February 2006
More than 300 people representing dozens of trade unions, business organisations and environmental groups debated the key issues facing UK society in the wake of the government’s current energy review.
The conference at Congress House, London, ‘A sustainable energy policy for the UK’, was a joint TUC-CBI and Carbon Trust event. As well as an impressive line-up of speakers, the event included lively debate and sharp questioning from the audience, including a strong contingent of Prospect members.
“We are both concerned about the question of energy prices and their effect on industry, both concerned that the cost of energy can take up so much of household budgets as to allow little disposable income for other issues.
“We are concerned too on the crucial issues of security and stability of supply in the future, of the employment consequences of the move to a low carbon economy and perhaps most importantly in dealing with the issues of man-made climate change.”
He said that rather than attempting to run a “command and control” energy system, the government should set a framework in which the market could deliver. It should make clear how many risks it was willing to take with security of supply, but it was not government’s job to ‘pick winners’ and offer incentives to particular types of energy.
Helm said the UK was in difficulties over energy because it was a prisoner of the past, with largely ‘clapped out’ assets and an energy policy developed to deal with yesterday’s problems.
The strategy of the past two decades had been to make existing assets “work as efficiently as possible, and that’s essentially what privatisation, competition and liberalisation and RPI minus X regulation did.” The operating cost of the energy system had been radically reduced and many people had lost their jobs.
Now investment was required in lower carbon technologies. The fight against climate change required long-term carbon contracts, where the market could decide how to meet the objectives. Windfarms could bid against nuclear power stations and clean coal for contracts. The issue was getting carbon down as quickly as possible, but not choosing the method.
On the energy review, Helm suggested that a ‘popular’ policy – getting the maximum number of people to cheer at the end by giving them a Smartie – would not result in good policy. “A good energy policy makes quite hard choices.”
In response to a question from Prospect assistant general secretary Mike Clancy on the skills question, Helm said: “The 1980s and 1990s were the decades of the economist, but hopefully now we will see the decades of the engineer.”
The 2003 energy white paper had failed on all three counts. While getting it right on climate change – and business and the CBI were signed up to cutting CO2 emissions – it had underplayed concerns about prices and ageing assets.
Cridland said that most damningly, it had suggested that the nuclear choice could be fudged. “Two years later it evidently can’t.”
Cridland said that in its current energy review, the government must understand that policy uncertainty was stopping investment. On nuclear power, it was hard to see how the government “can sustain its current position of a political veto. “Given climate change, ministers have a lot of explaining to do if they conclude that new nuclear should remain a closed door. Having said that, issues like cost, waste disposal, and how nuclear fits with a liberalised market do need to be fully explored.”
The government also needed to commit to supporting renwables and clean coal, and to back construction of a demonstration CO2 capture plant and CO2 storage.
This meant a shift away from liberalisation, and at the very least, a greater degree of co-ordination between EU member states on energy. It meant revisiting the emissions trading scheme, which had failed to significantly trigger investment in carbon emissions reduction.
“Because climate change knows no boundaries, we cannot leave this most fundamental of issues to be resolved by market forces alone. All of us – government, industry, consumers, workers – have a role to play in tackling global warming.”
Unions had two fundamental roles: first, to raise awareness of the need to promote energy efficiency and environmental responsibility at work and at home. Second, in the skills arena. The shift to a low carbon economy would mean jobs being lost and jobs being created. Some skills would become obsolete and other new skills needs would emerge. The unions were “powerful advocates of workforce upskilling, and nowhere are the needs more acute than in terms of engineering, technical and IT skills.”
It was not economic daydreaming to believe in the possibility of combining economic growth and environmental improvement. But achieving the target of reducing carbon emissions by 60 per cent by 2050 would require bold action, and the development of the right long-term energy mix.
“That means a much bigger role for clean coal, an expanded role for renewables and the role of nuclear power,” said Barber.
On nuclear power there was a role as part of a balanced energy policy, with two key provisos: “First – that there is a sound economic case for nuclear new build, at the same time recognising that cost issues are not unique to the nuclear industry. And second that we can safely dispose of radioactive waste, as part of an integrated policy embracing defence and medical as well as industrial waste.”
But following a question from the floor, he said that in its 2003 white paper the government had “left the door ajar.” Now the government had to decide whether to close or open that door, a decision not yet made. Cost and waste were still the two central issues, and if anyone was expecting the government to write cheques to build new nuclear power stations, forget it. There needed to be a market signal.
On clean coal technology, Johnson welcomed the creation of a clean coal task group and said if the technology could be made to work, “clean coal can play a crucial role, not just in UK but in fast growing economies like China and India.”
Johnson also spoke in favour of microgeneration – small scale energy production. Recent research had suggested this could provide a third of UK’s electricity by 2050. “But people aren’t choosing to install microgeneration in large numbers, despite the fact that they could save a third of the average yearly electricity bill and could earn more money by selling surplus energy back to the grid.”
In the longer term, microgeneration would become cheaper to install. “In the shorter term I want to work at making it the new must-have gadget in your home – the iPod of the energy world.”
