Examination of Witnesses (Questions 131-139)
MR TIM
HELWEG-LARSEN,
MR PAUL
ALLEN AND
DR DAVID
FLEMING
17 JULY 2007
Q131 Chairman: Good morning and welcome.
I think you have all heard the previous exchanges. Can I personally
welcome you, David. I think you and I first discussed this idea
at least ten years ago and possibly longer. I am delighted to
welcome you to the committee to discuss this again. The zerocarbonbritain
report[8]
is, by its own declaration, a very ambitious one. I want you to
say a word to the committee about the project, the thrust of it,
and in particular how personal carbon trading fits into your ideas?
Mr Helweg-Larsen: The name zerocarbonbritain
came out a few weeks before publication. Our initial objective
was to explore a set of policies and a scenario for Britain—a
set of polices to be able to deliver the maximum energy savings
and also incentivise the maximum amount of renewable energy update.
We then explored a scenario of what we saw as potentially one
of the most constrained possible scenarios that we could to explore
an island Britain, one which had no flows of energy and fuel in
or out. Could Britain feed and power itself within its own borders
and coastal waters? What we found was that the answer is: yes,
we do have the ability not only to provide the energy that can
deliver our current levels of wellbeing, albeit in a different
way, but we can also match a variable supply of renewables to
a variable demand. In terms of how we achieve that, we explored—and
by "we" I refer to Paul Allen and the Centre for Alternative
Technology here—the various policy options out there. We
found that we would definitely be needing what amounts to a cap
and trade scheme. Our reading of the climate science is that this
is an emergency situation. It is within that emergency context
that we framed our scenario. So we were asking ourselves: how
fast, under emergency conditions, can we move to zero carbon?
We figured that two decades would not be unreasonable under emergency
conditions. We then had to consider that that could be done by
diktat but what would smooth the process most effectively? We
have explored personal carbon allowance schemes. We found that
the tradable energy quota scheme that David Fleming compiled has
most comprehensively explored the issues and problems associated
with a personal allowance scheme and then, not only explored them
but sought to answer them, always through proven mechanisms, such
as, and I dare to use the word, rationing and what we can see
with the success for instance of Oyster cards, that the technologies
and approaches that are incorporated in the system are all ones
with which we are familiar.
Mr Allen: The project started
really with the reading of the most current science. We have met
up with Sir John Houghton, James Lovelock, we visited the Hadley
Centre and talked Cox and Betts there, and we are mapping what
seems to be unthinkable because the evidence compels us to do
so. Rather than being bounded by forecasting from existing attitudes
within the existing parallel, what we attempted to do was to back
cast, to go to where the science tells us to be, and then evaluate
polices and technologies that could build a bridge with where
we are now, although we see the primary driver of this transformation
as the market, setting up the right drivers in the market, to
set us on a race out of carbon rather than a race into carbon.
We have identified particular government interventions that will
be vital catalysts and particularly to increase climate research
and petrochemical depletion research, a vastly accelerated technology
and R&D programme to get these technologies started now as
we have a closing window of opportunity, but particular strong
investment in new skills and training. When we talked to the Sector
Skills Council, we did not find anywhere near the degree of urgency
that we feel in those areas, so CAT is launching a major initiative
to begin upskilling to give us the professionals that we need
to transform plumbers and electricians to be skilled and ticketed
ready for a roll-out of these technologies. The core of it is
a national public awareness programme of what is needed going
beyond what we do now. Transforming behaviour means getting the
information you need, making sure that information is in the public
domain and that the public trust it, and then transforming attitudes.
There is an attitude that is comprised of the consequences of
behaviour and we need more to directly link current behaviour
to the consequences of that behaviour. When we can shift attitudes,
then we can begin to shift behaviour. The change in our attitudes
to smoking was essential to the change in the behaviour of smokers.
Q132 Chairman: Do you think that
shift in attitudes can only be achieved by some sort of trading
scheme?
Mr Allen: I think the shift in
attitude needs to come ahead of a trading scheme. Once we have
achieved the information we need and it is in the public domain
and the shift in attitudes through the connections of the consequences
of behaviour, then we are ready for the public to look at what
sort of scheme will help us deliver that. When people are ready
and understand the serious situation that we are in perhaps, bringing
everybody up to speed is a bit much to expect but certainly a
high proportion of the movers and shakers within society thoroughly
understand that position, then carbon allowances would be seen
as a leading contender in meeting that challenge.
