Examination of Witnesses (Questions 300-302)
DR DIETER
HELM
13 JUNE 2006
Q300 Mr Weir: Do you see this agency
as being completely outwith government and setting targets that
are binding on government, if you like? Do you see the government
having any input into these targets at all?
Dr Helm: The government sets the
targets. It is the government's job to decide what its policy
is, that is the political decision. The only thing the agency
does is deliver. It says, "If that is what you want to achieve,
we will try to harness the market to deliver those at the lower
cost to the economy and to society and for customers", that
is what it does. You cannot jump to the delivery issue, "Shall
we build 10 nuclear power stations" before you have sorted
out what the question is that they are supposed to be an answer
to. The question they are supposed to be an answer to is: what
is your climate change objective; and what is your security of
supply objective. That is what I think we should focus on. That
is the area where it is more likely there is a possibility of
getting a political consensus than a political consensus about
picking a particular technology.
Q301 Mr Weir: Given the experience
with the EU scheme, do you see any government being able to set
a long-term carbon target and sticking to it?
Dr Helm: You say given the experience
with the EU system. First of all, we had a three year trial period,
it was set up as such. This is the most ambitious emissions trading
system in the world, nobody has done anything on this scale. It
is true that there have been some serious teething problems with
this regime, higher prices than anticipated and then the collapse
of prices, but what do you learn from that? Do you learn that
because it has not worked exactly as we planned it to work in
the first three years, we should abandon it, or do you learn from
that that we can make the system work a lot better than it currently
does and build consensus around it to build a framework not just
for Europeans to find the most efficient solutions to reducing
carbon but find a basis for constructing a post-Kyoto world? Think
about it the other way round: supposing you just abandon it, give
it up, have no Emissions Trading Scheme at all in Europe, and
presumably in the UK too, what happens then? Any semblance of
an attempt to achieve the Kyoto targets from a European point
of view would probably go out of the window. Is that a bad thing?
It depends upon your view about the seriousness of climate change
and the contribution that Europe has to make to engineering some
form of international treaty. Trading in quantities is usually
the way in which that is achieved.
Q302 Chairman: Your ideas are both
simple and radical at the same time. In the very short time until
this energy review do you think their radical nature will commend
themselves to Government and be likely to be adopted?
Dr Helm: Who knows what the Government
will do? That is for elected politicians, not an academic. The
attraction of my suggestions is they are very focused, very simple
and they address the cost issue and the competitiveness issue.
If the Government goes forward by trying to intervene in lots
of detailed ways there will be unintended consequences and it
will turn out to be vastly more demanding and complicated than
they think it is at the moment. In the end the results will be
that the cost will out, someone has to pay those burdens. I remain
optimistic that capacity markets will be seen in the UK. It depends
how many tight winters it takes to get there but they will be
seen, and some form of carbon contracting is plausible, practicable,
do-able and in the spirit of the EU ETS. Whether it will be done
or not is a matter for Government and not for me.
Chairman: Dr Helm, we are most grateful
to you for a very interesting hour, thank you very much indeed
for your time and trouble.
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