Transitioning to a Low Carbon Economy - Essay Example

? ECONOMICS OF ENVIRONMENT AND ENERGY Economics of environment and energy Transitioning to a Low Carbon Economy – Markets and Government Carbon dioxide emission into the atmosphere has been a concern across the globe owing to the effects created. Carbon dioxide is the leading greenhouse gas causing global warming. Efforts to reduce this gas are so welcome in a world that faces tremendous environmental challenges. Some people think that the measures to undertake in this venture are so expensive to attain. This applies especially to those who only view environmental concerns, as anti-economic Transitioning to a low carbon economy is indispensable if the world is to continue uninterrupted by environmental degradation. Researchers have made a prediction that continued greenhouse gas emissions would result in a rise of temperature by 6°C before 22nd century. This temperature rise will result in problems such as drought and floods, global instability, public health related deaths and rampant migrations of people. All these problems will befall the world community including the UK. For the world to avoid these disastrous effects, global carbon dioxide emissions must fall to at least 50% below the levels of 1990 by the year 2050 (DECC, 2011,pp 3). This will ensure that world temperatures will not rise more than 2°C. In some past UN talks, the European Union promised to cut carbon dioxide emissions to 20% below the levels of 1990 by the year 2020. To reduce carbon dioxide emissions and fund emissions cuts in developing countries, the European Union has created the world’s largest emissions scheme (Leticia et al, 2012). The transition to reduce carbon dioxide emissions will happen but not without challenges. The UK will face the challenge of getting alternative energy sources that are environmentally friendly to run industries. Climate change needs urgent solutions to prevent ecological catastrophes, political and economic instability, and human suffering. According to Lund (2009, p.88), efforts to minimize greenhouse gas emissions will provide international security and improve energy, new economic opportunities, a fair society and a better environment. This paper will deal with energy consumption trends and prices in the UK, role of competitive markets in delivering the low carbon economy and government’s intervention in fostering the economy. The trends in energy consumption and prices have been on the rise in the whole world with the challenges of employing the use of environmentally sources of energy. Energy production of 2010 was down by 5.3% compared to the 2009 production in the United Kingdom (DECC, 2012, pp 2). Energy consumption normally becomes high during cold seasons, and thus in a cold year we expect a rise in energy consumption. This happens because people use lots of energy to keep warm their dwellings during cold times. In 2010, the final energy consumption rose by 4.4% while primary consumption of energy was up by 3.2%. However, the primary consumption on the temperature-adjusted basis fell down by 0.4 per cent. This happened because the average temperatures of the year 2010 were 1.1°C below those of 2009. The year 2010 saw the UK remaining a net energy importer, importing 28 per cent of its energy requirement. Because of reduced nuclear output due to outages, imports of liquefied natural gas increased. The tables below show the final energy consumption in the year 2010. By users Sector Percentage Transport 35.0 Domestic 30.5 Non-energy use 5.5 Iron and steel industry 1.0 Other industries 16.5 Other final users 11.5 By fuels Type of fuel Percentage consumption Natural gas 33.0 Electricity 17.5 Petroleum 45.5 Others 4.0 The final total energy consumption was 159.1 million tones of oil equivalent. From the tables, we can see that UK had increased dependency on fossil fuels, and the transport sector was the leading consumer of total energy consumption. In the fourth quarter of 2011, total energy production fell by 13% as compared to the productions in the fourth quarter of 2010 (DECC, 2012, pp 4). The production of oil dropped by 17%, and the production of natural gas fell by 12.5%. The imports of gas fell by 17.5% showing a fall in gas demand compared to 2010. The total primary energy consumption was 13 per cent lower than that of 2010. The temperature-adjusted value for the consumption was 4.5 per cent lower than in 2010. Production of indigenous primary fuels Million tones of oil equivalent Primary fuel 2010 2011 Coal 15 17 Petroleum 70 57 Natural gas 60 47 Primary electricity 15 18 According to the Department of Energy and Climate Change (DECC, 2012), the decrease of total production of energy in 2011 was a result of significant falls in oil and gas production. The net import dependency of energy in 2011 hit 36.4 per cent because of oil and gas production falls. The most up to date data on energy consumption in the UK shows primary electricity and natural gas on the rise. The table below helps to make the information clear for interpretation. Million tones of oil equivalent Final energy consumption 1980 1990 2000 2008 2009 2010 Industry 48.3 38.7 35.5 30.9 26.6 27.5 Domestic 39.8 40.8 46.9 45.5 43.0 48.5 Transport 35.5 48.6 55.5 58.5 56.1 