The energy crisis is making the green movement’s case
As the world braces for an energy shock even bigger than that of 1974, it is striking that Vladimir Putin’s war in Ukraine has foisted upon us something more like a global carbon tax than anything achieved by UN climate summits. Yet the green movement is oddly silent.
It would be callous to cheer price hikes that could devastate less well-off families and bankrupt businesses. The scale of the human cost will be enormous and the most needy must have protection. But help ought to come in ways that don’t derail the underlying incentive to adapt to higher energy bills — especially for those who are rich enough to have an outsize impact on the planet. That is what environmentalists should be saying.
When I studied environmental economics two decades ago, climate scientists were already pushing to make polluters pay the true cost of greenhouse gas emissions. Carbon pricing, they thought, would give incentives to reduce energy use, most efficiently. More than 30 jurisdictions around the world now have some form of carbon pricing or emissions trading scheme. But last year most of them priced carbon dioxide at $40 a tonne, or less — which is too cheap. The International Energy Agency says that the average carbon price needs to hit $200-250 a tonne for the world to achieve net zero emissions by 2050.
How do today’s astronomical prices change the equation? Adair Turner, chair of the Energy Transitions Commission, reckons the gas hike is the equivalent of a “massive” carbon tax, of around $600-$950 a tonne. If prices persist at anything like this level, he says, technologies like green hydrogen will be adopted much sooner than expected. The payback times for installing renewables and home insulation will also shorten dramatically.
Lengthening wait times for heat pumps and solar panels in the UK and the Netherlands suggest that richer consumers are already responding. In the US, president Joe Biden’s Inflation Reduction Act has doubled down, with subsidies and tax credits for renewables and carbon capture. Yet in the UK, the frontrunner to be the next prime minister has dubbed solar panels ‘paraphernalia’.
Whoever wins will need to support households and businesses while launching a radical programme to help us all adapt, through renewable subsidies and insulation. An astonishing report suggests that Britain’s draughty homes will bust the entire carbon budget unless there is a dramatic upscaling of retrofitting.
It is still unclear how long energy bills will remain high. But as I stand in my garden looking at brown grass, enduring freak storms and wondering why certain birds are no longer migrating, I recall with a creeping dread the warning that one day we will reach a tipping point that leads to runaway global warming Unexpectedly, we are at a different kind of tipping point: one that could accelerate the adaptations we need to make.
Many governments are currently capping bills which would otherwise be crippling. That’s understandable, given the exponential rises. But price caps do little to reduce energy use, or help economies adapt. In the UK, British Gas’s decision to donate 10 per cent of profits to its most vulnerable customers was certainly better targeted than the government’s perverse decision, back in May, to include second-home owners in its energy rebate. No one wants the poor to face a choice between heating and eating. But nor should governments be protecting the rich. In 86 countries, the wealthiest tenth of people consume about 20 times more energy than the bottom tenth, according to one recent study.
Under a conventional carbon tax, governments receive the revenue to compensate those who lose out from higher prices. But this ‘tax’ has been imposed by Putin. Every therm of gas we burn benefits his regime. It is surprising that more leaders have not echoed President Emmanuel Macron’s call for French citizens to use less energy as part of the national effort to support Ukraine. As he has said, “freedom comes with a cost” — and so does energy security.
People may prove more amenable to sacrifice than politicians imagine. On a business trip to Tokyo after the Fukushima meltdown, I found executives complying with government instructions to limit air conditioning and jettison jackets. It was high summer, and we were all sweating, but it didn’t matter. More recently, the Spanish government has asked businesses to keep air conditioning no lower than 27C, and shops to switch off lights at night. Germany is switching off hot water in public buildings.
Far more will be needed. But in this strange, global experiment, we are about to learn what changes industry and individuals find it easiest to make, and what requires a giant leap of faith.
camilla.cavendish@ft.com