Examination of Witnesses (Questions 185-203)
PROFESSOR PAUL
EKINS
14 JULY 2009
Q185 Chairman: Welcome back to the
Committee; we are very glad to see you again. We have about half
an hour so we are going to pace our questions in a way which gives
us a chance of finishing before 12 o'clock on this session. Can
I ask first of all why you think we have not made as much progress
as we would like to towards our 2010 target for a 20 per cent
cut in CO2 emissions? We are not going to hit it, and given the
rhetoric that has been around why do you think it is?
Professor Ekins: The policies
that have been implemented have not been implemented strongly
enough. There has been huge policy innovation over the last ten
years. We have devised and put in place an extraordinary range
of policies across all relevant sectors but they simply have not
been strong enough. I would start by singling out the price mechanism.
The Stern Review was absolutely clear; every economist is absolutely
clear; every session such as this that I come to says that the
carbon price is absolutely critical and unless we have a decent
carbon price that is visible we will not be able to do it. However,
we do not have a decent carbon price that is visible and until
we do we will not manage to crack the problem.
Q186 Chairman: The recession obviously
is going to help a bit. If emissions do fall in a recession is
there something we can learn from that in terms of strengthening
the other policies?
Professor Ekins: I think the main
lessons to be learned from the fact that emissions will fall in
the recession is that when the recession ends emissions will go
up again. There is an absolutely ineluctable link in all economies
between incomes and energy use. This makes even more important
the issue of carbon prices because unless carbon prices go up
at the same time as incomes then inevitably economic growth will
lead to greater carbon emissions. That is a lesson which we have
yet to learn; it is a lesson that comes straight out of every
single piece of energy economic analysis I know. If we are going
to get richer we will use more energy unless that energy is also
more expensive.
Q187 Dr Turner: Your evidence to
us suggests that UK's 2020 targets need to be considerably toughened.
What key policies do you think the government needs to implement
to make this difference?
Professor Ekins: There is no magic
bullet. We will need a range of policies across the sectors. However,
they will need to be underpinned by a robust carbon price. That,
to me, is a necessary but not sufficient condition for progress.
The only way of introducing that in the absence of OPEC increasing
prices (which is bad for everyone except OPEC; it is very bad
for our economy certainly) is through a policy that I have spent
an enormous amount of time researching called environmental tax
reform whereby the government systematically increases carbon
prices across the board—through the kind of escalator that
we have seen now with the landfill tax, which we saw in the 1990s
with the fuel duty escalator—and reduces other taxes to
compensate so that the overall budget is not affected. People
have more money in their pocket; businesses have more money because
social security contributions and national insurance contributions
go down; consumers have more money because income taxes go down
or employees' national insurance contributions go down. If they
then want to spend that money on high carbon goods and services
then they pay significantly more than they are at the moment.
Over time a five or six per cent escalator on the major carbon
bearing energy uses supplemented by sensible regulation, supplemented
by voluntary agreements of various kinds, supplemented by consumer
information so that people became more aware when they were consuming
carbon containing goods and services that would transform the
economy by 2020 and I see no other way of reaching the 2020 targets
which are right at the bottom of the Committee on Climate Change's
recommendations; they are right at the bottom of where they need
to be if we are to make the scientifically appropriate contribution.
Q188 Dr Turner: How much confidence
do you place in the government's predictions of CO2 emission reductions
by 2020? The government are saying 19 per cent; do you believe
that?
Professor Ekins: I do not because
I do not see the basic change in the policy approach and the policy
profile which we need. What I see is a continuation of the policies
that have, over time, been put in place since 1997—supplier
obligations et cetera—which have certainly delivered something
and it is certainly the case that emissions would be higher now
than if those policies had not been implemented. However, they
have not met the 2010 target and they will not meet the 2020 target
unless we have a much higher underlying carbon price. In the previous
evidence we heard that to motivate carbon capture and storage
and make it economically viable we might need a carbon price of
a hundred euros per ton of carbon dioxide; for me that is the
absolute minimum towards which we should be aiming through a process
of environmental tax reform by 2020. Not all at once, but a little
bit every year. That would then start to make real inroads and
the other measures that are being implemented would of course
be motivated and stimulated to a greater extent. Innovators would
have a greater incentive to invent low-carbon technologies; everyone
would have a greater incentive to implement more efficient appliances
and more efficient houses in energy terms. It would give an enormous
extra stimulus to all the other things that have been implemented
so far to rather weak effect.
Q189 Dr Turner: The Committee on
Climate Change has recommended that the interim targets for 2020
ought to be achieved without the purchase of any offset credits.
