Watching The World: Huhne's energy plan

March 14, 2011
Britain should reduce its reliance on oil and move towards renewable energy. That's the view of Chris Huhne, Britain's minister of energy and climate change.

Eric Watkins
Oil Diplomacy Editor

Britain should reduce its reliance on oil and move towards renewable energy. That's the view of Chris Huhne, Britain's minister of energy and climate change.

"I asked economists at [the Department of Energy and Climate Change] to look at how a 1970s style oil price shock would play out today," Huhne said.

"They found that if the oil price doubled, as from $80[/bbl] last year to $160[/bbl] this year, it could lead to a cumulative loss of GDP of around £45 billion over 2 years," he said.

"This is not just far-off speculation," he claimed, adding, "It is a threat here and now. And the faster we move to a low-carbon economy, the more secure and stable our economy will be."

Demand not considered

Huhne spoke as though high oil prices are a foregone conclusion, having nothing to do with demand. Yet, in his speech, Huhne drew attention to a key fact about demand in Britain.

"We have the oldest and least-efficient housing stock in Europe," Huhne noted. "We use more energy heating our homes than Sweden, which is nearly 5° colder on average."

"Our homes may be our castles, but they shouldn't cost a king's ransom to run," he said, in a neat rhetorical touch.

"Across the country, boilers are firing up earlier than they need to, burning more gas than they have to, producing more emissions than they should do, and all because our homes leak heat and waste carbon."

He said, "Our housing stock is costing us the earth," apparently without thinking that such demand boosts prices. Too green behind the ears, perhaps, Huhne says Her Majesty's government is now developing policies to make the country's housing more energy efficient.

Nothing up front?

"Householders," Huhne claimed, "will pay nothing up front."

He said, "Businesses will do that for them, getting their money back from the savings on energy bills not just from the present occupier but from the next tenant or owner as well."

He gushed, "It is the most comprehensive energy saving plan in the world," adding, "There has never been anything quite like it."

Indeed. Yet something does not quite add up in all of this, a point registered by Alistair Lowe of Lloyds Banking Group.

"The high oil price, whilst having downsides, should not mean the focus on energy needs to shift exclusively to greener alternatives," said Lowe.

"One should not forget that prices of crude in excess of $100/bbl create a cash cow, and cannot be replaced by manufacturing economics. Huhne's plan should look to the dwindling North Sea and encourage reinvestment."

Boosting supply! Now that sounds like a plan!

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