You say ‘transition’, and I say ‘transformation’ – the scale of change is fundamental and the timetable urgent.
Governments, such as the United Kingdom in the Thatcher–Blair era, that have wholeheartedly embraced the liberalised free market, need to recognise it is a model that will not easily deliver rapid quantum change. It is tailored to efficiently maintain the status-quo because its focus, especially in regulated markets, is on maximising the output of historical investments.
We were starting to face the toll of this ‘sweating the assets’ strategy, even before environmental issues became so pressing. The nation’s energy infrastructure, rail network, water and waste pipelines had suffered chronic underinvestment. They entered the 21st century no longer fit for purpose and hopelessly ill-adjusted to the emerging sustainability imperatives.
The solution? If we had the option of ‘not starting from here’, we might have appreciated before the privatisation frenzy that certain utilities are natural monopolies, and sought to find a way of making them efficient without introducing phony competition. This is arguably the approach some continental European countries adopted.
Starting from here then, one option could be to re-nationalise assets, as we have started to do with the banking sector. My verdict: this is unlikely to be politically palatable.
The remaining options are to embed sustainability measures into the metrics of private sector businesses. One approach is the ‘triple bottom line’ whereby shareholders, regulators, employees and other stakeholders measure companies not solely by their financial performance but also by environmental and social factors. Can this noble concept be made to work? I fear not – we humans are simple beasts used to comparing schools, sports teams and companies on one-dimensional league tables.
That only leaves, then, the option of internalising the costs of carbon (and other sustainability measures) into financial performance. The simplest and most transparent way would be a carbon tax (plus depletion taxes, pollution tax, waste taxes, pensions tax etc). It is only because the political courage for such taxes has not been manifest that we have had to invent all those trading schemes, obligations, subsidies, tariffs, grants, regulations, allowances and other measures. My verdict: this is an abdication of leadership, but even it can be made to work if the measures are holistic, coherent, and of course long, loud and legal.
Philip Wolfe FEI FRSA is an expert on renewable energy with various business interests and is currently Director General of the Renewable Energy Association.