A big chill will heat up energy debate
By Richard D North
(Filed: 24/11/2005)

The gas price is rocketing, and suddenly we've all heard of the "Interconnector", the gas pipeline distributing gas between the continent and Britain. Our EU neighbours are preserving their supplies - and their competitive advantage - by state mandate, while letting our much freer market suffer steep gas prices.

It's a re-run of problems we saw last March, and it is fuelling calls for British ministers to take an old-fashioned protective interest in the nation's energy supplies. And all this before the Met Office's two-in-three bet that there will be a proper old-fashioned winter this year.

There is one large comfort to be had. We have had far too much discussion of energy policy framed in terms of self-sacrifice: as though virtuous consumers must forgo naughty habits in order to save the world from climate change.

With today's serious threats to our energy supplies, we are back on the safer ground of self-interest. And this is far more likely to help the environment than appeals to altruism.

Thirty years ago, greens used to argue that we were running out of fossil fuels, and especially the most convenient of them, oil (coal was and is inconveniently common and gas wasn't much spoken of).

Now, we are learning to dread energy insecurity and high prices arising from a chaotic world in which we hardly know whether we have more to fear from over-mighty states (Russia), or wobbly or wicked ones (you name your own favourite handful in Central Asia, Africa and the Middle East). In the case of gas, even the EU is against us. Out in the wider world, energy demand is soaring in countries that are doing the energy-hungry metal-melting we are too fastidious for. Suddenly, our gas-guzzling looks a bad idea.

So maybe the greens were right? And if so, should we be listening to them today?

Actually, the present great cause, global warming, is coming under rather sceptical scrutiny. Tony Blair has abandoned his messianic devotion to climate alarmism. Some time in the countdown to the Gleneagles G8 summit in July, he seems to have noticed that the Kyoto Protocol would make at best only a minute difference to mankind's emissions of greenhouse gases.

The UK is finding its climate change promises hard to meet, even after the "dash to gas" which has helped produce both lower greenhouse emissions and this week's problems. It now faces calls to go much further. The scientific establishment (in the form of Lord May of the Royal Society and Professor Sir David King, the Government's chief scientific adviser) is signed up to the "consensus" that urgent action is needed.

But what action? This summer, Professor David Henderson, the former chief economist at the OECD, seems to have scored a considerable success in persuading the House of Lords economic affairs committee that it was time for some hard thinking about the cost effectiveness of different options for dealing with climate change.

The Treasury and the Cabinet Office duly announced that Sir Nick Stern (a senior official at the former) would conduct a review.

It is quite likely that he will find that in order to reduce greenhouse emissions significantly, we would need to make large adjustments and still have no guarantee that anyone would benefit very much. In short, to address climate change seriously might take the kind of forward-looking altruism whose reward is likely to be in heaven, if anywhere.

However, it doesn't take a climate change sceptic to see that Hurricane Katrina may yet turn out to be the key to how things unfold. For Katrina showed how fragile oil supplies can be.

Whether we fear the climate or foreigners, it looks very likely that some big money and effort will soon have to be expended on securing our energy supplies. Conservation and renewables may look comparatively attractive, which will please the greens. But they will kick up a tremendous fuss about one important option: nuclear power. Tony Blair has pretty obviously become a convert. David King, his climate alarmist-in-chief, is certainly keen. The Prime Minister is apparently about to order a nuclear review, presumably to overturn the prevarication of the last one he ordered, in 2002.

The more idealist greens hate being reminded that voters want more of everything and may well tolerate nuclear power as part of the mix. But nuclear also offends libertarians of another sort: it is a technology that requires very large state support. It requires big subsidies, and a significant security presence. Indeed, hardly anything in this field doesn't offend someone. Global warming "deniers" insist that climate change will be small or benign. And there will be those who say the market will respond to energy demand, and sooner rather than later.

Still, the great news from the past few days is that discussion of energy looks like becoming vigorous and informed by a properly hard-nosed assessment of the risks of doing nothing, or doing the wrong thing. We've had an intolerable amount of humbug from politicians about their ambitions for a less energy-hungry future. Now, ministers more clearly see that we want energy and plenty of it.

As they discuss what kind they should opt for, ministers should realise that voters only like policies which are cheap, convenient - and of obvious benefit to themselves. Energy insecurity is more likely to motivate them than climate change.

  • Richard D North is a fellow of the Institute of Economic Affairs

    Information appearing on telegraph.co.uk is the copyright of Telegraph Group Limited and must not be reproduced in any medium without licence. For the full copyright statement see Copyright



  •