THE media find it difficult to focus properly on more than one thing. Right now that thing is what is loosely being called the cost of living crisis.
What has been swept from the front pages, along with the war in Ukraine, is climate change. This is a pity because over the long run a changing climate will dramatically impact our standard and quality of life.
The current cost of living problem actually provides us with an opportunity to fast forward real action to combat climate change.
A key difficulty with our efforts to reduce our impact on the environment has always been that for most people it has not made much economic sense. If you have access to mains gas then switching to a heat pump or putting solar panels on your roof has meant you are signing up for more cost not less.
What we now have – and we have not yet felt its full power – is what in a market economy is the most powerful possible agent of change. A strong price signal.
At less then 20p per kilowatt/hour your electricity bill is one of those things you juggle. At the price of well over 50p which is almost certainly coming this winter your bill becomes a key focus of your attention.
Politicians have been trying to nudge us in the right direction. Subsidies for electric cars, no VAT on energy efficiency measures etc. Now the baton has passed to consumers. Should we insulate those draughty windows? Should we buy a more fuel efficient car? Should we turn the heating down a bit? Should we replace those last inefficient lightbulbs? When we replace our fridge or TV should we care how energy efficient it is?
The answer to all of these questions is a resounding Yes. In terms of reducing our impact on the environment the answer should always have been Yes. Now the answer is Yes because it makes economic sense to us personally. This shift is powerful, going green no longer costs you money, it can save you money.
The problem – as you will have already guessed – is that the rise in energy bills this winter will not be affordable for a large number of people, causing not just discomfort but real distress and bad choices for individuals, which as a civilised society we should not find acceptable.
The current high rate of inflation is temporary, by the end of 2023 the rate of inflation will almost certainly be moving strongly downwards. By 2025 it is more probable than possible that inflation will have fallen below its 2 per cent target.
What is likely to remain after the inflationary surge fades is higher energy prices than we were used to up until last year.
In time the increase in investment in low carbon energy which the sharp rise in fossil fuel energy prices is bringing about will mean that a decisive price advantage in favour of low carbon energy sources will emerge. This is the win-win position.
The difficulty in the transition to green energy has always been its cost. Once economic incentive brings about innovation, mass production and changed consumer behaviour that price premium should reverse. We will then have a situation where we can afford a more sustainable planet and not be held to ransom by Putin and other lowlife.
The role of government should be to make the accelerated transition to a lower carbon economy affordable for those who simply cannot pay.
The wrong approach is the one followed by France and advocated by Keir Starmer which is to cap the price of energy so that bills don’t change. This is madness, it switches off the price signal which will drive us towards net zero. It is staggeringly expensive and it helps those who don’t need help.
The mechanisms already in place which require energy companies to fund measures to help the fuel poor must stay. By all means shift their cost to general taxation rather than energy bills for a few years but the measures themselves should remain. Support should be focused on people who really cannot afford to pay their energy bills – and if you plan to have two holidays abroad this year that’s not you. Nobody should have to choose between warmth and food but the Government cannot sensibly lift the full burden from all of us.
In the 1970s we lacked the political will and the technology to take benefit from rapidly rising fossil fuel energy costs. This time we have the technology and if we have the will there is an enormous prize to be grasped.
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