U.K. Energy Sustainability Public Policy - Essay Example

? TOPIC Examine a public policy issue in one country, of relevance to the private sector, from a public policy perspective. Draw recommendations for policy makers informed by the conclusions. ISSUE U.K. Energy Sustainability Public Policy (Name) (Institution) ABSTRACT This paper is designed to provide an initial insight into the nature of public policy in the United Kingdom, as it affects the private business and commercial sectors, and the public at large. Its specific focus is on the nature and effectiveness of Public Policy on Energy in the UK. The concept of public policy is introduced and the nature and development of the UK’s Energy Policy is outlined. The positive aspects of the policy are examined, and the positive and reasonable intention of this public policy highlighted. The critical view of this public policy follows, with a summation of some of the current suggestions from academics that may assist in creating a more effective public policy in this sphere. Two particular points of view emerge: a free-market approach, and an approach that calls for significant government intervention in the energy industry. Neither is found to be absolutely satisfactory. The paper concludes with the suggestion that public policy is shaped significantly by interest groups, and in industrialised democracies those interest groups are often the largest users of fossil fuels, and consequently most likely to be contributing to climate change due to carbon emissions – the very aspects the government is being called on to manage and reverse if the planet is to survive. Key Words: public policy; energy policy; innovation in management of reducing carbon emissions. INTRODUCTION Public Policy is a set of rules, or guides promulgated by governments to ensure that the branches of government all deal with issues in a similar, consistent manner, according to the laws and constitution of the particular country (Wolf, 2006, paraphrased). Inevitably, public policy is not simply decided by an elected (or non-democratic) government: it is influenced and changed by pressure, or lobby groups, by organisations within the society or community, and by the public at large and its perceptions. While public policy can be confined to domestic policy and thought, the increasingly globalising world means that it is not only internal pressure which is brought to bear on government and their policy formulation, but also international trends and necessities. Thus, although this essay will focus on the Energy Policy of the UK Government, some consideration must necessarily be given to the influence that international trends in energy policy have on the UK. The Department of Energy and Climate Change formulates public policy in this area and relies on two pieces of legislation: the Energy White Paper of 2007, and the Low carbon Transition Plan of July 2009. Four key policy goals were tabled in the 2007 paper: The UK should be on a path to cut carbon dioxide emissions by 60%, and significant cuts should be evident by 2020; The UK should ensure reliable energy supplies; Competitive markets in the UK and internationally should be promoted, so that sustainable economic growth is possible, and productivity can improve; and Every home in the UK should be adequately and affordably heated. Additional considerations are highlighted in the policy, among them the production, distribution and use of electricity, fuel used for transport, and heating. The longer-term intention is to contribute to the worldwide fight against climate change, and to ensure secure, clean and affordable energy for the UK itself. By 2008, the policy included emphasis on the energy market, offshore gas and oil, and investment in nuclear power. Direct control of energy in the UK economy now does not lie with the government, after the liberalisation and nationalisation policies of the 1980s and 1990s, and while UK energy is recognised as being highly reliable in delivery to the population (Bowlby, 2011, website) there are a significant number of UK citizens in fuel poverty. Yet, the UK Low Carbon Emission Plan aims to cut carbon emissions by 34% by 2020. Furthermore, this plan aims at 1,200,000 people in the UK being gainfully employed in so-called green jobs; 1.5 million homes will be generating their own renewable electricity, and 7 million homes will have been upgraded; gas imports will be 50% lower than they could have been; and the average new car will be 40% more carbon efficient (Cole, 2010, website journal). Many practical steps have been taken, and are in force to ensure energy saving in the UK, and these range from the intention to clean homes of all carbon by 2016, to encouraging private investment to become involved in the building of new nuclear power stations. These measures, along with the larger initiatives aim to address the issue of security of supply. Increasing oil and gas imports, growing international demand for carbon fuels and affordability all threaten energy supply in the UK. This policy formation became imperative due to both local and international public pressure, and the decision of the UK Government was to place the power to implement such policy into the hands of market forces, rather than to maintain control itself. In effect the use of such public choice theory principles has rendered the policies fairly confused and difficult to implement. Electricity, however, is constantly becoming more expensive in the UK. Consumers are being asked to pay for subsidies for renewable energy. Other carbon reducing technologies also are not cheap, and these, too, are being subsidised, at the expense of the UK taxpayer. It is only through getting the balance right between the lowest possible cost to the economy and the lowest possible carbon emissions that the UK policy on energy can hope not to be deemed a complete