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DECC closure
Image: John Blower

A chink of light in an otherwise dark decision?

After a brief eight year lifespan, the UK Department for Energy and Climate Change (DECC) is no more.  An early casualty of Teresa May’s reshuffle, energy is handed to Greg Clarke – who has previously supported fracking while opposing wind power – and the climate change brief has been handed to Andrea Leadsom – who famously asked whether climate change was real when she was appointed Energy Minister in 2015.

The demise of DECC has been welcomed by climate change deniers in the UK and America’s environmental Wild West.  For example, the climate change denying Daily Caller has welcomed the change as an all-out assault on wind power:

“The new agency will be headed by Greg Clark, who has a record of opposing wind power, causing environmentalists to panic.”

The same journal also believes that:

“The U.K.’s new government, led by Prime Minister Theresa May, is already eliminating Britain’s energy and climate bureaucracy by merging it with the government’s business department.

“May’s government is expected to sharply reverse the Conservative Party’s ‘green’ image under former Prime Minister David Cameron.”

From the opposite end of the climate change spectrum, a raft of UK environmental groups also believe that the decision to axe DECC is the opening round in a plan to reverse UK Environment and energy policy.  According to Ian Johnston at the Independent:

“The decision to abolish the Department for Energy and Climate Change has been variously condemned as “plain stupid”, “deeply worrying” and “terrible” by politicians, campaigners and experts.”

Johnston cites a range of campaigners including former Labour leader Ed Miliband, Green Party MP Caroline Lucas, Greenpeace, Friends of the Earth and the New Economics Foundation; all of who see the decision as evidence of a shift in the direction of climate scepticism and renewed support for fossil fuels.  Stephen Devlin, Environmental Economist at the New Economics Foundation (NEF), said:

“This reshuffle risks dropping climate change from the policy agenda altogether – a staggering act of negligence for which we will all pay the price.

“Tackling climate change is an era-defining challenge that must direct and determine what industries we develop, what transport infrastructure we construct, how we manage our land and what our diets look like. It requires a central co-ordinated strategy; if we leave it to the afterthoughts of other departments we will fail.”

The one chink of light in this otherwise gloomy picture is the location of energy policy within the business department of the new government.  Insofar as businesses are far more concerned with the bottom line than with the ideological beliefs of politicians and their advisors, the new government could well find itself forced to bend to the realities of Britain’s current energy predicament.  For example, Alistair Phillips-Davies, CEO of Energy company SSE has warned the new government that:

“My particular interest is our energy system and the first thing I’d say to Mrs May and her Cabinet is that Britain needed secure, clean and affordable energy before the EU referendum took place. This was the case before the referendum and this hasn’t changed.

“Whilst new low carbon infrastructure is being built, including our recently confirmed Beatrice Offshore Wind Farm due for completion in 2019, after 2020 the pipeline (and economics) of clean energy projects are less clear and this uncertainty deters investment. At the same time the economics of ageing coal plant make this technology challenging and the UK will require a range of other flexible technologies – such as gas – to replace these plants and keep the lights on. This means that immediate action has to be taken to ensure that the UK stays on track to meet its climate change commitments whilst maintaining secure and affordable supplies.”

Other energy companies are likely to take a similar position.  In the unlikely event of anyone managing to extract UK shale gas at a profit, the big energy companies will no doubt use it.  However, for the time being Britain will depend upon its remaining (and fast depleting) North Sea gas together with growing volumes of imported compressed liquid natural gas.  But the energy companies also recognise that energy prices – particularly those charged to large business users – will have to be kept well below the cost of LNG imports if the energy industry is to avoid a “death spiral” in which large energy users go off-grid in an attempt to maintain low prices.

It is clear that Mrs May has been propelled into Number 10 by big business interests horrified by the outcome of the Brexit referendum result.  These interests are going to favour pragmatism over ideology at every stage.  When it comes to energy, the simple truth is that the UK economy cannot bear the cost of (largely imported) fossil fuels.  Like it or not, businesses and households are already using green energy technologies to generate their own energy.  As energy prices rise, this death-spiral trend will continue.

It may be that Britain’s business lobby will make clear to the new Minister that his only real choice is between supporting the trend to green energy or getting out of the way so that business can go it alone.  The one option that is not on the table to anyone with a grasp of energy economics is a future based on fossil carbon.

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