Renewable Energy Abandoned?

Ministers are planning a U-turn on Britain’s pledges to combat climate change that “effectively abolishes” its targets to rapidly expand the use of renewable energy sources such as wind and solar power.

Leaked documents seen by the Guardian show that Gordon Brown will be advised today that the target Tony Blair signed up to this year for 20% of all European energy to come from renewable sources by 2020 is expensive and faces “severe practical difficulties”.

According to the papers, John Hutton, the secretary of state for business, will tell Mr Brown that Britain should work with Poland and other governments sceptical about climate change to “help persuade” German chancellor Angela Merkel and others to set lower renewable targets, before binding commitments are framed in December.

It admits that allowing member states to fall short of their renewable targets will be “very hard to negotiate … and will be very controversial”. “The commission, some member states and the European parliament will not want the target to be diluted, though others may be allies for a change,” says a draft copy of Mr Hutton’s Energy Policy Presentation to the Prime Minister, marked “restricted - policy”.

The revelations came as scientists announced that carbon emissions were accumulating in the atmosphere far more quickly than predicted. The sharp increase found by the Global Carbon Project is attributed mainly to Chinese coal-burning and a weakening of the ability of oceans and forests to soak up carbon dioxide.

The leaked papers admit to “a potentially significant cost in terms of reduced climate change leadership” if Mr Brown is seen to be driving a plan to let European member states fall short of their renewables targets.

They also reveal different priorities across government departments about how to get renewables to 20% of the electricity mix. Although Germany has increased its renewable energy share to 9% in six years, Britain’s share is only 2%, with its greenhouse gas emissions rising.

Last night campaigners expressed alarm at the new direction of government policy. “Gordon Brown is now in danger of surrendering any claim to international leadership on climate change and would rather support nuclear power and scupper the European renewable energy target,” said John Sauven, director of Greenpeace.

Mr Hutton will tell Mr Brown that there are severe practical difficulties about meeting the 20% target. These include persuading the Ministry of Defence and the shipping industry to accept more offshore wind power, as well as increased research and development costs for marine and tidal power.

One of the main objections of government to meeting the renewables target set by Mr Blair is that it will undermine the role of the European emission trading scheme. This scheme was devised by the Treasury under Mr Brown and allows wealthy governments to pay others to reduce emissions. “[Meeting the 20% renewables target] crucially undermines the scheme’s credibility … and reduces the incentives to invest in other carbon technologies like nuclear power”, say the papers.

The government is clearly worried about its ambition to introduce more nuclear power as soon as possible. Mr Hutton will tell Mr Brown that he expects a second legal challenge by Greenpeace. “[It is] most likely to be on the basis of pre-judgement, concerns about waste, a flawed consultation process or inaccuracies.”

Analysis by Mr Hutton’s department suggests it could cost the UK £4bn a year to achieve a 9% share of renewable energy by 2020.

The shift in stance is due to be discussed at full cabinet next week. Last night a spokesman for the Department for Business Enterprise and Regulatory Reform said: “We don’t comment on ministerial meetings with the PM.”

I am surprised the global warming fear mongerers haven’t chimed in.

[quote]Zap Branigan wrote:
I am surprised the global warming fear mongerers haven’t chimed in.[/quote]

I’m not the least bit surprised 100meters hasn’t replied, not responding to pragmatism about ecology is that guy’s MO. Although, if I had said ardent environmentalism is profitable, I’d probably keep my mouth shut at this point too.

Uhhh…maybe they realized petrol is still cheaper and more abundant? Some people still pay attention to the laws of economics.

I wonder how Cameron will make use of this - he’s been hammering away at Brown in the Commons.

[quote]LIFTICVSMAXIMVS wrote:
Uhhh…maybe they realized petrol is still cheaper and more abundant? Some people still pay attention to the laws of economics.[/quote]

Really? I thought Adam Smith was just that kid who works at the less ethnic McDonalds now?

[quote]Beowolf wrote:
LIFTICVSMAXIMVS wrote:
Uhhh…maybe they realized petrol is still cheaper and more abundant? Some people still pay attention to the laws of economics.

Really? I thought Adam Smith was just that kid who works at the less ethnic McDonalds now?[/quote]

Unfortunately Adam Smith doesn’t give an explanation for entrepreneurial incentive or of the business cycle which is what is needed to understand why someone might not undertake the risk of investment in an alternative fuel, such as bio-diesel.