55.7 Services 18.7 19.2 21.5 19.2 17.7 18.4 Total final energy consumption 142.4 147.3 159.4 154.0 143.4 150.1 Total primary energy consumption 204.5 213.7 233.9 225.6 211.5 218.5 Temperature corrected total inland consumption 206.2 221.6 239.6 226.5 213.0 212.3 The table below shows the uses of various sources of energy by the sectors noted above. Year: 2010 The total final energy for the year 2010 was 5% higher than that of 2009. The use of energy by sectors rose most in the domestic sector because of the fact that 2010 was colder in average as compared to 2009 (DECC, 2011, PP 5). Although the United Kingdom has been exporting energy, its dependency on crude oil imports makes it an importer of energy. The table below shows energy production by UK in the recent past. Percentage Energy source 2000 2006 2007 2008 2009 2010 Coal 39% 75% 69% 75% 78% 51% Gas -11% 12% 20% 26% 32% 38% Oil -55% 9% 2% 9% 8% 14% Total -17% 21% 21% 26% 27% 28% The negative sign means the country did not produce own supply and thus depended on imports. It is evident from the above table that UK still depends a lot on the use of energy from coal, which is a principal contributor of carbon dioxide into the atmosphere. The table below shows the percentage use of different non-carbon sources of energy in the UK. Percentage Energy source 2000 2006 2007 2008 2009 2010 Nuclear 8.4% 7.3% 6.2% 5.3% 7.2% 6.4% Wind 0.0% 0.2% 0.2% 0.3% 0.4% 0.4% Hydro 0.2% 0.2% 0.2% 0.2% 0.2% 0.1% Biomass 0.9% 1.6% 1.7% 1.8% 2.2% 2.3% Transport fuels 0.0% 0.1% 0.2% 0.4% 0.5% 0.6% Other 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% Total 9.5% 9.4% 8.4% 8.0% 10.5% 9.9% From the data above, we note that nuclear power contributes the largest percentage of non-carbon sources of energy. Non-carbon energy sources use is still low in general. Energy prices in the UK The table below shows recent price indices of various energy sources in the UK. Current fuel price index numbers 2005=100 Year Coal & smokeless fuels Gas Electricity Heating oils Fuel & light Petrol and oil Fuel, light petrol and oil RPI all items 2005 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 2006 107.5 131.9 121.7 113.2 124.6 105.5 114.0 103.2 2007 115.2 142.1 131.4 114.2 133.4 108.4 119.5 107.6 2008 137.2 170.1 151.9 164.9 158.7 124.7 139.2 111.9 2009 161.3 193.5 158.8 126.4 168.6 114.7 129.0 111.3 2010 161.3 182.0 154.9 161.2 164.0 134.1 128.2 116.5 2011 169.1 201.4 166.1 201.4 181.4 153.5 132.3 122.5 According to the department of energy and climate change UK (DECC, 2012), prices of the various energy sources have constantly risen. Between 2010 and 2011, there was a rise of about 8% in prices paid by customers for all fuel and light. During the same period, there was a rise of 4.8 per cent in prices of electricity including value added tax. There was a rise of 8.1% in real terms of domestic gas prices including VAT. There was also a rise in prices of smokeless fuels and coal though by a small percentage of 2.4%. The prices for the year 2011 increased but fell below those reached in 2009. The Low-carbon Transition Plan The available data show UK still depending much on the use of coal. The world community is fighting to reduce carbon dioxide emissions, and UK is part of the plan to decarbonize the atmosphere (Carbon Plan, 2011). The Copenhagen proposals are binding to everyone in the world, and we should promote by joining the world in cutting carbon emissions. Coal and gas contribute to three quarters of the electricity production in the UK, and of the total emissions, the heavy industry and power sectors contribute 35%. The carbon plan has a target to reduce this as much as possible. This will be possible by ensuring that all electricity will come from nuclear or renewable sources of energy. In case of use of fossil fuels to generate electricity, emissions would be captured and stored. The plan aims to cut emissions by 22% from both power and heavy industry as compared to 2008 levels while securing power supplies by the year 2020 (UK Low Carbon Transition Plan, 2009, pp 4). The projection expects to draw about 40% electricity from low carbon sources by 2020. The EU Emissions Trading System is a key tool in the UK’s carbon plan as it focuses on electricity and heavy industry to limit emissions. However, this approach will not be enough to ensure use of low carbon technologies accompanied by desired rapid development in the UK. Thus, the government will provide support in various ways to achieve a rapid sustainable development. The government of the UK is currently working to support as follows: 1. Renewable: the carbon plan aims to increase electricity from renewable sources to about 30% by 2020. To enable this change, the UK government will launch the Office for Renewable Energy Deployment, including supply chains development to create jobs. 2. Nuclear: the Government is working on regulatory and planning approvals that would bring new nuclear power stations. Currently the government is doing assessments of sites and hopes to encourage developers to bring nuclear power stations before 2025. 