Tuesday, 19 July 2011

Britain's economic suicide

A superb article from The Rational Optimist:
British Gas is putting up the cost of heating and lighting the average home by up to 18 per cent, or about £200 a year. Indignation at its profiteering is understandable. But that can only be a part of the story: the combined profits of the big six energy supply companies amount to less than 1.5 per cent of your energy bill, according to the regulator, Ofgem.

Gas prices have gone up this year mainly because of demand from post-Fukushima Japan and booming China. With energy now a big part of household bills, genuine fuel poverty threatens many Britons next winter.

So what does the Government plan to do? This week it publishes a white paper on electricity market reform that will be predicated upon, indeed proud of, pushing up prices even faster. To meet its self-imposed green targets, the Government’s policy is to tax carbon, fix high prices for renewable electricity and load extra costs on to people’s electricity bills — but without showing them as separate items.
Cheap energy is the elixir of economic growth. It was Newcastle’s cheap coal that gave the industrial revolution its second wind — substituting energy for labour drove up productivity, creating jobs and enriching both producers and consumers. Conversely, a dear-energy policy destroys jobs. Not only does it drive energy-intensive business overseas; according to Charles Hendry, the Energy Minister, the average British medium-sized business will face an annual energy bill £247,000 higher by 2020 thanks to the carbon policy. That’s equivalent to almost ten jobs it must lose, or cannot create.
Raising the costs of electricity to subsidise irrelevant wind farms will fail to make the slightest dent in British carbon emissions, let alone global ones. In any case, natural gas is going to do far more than renewables ever could to accelerate the decarbonisation of the world economy, as it replaces high- carbon coal and oil in coming decades.

So the hijacking of energy policy by carbon targets is mad. Far more urgent questions face us than that. How do we replace the one-third of coal-fired stations that will close by 2015? Not by renewables, that’s for sure. How do we replace the capacity of our nuclear power stations, all but one of which will close by 2023? How do we compete with China, where it takes five years, not 15, to build a nuclear power station? How do we compete with America, where companies are now swimming in cheap domestic natural gas, half the price it is over here, thanks to shale gas exploration?
The only thing that the government's carbon taxes will achieve is the continued destruction of British industry. The demand for these products won't go away, it will simply be met by foreign producers rather than domestic ones. Those who care about carbon emissions should not rejoice: instead of British gas and nuclear power, goods will be produced using Chinese coal, then shipped half way around the world.

I can't begin to describe the lunacy of our government's environmental policy, but Matt Ridley does a pretty good job. I thoroughly recommend the whole article.

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