Linking economic recovery with environmental responsability is a tricky issue for European governments. Yet it is one they cannot avoid. Several strategies can increase energy efficiency in the United Kingdom. Chris Huhne, the British Secretary for Energy and Climate Change, made his case at a public lecture at the London School of Economics (LSE).
The EU is a global leader in taking action against climate change. However, due to geographic and economic disparities it is not easy for the EU to take common actions to mitigate its global carbon footprint. EU member states up north have a high level of economic development, which goes hand in hand with a higher awareness of environmental challenges. Newer, less wealthy member states are still struggling with other challenges. Some member states have a greater potential for solar energy, some can rely on hydro or wind energy, others cannot. However, whether we are ready to take actions against climate change or not, it is happening.
Sustainable development is the socially efficient answer to this challenge. Economics calls for stricter environmental control. The need to preserve our planet for the future, i.e., to link economic development with environmental responsibility, appeared in political debates only in the 1980s. Sustainable development is possible, but it takes political will and is costly. This money does not necessarily have to come from public spending, one could also impose some costs on the private sector: at the moment we allow polluters to externalise costs on outsiders. This is easy, because most of the pollution victims are not even born yet. It makes climate change the single biggest issue in intergenerational equity: what kind of world will we leave for our offspring to live in ?
European governments have been proposing solutions to mitigate the future impact of climate change. However, after the EU’s failure to speak with one strong voice at the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen 2009, an internationally binding solution seems hard to reach. However, the pressing need to handle climate change remains omnipresent. “We cannot risk falling behind. Other countries are not waiting for international agreements before engaging with the next global growth sector.”, said Chris Huhne at a public lecture at the London School of Economics (LSE). He is the British Secretary for Energy and Climate Change, and a member of the Liberal Democrat Party. In his speech Green growth: the transition to a sustainable economy he linked the strategy to avoid climate change with fostering economic growth: “To change our national economic story from one of financial speculation to one of future growth, we need a third industrial revolution: a green revolution.”
The deal about the Green Deal
Just as he is currently doing at the current United Nations Climate Change Conference in Cancun, Mexico (29.11-10.12), Chris Huhne pictured Green Growth as a way out of recession.
At his speech at LSE, he highlighted that the United Kingdom is still far from meeting the sustainable energy targets it has committed itself to. Currently the country ranks 25th in the EU for its use of renewable energy.British domestic power consumption is highly inefficient. According to government research, 3 billion pounds (€3.6 billion) are lost every year. This is due to simple deficiencies such as poor insulation, an inefficient use of thermostats and leaving appliances on standby. As a result one-fourth of the country’s energy supply is used for domestic consumption - this is more than in Sweden.
The so-called Green Deal that will be implemented starting from autumn 2012 is the government’s answer to this challenge. The Green Deal targets private housing as well as companies and it works according to a PAYS (Pay As You Save) scheme. In practice this aims to foster interventions to increase buildings’ energy efficiency: the cost of these interventions will not have to be paid by the owner at once, but will be reduced from future energy bills. The golden rule for the Green Deal is that the savings in every property that receives such interventions on the pay-as-you-save model must always be greater than the financing costs. According to the scheme, the costs of the interventions will be rolled up and repaid through the energy bill for that property over 25 years. If the owner moves away, the cost is transferred to the next occupant. If the occupant changes the energy company, the cost will transfer to the new energy company.
The age of cheap energy is over
Chris Huhne also emphasised the importance of energy security: security of supply coupled with security of price. Shrinking fossil fuel resources and rising demand push companies towards more risky and more costly methods of fuel extraction, BP and the Gulf of Mexico being only one example. Energy prices will rise. Who will bear the costs? Chris Huhne’s answer: “Our policies are not free. There will be a significant price impact, and there will be costs to the consumer.”
However, the British government’s policies target offsetting these costs. On the one hand, the Green Deal will help decrease energy demand. On the other hand, the government advocates a market-delivered solution of energy supply technology. The goal is to develop a new market framework that encourages low carbon investment at an affordable price. It should enable to foster the use of various different technologies. This is a crucial step to increase consumer security. Nobody can predict the costs of one technology over time. However, the more choice consumers have, the more competition there is, and thus the greater the incentive to keep prices low.
About Chris Huhne
Before entering politics Chris Huhne was a financial and economic journalist at The Guardian, Independent and The Economist for nineteen years. Chris Huhne was a member of the European Parliament for six years (1999-2005), where he was deputy leader of the Liberal Democrat group. Chris Huhne is the Secretary of State for Energy and Climate Change.
Special thanks to Eric Neumayer, Professor of Environment and Development and Head of the Department of Geography and Environment for sharing his views.
To go further
On the Internet
- Chris Huhne’s speech on “Green growth: the transition to a sustainable economy” held at the London School of Economics on November 2nd 2010.
- Parliamentary Select Committee on Climate Change and Energy online resources.
Source photo : huhne speech 01, par Liberal Democrats sur flickr