3. Carbon capture and storage: the Government has promised to support about four demonstrations on coal power stations to test whether this technology would work along other strategies aimed at cutting carbon emissions. Apart from the above efforts, the government will develop bigger, smatter electricity grid than the one currently in use. The government is currently working to increase grid capacity, supporting the development of new technologies and speeding up the connection of renewable electricity to the grid. The carbon plan also targets communities and homes. In the UK, homes consume three quarters of the energy. Most of the energy comes from gas-fired boilers and used to heat rooms and water (DECC, 2011). Homes and communities contribute about 13% of emissions in the United Kingdom. It is necessary to reduce this value to realize almost zero value expected in the year 2050. The carbon plan targets to cut emissions from homes by 29% on the levels of 2008 by the year 2020. The plan looks to improve security of gas supplies and introduce further measures to protect the most vulnerable (Carbon Plan, 2011). The role of the government in energy consumption in the homes and communities will focus on two crucial priorities (UK Low Carbon Transition Plan, 2009). First is to increase energy efficiency in the homes. This involves ensuring high-energy efficiency of newly-build houses. The government aims to move towards zero carbon homes starting the year 2016 and in 2019, zero carbon non-domestic buildings. Secondly, the Government will help people decide to use low carbon alternatives and avoid relying on fossil fuel-based space and water heating. Education will also be a necessary component to inform people on the impacts and sources of the energy they are using. The carbon plan has a vision to reduce emissions from business and industry. Businesses and industrial processes in the UK contribute about 17% of greenhouse gas emissions (DECC, 2006, pp 6). These emissions result from industrial, chemical reactions, fluorinated gas leaks, and heat-related emissions. The move towards a low carbon economy takes into account the necessary changes in business and industry. The UK government will help businesses through the following mechanisms: The European Union Emissions Trading System, the system with the greatest responsibility in emission reductions from both business and power sectors The European Union regulatory framework concerned with fluorinated gas emissions. Voluntary agreements on energy efficiency in businesses, with energy suppliers to provide energy audits, services and energy efficiency advice Enhanced Capital Allowance scheme targeting energy efficiency, enabling business 100% tax-deducted allowance claim in the first year on their expenditure on machinery and plant Waste and Resources Action Plan, providing businesses a technical support and advising consumers to help the promotion of resource efficiency, investor confidence and increasing businesses The UK Government has a duty to help in delivering the objectives of climate at the lowest cost. To counteract barriers to investments in energy and carbon saving, the Government will focus its support where there is a need. The Government is also targeting large organizations participating in the Carbon Reduction Commitment Energy Efficiency Scheme in order to ensure achievement of energy efficiency savings. This will be possible through reputational and financial drivers of the scheme. The carbon plan and the transport sector Transport involves moving workers and goods from one place to another. It also involves moving people to access employment, family and friends, services, communities and leisure activities. Through all these activities, transport contributes to about 22% greenhouse gas emissions in the UK (Carbon Plan, 2011, pp 36). There is a need to develop and improve vehicle technologies that enable use of less fuel or lower carbon fuels. This will help to tackle greenhouse gas emissions and other dangerous emissions from transport. Sustainable travel choices and alternatives to travel are areas the Government will have to support. The Government has promised to support technologies of low emission vehicles. The carbon plan and emissions from waste About 3% of greenhouse gas emissions come from waste in the UK (Carbon Plan, 2011, pp 45). Most of these emissions emanates from decomposing biodegradable wastes in landfills giving off carbon dioxide and methane gas. Reduction of waste into the landfills will be a short-term priority. However, a long-term priority will involve the use of waste to produce low carbon energy. Landfill tax has helped the UK make a progress in reducing waste dumping in the landfills. The Government is currently reviewing waste policies in order to realize progress on this issue. The Environment Agency is working closely with the Government to capture high amounts of methane from landfills. There is an opportunity to generate energy from avoidable and unrecyclable waste. The carbon plan is also going to address sustainable management of the land. This will involve concerns on improvement of livestock productivity and efficiency, use of nutrients matching crop needs and us use of improved fuel and on-farm energy. The plan will also address reduction of emissions from the public sector. The aim of doing so is to ensure that the government takes a lead in the move towards a low carbon economy. Discussion