Isn’t it good, Norwegian soot

Just keep reminding yourself that things need to get worse before they get better.

Norway – a grand profiteer from blood carbon, according to the puritanical wing of the climate church – has come up with a very old and very bad answer to Europe’s energy price crisis.

According to the Times, the government is going to help pay Norwegians’ electricity bills:

“Each household is expected to save hundreds of pounds through state subsidies to cover half of power costs above a price floor over the coming months.”

Now the essence of the decarbonisation transition is to make carbon relatively more expensive to discourage usage and encourage alternatives.  This results in more expensive energy.

So in effect Norway is spending money to encourage Norwegians to use more electricity. Which might otherwise have been available to help fellow Europeans burn less coal. Shame.

But before sniggering too much, give Norway’s politicians credit for a deeper logic to their approach.  The ultimate end point of rejection of markets is state control of supply and rationing according to social criteria.  

The record of this approach is not great.  NZ achieved mediocre results in the post war years with a mixed model.  But if you really want to get the carbon footprint down, go all the way with Cuba.

So perhaps the most revealing element of the current European crisis is the demonstration of near-complete dependence of private sector investment on government policy.

In a recent illustration, Shell UK pulled out of a major North Sea field extension project, despite surging energy prices, in part because it felt it had insufficiently enthusiastic support from Boris Johnson’s Conservative government.

It rather suggests that the big commercial decisions are made by Ministers and officials under the cover of policy, with the private sector prepared to execute only if the government covers the risk.

And the perception of risk may be increasing too.  The energy crisis raises real questions about the stability of Europe-wide energy policy, and investors are fretting that governments will find it hard to resist the political temptation to snatch at private sector capital as the price increases come through.

Fortunately, what can’t go on forever, won’t.

But strategists for the centre-right ought to be thinking how to turn this situation to their longer-term advantage.  They might bear in mind a couple of lessons.

First, the continent-wide chaotic response to the energy price changes is a further reminder that a successful transition away from carbon is not going to be delivered by a central planner, whether in Oslo or Wellington.  It will need to be delivered by the private sector operating in a predictable policy framework.

Secondly, the predictability needs to be on the approach to pricing of carbon and requirements for energy security.

The climate establishment embedded in most Western governments is uncomfortable with these principles.  But it does have the advantage of believing in something (even if illogical) and being willing to make ad hoc populist responses (even where they make the problem worse). 

But as evidence mounts that the proposed journey is painful and the sign-posted destination dubious, the opportunity for breaking with orthodoxy looks ever more promising.

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