consequence of reducing national income and hence affordability.

This is partly because EU-wide policies such as the emissions trading scheme have been of limited success, and partly because the physical infrastructure of interconnections with Europe will remain and be used for mutually beneficial trades. The UK might even in principle enjoy greater freedoms in state aids for the energy sector without the restrictions of a Europe wide competition policy.

As the EU scheme develops however it may provide members with potentially more efficient means to meet their carbon targets through trading, but it will be a scheme from which the UK is likely to remain excluded. Much more important however will be the longer term loss of UK influence on global climate initiatives, and most important will be the likely collision of climate policies with UK aspirations for international trade.

Increasingly countries making serious attempts to reduce carbon emissions will find it difficult to tolerate the export of jobs in energy intensive sectors to countries that pursue more lax policies. Climate policies will necessarily intrude into trade negotiations.

Since the Conservative Brexit narrative, despite the blizzard of other danger signals on pharmaceuticals, agriculture and regulatory standards, is based largely around a new trade deal with the US, this creates a serious inconsistency between their promises on carbon reduction and their post Brexit philosophy on trade. The US has already removed itself from the Paris Agreement, and is likely to retain a strong interest in protecting its own coal industry and promotion of coal exports, while countries adopting more responsible climate policies will not be willing to see their own industries penalised. This leads on to issues that the Conservative party has so far been unwilling to confront.

Brexiters will have many more questions to answer.

CHAOS AND CLIMATE

At a time of chaos in national politics (with our new UK prime minister) and international crisis, it may seem frivolous to write about the mathematical concepts of chaos theory. Analogies can indeed be drawn between seemingly trivial chance events in politics and “chaotic” or seemingly unpredictable situations and outcomes like Brexit. But this blog is concerned primarily with energy, low carbon, and climate issues and policies, to which the world will be increasingly turning its attention when Brexit is done and dusted. In the absence of much immediate policy discussion on that front, it is perhaps a good time to cover a subject that is at the same time both arcane and interesting, and to speculate on what we might learn from that discussion.
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Could a butterfly flapping its wings in China set off a tornado in Texas? This rather fanciful idea is of course incapable of being tested, but it has nevertheless been used to describe chaos theory, and is in reality rather misleading. Since weather and climate systems are indeed genuinely “chaotic” as defined in terms of the mathematics of chaos theory, it is important to understand what this might mean for our understanding of climate science, and what chaos theory might or might not tell us about predicting either weather or climate.

Chaos in this context does not have quite the same meaning as chaos in everyday language. So it is worth stressing what it does not mean.

·         Chaotic behaviour does not mean behaviour that is not governed by well understood rules.

 ·         Chaos is not the same as mere complexity.

 ·         Chaos is not the same as unpredictability.

 ·         Nor does it imply randomness.

 ·         The chaotic nature of a system does not mean that we cannot develop important understandings of the nature and frequency of its future states

The definition of a chaotic system, in the mathematical sense, is one in which very small changes in the initial conditions, sometimes called boundary conditions, will have a very large impact on the actual state of the system at more distant points in the future. It is comparatively easy to find examples, even in the relatively simple world of Newtonian mechanics, and one does not need to assume the deeper uncertainties of quantum theory, or waste time on the rather fanciful and unverifiable claims about the impact of a butterfly’s wings.

All of this matters in understanding what chaos theory can tell us in relation to climate and weather. The close connection is emphasised by fact that it was a climatologist, Edward Lorenz, who is credited as one of the founders of chaos theory.  The phenomenon is closely associated with the differential equations that can be used to describe weather and climate systems.

One of the best (because it is simple) illustrations of the nature of chaotic systems is provided by the double pendulum – two rods hinged at their junction, with a weight at the end of each.

https://math24.net/double-pendulum.html

The article explains the nature of the double pendulum. Its behaviour is governed simply by Newtonian mechanics, and can be described by a set of differential equations, which are solved in order to produce the simulated behaviour that the article then illustrates.

The reader is invited to experiment with this link, changing the relative size of the weights and the initial angle, which corresponds to the amount of potential energy the system has at the start. When the system is charged with relatively low amounts of energy, its pattern remains fairly close to that of a conventional single pendulum, and will continue in this pattern indefinitely, as we can see from the picture below. 