Do you think the government could however use offsets to make
an additional effort to exceed those targets? What do you feel
about the admissibility of credits in the system?
Professor Ekins: I think that
using credits to achieve domestic targets confuses and undermines
the purpose towards which we are directed. One of those purposes
is to achieve a low-carbon economy in a developed country like
the UK. Unless industrial countries like the UK achieve a low-carbon
economy developing countries are not going to begin to try to
do anything on their own account because they will interpret moves
towards low-carbon economies as moves to stifle their development
which they have made abundantly clear they are not prepared to
consider. In a sense, by allowing people to purchase offset credits
you are accepting that moves to a low-carbon economy might be
unacceptably expensive. If they are going to be unacceptably expensive
then people will not want to go there. What we have to prove is
that we can do it and we have to use targets to stimulate the
policy measures that will enable us to do it at home in our own
economies. The second thing we need is the provision from developed
countries to developing countries of finance to help them decarbonise
their economies as they develop, which is a quite different purpose
and should not be confused with the decarbonisation of our own
economy. Unfortunately this business of offsets has been introduced
in order to make it cheaper for us and therefore stop us moving
as quickly as we might to a low-carbon economy, and in order to
provide this finance. We would do much better to separate those
two objectives, to provide the finance (which everybody agrees
is going to be necessary for a global deal to be achievable) independently
of our own targets to be met at home.
Q190 Dr Turner: So you would abolish
offsets?
Professor Ekins: It seems to me
that it is a very flawed mechanism. While we do not have another
mechanism for providing the finance, there may be some political
pragmatists who would say that in the absence of a kind of offsetting
mechanism actually that finance would not materialise, then probably
it is better to have offsetting credits than no finance. Then
I think it would be very important for the targets that we set
in our own country to be much tougher so that those targets themselves
really did bring forward the kind of domestic effort that we need
to show that decarbonising an economy like the UK is possible
at acceptable costs.
Q191 Dr Turner: How would you envisage
a financial support mechanism for developing countries actually
working? How do you think we can get the developing world to cough
up, instead of buying cheap credits?
Professor Ekins: There have been
a lot of proposals of various kinds, some of them are more or
less automatic like a global carbon tax. If you were to have a
global carbon tax and rich countries were to contribute some proportion
of the revenues from a global carbon tax into an international
fund and the rest of the revenues from the global carbon tax could
be used for an environmental tax reform of the type I was talking
about earlier, that would be one possibility. Some people have
suggested taxing international currency movements; some people
have suggested using the Global Environment Facility of the World
Bank and putting some proportion of GDP from each developed country
into that to be used explicitly for low-carbon purposes. I do
not think the problem is the lack of suggested financial mechanisms.
I think the problem has so far been the unwillingness of the developed
countries to follow through on any of those suggested mechanisms
in order to implement them.
Q192 Dr Turner: There seems to be
no actual move so far towards getting the international agreement
that would be needed in order to establish such a mechanism.
Professor Ekins: We have the Road
to Copenhagen document published by the government just recently
where the prime minister does suggest a sum which developed countries
should put on the table. This is clearly a crucial part of the
bargaining that is going on in the run up to Copenhagen and no
doubt it will continue right to the wire, probably until 11.59
on the final day when the final announcement is to be made as
to exactly how much money is going to be there. My own feeling
is that that is really not desirable and likely to be counter-productive.
The only way we are going to counter this problem is through enormous
innovation and low-carbon technologies, and if we achieve that
innovation in our own country with our own technologies and with
our own companies, then a lot of the money that goes in these
kinds of funds will be used to deploy those technologies around
the world and our own economies can benefit from that. We are
used to that with trade and aid budgets in the past and this seems
to me to be an extension of that. To have a low-carbon innovation
fund at the global level funded by many hundreds of billions over
a period of time is the minimum we will need, but it will ultimately
benefit all countries, especially those countries that have taken
the lead in developing the low-carbon technologies. At the moment
it looks as if those countries are going to be largely constituted
in Asia, places like South Korea which featured prominently in
the previous evidence, and China and Japan because they are investing
heavily in low-carbon technologies. Unfortunately, we have yet
to show that we take that form of investment seriously.
Q193 Mr Chaytor: Given your sweeping
criticisms of the policies that this government and perhaps some
other European countries have adopted as being inadequate, are
you absolutely confident that the EU Trading Scheme as the central
plank of the European Union's efforts to reduce its total emissions
is the right policy for Europe? Or what changes to the EU Trading
Scheme would you like to see in place to make it more effective
and give it more teeth and more bite?