Q133 Chairman: What led you to choose
what you describe as tradable energy quotas as a variant? Perhaps
I could ask David first what he thinks about it. What led you
to pick on that particular model?
Mr Helweg-Larsen: We have looked
at a focus from first principles at what the scheme needed to
achieve as well as exploring some different options that had been
spelt out, David's being one of them. I think we wanted to achieve
a very rapid reduction in carbon and so we needed to have a government-implemented
cap. We find that element of it. We needed to have a system that
would be as efficient as possible and to look to something that
was going to be an electronic mechanism. We needed a scheme that
was going to engage all members of society—individuals,
business and government—so that they are all focused on
achieving the objective of moving beyond carbon. To do that, all
of these groups need to have feedback: personal feedback, feedback
from business and feedback from government. We currently do have
a very powerful feedback mechanism in terms of how we use cash,
but we need an equally powerful one in our use of carbon. Those
are probably some of the central tenets to looking at tradable
energy quotas.
Q134 Chairman: David, do you want
to comment on that?
Dr Fleming: Yes. There are lots
of different interpretations of what a personal carbon allowance
may mean, and tradable energy quotas are distinctive in two fundamental
senses. The first sense is that it is actually not based on carbon
allowances. Personal carbon allowances are not a very good name
for them. They are based on energy. The carbon involved in their
combustion is mapped on to energy. What you do is you buy energy;
you buy petrol; you buy electricity, in exactly the same way as
you do at the moment. As a result, you do not need to know what
your carbon footprint is; there is no need for smart metering.
This is of the most fundamental significance because Chris Huhne
and the Liberal Democrats, amongst others, have said, quite rightly,
that it would take 15 years to set up the technology to measure
carbon emissions and to measure carbon footprints. Indeed it would;
it might even take longer. I doubt if it is feasible at all. You
do not need to do that in the case of tradable energy quotas or
TEQs because you just surrender units when you buy a gallon of
petrol or when you buy some fuel. It is immensely simple. That
is the first point.
Q135 Martin Horwood: Surely, the
tradable energy quotas have to distinguish between renewable energy,
energy with a very low carbon content and other forms of energy,
so in effect, you do have to do the calculation behind it somewhere,
do you not?
Dr Fleming: Yes. That is very
easy. You do the calculation upstream. You do not do it downstream.
That is the point. The downstream calculations of carbon emissions
are enormously expensive and appear to require a civilisation
changing effort. It is very easy and lots of people have done
it—EPSU before they were abolished were doing it ten years
ago. I have lots of numbers of those. We know what the carbon
emissions of different sorts of petrol are. We know what the carbon
emissions of the different sorts of electricity are, depending
on where they come from, whether they come from renewables or
gas or coal or oil, whatever it may be. In fact, those numbers
are done very simply by a few high level calculations. Everything
else is done on the basis of bottom-up. In fact, there is no problem.
Carbon footprints are not a concept of which people are going
to have to be aware. They are entirely concerned with the energy
they buy and rated, as I said.
Q136 Martin Horwood: They are not
really energy quotas, are they, because you would not need them
to buy some kinds of energy?
Dr Fleming: I think energy quotas
is the best name for them. The whole thing is based on energy.
The whole thing is concerned with energy use, so we are not just
concerned with encouraging people to buy energy with a low carbon
rating, which indeed we would do, but actually we are also encouraging
people to do the fundamental thing which a lot of this tends to
forget and that is achieving an absolute transformation in the
whole of the energy use of our civilisation. Civilisations in
the past have not succeeded in such a transformation. The scale
of this change and the scale of the way we change it in the use
of transport and the way we grow food and the way we organise
our economy is quite spectacular and is going to have to be done
very fast indeed. That is the energy shift. Moreover, we need
to bear in mind, and this is the second point I was going to make,
that we are not just looking at climate change. It is becoming
very clear now that we also have to set up a system which can
accommodate itself to energy depletion. It is looking highly probable
that the energy market will be breaking down in the next few years.