However a small increase in the amount of energy above a certain level creates a highly chaotic system, observed in the second picture, and giving rise to much more complex and unusual patterns of motion.

So what analogies might we draw from this simple example. I suggest there are two.

The first is simply that the injection of more energy into any physical system tends to make it more turbulent and chaotic, something that will seem intuitively clear to many people. In the case of weather and climate, the extra energy is the "warming" injected by radiative forcing. Its effects might include obviously turbulent events such as hurricanes, but might simply mean a wider variety of new or unusual weather and climate patterns. Identifying those possibilities is of course a significant part of what climate science is about.

A second analogy is that there are indeed “tipping points” or extreme non-linearities of response. At a certain point the extra energy injected into the system, raising the initial angle from 75 to 79 degrees, induces much more unstable and "chaotic" behaviour, and a much wider range of "extreme" events. The parallels with the dispute over tipping points, often ridiculed by climate sceptics, are clear. Far from being speculative scare stories, the illustration shows that tipping points can be a major feature of even highly simplified chaotic systems.

LABOUR TO RENATIONALISE NATIONAL GRID? WE NEED BETTER ARGUMENTS AND MORE COMPREHENSIVE SOLUTIONS.

There is a good case for more central direction and control for the power sector but many of  Labour’s proposals are either muddled or counter-productive.

The Labour Party is talking about plans to renationalise the Grid. The UK power sector certainly has some major problems. The utilities themselves, and current market arrangements, are neither popular with the public nor particularly effective in delivering on key policy objectives, especially on reducing the UK carbon footprint.  The institutions of the sector do indeed need a serious overhaul, but the emphasis of Labour proposals distracts from more fundamental issues that surround the difficult task of decarbonising the UK economy, and overcoming the failings of the liberalised electricity market. We need a better discussion.

The Labour party has unveiled plans to take the National Grid back into public ownership, with the stated intention of providing a correction to alleged excesses of asset stripping and profiteering at the consumers’ expense, and making the power sector more responsive to social and environmental objectives. One headline grabbing feature of the proposals has been to suggest that shareholders would receive less than full market value in compensation. Another important component has been proposals to assist poorer households with the installation of solar panels, simultaneously enabling them to cut their electricity bills and reduce overall power sector emissions of CO₂.

The background is that National Grid is responsible for the nationwide transmission network, and transmission per se only accounts for around 10% or less of consumer bills. However, the Labour proposals extend to the much larger distribution networks and the aggregate of all the “wires” business is much larger, amounting to around 30% or more of domestic consumer bills. The tariffs that pass on these network costs to suppliers and consumers are regulated by OFGEM. The regulator’s main remit is to allow the network companies to make a fair, but not excessive return, on their assets, while at the same time encouraging efficiency and ensuring a high quality service.

Excess profits? If this is a problem it is easily cured within the existing regulatory framework.

OFGEM is a technically competent body and has 30 years experience in regulating tariffs. So, although private companies may always be seeking to outwit the regulatory regime and squeeze a little extra revenue, it would be surprising if large excess profits were a major issue[1]. If this were so, it should be a comparatively easy matter to tighten OFGEM’s regulatory regime. It’s also worth noting that the original 1990 privatisation is generally considered to have brought down network costs, although this was not the biggest source of cost reductions[2] for the sector as a whole.  The structure of the tariffs through which these costs are recovered is also an important but separate separate matter and one which we address briefly below.

National Grid currently discharges its main functions very competently, so proposals appearing to punish this part of the power industry may seem perverse and unnecessary. Proposals to confiscate part of the value of what are already closely regulated assets are particularly dangerous. If pursued, this could undermine the financial standing and credibility of the entire sector, as well as the borrowing capability of government itself. A serious unintended consequence would be to deter investment in the UK power sector. Raising the cost of either private or public capital, not just for the grid but for the whole sector, would make it harder for an increasingly capital intensive sector to maintain supplies to consumers at an affordable price.