failure (Noel, 2010, website). While public policy should, theoretically, be a set of guidelines, acceptable to the population of a country, and fairly immovable and stable, it is evident that public policy on energy is far from this theoretical ideal. The ideal may be to implement a rational comprehensive style of policy formation, where a root and branch approach is possible. Thus changes will take place through mutual adjustment and negotiation, and policy is able to evolve. In fact, for decades now, and still, the need to finalise an approach, rather than rules for implementation, is vital. Alternatively, however, it may be possible that the very lack of overarching and powerful public policy in this arena has placed the UK in a good position when it comes to security of power supply, and reputation in terms of its contribution to the global action to stave off climate change. FINDINGS AND DISCUSSION As public policy, the UK energy policy is claimed by senior politicians to be part of the myriad of opportunities presented to UK business by climate change. In 2004, former Prime Minister Tony Blair claimed that “just as British know-how brought the railways and mass production to the world, so British scientists, innovators and businesspeople can lead the world in ways to grow sustainably” (Watson, 2009, p. 22). Significantly, the UK has become in several regional and international agreements, which could advantage local business, and has continued to attempt to provide funding across a spectrum of new technologies. The effects on the private sector are evident, but it can also be argued that innovation is limited by this approach. Existing energy giants are favoured to a large degree, and these do prevent new firms, business models and technologies efficient access to the market place in many instances (Watson, 2009, p. 26). It seems again, that the UK is in effect favouring only self-interest, and ensuring that big business remains supportive of government – the giant energy companies and the politicians seem neither to be concerned about the global environment, particularly, nor about the economic conditions of the general public in the UK. Thus it is that UK public policy on energy seems to be separated into two distinct areas from which it is criticised by respective adherents. On one front, the criticism is that years of public policy aimed at liberalising the economy, and allowing the free market to thrive have prevented effective measures to counteract carbon emissions, and are steering the UK toward an energy crisis from which it will be difficult to recover. On another front, the failure of this policy is highlighted, as the argument is formulated that something as important as committing a nation to preventing climate change cannot be left in the hands of industry and the free market. Instead, the UK government ought to have intervened, not only in terms of subsidies, but also in the form of defined and well-structured and managed public policies on energy. The 2007 document “Meeting the Energy Challenge; a White Paper on Energy” sets out current UK Public Policy on energy (Fells & Whitmill, 2008, p. 4) and according to many, the additional acknowledgement for the need to employ nuclear power, in a January 2008 White paper on Nuclear Power was a positive next step. The challenge is to meet the political targets of the European Union (EU), though, set at a level where 20%of all energy consumption across the EU must be from renewable sources by 2020. The UK plays an international role in climate change policy, and would hope to be able to lead it, but the momentum of the changes in the 1990s, from coal to gas technologies, are no longer so significant. In fact, carbon emissions have been on the rise again (Watson, 2009, p. 5), as is the case in many industrialised nations. ` According to the UK’s 2003 energy White Paper, from which the 2007 paper was developed, innovative technology to decrease climate change effects will only be possible “within the right framework which will regard the best, most effective technologies ... a policy that is not about picking winners ... but allows the market to provide appropriate incentive” (2003 energy White Paper, cited in Watson, 2009, p. 7). This does however require that the government has the political will to select not to provide support for failing technologies, even if it is under pressure to support popular or currently publicly highlighted technologies. In the UK, the Renewables Obligation has favoured economically attractive technologies – fortunately so, according to Watson (2009, p. 10). In considering energy policies in the UK, all the options – power generation, energy efficiency, transport and energy networks – should be supported by government. Given the continuing restraints on government budgets, it could be argued that prioritisation is absolutely essential, and political acceptability may have to be a secondary consideration. When private capital becomes involved in determining which technologies should be deployed to counter carbon emissions, the picture changes slightly. As the UK has liberalised the electricity sector, for example, a different perspective has emerged on financial risk associated with reducing carbon emissions. Capital cost increases, fossil fuel price variations, and even consumer confidence are assessed to determine the viability of new technologies. This means that even if technologies can be proposed to have very similar costs (Watson, 2009, cites existing gas and existing wind plants, p. 14) the risk levels can be significantly different. Government incentive schemes, therefore, should take these varying risk profiles into account when creating incentives for private enterprise to invest in innovation in energy saving technologies. The possibility to hedge risk across technologies and innovations should also then