[quote]LIFTICVSMAXIMVS wrote:

Unfortunately Adam Smith doesn’t give an explanation for entrepreneurial incentive or of the business cycle which is what is needed to understand why someone might not undertake the risk of investment in an alternative fuel, such as bio-diesel.[/quote]

Lift, what makes you thinkest this? Perhaps I’m not understanding what you mean.

Smith spends most of the wealth of nations talking about “entrepreneurial incentives” - what drives them, etc. I believe he had a fairly rudimentary theory of the business cycle, but I’m not sure how that’s relevant.

The market evaluates the risk of investing in alternative fuels and proceeds on the basis of that ever-changing risk profile.

There has been a large uptick in the amount of capital invested in alternative fuel research and development, reflecting both the high risks as well as the phenomenally large opportunity. Indeed, I think it’s likely that it could drive the next “industrial revolution.”

I suppose I’m not sure how or why a state adopting unrealistic alternative fuel targets helps matters.

[quote]

LIFTICVSMAXIMVS wrote:
Uhhh…maybe they realized petrol is still cheaper and more abundant? Some people still pay attention to the laws of economics.

Beowolf wrote:
Really? I thought Adam Smith was just that kid who works at the less ethnic McDonalds now?

LIFTICVSMAXIMVS wrote:
Unfortunately Adam Smith doesn’t give an explanation for entrepreneurial incentive or of the business cycle which is what is needed to understand why someone might not undertake the risk of investment in an alternative fuel, such as bio-diesel.[/quote]

Sometimes an imperfect market should be addressed with more entreprenurism: TCS Daily - So You Want to be a Masonomist

EXCERPT:

[i]The Cure for Market Failure

At the University of Chicago, economists lean to the right of the economics profession. They are known for saying, in effect, “Markets work well. Use the market.”

At MIT and other bastions of mainstream economics, most economists are to the left of center but to the right of the academic community as a whole. These economists are known for saying, in effect, “Markets fail. Use government.”

Masonomics says, “Markets fail. Use markets.”

Somewhere along the way, mainstream economics became hung up on the concept of a perfect market and an optimal allocation of resources. The conditions necessary for a perfect market are absurdly demanding. Everything in the economy must be transparent. Managers must have perfect information about worker productivity and consumers must have perfect information about product quality. There can be nothing that gives an advantage to a firm with a large market share. There cannot be any benefits or costs of any market activity that spill over beyond that market.

The argument between Chicago and MIT seems to be over whether perfect markets are a “good approximation” or a “bad approximation” to reality. Masonomics goes along with the MIT view that perfect markets are a bad approximation to reality. But we do not look to government as a “solution” to imperfect markets.

Masonomics sees market failure as a motivation for entrepreneurship. As an example of market failure, let us use a classic case described by a Nobel Laureate, which is that the seller of a used car knows more about the condition of the car than the buyer. Masonomics predicts that entrepreneurs will try to address this problem. In fact, there are a number of entrepreneurial solutions. Buyers can obtain vehicle history reports. Sellers can offer warranties. Firms such as Carmax undertake professional inspections and stake their reputation on the quality of the cars that they sell.

Masonomics worries much more about government failure than market failure. Governments do not face competitive pressure. They are immune from the “creative destruction” of entrepreneurial innovation. In the market, ineffective firms go out of business. In government, ineffective programs develop powerful constituent groups with a stake in their perpetuation.[/i]

Also, there are all sorts of private investments in alternative energy, particularly by focused VC funds - for example: http://www.khoslaventures.com/

[quote]BostonBarrister wrote:

Masonomics worries much more about government failure than market failure. Governments do not face competitive pressure. They are immune from the “creative destruction” of entrepreneurial innovation. In the market, ineffective firms go out of business. In government, ineffective programs develop powerful constituent groups with a stake in their perpetuation.[/i][/quote]

Great post BB. Except for in some very specific cases - say, with an inherent natural monopoly/public good - I’ve never really understood what is meant by “Market Imperfections.” It seems to me that it’s a term either used by people who arrogate for themselves more knowledge than they should lay claim to (I know better than the market…) or it’s merely a market opportunity going by another name.