I would argue quite strongly that any responsible government would
right now be saying, even if they had never heard of climate change:
we need to have a contingency plan to organise energy rationing
schemes when oil and gas depletion kicks in, which is going to
happen very soon. Even if they were not going to be used, the
government would need inevitably to set up an electronic rationing
scheme. There are two sorts of electronic rationing schemes. One
is a paper rationing scheme with which we were familiar during
the War; the other is an electronic rationing scheme. If it is
an electronic rationing scheme, it more or less has to be tradable
energy quotas. Tradable energy quotas are not my idea; it is a
generic way of doing rationing if one is going to use the modern
technology. We definitely do need a rationing scheme to be set
up. In fact, the core of this is energy. If you design a system
properly, then you get to the point of leverage so that if you
just pull one string, everything else comes together. If we concentrate
on our use of energy, then lots of other things will come into
play. We will be addressing carbon in a very effective way. We
will be addressing climate change. We will be addressing the whole
question of developing renewable forms of energy with a low carbon
footprint. All those things do come together, but they only come
together if you focus on just one thing right at the start.
Q137 Mr Chaytor: Your zerocarbonbritain
report refers to redirecting Adam Smith's invisible hand. My recollection
is that Professor Stern said in his report[9]
that it was Adam Smith's invisible hand that led to the biggest
market failure in the history of civilisation, climate change.
My question is: are you sure that the pure market mechanism of
tradable energy quotas by themselves will actually bring about
the changes that you wish to see?
Dr Fleming: I am, yes, and the
reason for that is that I think we need to understand Adam Smith
and his invisible hand. There are various ways in which the invisible
hand can work. Adam Smith, writing at the end of the eighteenth
century, was thinking in terms of the market and in terms of money,
which is very well recognised. What he is actually talking about
is the common purpose. The common purpose is a system for bringing
together individual aims with collective aims. There has to be
a way of achieving a common purpose if a society is to hold together
at all. There were previous ways in which the invisible hand would
work. In the medieval period, there was a cultural way. The culture
was the invisible hand. Tradable energy quotas are the invisible
hand, I would argue, that we need for the common purpose exercise,
the common purpose challenge, of transforming our use of energy.
The invisible hand is right there; it is just wearing a different
glove.
Q138 Mr Chaytor: What is the relationship
between the downstream measures of tradable energy quotas and
the upstream measures? Earlier you said that the issue of carbon
content of energy was to be dealt with upstream. Your report does
not say anything about the EU Emissions Trading Scheme, so how
do you see the relationship, for example, between tradable energy
quotas and the EU Emissions Trading Scheme or the other midstream
measures of the energy efficiency commitment to the renewables
obligation? Do they need to be all swept away?
Mr Helweg-Larsen: It is probably
worth just making a distinction. David was not an author of our
zerocarbonbritain report. We have certainly drawn on his
work for it. David may still want to answer the question
Dr Fleming: Yes. The point is
that the only way we are going to achieve this transformation
is by recruiting the biggest energy resource we have, which is
the intelligence of the people. Not only do we need to involve
them but we need to make them want to achieve results. There are
two ways of getting people to achieve results, which are very
well understood in industry. This has been the biggest debate
in industry over the last 60 years. One is telling them what to
do and saying, "If you do not do this, it is going to cost
you and this is the regulation we are approving and these are
the instructions". That is yesterday's way of doing it. Unfortunately,
in terms of public policy, our public policy does not seem to
have caught up with lean thinking, which is now becoming very
well established in industry and we are absolutely achieving transformation
in consequence in terms of quality. Therefore, that is what TEQs
(tradable energy quotas) are designed for, to say, "Sir,
that is the energy budget you have got. The onus is on you to
work within that energy budget. You have to recognise that the
energy available to you in 20 years time is going to be this.
You are right down to there. So you, sir, will need to
get together with your family, your community and your employers
to work and develop a common purpose so that you are the centre
of a network of collective motivation. If you do that, and only
if you do that, will you actually achieve serious results.
Q139 Mr Chaytor: I understand how
the TEQs can reduce personal energy consumption. I do not understand
how the TEQs alone, as you describe them, can result in a continuous
reduction in CO2 emissions.
Dr Fleming: I am glad you have
asked that because here is the picture in my reply. The whole
thing is based on the carbon budget. A carbon budget is set 20
years ahead.
8 www.zerocarbonbritain.com/images/zerocarbonbritain.pdf Back
9
www.hm-treasury.gov.uk/independent-reviews/stern-review-economics-climate-change/sternreview-index.cfm Back
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