He warned that the effects of climate change lag around 30 years behind the actions that cause them, meaning that the effect of today’s policy decisions would not be felt before 2040.
He said that if global consensus on fighting climate change could be achieved, it was possible that greenhouse gases in the atmosphere could be kept below the critical mark of 550 parts per million. But it would require rapid action – the transition to a zero carbon economy would inevitably be slow.
People would have to get used to living in a hotter world and while richer countries may not find it too difficult to adapt, it would pose a major problem for poorer African countries.
Warmer weather could also bring a repeat of the 2003 European heatwave that killed 50,000 people and forced $15.5 billion worth of damage. This event – one of statistical rarity – had undoubtedly been caused by climate change and had been the biggest ever unrecognised natural disaster.
Cutting greenhouse gas emissions was a task not just for developed countires but also countries such as China, India, Mexico, South Africa and Brazil.
The trade unions and the TUC needed to do better on the question of tackling man-made climate change, particularly CO2 emissions.
There was a need to control demand as well as supply, and trade union members were interested in greener workplaces and believed they could make a difference. There was also a need to connect with a new eco-aware generation of school leavers.
Michael Roberts, director of business environment at the CBI, who chaired the afternoon session, said the responsibility lay with ‘all of us’ to tackle climate change; both business and individual consumers had a key part to play. The task of the government was to make decisions that resolved the tensions and created the right balance between providing a policy framework and enabling the market to deliver outcomes.
Everyone has a part to play in tackling global warming
A conference of more than 300 trade unionists, business people and environmentalists came together at the TUC on 28 February to discuss the key issues facing society as the government reviews its energy policy.More than 300 people representing dozens of trade unions, business organisations and environmental groups debated the key issues facing UK society in the wake of the government’s current energy review.
The conference at Congress House, London, ‘A sustainable energy policy for the UK’, was a joint TUC-CBI and Carbon Trust event. As well as an impressive line-up of speakers, the event included lively debate and sharp questioning from the audience, including a strong contingent of Prospect members.
Common interest
Chairing the morning session, Prospect general secretary Paul Noon said some might see the TUC and CBI as an unusual marriage on this issue, “but both sides of industry have a common interest in the issues we are going to discuss.“We are both concerned about the question of energy prices and their effect on industry, both concerned that the cost of energy can take up so much of household budgets as to allow little disposable income for other issues.
“We are concerned too on the crucial issues of security and stability of supply in the future, of the employment consequences of the move to a low carbon economy and perhaps most importantly in dealing with the issues of man-made climate change.”
One energy agency
Dieter Helm, an economist from New College, Oxford, called for the creation of an energy agency to replace the “hotch potch of regulatory bodies that overlap and compete with each other.”He said that rather than attempting to run a “command and control” energy system, the government should set a framework in which the market could deliver. It should make clear how many risks it was willing to take with security of supply, but it was not government’s job to ‘pick winners’ and offer incentives to particular types of energy.
Helm said the UK was in difficulties over energy because it was a prisoner of the past, with largely ‘clapped out’ assets and an energy policy developed to deal with yesterday’s problems.
The strategy of the past two decades had been to make existing assets “work as efficiently as possible, and that’s essentially what privatisation, competition and liberalisation and RPI minus X regulation did.” The operating cost of the energy system had been radically reduced and many people had lost their jobs.
Now investment was required in lower carbon technologies. The fight against climate change required long-term carbon contracts, where the market could decide how to meet the objectives. Windfarms could bid against nuclear power stations and clean coal for contracts. The issue was getting carbon down as quickly as possible, but not choosing the method.
On the energy review, Helm suggested that a ‘popular’ policy – getting the maximum number of people to cheer at the end by giving them a Smartie – would not result in good policy. “A good energy policy makes quite hard choices.”
In response to a question from Prospect assistant general secretary Mike Clancy on the skills question, Helm said: “The 1980s and 1990s were the decades of the economist, but hopefully now we will see the decades of the engineer.”
The business view
John Cridland, deputy director general of CBI, said business wanted and needed a policy that has “some staying power”. To be politically sustainable, energy policy had to do three things: address the big energy concerns of the day; be explicit about the trade-offs and choices that need to be made; and adopt a balanced effort across society.The 2003 energy white paper had failed on all three counts. While getting it right on climate change – and business and the CBI were signed up to cutting CO2 emissions – it had underplayed concerns about prices and ageing assets.
Cridland said that most damningly, it had suggested that the nuclear choice could be fudged. “Two years later it evidently can’t.”
Cridland said that in its current energy review, the government must understand that policy uncertainty was stopping investment. On nuclear power, it was hard to see how the government “can sustain its current position of a political veto. “Given climate change, ministers have a lot of explaining to do if they conclude that new nuclear should remain a closed door. Having said that, issues like cost, waste disposal, and how nuclear fits with a liberalised market do need to be fully explored.”
The government also needed to commit to supporting renwables and clean coal, and to back construction of a demonstration CO2 capture plant and CO2 storage.
