Memorandum submitted by Tom Burke
1. This evidence is submitted on my own
behalf and represents my personal views on the issues under inquiry.
It does not reflect the views of any of the organisations with
which I am associated.
2. I am currently employed part time as
an advisor on environmental matters by Rio Tinto plc. I am also
a Visiting Professor at Imperial and University Colleges, London
and a co-founder of E3G, Third Generation Environmentalism. I
have been actively involved in the public discussion of energy
and environment matters for some 35 years in a variety of roles
including those of a Special Advisor to three Secretaries of State
for the Environment and as Executive Director of Friends of the
Earth and the Green Alliance.
3. Energy policy in the 21st Century will
be dominated by the interwoven issues of energy security and climate
security. As global population and economies grow, governments
will face the challenge of providing secure and affordable supplies
of energy in a manner which does not destabilise the climate.
Abandoning either of these goals is not an option.
4. The dynamics of climate change offer
only limited scope for trade-offs between them. They must be met
together. Insecure access to energy supplies leads to economic,
social and political instability—economic prosperity, national
security and personal fulfillment would be put at risk. An unstable
climate will do the same. Weak economies are ill-equipped to make
the technological and institutional advances necessary to prevent
and adapt to climate change. An unstable climate will divert economic,
institutional and political resources from more productive uses.
In both cases, the poorest among us will be the most vulnerable.
5. This memorandum will address four aspects
of the energy and climate security nexus. First, the case for
additional interventions by government. Second, the timeframe
within which policy in both areas must be brought into alignment.
Third, the global background against which decisions on these
issues by the British Government will be taken. Fourth, a consideration
of the role new nuclear generation might play.[42]
THE CASE
6. Successive British Governments have
pursued a policy of progressively liberalising and deregulating
energy markets for more than quarter of a century. As a consequence,
Britain has one of the most open markets in electricity generation
and distribution in the world. Until the recent rise in global
energy prices this generated a consistent downward pressure on
electricity prices to the benefit of both consumers and the economy.
Within the EU, Britain has argued forcefully for further liberalisation
of energy markets as an essential element in maintaining competitiveness
and employment as well as for securing a fair and efficient internal
market.
7. This background of a consistent and successful
long term policy sets a high hurdle to be met by any new proposal
for significant intervention in the operation of electricity markets
by government. The public goods that would not otherwise be delivered
need to be clear and the particular pathway chosen for delivering
those goods needs to represent the best value for money.
8. It would be difficult to argue against
both energy security and climate security as public goods which
meet the first part of this test. Neither can be guaranteed by
even the most efficient operation of electricity markets. Choosing
the right pathway for delivering these goods is a more difficult
question and is, appropriately, the main focus of this inquiry.
9. It is vital not to constrain choices
artificially in advance. The purpose of any government intervention
in this area is to deliver energy security and climate security
together. The full spectrum of options available for meeting this
goal needs to be considered in order to establish the base case
for the chosen pathway. Thus, simply asking the question whether
nuclear or wind offers the cheapest way to generate electricity
asks the wrong question. The purpose is not to find the cheapest
way to generate electricity but to find the most cost effective
way to guarantee energy and climate security for Britain.
10. This means we should be thinking of
choosing between deliverable and cost effective pathways to energy
and climate security not simply between technologies. Any pathway
to energy and climate security will contain a mix of technologies
and policy measures which will have differing economic, social
and environmental impacts. There are several such pathways available,
each with a differing balance of advantage and disadvantage. The
base case for intervention by government should set out a range
of these pathways together with the technical and economic assumptions
on which they are based. Without such a broad analytic foundation
it is difficult to see how the transparent comparability essential
for both investor and consumer confidence can be established.
11. Discussions of public policy in this
area are prone to some familiar errors which should be avoided.
The first is to start with a implicit technology preference and
then to argue against all the other options rather than for the
ultimate goal. A second is to forget that all assessments of cost
are dependent on assumptions which are themselves contestable,
frequently policy dependent and which are often not completely
described. A third is to include implicit considerations from
other areas of policy: social, industrial, employment or regional,
for example. This is why it is important that there be both clarity
and completeness in the presentation of the analytic foundations
for policy. To command the greatest confidence, the Government
would be well advised to separate the presentation of the range
of possible pathways from its judgments and rationale for choosing
one rather than another.
THE TIMETABLE
12. Climate change is not just another environmental
problem. It is unique in that it will effect every single person
in Britain, indeed, everyone on the planet. It will exacerbate
all the other stresses the planet is experiencing. There is little
likelihood that the beneficial effects will outweigh those that
are harmful. The longevity of carbon dioxide in the atmosphere
and the slow response of geophysical and ecological systems to
increases in global average temperature means that these effects
are, for all practical purposes, irreversible. The consequences
of mistaken policy choices today cannot be remedied later. In
this, too, climate change, is a unique challenge to humanity.