Competitive markets are fair situations of the market where the consumers and sellers benefit from the control and prices of the market. Competitive markets would involve independent regulator given responsibility to ensure competition and protect consumers in a proactive way. If markets fail, individual decisions will cause the wider society harm. The action of the Government putting prices on carbon emissions reflecting real damage will be a brilliant move. This will match the encouragement to adopt cleaner technologies and behavior change through incentives to companies and consumers. The government is currently working to support new technologies of electrically powered cars to reduce reliance on fossil fuels in vehicles (Carbon Plan, 2011, pp 37). Making the prices of such vehicles fair would mean that consumers would go for them and move away from the previous vehicles. The government has a role in informing people to make choices for the low carbon plan. Businesses and people face difficulties including lack of information and upfront costs. The government will have to offer support and provide information for businesses and homes to install insulation. The government will intervene by promoting new low-carbon sectors and climate-friendly industries in the economy. This will not be enough on its own. Relevant government policies to increase funding for research on new technologies and demonstrations will play a key role. The government will have to address all sectors in the UK economy to enhance domestic cooperation. This will also ensure that all sectors are moving towards a low carbon economy by the year 2020. The government is laying emphasis on sectors including the transport, businesses, and homes, the energy and agricultural sectors. The government’s intervention will work to increase energy efficiency of the businesses. Businesses and industries contribute significantly to the greenhouse gas emissions in the UK. Thus, these sectors should feature, in the strategic plan, to reduce carbon dioxide emissions. The government must engage use of policy measures for industry and businesses. The policies will be decisive in bringing down the cost of deployment, driving innovation forwards, and increasing market competitiveness. The Carbon Change levy currently does not apply to the domestic sector, but there is a possibility to cut emissions from the sector by increasing prices of energy. Increasing household energy prices will help in reducing carbon emissions in that the government will support households adopting low carbon technology heating systems (UK National Statistics, 2012). Households in the UK contribute 13% of greenhouse gas emissions as seen earlier. Increasing the prices energy bills will encourage residents to switch to low carbon technologies such as heat pumps and solar power. The UK Low Carbon Transition Plan aims to bring, to almost zero, greenhouse gas emissions from households by 2050. This move to increase energy price will be effective because the households will meet high costs of energy. Thus, they will participate in making choices that minimize emissions by switching to low carbon technologies. Although the energy prices in the UK are low as compared to other European Union countries, many households cannot afford adequate heating for their homes during winter (DECC, 2009). The UK government has committed itself to fight this fuel poverty. The aim of the government in the fight will be to reduce fuel poverty and end it by 2016 or 2018. Fuel poverty estimates stood at 2 million households in the year 2004, which indicated a substantial fall from about 6 million households in 1996. The UK has made tremendous efforts towards a low carbon economy, but much still needs to happen. Production of energy from low carbon technologies has increased substantially. For instance, generation of electricity from renewable sources of energy nearly trebled between 1990 and 2005. The UK remains independent on traditional fossil fuels, but the choice of fuels used in the various sectors matter a lot in terms of carbon emissions. Conclusion The UK still depends much on imported energy, but it has opportunities of making tremendous changes to this scenario. The opportunities for change in this case include tapping of renewable energy and nuclear power, which are low carbon alternative sources of energy (Miles & Frank, 2008). Competitive markets will play a critical role in the plan for a low carbon economy, and the Government has to intervene continuously in energy prices. The carbon plan is a working plan if implemented to the later addressing all the sectors as stipulated in the plan. The UK will make remarkable achievements in the global fight to reduce carbon emissions through the plan. This will happen if the Government works to realize the goals of the plan by the year 2020 and onwards to the year 2020. It is worth noting that success will not only depend on the government but also on the communities, homes, and individuals. Bibliography ‘Developments in International Bioenergy trade & markets - Results from work of IEA Bioenergy Task’Vol. 4, no. 1, pp. 688-701. DECC, 2006, ‘Energy-Its Impacts on the Environment and Society. 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