[quote]katzenjammer wrote:
LIFTICVSMAXIMVS wrote:

Unfortunately Adam Smith doesn’t give an explanation for entrepreneurial incentive or of the business cycle which is what is needed to understand why someone might not undertake the risk of investment in an alternative fuel, such as bio-diesel.

Lift, what makes you thinkest this? Perhaps I’m not understanding what you mean.

Smith spends most of the wealth of nations talking about “entrepreneurial incentives” - what drives them, etc. I believe he had a fairly rudimentary theory of the business cycle, but I’m not sure how that’s relevant.

The market evaluates the risk of investing in alternative fuels and proceeds on the basis of that ever-changing risk profile.

There has been a large uptick in the amount of capital invested in alternative fuel research and development, reflecting both the high risks as well as the phenomenally large opportunity. Indeed, I think it’s likely that it could drive the next “industrial revolution.”

I suppose I’m not sure how or why a state adopting unrealistic alternative fuel targets helps matters.
[/quote]
Entrepreneurs need to have accurate “information” of the particular market to make “good” calculations – or what they deem to be good calculations. This information is in the form of pricing.

This is impossible to do when government subsidizes farmers because it does not provide a true free-market pricing structure – it is artificial and hence inaccurate. Smith might have understood the incentive as profit but he did not understand how entrepreneurs calculate such profits.

Concurrently, risk is also blurred because prices are artificial. I think here in the US, as well as abroad, investors understand that right now as far as the technology goes it is a wash which to pick to produce such energy.

Could we produce bio-fuel technology? Certainly, but a clear incentive won’t really be understood until the gov’t quits manipulating prices. It also doesn’t help that oil prices are set artificially low by having the US military protect its production and hence that price isn’t included into the end-product (except in the form of inflation).

Crop prices are artificially high here in the US specifically because there is not an accurate pricing structure. Socialism cannot make economic calculations – and socialism wasn’t even understood in Smith’s day, hence there is no explanation.

The business cycle is important to understand as well because the means of production are many and varied and at no point in time can anyone have perfect knowledge of where to invest. Knowing how credit expansion by the gov’t creates these cycles helps signal where to invest. For example, should I buy land or invest in manufacturing goods.

Make no mistake, the next industrial revolution will be alternative energy, but government intervention is stifling it tremendously.

Just my .02.

[quote]LIFTICVSMAXIMVS wrote:
Make no mistake, the next industrial revolution will be alternative energy, but government intervention is stifling it tremendously.

Just my .02.[/quote]

A-fucking-men to your post. (Perhaps I misunderstood you.)

The rub:

[quote]BostonBarrister wrote:
[/i]Masonomics worries much more about government failure than market failure. Governments do not face competitive pressure. They are immune from the “creative destruction” of entrepreneurial innovation. In the market, ineffective firms go out of business. In government, ineffective programs develop powerful constituent groups with a stake in their perpetuation.[/i][/quote]

Reallocation does not happen efficiently in government and this is precisely why entrepreneurs cannot make economic calculations under such programs.

[quote]Zap Branigan wrote:
Ministers are planning a U-turn on Britain’s pledges to combat climate change that “effectively abolishes” its targets to rapidly expand the use of renewable energy sources such as wind and solar power. [/quote]

Meanwhile, Sarkozy turned out to be slightly better a president than I anticipated.

[quote]LIFTICVSMAXIMVS wrote:
Beowolf wrote:
LIFTICVSMAXIMVS wrote:
Uhhh…maybe they realized petrol is still cheaper and more abundant? Some people still pay attention to the laws of economics.

Really? I thought Adam Smith was just that kid who works at the less ethnic McDonalds now?

Unfortunately Adam Smith doesn’t give an explanation for entrepreneurial incentive or of the business cycle which is what is needed to understand why someone might not undertake the risk of investment in an alternative fuel, such as bio-diesel.[/quote]

It was more of a metaphor than a literal statement, but point taken.

[quote]lixy wrote:
Zap Branigan wrote:
Ministers are planning a U-turn on Britain’s pledges to combat climate change that “effectively abolishes” its targets to rapidly expand the use of renewable energy sources such as wind and solar power.

Meanwhile, Sarkozy turned out to be slightly better a president than I anticipated.

BBC NEWS | Europe | Sarkozy details green France plan [/quote]

The man is a non-interventionist, who wants to protect French interests and modernize France by getting rid of the retarded US hate. And he’s bat-shit insane in the good way.

What’s not to like?