13. Our growing understanding of the science
of climate change sets out a clear, if daunting, timetable within
which action to maintain climate security must occur. The United
Nations Convention on Climate Change has as its goal the avoidance
of dangerous climate change. There is no formal agreement as to
what constitutes "dangerous" climate change. The EU
has stated that the intent of its climate policy is to avoid a
rise in global average temperature of more than 2.0C[43].
There is a growing acceptance of this threshold within the scientific
and policy communities engaged with climate change.[44]
14. The Prime Minister convened a conference
of the world's leading climate scientists in February this year
under the title "Avoiding Dangerous Climate Change".
They concluded: ". . . there is greater clarity and reduced
uncertainty about the impacts of climate change across a wide
range of systems, sectors and societies. In many cases the risks
are more serious than previously thought." They went on to
further conclude that: ". . . limiting warming to 20C above
pre-industrial levels with a relatively high certainty requires
the equivalent concentration of CO2 to stay below 400ppm. Conversely,
if concentrations were to rise to 550ppm CO2 equivalent, then
it is unlikely that the global mean temperature increase would
stay below 20C."[45]
15. We have observed an increase in global
mean temperature of 0.60C above pre-industrial levels. We
are already committed to another 0.60C rise in temperature
even if we were to prevent any further increase in the concentration
of greenhouse gases in the atmosphere from today. This is a consequence
of the extensive lags in the response of the climate system to
the forcing it has already experienced. The current concentration
of CO2 alone in the atmosphere is 379ppm, up from its pre-industrial
level of 280ppm. It is rising at a rate of approximately 1.8ppm
per year. There is some evidence that this rate is itself increasing.
16. This establishes the timeframe within
which action must be taken. We will cross the 400ppm CO2 equivalent
threshold within a decade and the 550ppm threshold some six or
seven decades later[46].
This is also the time frame within which there is growing consensus
that the world will pass the point of peak oil production. This
has inevitably heightened concerns everywhere about energy security.
Governments will invest considerable sums in coming decades to
ensure energy security for their citizens. It is vital that decisions
made for this purpose are convergent on those made to guarantee
climate security. Correct decisions made now will secure both,
incorrect decisions will be extremely difficult, if not impossible,
to remedy.
THE GLOBAL
BACKGROUND
17. Decisions about energy and climate security
in Britain cannot, and should not, be taken in isolation from
the global background. In a globalising world neither energy nor
climate security can be guaranteed by our government alone. Britain
possesses the analytic, technological, financial and political
resources to play a key role in shaping the global response to
this twin challenge. Our membership of the European Union gives
us the potential to leverage those resources to the scale necessary
to influence global outcomes significantly.
18. Britain has led the drive for climate
security by example. The EU as a whole is committed to reducing
its greenhouse gas emissions by 8% below 1990 levels by the period
2008-12. As its share of this target, Britain has undertaken to
reduce its emissions by 12.5% in the same timeframe. Confidence
that this commitment will be met without prejudicing either energy
security or competitiveness is high. In addition, Britain has
taken on a voluntary target of reducing CO2 emissions by 20% below
1990 levels by 2010. This is a more difficult target to achieve
but is nevertheless within reach of a properly focussed effort.
In its 2003 Energy White Paper the Government also accepted the
recommendation of the Royal Commission on Environmental Pollution
that Britain should aim to reduce its CO2 emissions by 60% by
2050.
19. These commitments provided a firm foundation
for the Prime Minister's initiative in setting climate change
as one of his key priorities for his Presidency of both the G8
and the EU. Britain has now firmly established itself in a leading
position on climate change. These clear political signals are
also providing an important long term framework for British business
as it considers its investment strategy to meet the twin challenges
of climate and energy security.[47]
20. The latest International Energy Agency
report on the World Energy Outlook projects an increase in global
CO2 emissions of 63% above their 2002 levels by 2030. This is
consistent with the emissions scenarios published by the IPCC.
To meet the expanding global demand for energy the world will
need to invest some $17 trillion, about two thirds of it in the
power sector. In order to meet the expected demand for electricity
the WEO forecasts that just under 1400 Gigawatts (GW) of coal-fired
power stations will be built[48].
China, which will build about 600 of this total, is currently
constructing new coal fired power stations at the rate of one
every five days. It is also planning to construct 30 nuclear power
stations, even so this will only produce 6% of China's electricity.
