The best editorials in The Economist are timeless. Traditionally they germinate in a Monday morning editorial conference run on the lines of an Oxbridge tutorial; Tuesday for a sometimes leisurely write up; Wednesday for editing; last minute tweaks on Thursday; giving a quality product with a life span longer than yesterday’s fish.
The latest on the global energy shock fits the bill. Structured on the classical editorial tripos of “ … three problems loom[ing] large”. Magisterial, incisive, combining sound economics with a global sweep of history.
But perhaps ten years too late.
This was the period in which governments took control of energy markets around the Western world. No private decisions have been made without reference to government policy.
And ensuring a secure supply of fossil fuel during the transition has had low priority. This might just be linked to the non-exploitation of Europe’s large shale gas reserves and the diversion of the oil majors’ investment flows away from carbon.
Productive investment needs policy to be sound and stable.
Democratic energy policy is not. But then it’s not been intended for markets. We’ve been the target. Policy aims to tiptoe round the division in the body politic. The goal: to engineer the biggest technological change in history without anyone really being troubled.
Markets are saying more loudly what energy company executives gave up on long ago. You can pretend for a while but ultimately you decide what you want and pay for it.
Not enough government controls is a ready answer from left field. Politicians like Boris Johnson usually respond with a call for smart controls. The Economist’s reprimand suggests that is less plausible than it was six months ago.
Certainly if the leaders at the COP26 climate jamboree in Glasgow next month want to take a grip of things there is a battery of command and control choices at their disposal.
A report – Scoping Net Zero from the Global Warming Policy Foundation – gives some examples from The Economist’s home turf.
“Even if 40% of the UK’s fossil fuel use could be eliminated through efficiency improvements, 120GW of new, continuous CO2-free energy generation capacity – equivalent to 40 nuclear power plants of Hinkley Point C size or 300GW of new offshore wind – would be required to replace the remaining 60%. The capital cost would be over £1 trillion, even without the necessary back-up.”
“ … 26 million gas boilers will have to be replaced in the UK; electricity generation and distribution systems will have to be rebuilt, particularly to account for the intermittency of wind and solar; large investments in battery charging infrastructure will be needed for BEVs; the aviation, steel and cement industries, livestock farming, oil and gas production and distribution, and oil refining will all have to be dismantled.”
The alternative is to acknowledge that a transition from carbon is so complex, that the only way of making efficient progress is to keep policy – what were those words – simple and stable. That defines the carbon tax – a means of identifying and eliminating the low value uses of carbon which we indulge daily without fully realising it.
So we would learn among other things that comfortable and stylish houses are even more expensive than we thought; internal combustion engines are rather efficient; don’t insulate your garage; and it costs more than you thought to get your children to leave home.
The other thing about a carbon tax is that it might make us understand that any transition period needs to be drawn out (Singapore and China’s policies recognise this). That waiting and seeing has enormous value. And adaptation to climate change is a big part of any response. Steady plodding forward, hoping for the best but preparing for the worst.
That would be worth another editorial from The Economist in ten years time predicting what happened.