← RESOLVE | Research group on Lifestyles, Values and Environment
Overall aims
The growing profile of sustainability issues in the UK over the last two decades has seen energy regulation since the late 1980s increasingly framed by environmental concerns. This research involved an exploration of the ways in which the increasing urgency of climate change, in particular, has seen a plethora of policies developed over the last two decades, as governing bodies have tried to successfully integrate environmental objectives into the UK policy framework.
Context
The governance of UK energy has been characterised by two quantitatively different periods and types of regulation since the post-war period. From 1945 to 1979, this regulation took the form of state-led intervention. During this period, government planning and political decision-making were placed at the forefront of the design and implementation of policy, where pricing mechanisms, quantified outputs, long-term contracts, and cross-industry integration were all characteristic elements of an approach that was first and foremost designed to ensure that there was a readily available supply of energy to drive the needs of heavy industry and domestic retail consumption. In energy markets, politicians are aware that there now needs to be a greater degree of government intervention in energy markets, due to the fact that economic instruments will only go so far in providing effective answers to problems such as climate change and energy security. The research considers the evolution of this agenda in more detail and explores the ways in which policies have developed around reconciling markets with governing mechanism as the means to deliver on more recently established energy goals and objectives in the UK.
Research questions and methods
The research provides a systematic analysis of energy policy initiatives that have been developed from the 1989 Fossil Fuel Levy with increasing environmental aims and follows the political thinking which informed their implementation. A series of 15 policies were assessed through desk-top research and literature review.
Results
Tracing the development of UK initiatives on climate change from the period 1989/90 to the present, the research presented the case that policies first introduced by the Conservative Government were designed primarily to complement the liberalisation of the UK energy market. It was argued for instance that policies such as the Non-Fossil Fuel Obligation provided interesting clarification into this agenda, where energy diversification, for example, was encouraged by trying to incentivise the market power of renewable energy. Likewise, it was thought that energy efficiency measures would be sufficient in working towards environmental aims by removing market barriers in areas such as household energy use. Growing pollution in road transport was addressed through progressive taxation measures such as the Fuel Price Escalator. Over time it was argued that a relative ineffectiveness of these policies was masked by the ‘benign’ reduction in the UK’s CO2 levels, caused primarily by electricity privatisation and the ‘dash for gas’. It was suggested however that this was a strong conditioning factor on the Labour Government’s decision to provide no great overhaul of UK energy policy at the time it came to power in 1997. Energy policy subsequent to the publication of the Royal Commission Report on Environmental Pollution in 2000 has noticeably moved the debate forward where, on the Commission’s recommendations, strategy has been largely characterised by a search for more innovative policies through which to reduce the UK’s CO2 emissions. This search now informs much of the thinking around the development of flagship government initiatives such as The Renewables Obligation, The Climate Change Levy, and the UK’s participation in the EU Emissions Trading Scheme (UK ETS) – policies which more directly target CO2 emissions as a case of market failure.
Implications
It remains open to debate whether the shift in the UK’s energy policy strategy which occurred after 2000 will deliver the cuts in emission levels that will be necessary to reach the targets recommended by the Royal Commission, the 20/20/20 targets proposed by the European Commission, and more importantly, the legal goal of 80 per cent by 2050 which underpins the Climate Change Act. Energy demand in the UK continues to rise and remains tied to fossil fuel generation at present and sectors such as transport and air travel continue to elude direct environmental regulation. The current Coalition Government inherited a complex set of problems, many of which remain to be worked through. One of the principal dilemmas for policy-makers remains the high degree of uncertainty which frames and conceptualises climate change science. Policymakers cannot currently operate from within clear-cut assessments and predictions concerning the time, scale, and economic and social indicators of future scenarios. For instance there is yet to be an effective price for carbon – encouraged by either markets or regulation; energy security and environmental goals often conflict; and the issue of ‘short-termism’ associated with the UK electoral process means that there remain limitations on the degree and extent to which governments are willing to intervene, despite rhetoric to the contrary. While the most recent energy white paper, The Low Carbon Transition Plan, suggests that the UK now has a viable energy strategy, characterised by an effective balance between markets and governance, it remains to be seen whether the urgent challenge of action over climate change and insecure energy supplies can be met through a successful new policy framework.
Project Team
Shane Fudge
Outputs
Fudge S, Hunt L Jackson T, Mulugetta Y and M Peters 2008. The Political Economy of Energy Regulation in the UK 1945–2007: Paradigms and Policy. RESOLVE Working Paper Series 02-08. Guildford: University of Surrey.
Fudge S and Y Mulugetta 2008. Reconciling markets and governance: energy regulation in the UK 1945-present. RESOLVE Working Paper Series 03-08. Guildford: University of Surrey.
Fudge S 2008. The impact of the Landfill Tax, the climate change levy, and the Aggregates Tax. Invited Talk at the Sustainable Development in the Construction Industry Conference. 30 September 2008. Rembrandt Hotel, London, UK.