Professor Ekins: I think the EU
Emissions Trading Scheme is an immensely important policy and
I am amazed, to be honest, that the EU managed to put it in place
in the relatively short time that it was negotiated. It does provide
some kind of model for a global mechanism which we desperately
need. I would have far preferred to have had a global carbon tax
and most economists would agree with me that that would have been
a far better way to have proceeded at this stage. We might then
have moved towards a trading scheme in order to arrive at a more
surety on the cap, but we failed to get a European carbon energy
tax in the early 1990s—which I remember very well—and
it was clear that a global carbon tax was not going to be introduced.
I think the European Emissions Trading Scheme was an essential
second best, but very much a second best. In order to make it
more effective there is only one thing you can do, which is to
reduce the number of emissions that are allocated or sold through
it. That is the way caps work; they work entirely according to
the quantity of carbon that is allocated through them. If we have
a very low-carbon price at the moment it is because there are
too many allowances. These allowances are extraordinarily difficult
to calculate; they are extraordinarily difficult to calculate
even in the absence of lobbying because you never know what technologies
will be brought forward as soon as you get a decent carbon price.
Every single estimate of abatement technologies in practically
any field has overestimated the cost that will be necessary to
bring them forward when they become mandated. We have seen it
with emissions regulations of all kinds and undoubtedly we are
seeing it with carbon. There are many very low cost ways of abating
carbon as the marginal abatement cost curves of McKenzie and others
show in the Committee on Climate Change report. As those are mobilised
by a carbon price of any size, the carbon price goes down. You
have to be really tough on the cap in order to maintain the carbon
price. Unfortunately, the political pressures brought to bear
both at national level and at European level by those who want
cheap carbon were very largely effective, in my view, even in
the second phase. They were extremely effective in the first phase
and very largely effective even in the second phase, meaning that
we have too many emissions allowances in the system. I am afraid
that in the third phase we are going to find very much the same
thing happening. As soon as people believe there will be a carbon
price above 20 euros per ton of carbon they will make the investments,
that will bring forward limited innovation which will make the
carbon price fall again. Unless we have a really tight cap so
that people know that one is serious, perhaps a cap that suggests
at the moment a carbon price of 200 euros per ton of carbon, then
people would make the investments and that might come down then
to 50 when we actually see the emissions trading. Politically
that has not been proven possible to deliver.
Q194 Mr Chaytor: In terms of the
use of offsets, you are utterly opposed to their use.
Professor Ekins: I am opposed
to the use of offsets for meeting domestic targets. I think that
the use of offsets may be a useful way for deciding which projects
to invest in in developing countries but while developing countries
do not have robust carbon caps—which they do not at the
moment—then the absolute carbon emissions that are delivered
by these offsets are extremely doubtful because you never know
the robustness of the baseline against which they are being calculated.
Undoubtedly many of these projects do save carbon but we do not
know precisely how much and they simply serve to undermine the
robustness of the developed country targets which are supposed
to be delivering against firm caps.
Q195 Mr Chaytor: Trading within the
EU itself to meet our targets will be required to buy up to 25
million tons of EU allowances which presumably will be invested
elsewhere in the European Union.
Professor Ekins: Indeed. That
is the whole purpose of the EU Emissions Trading Scheme.
Q196 Mr Chaytor: If the investment
is elsewhere, particularly in countries that are heavily dependent
on coal—Poland being the obvious one—is simply used
to transfer from coal to gas, is that an effective outcome of
the system because it is not dramatically reducing the amount
of carbon consumed, is it? It is locking in Poland and other Eastern
European countries to many more years of fossil fuel consumption.
Professor Ekins: The issue of
carbon lock-in is very important and undoubtedly the best outcome
would be to enable Poland and other countries to leapfrog from
coal straight to renewables. It does not sound very good coming
from someone in the UK because of course we have not leapfrogged
from coal to renewables, we have gone very heavily from coal to
gas so it might seem just a trifle rich for us to suggest that
Poland did not do the same because our government has not been
prepared to do that by paying what it would to exploit some of
the best renewable resources in Europe. Obviously EU emissions
trading schemes do tend to go for the next least expensive alternative
once the cost of carbon goes up. To me the obvious answer to that
is that if strategically we do not want people to go from coal
to gas then the carbon price has to be sufficient for even gas
fired power stations to be too expensive because of the carbon
that they emit, so that renewables investments then do become
economic throughout Europe. Again the UK would stand to benefit
very greatly from that because our renewable resources are among
the best in Europe and among the least exploited so far.
Q197 Mr Chaytor: If the cap is set
too low because of political preferences and the lobbying of vested
interests, does it mean that the trading system alone will be
inadequate to deliver the kind of emissions cuts needed? I suppose
my question is, is a carbon tax an inevitable supplement to the
trading system because the trading system cannot deliver the depths
of cuts in emissions that we will need?