be considered. Watson, 2009, argues that investment from government should be in a “diversity of projects (p. 15). Within the UK strengthening and liberalising markets has been the trend in public policy since the 1980s. In this time also, the issue of an Energy Policy has been on occasion sidelined, and certainly de-emphasised (Keay, 2005, p. 33). The ever-increasing European dimension in UK government has also to be considered in the development of UK Energy Policy, as the dependence the UK still has on Europe for fuel imports, and her involvement in the single gas and electricity markets which Europe potentially represent, impact heavily on the possibilities for a distinct and British-only policy. Beginning with the policy-making of Nigel Lawson, Secretary of State for Energy in the 1980s, the energy sector has been viewed as similar within the economy to any other sector, and thus dependent only on the free-market to ensure its efficiency and success. Privatisation and competition were forwarded as the only way to ensure carbon emission reduction, and by implication, the UK needed no overall energy policy at all (Keay, 2005, p.34) and all that was required was a set of regulations and policies to free up the market in the energy sector. Government was thus not directly investing in supply, fuel choice or pricing, instead letting the market determine these aspects of energy policy independently of government intervention. Global developments, Keay (2005, pp. 34-37) argues, however, made continuing this approach impossible. As fuel prices and fuel shortages in other parts of the world began to be felt, and in the UK protests against high fuel prices began to occur, the political and economic importance of energy had to be acknowledged. The UK will never again be isolated from world market in terms of energy supply and security of fuel supply. Furthermore, the political changes of the 1980s and 1990s led to Labour governments, with poverty alleviation and the environment more at the forefront that privatisation, or liberalisation of markets. Privatisation and liberalisation also failed in one important area: they did not provide the diversity in electricity delivery that was hoped for – instead the belief was that an overdependence on natural gas had come into being instead. Additionally, the idea that private markets can be encouraged in order to meet defined environmental targets, accepted and ratified by government, was found to be questionable. The need is inevitably for higher prices, if conservation is to succeed while private markets thrive on lower price structuring. The interests of the economic and political elites were certainly being served, at the expense of the UK citizen, and even under the Labour Government, this public choice approach seemed not to be successful. At the end of the 1990s, then, it appeared that there was no coherent and cohesive energy policy in the UK. Currently, the situation is extremely complex. The renewable energy policy in the UK is expensive. Subsidies are given to technologies which “under-deliver” (Noel, 2010, website) and this costs the UK consumer close to ?1.4 billion a year. This is within the market which gas supply is not as direly threatened as is often thought. The competitive gas market in the UK does manage to meet the needs of the country, competitively, and is not at the mercy of Russia because of it. Instead, the UK is the point of entry for gas from the west into Europe. Furthermore, plans to develop new nuclear facilities by private investors are on track – see: EDF Energy Press Release, March 2011. It is necessary, though, to consider that technological change does outpace policy, and that long-term planning in the energy sector is likely to be made obsolete due to technologically rapid change and adaptation. Again, this argues for the decentralization of decision-making and suggests that central planners are not motivated by a market imperative, and therefore do not need to make the right decisions (Moore, 2011, p.23). Consequently also, policy makers cannot correct mistakes quickly, as market players sometimes have to. Therefore the argument may be made that markets, not government, should identify, support and create emission-reduction technologies, and should leave the government to invest in reducing the costs of finding low-carbon technologies by subsidising research and development, rather than carbon reduction. Government argues that improving energy efficiency will save individual businesses money, but also emphasises that it will “improve your organisation’s reputation” (Newey, 2011, website). As part of the Carbon Reduction Efficiency Scheme (CRC Efficiency Scheme), 2012 will bring measurement tools for individual and company emissions on an annual basis. Carbon emission reduction will allow businesses to offset costs for the new year based on performance in the previous year. Perhaps the UK is becoming more aware of energy, and more accepting of the theories of global warming. Yet the debate in the UK continues to be, as it was in the 1970s, a debate about nuclear energy (Bowlby, 2010, website). Yet a further set of complications arise in the implementation of public policy in the UK. Instances of public resistance to renewable energy policy do illustrate some notable opposition to particular aspects of such public policies. Upreti and Van der Horst (2003) reveal in a study into the failure of a biomass electricity plant, that at the time of the study, the general public was unfamiliar with biomass energy, and that the consequent mistrust of this source of energy, and by implication other sources of renewable energy does contribute to the effectiveness of UK public policy on energy. The conflict between local and national interests is highlighted in studies such as this one, and the impact of the government’s 10% energy from renewable