Wind turbines

Energy policies – the good, the bad and the ugly

30 November 2010

The article at a glance

The future of energy policies in the UK and Europe – is there a ‘right’ approach? What are the consequences for both society and the country’s economic recovery?

Academics from Cambridge Judge Business School have been setting out their joint visions of a future energy policy for the UK and Europe in a new podcast documentary.

In a discussion proposed by the Electricity Policy Research Group (EPRG), “Energy Policies: The Good, The Bad and The Ugly” at the University of Cambridge’s Festival of Ideas, four expert academics each put forward two propositions which are discussed in the podcast.

Dr David Reiner, Director of the MPhil in Technology Policy Programme at Cambridge Judge Business School, thinks we should put more effort into technology policy, adaption and geo-engineering to reduce CO2 emissions and that this will help to engage China and the US in the debate too:

“The biggest challenge is that China and the US are by far the biggest emitters in terms of carbon dioxide and they are also the two power houses in terms of coal users. China mines three billion tonnes of coal per year and the US mines one million tonnes of coal per year. Both countries are very dedicated to the notion of energy security, that is home grown energy, and they will use hundreds of years of coal reserves, so we need to come up with energy policies that will allow them to continue burning coal and engage in an effort to reduce carbon dioxide emissions.”

A more sensible national policy framework to promote renewable electricity is essential if we are to meet the EU’s carbon reduction targets, said Dr Michael Pollitt, Assistant Director of the Electricity Policy Research Group at Cambridge Judge Business School. He thinks early stage low-carbon energy technologies should be subsidised:

“It’s quite fashionable for politicians to claim that the renewable energy target is a climate policy and actually it is to do with reducing CO2. In reality CO2 emissions are capped by the emissions trading scheme from the electricity sector and that means any more renewable electricity doesn’t reduce CO2 it reduces the tightness of the cap, the price of CO2 permits and people who were burning gas switch to burning coal. The total amount of emissions from the electricity sector remains the same.

“Early stage technologies should be subsidised because they have the prospect of substantial amounts of learning by doing and by the benefits of strategic deployment which mean that as we deploy more of these technologies the cost comes down and we then have the prospect of lower prices in the future.”

Politicians of all parties have proposed to limit the freedom of traders to export gas from Britain to continental Europe, in the name of energy security, said Dr Pierre Noël, a researcher at the Electricity Policy Research Group:

“The UK imports a lot of gas that is re-exported to the continent and some worry about it reducing the security of supply here. But I don’t think it is true. It is good for the security of supply of continental Europe and it also a major reason why people would build new import facility in the UK as opposed to Spain or Italy.

“Gas is one of the only good news items around as a climate policy field, so we should not for the wrong reasons penalise gas. We should welcome the opportunity to go in this direction at low cost, we should not let uniformed views about security of supply prevent us from benefitting from the new situation on the gas market.”

There are more than 400 nuclear power stations throughout the world, but new policies are needed to encourage more investment and competitive energy markets can deliver these, said Dr William Nuttall, Assistant Director of the Energy Policy Research Group at Cambridge Judge Business School. He wants the 27 energy ministers in Europe to come under one umbrella:

“The carbon price should be stable and it should be substantial; the price right now is insufficient to incentives the changes that need to be made. Equally the policy driver of energy security is struggling to find a market framework, but there are various ideas in play such as allowing prices to spike to provide a spur to investment or admitting a capacity payment. These are policy adjustments to the market which would not destroy the market.

“The global climate challenge is global and not regional and increasingly the challenge of energy security is about the EU as a whole importing energy resources from the rest of the world. This is an area where Europe could speak so much more powerfully if it had one voice. I think the case for handing over power to Europe is at least as strong as in some other areas.”