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Prioritising energy security

In his Autumn Statementthis week (a budget in all but name), George Osborne gave UK government support to increased R&D on new energy sources: The government will prioritise energy security, whilst making reforms to meet our climate goals at lower cost. The government is doubling spend on energy innovation, to boost energy security and bring down the costs of decarbonisation.”

The prioritisation of energy security is entirely consistent with Amber Rudd’s recent speech, which is a reassuring sign of joined-up government. The reference to decarbonisation is necessary for a government which is committed to emissions reduction, but it is significant that this is made in the context of reducing costs. Mr Osborne and Ms Rudd are very much singing from the same hymn sheet.

Another significant statement in the section on energy confirms a commitment to develop capacity in nuclear energy technology “As part of this, the Spending Review and Autumn Statement invests at least £250 million over the next 5 years in an ambitious nuclear research and development programme that will revive the UK’s nuclear expertise and position the UK as a global leader in innovative nuclear technologies. This will include a competition to identify the best value small modular reactor design for the UK. This will pave the way towards building one of the world’s first small modular reactors in the UK in the 2020s.”

Given the imminence of the Paris climate change summit, this is a clear-cut and interesting move away from an emphasis on cutting emissions at almost any cost. Separately from the Autumn Statement, the government has also withdrawn its support for the proposed demonstration project for large-scale carbon capture and storage (predictably, Fury as axe falls on £1bn UK carbon capture plan).

Although this has angered both campaigners and companies involved in the two competing projects, previous attempts to build such a CCS scheme have failed after those involved have withdrawn. This seems to be a technology destined to be forever promising but impractical on a large enough scale. Despite its superficial attractiveness as a way of continuing to burn coal while reducing emissions, the practical difficulties and costs of this option make the government decision a sensible one.

Also sensible is a move to protect energy-intensive industries from climate change levies: "We're going to permanently exempt our Energy Intensive Industries like steel and chemicals from the cost of environmental tariffs, so we keep their bills down, keep them competitive and keep them here." No doubt prompted by recently-announced job losses in the steel industry, this is a recognition that driving up energy prices puts more traditional manufacturing industry at a permanent global disadvantage, with the result being export of jobs to countries that are not trying to cut emissions. Germany, a country whose current success is based on manufacturing and exports, has for some time given its own heavy industry the benefit of lower energy prices than those paid by domestic consumers.

In fact, there are also other things the UK can learn from Germany. The EU’s leading economy has long been committed to the Energiewende, but the path to decarbonisation is not as easy as may have originally been envisaged. One particularly large hiccup was the kneejerk decision to reverse Mrs Merkel’s policy of keeping nuclear power stations open, following the Fukushima disaster. She may have felt that she had no choice politically, given the strength of opposition to nuclear from some quarters, but she has saddled the economy with a tremendous problem in replacing this zero-carbon energy, which still contributes 17% of the country’s electricity supply.

The demise of nuclear, coupled with generous subsidies for renewable energy, little incentive for gas turbine back-up and low coal prices has led to the current situation of large numbers of wind farms in the north, great swathes of solar panels in the south and an increasing reliance on coal (including domestic lignite) to provide base load. These and other issues are covered in more depth in Matthew Karnitschnig’s article Germany’s green sticker shock.

Despite the intense effort – the bill for complete transformation is estimated to be more than a trillion euros by 2050 – carbon dioxide emissions are actually rising because of increasing reliance on coal, putting in jeopardy the target of a 40% reduction in emissions by 2020. And, although the focus is on the ‘easy’ target of electricity generation, much more of the total energy use goes on heating and transport. Fossil fuels still account for 80% of total German energy consumption. This, of course, is likely to accelerate a trend towards electrification of everything, including ground transport, which will only increase the difficulties of providing a secure, low carbon supply grid.

The other fact to bear in mind is that Germany, although the world’s fourth largest economy, is responsible for less than 3% of global emissions (and the EU as a whole for less than 10%). And, while Angela Merkel’s government has set the country firmly on the path to decarbonisation (an act of faith, given that the technology to provide a secure, low-carbon energy supply to a modern manufacturing economy in the absence of nuclear has yet to be developed), other countries are increasing their emissions far more. This is put in context in a sobering piece from the BBC’s Matt McGrath – Will coal be on the dole after COP21?

At the same time, we hear from the same source that the public in only four out of 20 countries polled favoured their governments setting ambitious targets in Paris (COP21: Public support for tough climate deal ‘declines’). Only in three countries – Spain, Russia and Turkey – do more respondents favour tougher action than before the Copenhagen conference in 2009. Even in Germany, despite strong support for the Energiewende, only 35% want to see a strong deal in Paris, compared with 55% pre-Copenhagen.

The underlying message seems clear: the voting public (and non-voting, given a similar picture in China) are not in favour of stringent measures to tackle climate change. We may debate the reasons for this, but the trend is obvious. Politicians with ambitions to lead the charge are likely to lose public support. Against this backdrop, the Chancellor seems to have read the public mood and is likely to find little opposition (other than from campaigners and vested interests) to his shift in strategy towards lower a cost, secure energy supply.