21. Coal-fired power stations built today
have a planned lifetime of 50 years. If all the currently planned
coal-fired power stations are constructed using conventional pulverised
coal technology, then the addition of carbon to the atmosphere
over their lifetime will come to 145 Gigatonnes. That is approximately
the amount added to the atmosphere since the beginning of the
industrial revolution. Such an outcome would render climate security
impossible.[49]
22. Nevertheless, energy security concerns
mean that there is no politically available route to climate security
that does not involve Chinese, Indian and North American use of
their abundant coal reserves. Advanced coal technologies, such
as Integrated Combined Cycle Gasification (IGCC) with Carbon Sequestration
and Storage, provide a route to combine energy and climate security.
Opening this route will require significant public investment
in order to leverage the currently planned private investment
onto a different technology deployment trajectory. However, were
this route to be opened globally it would also become available
for Britain.
THE ROLE
OF NUCLEAR
23. The future role of nuclear power in
Britain's effort to meet the twin challenges of energy and climate
security needs to be considered in this context. Britain currently
generates about a quarter of its electricity from nuclear power.
The current reactors are ageing. All but one will close by 2023.
The question has therefore arisen as to whether Britain should
embark on a programme of new nuclear build in order to replace
the reactors coming out of commission. A more pertinent question
is whether new nuclear build could contribute significantly to
the goal of ensuring both energy and climate security.
24. Nuclear power is unattractive to private
investors. The Government has made it clear for some years that
it would welcome proposals for new nuclear power stations from
the private sector. None has been forthcoming. This should cause
little surprise. Investors in nuclear power are exposed to a very
particular set of risks.
25. The economics of nuclear power are only
viable if there is series ordering for a programme of eight to
10 stations. This would require an extraordinarily high degree
of cooperation between competing utilities to accomplish in Britain.
Investors must also be willing to bear very high expenditures
for a minimum of seven years before generating revenues. They
must be willing to risk periods of falling electricity prices[50]
during the long lifetime of the stations.
26. There are also uniquely difficult political
risks surrounding matters such as the allocation of financial
responsibility for radioactive waste management or the continued
willingness of government to provide the bulk of insurance cover
against accidents. Furthermore, the support from government would
need to remain consistent over several parliaments. There are
also wider concerns about the public acceptability of new nuclear
build. It is hardly surprising that public concern over nuclear
power should apparently have fallen during more than a decade
when no new proposals have been made.
27. These considerations make it very unlikely
that new nuclear power stations will be built in Britain without
considerable Government support. This could take many forms including,
for example, direct subsidies to construction and operating costs,
or constraints on the operation of the electricity market to offset
revenue risks, or both. The Government could also create a favourable
regulatory regime through absorbing more of the risks associated
with decommissioning and waste management. In all of these, and
other, cases, the additional costs would be borne either by business
and household electricity consumers, or the taxpayer, or both.
28. Clearly, the rationale for government
intervention on this scale would need to be very compelling to
attract private investors. The contribution of new nuclear build
to the challenge of guaranteeing Britain's energy and climate
security would need to both significant and apparent to all. However,
even if we assume the most favourable resolution to the problems
outlined in paragraphs 26 and 27, there is good reason to doubt
that this will be the case.
29. The Government has recently pledged
to make a decision in principle on new nuclear build by the end
of 2006. Depending on the exact mix of policies chosen to provide
the necessary support to stimulate a practical proposal, which
might require primary legislation, it is unlikely that a concrete
order for a new reactor would be placed before 2008. It could
then take another two years to produce the detailed design necessary
for review by the Nuclear Installations Inspectorate and the Environment
Agency. Their consent, which would form an essential part of any
planning application, would take at least another two years. Thus
a formal planning application is hard to envisage much before
2012, by which time existing reactors would already be coming
out of use.
30. Assuming a more rapid planning inquiry
than for any previous nuclear reactor and a further year for the
government to review the Inspector's report and it is possible
that planning permission might be granted by 2015. A construction
time of five years would be better than has ever been achieved
before in Britain and a year to work the reactor up to full power
means that series ordering could possibly begin somewhere around
2021 if all went well.
31. These are optimistic assumptions. Even
so, it is clear that whatever other contribution it might make
to Britain's energy and climate security, there is no prospect
that new nuclear build will do so by replacing our existing nuclear
reactors as they come out of commission. Thus, we will have to
find another option for replacing the bulk of the current nuclear
fleet before 2020 and we will have to do so in a way that helps
maintain both climate and energy security. Clearly, if there are
viable options for meeting our electricity security needs in a
climate compatible manner prior to 2020 there is no obvious reason
to suppose that those same options would not be available post-2020.
32. Finding these options is even more urgent
for another reason. Older coal-fired power stations currently
supply some 32% of Britain's electricity. Between now and 2015,
some 50% of the current stations will close. They will also have
to be replaced in a climate compatible manner if both energy and
climate security are to be guaranteed. Without government intervention,
this would be overwhelmingly by a further shift to gas raising
understandable concerns about future over-dependence on imported
gas.