target is what prompted developers to be so keen to establish this particular plant. Of real value in the research referred to in the previous paragraph, is the lessons that can be learnt from such opposition between local communities and national government. Policy-makers, industry and other public bodies are often not trusted by the British public (Upreti & Van der Horst, 2003, p. 62) and pressure groups such as environmental Non-Governmental Organisations (NGOs) have more credence with the UK’s population generally. Public consultation in the planning process is identified as being vital, as are transparency, and accurate, factual communication with the public if any energy-saving initiative is to succeed. The advocacy coalition model, thus far never employed in UK energy policy, may indeed be the solution. The fact that public policy has been set does not imply that it is acceptable to the broader public, clearly. Despite governmental justifications – more jobs, or less greenhouse emissions – the public is not always eager to acquiesce. Upreti and Van der Horst (2005, p. 68) suggest that perceived environmental risk is “primarily a social construction and depends upon the moral commitments of community and social and cultural dimensions”. Just public policy, then is not enough. The World Energy Council (WEC) reports that the UK has moved from eighth to fourteenth place in the world in the November 2011 Energy Sustainability Index. In terms of energy supply security, access to energy and environmental impact, other countries have equalled and overtaken the UK. According to this report, the decline in standing is due to the lack of diversity in power generation, and regulatory uncertainty. Perhaps this is due to the indication that business, not conservation is the aim of UK energy policy. A Department of Energy and Climate Change spokesman directly stated that the purpose of new proposals is to guarantee that British energy intensive industries “remain competitive and that the UK remains open for business” at a meeting of energy intensive industries all parliamentary group, late in November 2011. It is clear, consequently, that a number of possibilities can be formulated to improve on this particular area of public policy. The dominant pressure groups have been big industry, and it seems that at least to some degree, these players are still dictating the dominant trends in UK energy policy. Nonetheless, growing public awareness of climate change, and numerous academics and researchers challenging government policy on energy, as well as undeniable global trends toward environmental concern, may soon be exerting enough pressure on the UK Government to significantly alter the course of public policy in this sphere. RECOMMENDATIONS AND SOLUTIONS A number of alternative and often more effective solutions can be suggested for energy policy in the UK. Government funding should be increased and focus should be on ensuring that technology paid for by government should be able to be commercially implemented. Consequently, too, specific technologies should be funded, not just general incentives provided, such as for example, carbon emissions trading schemes. The process by which government decides on which technologies to fund must also be more transparent and accountability should be evident. This does mean that government has to have the required expertise to evaluate proposals, and select appropriate ones for funding. Perhaps most importantly, government needs to consider that the existing energy systems may be difficult to change, and this will require commitment from institutions and be able to be implemented given current infrastructure (Watson, 2009, pp. 3-4). Innovative changes are called for, and the stages of such innovation – traditionally from research and development, to prototyping, demonstrating, commercialising and deploying of technologies – are perhaps too time consuming. Speed and flexibility is required to implement in response to new needs – and this is particularly true of responses to climate change worldwide. Still, costs of research and development suggest that government funding at the research and development stage, is essential (Watson, 2009, p. 8) since profitability can be significantly affected by high development costs, and private companies may thus be reluctant to undertake extensive research and development. In some instances, public policy does reveal some positive impetus in the energy sector. The UK’s Renewables Obligation, for example, is able to support a number of technologies at once. But reality shows that it has largely supported the cheapest technologies, easiest to implement in the marketplace. This has resulted in the UK’s progress being slower than that of, for example, Germany, where a system of tariffs is prevalent, and it is suggested that lower risk to investors is facilitated (Mitchell, 2006, cited in Watson, 2009, p.18). It must be noted, nonetheless, that even if the UK’s spending on innovative energy technology were to rise considerably, it would still be a challenge to meaningfully provide financial support to all emerging technologies. Public policies may, thus, on occasion compensate for cost barriers in the development of renewable energy sources by providing for increased government spending on subsidies – sometimes in the form of “tax credits, incentives, special pricing and power-purchasing rules, and by lowering transaction costs” (Beck & Martinot, 2004, p. 4). These policies have, however, not considered the advantages of reducing subsidies for fossil fuels and nuclear power. An example that could serve the UK government well is that of Brazil where a certain percentage of all liquid transport fuels has to be derived from renewable resources. An ethanol, petrol blended fuel is used most widely – over 40% of all fuel consumption in Brazil is ethanol (Beck & Martinot, 2004, p.14). While this policy may not directly state that the subsidy for fossil fuel is being reduced, the effect is that by lowering use of the fossil fuel – petrol – in reality, the subsidy of this commodity is cut, and redirected at a new industry – bio fuels. On two fronts, the public is advantaged – lowered costs, and new jobs related to the industry with enormous potential for growth. Electricity production in the UK is not realistically able to be provided by renewable sources, not even to the 20% target; neither is gas a completely viable solution (by 2020 80% of has will have to be imported into the UK) (Fells & Whitman, 2008, p.5). Clear and defined public policy has also been absent, meaning that development has not proceeded as swiftly as it could have. Even in the most high-profile drive toward renewable energy, there are shortcomings: a focus on wind generation, for example, because of its low capital intensity, means that one of the lowest energy return renewables is actively being sought out. In order to counter this, Fells and Whitmill outline three elements to ensure that UK energy policy becomes more pragmatic: “Ensure security of supply both in the short term (up to 2020) and the long term (2020-2050) Protect the environment by striving to achieve CO2 and renewable-energy targets Remain technically feasible from an engineering perspective” (p. 5). Their critique of current policy relies on the assumptions that the market cares only for current profits, not tomorrow’s generation; that government intervention is essential due to the scale of investment required and the longevity of projects; and the current pattern of government intervention in the free-market energy sector, which is inconsistent and poorly advised (Fells & Whitmill, 2008, p. 12). If public policy on energy is to become more effective it has to ensure the supply of skilled and qualified engineering and construction workers, to drive the emerging industries that would meet the planet-saving targets set. To achieve credibility, and wide, indeed universal support, policy will have to encourage employment creation. This is possible with construction of barrages (for example the proposed barrage at the Severn Estuary – see Fells & Whitmill, 2008), and other major construction initiatives such as nuclear plants. Most importantly, perhaps, it needs to intervene directly and transparently in the free-market – the initiatives, incentives, and subsidies structured by government must be seen to be equitable, purpose-driven and rational in their justification. Another option to improve public policy on energy in the UK is to fix a price for carbon, at higher levels, for the long term and nationwide. This will enable investment decisions based on a certainty, rather than decisions based on a reduced carbon-emission target which has nothing to do with pricing (Noel, 2010, website). At the same time, honesty from policy makers with the UK public would offset the truth that the cost of carbon reduction is high. Similarly, the likelihood that subsidies will create endless new so-called green jobs is distant. Amid widespread criticism of the open market policy in the UK, there is evidence of the significant failure of the past and present governments’ liberalised approach to the challenges of climate change. Fuel poverty in the UK is one of the tenets of the original text of the 2007 White Paper, which aimed to eradicate, or at least mitigate, the effects of energy costs, so that fuel poverty did not grow. Presently more than 6 million UK households experience fuel poverty (NEA, 2011, website). Financially disadvantaged households will not likely benefit from programmes which claim to make energy use more efficient, as the affordability of power and energy will move even further out of their reach. Domestic energy bills are levied to enable the programmes to be implemented, but it is absolutely necessary to prevent the scenario where disadvantaged households are paying for something they cannot see the benefit of. CONCLUSION The London School of Economics blog reports that despite the slower global economy, emissions of carbon dioxide internationally grew 6% between 2009 and 2010. It is predicted that without bold policy changes worldwide, the world will “lock itself into an insecure, inefficient and high-carbon energy system” (Fankhauser, 2011, website). It is self-evident that a global imperative does exist to ensure that the planet is protected from continuing population expansion, and the consequent strain on natural resources. Primary in this imperative is the need to reverse, or at least halt, the dangerous climate change resulting from carbon emissions. And as noted, carbon emission levels are directly linked to the effectiveness of public policy to determine the way power is managed in countries. This is true in the United Kingdom, too. Yet, despite being politically influential on the world stage, in numerous areas of public policy, the UK has not managed its own public policy on energy as effectively as it could have. The need is to reform energy policy to a more public advocacy framework so that the United Kingdom is able to lead the world in strategies, policies and technology designed around climate change prevention. Public policy, though, has to reflect the minds of the public, at least in democracies. And internal, domestic public policy is so intermingled with international trends and thought in the globalising world, that national public policy has of necessity to reflect international policy, too. Most importantly, public policy must be effective. If it leaves too much, or too little to the free market, or to public opinion, it is likely to fail. This is perhaps the error that requires immediate attention in UK public policy on energy. REFERENCES Barker, G. 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