Professor Ekins: Until the market
becomes better established I think a carbon tax would be very
helpful indeed. I have done quite a lot of work on how a carbon
tax might be combined with the Emissions Trading Scheme at the
European level and suffice to say it is perfectly feasible to
do that. Until the carbon market settles down, until the costs
of carbon abatement are reasonably well established, until one
can see what sort of quantity of permits will deliver what sort
of carbon price, then I think it would be very helpful to have
a carbon tax which could be used to set a floor on the price of
carbon, which is what investors of low-carbon technologies tell
us that they need above all. Indeed, when you look at those countries
that have been successful in investing in low-carbon technologies,
without exception it is because the investors have been able to
calculate over a long period what the returns from their investment
would be. That is not the case in the UK where we not only have
the Emissions Trading Scheme which is very volatile but we have
the Renewable Obligation Certificate Scheme which also produces
very volatile prices for these ROCs so that it is not possible
to make those bankable, take loans in the certainty of being able
to pay off the loans and make a normal return for your shareholders.
Until that kind of certainty is forthcoming through the system
I am afraid that our investors will not make the investments in
low-carbon technologies that are necessary.
Q198 Mr Chaytor: Your figure was
100 euros a ton as the absolute minimum, but with the current
arrangements how many years will it be before the carbon price
rises to, say, 60 euros a ton, which is where many people are
saying is the cut-off point?
Professor Ekins: It is very interesting
because that depends entirely on innovation. It depends entirely
on how the next generation of low-carbon technology develops and
the extent to which, once we start rolling out these new designs
of nuclear power stations and new designs of wind turbines, they
become cheaper. The cost of photovoltaics is already coming down
very fast, and if we were to make sizeable investments in sunny
parts of Europe and North Africa which would provide large amounts
of energy those costs might come down even faster. It may be that
actually the backstop technology which appears in a lot of economic
models—that technology at which very large quantities of
low-carbon energy become available—would emerge at 60 euros
per ton of carbon dioxide. It is impossible really to predict
what that is. What we know is that that would stimulate that development
very quickly. If we were able to get to a price of 100 relatively
quickly then the innovators would know that that gave a significant
margin for the development of these technologies, and they could
go forward in the confidence that they would make a return. It
may then be that we would have a cost reduction and the price
of carbon could come down, but that would be once we have gone
over the hill of innovation and we have made those investments,
we have deployed the technologies and we have started to reap
the benefits of the economies of scale to the kind of sunlit uplands
towards which low-carbon enthusiasts like myself look. However,
it takes a long time to get to those sunlit uplands, as anyone
who has been in mountains knows. That climb will not be easy and
it will require high carbon prices and high carbon prices are
politically difficult.
Q199 Colin Challen: The Climate Change
Act sets the remit for the Committee on Climate Change and in
that remit it has responsibility to take into account not only
the climate science but fiscal circumstances, economic competitiveness
and social circumstances amongst others. How well do you think
it is balancing these things? How are the trade-offs working?
Professor Ekins: I think it is
extremely difficult. The Committee on Climate Change is obviously
a policy relevant body in the sense that it has to consider the
policy implications of the targets that it suggests but it is
not comprised of politicians and ultimately these decisions about
balance between competing economic social and environmental considerations
need to be taken by politicians. The scientific case for very
strong carbon abatement is absolutely unassailable and the factor
concerning which I am least optimistic, if you like, is that public
awareness of what climate change means for this country and the
world at the moment is nowhere near the scientific reality. People
just do not seem to understand, appreciate or even be particularly
interested in a change to human circumstances of absolutely extraordinary
proportions that will dwarf anything that we experienced in the
first 50 years of the last century when we had two world wars
and Stalin purges. It is that kind of change that people need
to realise is coming up the track in the second half of this century,
which may seem a long time but of course it is well within the
lifetime of probably most people who are currently living in this
country at the moment. It is not far away and until we get that
perception then I am rather afraid that the kinds of political
changes and policies I have been talking about, as being necessary,
will not be politically deliverable. I think politicians have
a real responsibility to explain these things in ways that carry
commitment, as do scientists and policy analysts like myself.
At the moment the message has not got across with anything like
the urgency that it needs to.
Q200 Colin Challen: Given that and
given the remit of the Committee to consider all these other things
which are not in themselves climate science related, do you think
that the Committee has chosen the correct emissions reductions
trajectory or should it have offered one or two other alternatives
so that we can contrast what it has chosen with something which
might have been more weighted to the science or perhaps a more
generous trajectory which was more weighted to social implications?