33. The issue is not whether or not there
should be government intervention, but what form that intervention
should take in order to deliver energy and climate security at
the best value for money. This choice is often presented as a
contest between nuclear and the renewables—in Britain's
case, primarily wind. The grossly oversimplifies the choices.
Coal, using advanced coal technologies with carbon capture and
storage, is clearly an option to hedge against over-dependence
on gas. The exact mix of advanced coal, gas, especially to fuel
co-generation, wind and other renewables, increased energy efficiency
and even further life extension for our existing nuclear stations
necessary to guarantee energy and climate security for Britain
is exactly what needs to be explored by the development of the
pathways referred to in paragraph 10 above. What is clear, however,
is that in the timeframe within which government intervention
will be essential, new nuclear build cannot make a significant
contribution on even the most optimistic assumptions.[51]
CONCLUSIONS
These consideration lead me to the following
conclusions:
— the problem of guaranteeing both
energy and climate security is more urgent than is widely understood;
— there is a good case for government
intervention to deliver these public goods;
— doing so will require defining and
choosing pathways to this end, not simply choosing technologies;
— any major error in the current policy
choice will be very difficult and expensive to correct;
— for this reason, and because delivery
of the chosen pathway will need the active support of investors
and consumers, not only must the government's conclusions command
confidence, so, too, must the process by which they are arrived
at;
— new nuclear build cannot contribute
to energy and climate security for Britain within the timeframe
under consideration and is therefore a distraction.
17 October 2005
42 The focus of this inquiry is on electricity generation
and its relationship to climate change and this evidence is addressed
to that set of questions. It is however worth remembering that
there is another nexus of issues around mobility where the same
interaction between energy and climate security features. This
has somewhat different dynamics from those associated with electricity
generation but clearly there is an interaction between the sectors.
The emissions from vehicles, shipping and aviation must be added
to those from electricity generation and elsewhere when calculating
total carbon burdens. Conversely, reductions in real or projected
emissions from the transport sector reduce the pressure on the
electricity sector. Back
43
2,610th Environment Council Meeting, 14 October 2004 "the
maximum global temperature increase of 2.0C over pre-industrial
levels should be considered as an overall long-term objective
to guide global efforts to reduce climate change risks." Back
44
There is no robust scientific foundation for this emerging consensus.
It is a "best guess" at identifying the threshold of
dangerous climate change. It is the point at which studies reported
by the IPCC suggest clearly that the negative impacts of a changing
climate will be widespread. Recent observations of current changes
in the climate reflecting a much lower global average temperature
rise suggest that even this might be unduly optimistic. Back
45
It is important to note the precise phrasing here. The most commonly
use data for CO2 concentrations are the measurements at Moana
Loa in Hawaii. These measure CO2 alone. To arrive at the "CO2
equivalent concentration" referred to above the greenhouse
warming potential of the other greenhouse gases released to the
atmosphere must be added to the actual CO2 concentration. This
has significant implications for the timetable within which governments
must act to maintain climate security. Back
46
Sooner if the rate of increase in concentrations continues to
rise. This could happen as a result of sharply rising emissions
or as a loss of the buffering capacity of vegetation and the ocean,
or both. Back
47
This political lead is particularly important for both the world
and for British business. For the world it sustains the momentum
as we run up to the vitally important, but unquestionably difficult,
discussions on the next phase of the Kyoto process. For British
business it reinforces the investment signal generated by the
European Emissions Trading scheme which is, on its own, not yet
sufficiently strong to drive investment. The Prime Minister has,
correctly, identified the importance of technology in achieving
both climate and energy security. Without investment, technology
will not be available. Without the kind of longer term framework
provided by the present series of political commitments, investment
will be deferred. Back
48
This is in addition to some 2,000 gas fired power stations. Back
49
Retro-fitting post-combustion carbon capture and storage to these
power stations is a possible, if very expensive, option. However,
even if stations were so designed as to permit such retrofits,
the constraints on electricity generation in many parts of the
world would make generators highly reluctant to take the plant
off-line for the retrofit. Back
50
The Government was recently forced to bail out British Energy
at a cost of over £500 million because, as a result of the
success of its energy liberalisation policy, the price of electricity
fell! Back
51
It is worth noting that the IEA in the World Energy Outlook was
clear that it did not expect there to be any significant global
growth in new nuclear build and that its share of global electricity
generation would fall in the period out to 2030. This year the
total amount of electricity delivered by co-generation and the
renewables ( including only hydro below 10MW ) will exceed that
delivered by the whole of the world's nuclear fleet. Whilst there
is no significant growth forecast for new nuclear, growth rates
in these technologies are forecast to grow exponentially. Back
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