One of the saddest things in this whole debate about climate change is that people simply manage to get, even assuming that the predictions are correct, the right course of action for the future so wildly wrong. As with Zoe Williams here:
The interesting thing about energy policy, as it comes into focus for the start of manifesto season, is that it gives each party the chance to be dreadful in its own unique way. The Conservatives are going with the line that bills are too high (they are), this is because of Labour’s high taxes (it isn’t), and can be rectified by “slashing green levies”. This is their offer: it makes very little financial difference (an average of £50 a year) and no demands on energy companies except to simplify their bills. It looks like a lot of bluster about the “mess they inherited” paired with some ineffectual flapping.
In fact it isn’t, it’s an extremely bold statement; by casting green levies as expendable, they show they are not serious about transforming the energy market. They’re not serious about renewables. They’re not worried about carbon targets. They’re not going to prioritise investment in green infrastructure. They’re not 100% convinced that climate change is even happening, and – this bit is crucial – they’re not going to do anything to undermine the market dominance of existing companies selling fossil fuels. Only alternatives will challenge the energy oligopoly, and alternatives need investment.
It’s that last line that is wrong. But so wrong that it undermines everything else that is being said.
So, let us start from our usual position around here, whether or not you believe it just, for the sake of the argument, work with this for the moment. That the IPCC, the Stern Review, they’re all correct. Climate change is a problem, one we’re causing and one that we should do something about.
OK, great, what? Well, firstly, as a matter of public policy we’ve an externality, those carbon emissions, and we should be getting them included into market prices. This is the great lesson from Stern (and he’s backed by all other economists who look at the subject, Nordhaus and Tol for example). Super: so, by a fairly inefficient kludge of the ETS, the minimum carbon price and the rest we’ve managed that. So, on that point we’re done. We don’t need to be stomping around the country shouting “Invest!” for we’ve already changed prices to take account of that externality. We’re done and dusted: we just need to wait for the effect of that price change to work through peoples’ investment decisions over the next few decades.
The second is that point that all of the solar PV boosters keep telling us. That solar power is, if not right now then definitely within the next couple of years going to be, price competitive with fossil fuel derived energy. And as a matter of public policy of course our carbon price has aided in this. So, do we now need to point a wall of “investment” at this technology?
Well, no, no we don’t. If, after the carbon tax, solar PV is not price competitive then we don’t want to install it. For that tax already includes the future damages the use of fossil might cause. And if it is price competitive then we don’t need to “invest” (when someone in The Guardian says invest of course they mean public subsidy) because as it’s already price competitive then people will install it anyway as the cheapest option.
Which brings us to a point we’ve made repeatedly around here. According to the standard works on the economics of climate change we in the UK have already done everything that it is necessary to do. That combination of technological advance in solar plus the public policy of pricing carbon is it: we’re done. We simply don’t need to do anything else but wait.