The trade union view
Brendan Barber, TUC general secretary, said the TUC wanted to see market incentives for industry and domestic users to do the right thing. “And that is why we want to see new measures put in place to promote genuine diversity of supply.”This meant a shift away from liberalisation, and at the very least, a greater degree of co-ordination between EU member states on energy. It meant revisiting the emissions trading scheme, which had failed to significantly trigger investment in carbon emissions reduction.
“Because climate change knows no boundaries, we cannot leave this most fundamental of issues to be resolved by market forces alone. All of us – government, industry, consumers, workers – have a role to play in tackling global warming.”
Unions had two fundamental roles: first, to raise awareness of the need to promote energy efficiency and environmental responsibility at work and at home. Second, in the skills arena. The shift to a low carbon economy would mean jobs being lost and jobs being created. Some skills would become obsolete and other new skills needs would emerge. The unions were “powerful advocates of workforce upskilling, and nowhere are the needs more acute than in terms of engineering, technical and IT skills.”
It was not economic daydreaming to believe in the possibility of combining economic growth and environmental improvement. But achieving the target of reducing carbon emissions by 60 per cent by 2050 would require bold action, and the development of the right long-term energy mix.
“That means a much bigger role for clean coal, an expanded role for renewables and the role of nuclear power,” said Barber.
On nuclear power there was a role as part of a balanced energy policy, with two key provisos: “First – that there is a sound economic case for nuclear new build, at the same time recognising that cost issues are not unique to the nuclear industry. And second that we can safely dispose of radioactive waste, as part of an integrated policy embracing defence and medical as well as industrial waste.”
Government message
In his main speech, trade and industry secretary Alan Johnson managed to hedge the issue of nuclear energy, focusing instead on the need for clean coal and microgeneration.But following a question from the floor, he said that in its 2003 white paper the government had “left the door ajar.” Now the government had to decide whether to close or open that door, a decision not yet made. Cost and waste were still the two central issues, and if anyone was expecting the government to write cheques to build new nuclear power stations, forget it. There needed to be a market signal.
On clean coal technology, Johnson welcomed the creation of a clean coal task group and said if the technology could be made to work, “clean coal can play a crucial role, not just in UK but in fast growing economies like China and India.”
Johnson also spoke in favour of microgeneration – small scale energy production. Recent research had suggested this could provide a third of UK’s electricity by 2050. “But people aren’t choosing to install microgeneration in large numbers, despite the fact that they could save a third of the average yearly electricity bill and could earn more money by selling surplus energy back to the grid.”
In the longer term, microgeneration would become cheaper to install. “In the shorter term I want to work at making it the new must-have gadget in your home – the iPod of the energy world.”
Consequences of climate change
The government’s chief scientific adviser Professor David King delivered a heartfelt speech warning that immediate action must be taken for the world to avoid the worst consequences of climate change.He warned that the effects of climate change lag around 30 years behind the actions that cause them, meaning that the effect of today’s policy decisions would not be felt before 2040.
He said that if global consensus on fighting climate change could be achieved, it was possible that greenhouse gases in the atmosphere could be kept below the critical mark of 550 parts per million. But it would require rapid action – the transition to a zero carbon economy would inevitably be slow.
People would have to get used to living in a hotter world and while richer countries may not find it too difficult to adapt, it would pose a major problem for poorer African countries.
Warmer weather could also bring a repeat of the 2003 European heatwave that killed 50,000 people and forced $15.5 billion worth of damage. This event – one of statistical rarity – had undoubtedly been caused by climate change and had been the biggest ever unrecognised natural disaster.
Cutting greenhouse gas emissions was a task not just for developed countires but also countries such as China, India, Mexico, South Africa and Brazil.
Focus on demand
Garry Felgate of the Carbon Trust urged the audience not to ignore the demand side of energy. People needed to take a long, hard look at how much energy they were using. It was possible to make changes now, for example the BMW factory in Warwickshire had cut emissions by 15 per cent with the help of the Carbon Trust. The organisation was working with other large companies, such as Boots, Tesco and the Royal Bank of Scotland, on achieving energy efficiency.Other speakers
The conference also heard contributions – among others – from Sue Ion, president of the British Nuclear Energy Society, Dr Gordon Edge of the British Wind Energy Association, Steven Kemp, national secretary of the National Union of Mineworkers, and a presentation on prices, markets and investments by Jon Hughes, power and utilities spokesperson from Ernst and Young.Conclusions
Summing up at the end, Paul Noon said the conference had shown the importance of the government taking hard decisions to develop sustainable energy supplies. The issue then was how to construct the market. Taking a leading role in Europe was important.The trade unions and the TUC needed to do better on the question of tackling man-made climate change, particularly CO2 emissions.
There was a need to control demand as well as supply, and trade union members were interested in greener workplaces and believed they could make a difference. There was also a need to connect with a new eco-aware generation of school leavers.
Michael Roberts, director of business environment at the CBI, who chaired the afternoon session, said the responsibility lay with ‘all of us’ to tackle climate change; both business and individual consumers had a key part to play. The task of the government was to make decisions that resolved the tensions and created the right balance between providing a policy framework and enabling the market to deliver outcomes.