The UK Department of Trade and Industry resorts to wishful thinking in a new white paper orienting energy policy to targets for carbon dioxide emissions (see Newsletter, p. 7). Asserting worst-case assumptions about climate change, the paper proposes a 60% cut in CO2 emissions from current levels by 2050. And it argues that the reduction can come largely from energy-use efficiency and supply from renewable sources.
The UK might, in fact, continue cutting its emissions of CO2. But it won't happen the way the white paper says it will.
The UK is one of few countries likely to meet emission targets of the Kyoto Protocol on Climate Change. Those targets use a baseline of 1990, when the UK was shedding coal subsidies and encouraging use of natural gas. With or without the Kyoto accord, UK emissions of CO2 were destined to fall.
The UK nobly has set CO2 targets for itself lower than those in the Kyoto accord. Kyoto asks the country for a 12.5% reduction from 1990 levels by 2008-12; the UK seeks a 20% cut by 2010. So why pursue deeper cuts over a longer period?
Threat seen
DTI believes warming of human origin represents a grave threat. Its white paper at one point declares, "Climate change is real," as though anyone thought otherwise. It attributes observed warming of the past century to "increased greenhouse gas emissions from human activities," although most of the apparent warming preceded most of the gas increase. And it calls droughts, floods, and other calamities resulting directly from elevated concentrations of CO2 in the atmosphere as "likely," which they are not.
Alas, governments panicked by climate change won't be dissuaded from the urge to act, even when the action is probably unnecessary and possibly futile. Hence the UK's quest for a "low-carbon economy." It's a political choice, a chance for the UK to retain leadership in the grand diplomacy of global warming. But DTI performs no service in overselling what efficiency and renewable energy can contribute to the effort.
There's nothing wrong with the economically sensible pursuit of energy-use efficiency, a beneficial result of modernization and economic growth. The more, the better.
There's nothing wrong with energy from renewable sources, either. Someday, all energy will come from renewable sources. With renewable energy as with efficiency, the more, the better—as long as it makes economic sense.
Yet sensible efficiency plus renewable energy won't soon realign energy markets in the UK or anywhere else. Their potential contributions are too small.
DTI's projections of primary energy demand through 2020—as far into the future as they go—give renewable energy no more than a 4.6% share of the energy market in 2020. To reach that share, output from renewable sources nearly quadruples from the 1999 level thanks to mandates and subsidies already in place. Squeezing more energy out of renewable sources would require more costly interference in the market.
Efficiency has limits, too. Energy consumption per unit of economic growth, one measure of efficiency, should be lowest in the demand case assuming, however improbably, high growth and high energy prices. Under those assumptions, DTI sees expansion in total energy demand of 13% during 1999-2020.
A more likely scenario, especially if the government enacts further favors for renewable energy, assumes low economic growth and high prices for energy. In this case, total demand still grows 7% through 2020, with oil demand up 24% and gas demand up 21%.
At least through 2020, therefore, any decline in emissions of CO2 comes from a projected slump in coal demand of 50%—or more under different assumptions about growth and price. The displacement of coal comes overwhelmingly from increased use of oil and gas and only marginally from renewable energy.
Policy success
The UK government can claim success with energy policy. Deregulation of the electricity and natural gas industries has raised competition and lowered prices. And the fiscal and regulatory regime has stayed generally in step with the changing needs of maturing oil and gas resources.
Hinging energy policy to aggressive global-warming precaution, however, will create problems. The trumpeting of false hope for efficiency and renewable energy is a familiar overture to a dangerous escalation of government activity in matters best left to markets.