Labour has also ignored some of the manifest weaknesses in supply competition[3], which in many respects is a more obvious failure to serve the consumer effectively.  It is far from clear that competition has been of any net benefit to consumers as a whole. The supply function per se adds little in the way of value, but supply margins have increased significantly^[4] while there is little or no differentiation in the quality of service that suppliers provide, little or no innovation in tariffs, and consumer prices have to cover the additional marketing costs incurred by the supply companies.

There is however a very strong case, as Labour suggests, for using the grid and network companies as part of an intervention to promote environmental and low carbon policies.

There are good reasons for concern that markets as currently organised have some manifest failings in relation to environmental objectives. These are described in more depth on the Low Carbon Power page, but the main considerations are the following.

1.    There is a need to support investment that is a necessary component of decarbonisation strategy but cannot be delivered by the private sector in a market environment that continues to under-price the true environmental and social costs of CO₂ emissions. A National Grid charged with an obligation to deliver national low carbon objectives could provide the mechanism and the expertise to remedy this. At present all low carbon generation investment depends on government support (through feed in tariffs or long term contracts) but government lacks the expertise to do this effectively.

2.    The need for coordination of choices made in transmission and generation investment is greatly increased in systems based on renewable or low carbon investment, in order to balance types of generation with different operating characteristics, storage and demand side response from consumers. An interesting illustration is the need for diversity in contracting for offshore wind power. Capacity auctions will most likely induce bids from the  most obviously attractive sites in terms of cost and output (site conditions and available wind), but solutions that work best will depend on selection of a diversity of sites that are not closely correlated in terms of weather. Market structures will not easily resolve these choices, but the Grid is ideally positioned to do so.

3.    Current consumer tariffs are quite dysfunctional in failing to provide the right economic incentives for low carbon. They fail to reflect incremental costs in ways which can penalise low carbon initiatives for consumers (such as domestic heat pumps) and arguably over-incentivise other forms of consumer investment, including solar. Getting the right economic signals in tariffs is particularly important in a future in which we envisage a much bigger role for various forms of decentralised energy provision. These arguments are discussed more fully in a recent blog[5] and report[6] commissioned by Energy Systems Catapult, but one possible resolution could be based on the transfer of supply responsibilities to the local distribution companies, who would have a much more explicit duty to encourage decarbonisation of the sector, very much in line with Labour’s stated objectives.

The essential point is that the National Grid, and the other network companies, will need to play a vital role in resolving these issues. Nationalisation need not be the only means to that end, with alternatives including the mandating of low carbon targets, or new statutory duties. But significant policy direction, and significant government support for low carbon investment, are likely to be essential components of any solution.

Labour is failing to make its case well

Labour has so far failed to make the comprehensive case that can be made for a more powerful National Grid, or for reform of the distribution and supply of power.  It has instead chosen to focus on greatly expanding the use of solar panels. This may please the solar lobby, and could indeed be part of a sensible overall strategy for the sector, but it is prima facie questionable to risk over-promoting solar power.  For the UK at least, solar power is counter- seasonal.  Solar output is highest in summer, but energy demand is highest in winter. This implies difficult technical judgements that an organisation like the Grid is better placed to make than either politicians or civil servants.

There are some strong arguments that opposition parties should be making, but they do need to do some better technical analysis, and avoid simplistic solutions that look attractive but fail to address the real problems.

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[1] The structure of the tariffs through which these costs are recovered is a separate matter and one which we start to address later.

[2] Much more significant was the move away from British coal, towards coal imports and later towards gas as an alternative fuel. The second factor was in part coincidental with the rise of new technology in the form of combined cycle gas turbines.

[3] These were extensively criticised in the 2012 IPPR report,  The true cost of energy: How competition and efficiency in the energy supply market impact on consumers' bills. Much of this analysis remains valid.

[4] The Monopolies and Mergers Commission report on Scottish Hydro in 1994, before introduction of competition in energy supply, considered that 0.5 per cent was an adequate margin for regulated energy supply. Recent margins have been as much as 4.0% or higher.

[5] THE ROLE OF TARIFFS IN A LOW CARBON FUTURE

[6] Cost reflective pricing in energy networks