For last week’s World Energy Forum held in Davos, Switzerland, Nicholas Stern, the economist and academic and author of the Stern Report on the economics of climate change, was asked several questions related to energy and climate policy by the UK’s Independent.
The Big Questions: Is fracking the answer to the UK’s energy needs? Has this ‘green government’ failed?
New climate change goals set out this week by the EU emphasise the need for economic growth and industrial competitiveness. What is your view of that?
What’s crucial is to give clear and stable signals on the sense of direction. And what has undermined investment in energy in Europe in the past few years has been instability of signals: governments chopping and changing. Investment in high hydrocarbon sectors looks over the medium term to be risky because policies will intensify against hydrocarbon. On the other hand, investing in low hydrocarbon, or carbon-free, forms of energy has been discouraged by instability of policy.
I hope that the agreement this week, which is a 40 per cent reduction [on 1990 levels] by 2030, is a key element in a more stable sense of direction. But it badly needs an integrated European energy market. Northern Europe is windy. Southern Europe is sunny. You don’t have to be a genius to work out that you might as well do the wind energy where it’s windy and the solar energy where it’s sunny!
Is fracking the answer to our energy needs?
No. That’s not a statement for or against fracking, but it’s ludicrous to suppose that it is the answer to our energy needs. Gas as a substitute for coal could make sense as a bridge and it could reduce carbon emissions, and we should consider doing that. But there is a world market for gas. The cost of British gas will be the world market price for gas because we could have exported that gas – it’s basic economics. If that price is high, somebody makes a profit. Profit is no bad thing – but it’s not the answer to an energy problem. Substituting gas for coal and renewables for nuclear – that’s an energy strategy for the UK. But where you get your gas from? That’s a separate question.
To what extent has the “greenest government ever” failed in its pledge?
There’s no simple answer. The positives first: we have the legislation which established the targets for the Climate Change Committee. It sets where we needed to go to fulfil our long-term targets and asks whether we’re getting there. That overall strategy has not been dismantled.
But you see threats. And those threats are worrying to investment. You see a fourth “carbon budget” that was agreed but subject to review. You have attacks from the Tory right (astonishingly ignorant and uninformed) and leaked statements (accurate or inaccurate) about “getting rid of green crap”. That kind of thing also undermines confidence.