Professor Ekins: I think the targets
that we have are sufficiently challenging to serve their purpose.
I think there is quite a strong chance that they will not achieve
their objective even if they are part of a global effort of delivering
us from dangerous and anthropogenic climate change. We know there
is only a 50-50 chance of staying below the 2° with those
targets. That 2° itself is not quite an arbitrary number
but it was certainly chosen on the basis of certain political
considerations. It is quite possible that 2° will turn out
to be too much for a comfortable human existence of nine billion
people on the planet, but it seems to me that the development
we now need to see is to move from having set the target which,
after all, is intended to be very much a first step in the process
rather than the last one, to getting on a trajectory which will
meet the targets with a certain amount of comfort. In other words,
we don't just put in place policies that we think, if everything
goes absolutely according to plan, might just squeeze in under
the 29 per cent carbon dioxide reduction, which has been the strategy
for the 2010 targets. I have been monitoring the 2010 targets
very closely ever since 1997 and every time the government has
produced a new policy effort to meet the 2010 targets and has
produced its calculations, it is just squeezing in below and of
course the policies have not delivered to the extent that was
anticipated and other things have blown the policies off course,
so we have ended up missing them by rather a large margin. We
simply cannot afford to do that in 2020 with these targets which
are relatively robust and challenging and can be justified—kind
of—with reference to scientific evidence. The overriding
task now is to put in place the policies that can be seen will
meet them with some assurance so that when things go wrong—as
they undoubtedly will—and technologies do not quite deliver
according to plan—as they inevitably will—and we have
to spend more on carbon capture and storage than we thought we
would and therefore we are able to implement less of it, or the
first nuclear power stations do not go in quite as planned—as
is happening in Finland—we do not then find ourselves many
percentage points short of these targets which are already absolutely
at the minimum of what is scientifically justifiable. We have
to start upping the level of ambition of the policies that we
put in place so that they will achieve these targets with some
headroom for comfort, which is how government operates in many,
many other areas. We need to introduce that into our climate change
policy as well.
Q201 Dr Turner: You lead the energy
systems and modelling research for the UK Energy Research Centre
and your principal conclusion is that decarbonising electricity
production should be our number one priority. Just how fast do
you think this can be achieved and what should the government
be doing to accelerate the process?
Professor Ekins: That conclusion
arose out of modelling which indeed we did do. The decarbonisation
of electricity is not something that can be done terribly quickly.
There are three large possibilities for the decarbonising of electricity.
They are: large scale offshore wind farms, new nuclear power stations
and carbon capture and storage. All of those require very, very
large investments which will take at least ten years to put in
place. Between now and 2020 the contribution that is planned is
that a lot of offshore wind will be in by 2020 (and it remains
to be seen in the White Paper which will be published tomorrow
the extent to which the government perceives that to be feasible)
but I do not know anyone who suggests that there will be large
numbers of carbon capture and storage plants or large numbers
of new nuclear power stations up and running by 2020. Prior to
2020 we have to do what needs to be done largely through renewables—offshore
wind and biomass—and improvements in energy efficiency,
in particular in relation to the existing housing stock. Those
are the two really important efforts—increasing the energy
efficiency of cars is another very important one—so that
by the time we get to 2020 the overall size of the energy demand
has been brought under control and we are clear about what sort
of levels of the new decarbonised sources of electricity will
be needed in order, eventually, to contribute to the decarbonisation
not just of electricity itself but of household energy use which
will increasingly rely on electricity and indeed vehicles and
road transport which can increasingly use hybrid or electric vehicles.
That time scale is between 2020 and 2040 really so that those
big new investments in low-carbon energy sources can roll out
between 2020 and 2040, plus perhaps marine and wave power if that
has been sufficiently developed by then.
Q202 Dr Turner: I was just going
to ask you for a rough guesstimate of the possible contribution
by 2020 of wave and tidal stream.
Professor Ekins: By 2020, very
small; the first prototypes are barely in the sea and they are
not delivering anything resembling large quantities of power.
Wind technology is infinitely further advanced than marine renewables
and we know what the challenges of rolling out large quantities
of wind are going to be over the next ten years. The challenges
in implementation terms will be just as great for marine; there
will be large structures sitting in the sea having to deliver
quantities of energy but at the moment we have no real idea what
the design of the ultimate structures that will be the commercial
models will be. That is very much a post-2020 technology so far
as I am concerned.
Q203 Chairman: Thank you very much
indeed. You have covered quite a bit of ground in a fairly short
space of time so we are very grateful to you.
Professor Ekins: Thank you.
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