Examination of Witnesses (Questions 260
- 279)
WEDNESDAY 1 DECEMBER 2004
PROFESSOR JIM
SKEA, PROFESSOR
PAUL EKINS,
PROFESSOR GEOFF
HAMMOND and MR
RICHARD STARKEY
Q260 Lord Wade of Chorlton: Could
I just sort of dig a little bit further into that before I ask
you my question because as I have been listening to you what I
do not quite understand is that, as has emerged from our inquiry
so far, there is no lack of knowledge about how you can save energy,
there is an awful lot of knowledge about how every building in
Britain could save energy and how individuals could save energy
but they are not doing it, so is the purpose of your research
to find some method that nobody has ever thought of yet that is
going to be so much easier and everybody is going to say, "That's
a wonderful idea and from now on I'm going to change my life,
and I press a button and it all happens," or is the purpose
of your research to find out how we can put into effect what we
already know, and if we do that is that not a different approach
from one which needs the sort of research bodies that you were
just describing? I am a little bit confused about what you expect
to happen out of everything that you are doing.
Professor Skea: It is an interdisciplinary centre
which draws together engineers, social scientists and economists.
The engineers are clearly concerned with developing new products,
new technologies, new techniques which will help you in the longer
term to reduce energy and it can range from very ordinary kinds
of things to the people in the materials theme looking at super-insulating
films which, for example, could really reduce energy use in existing
housing. But as you say, I think in terms of demand reduction
a lot of the challenges are to do with deploying existing technologies
or changing existing patterns of behaviour and it is there that
perhaps the policy people, the social scientists and the economists
have a bigger role to play and here we quite acknowledge the fact
that there is a very heavy stone to be rolled up a very large
hill in terms of taking that forward. So I do not think we expect
to develop magic bullets in that sense of developing new strategies
and policies. What we are really hoping to do is to contribute
to the policy-making process and move forward rather incrementally
in improving the overall portfolio of measures that we might put
in place.
Q261 Lord Lewis of Newnham: But I
think we have discovered, paradoxically, that in fact if you increase
the energy efficiency in a home it does not reduce the amount
of energy they use, in fact it could increase it because we were
given examples, for instance, of double glazing for conservatories.
So double glazing now means that the conservatory is used for
the whole year, whereas under the old system it was only used
during the summer period. So it has adapted itself to a completely
different type of sociology in this system. This seems to me to
be another feature which is very important and very worrying from
our point of view.
Professor Skea: Yes.
Professor Ekins: I am quite happy to comment
on that because that brings together really the two themes with
which I am mainly concerned in this area. One is the need for
investment. A lot of realising energy efficiency opportunities
requires investment and very often that investment does not take
place. It either does not take place, to be frank, because it
does not yield a great enough return and people can get more money
back from investing in other things, or it does not take place
because the people who need to make the investment have not got
the money and the financial markets do not work well enough to
lend them the money and they do not have the expertise to take
that route in any case. So that is one important set of issues
to be looking at, as to ways in which those financial barriers
to investment can be addressed. The other issue is to do with
this very complicated business of behaviour. Clearly people could
change their behaviour and save energy in all sorts of ways which
would not require any investment at all, but behaviour is a very
complicated business and we all behave in the way that we do for
quite good reasons as far as we individually are concerned. One
gets then into, I think, academically a very rich area of social
science because one is talking there about incentives, about the
interplay between incentives and regulations, and about actually
knowing how people will behave when certain actions are taken.
Your discovery about greenhouses was a quite unexpected and unintended
consequence of this particular development. In the economics literature
it is actually well known that increased efficiency in the use
of a resource leads over time to greater use of that resource
and not less use of it, because it becomes more widely available
for more purposes and the business of a growing economy sucks
more of that resource into it becoming more fundamental, which
is why I as an economist tended to think that the price mechanism
is important and that unless you get increased efficiency allied
to rising prices you will get increased use overall rather than
decreased use overall. If we look at where energy prices have
been until very recently over the last fifteen or twenty years
we should not be surprised that there has been a tendency for
energy use to increase rather than the reverse.
Baroness Sharp of Guildford: We have
also been looking, if I might say so, at the issue of savings
made through energy efficiency which are then used to finance
holidays or cheap flights.
Q262 Lord Paul: But more than the
holiday, I mean, there are better designs, more energy efficiency
but then you build far bigger glasshouses, etc., which expend
more energy. So what is the theme? Are we trying to make it energy
efficient irrespective of how much energy use increases or are
we trying to make energy consumption less?
Professor Hammond: This phenomenon that you
have identified is sometimes called the rebound effect. I think
there are likely to be limits to the rebound effect. For example,
many people argue that energy efficiency in the home means that
you buy into greater thermal comfort, but there is a limit to
the amount of thermal comfort that you are going to have. After
you have got a temperature in the home of 20 or 22 degrees, or
something like that, you are not going to put the thermostat up
even further. So I have a feeling that there will be saturation
effects to this so-called rebound effect. Certainly if you have
new-build, then you can build new houses to a very high standard
in terms of thermal insulation and the efficiency of the building.
One of the major problems we have is refurbishing the old stock,
given the long life of existing houses.
Q263 Chairman: Yes, but is there
not another spectre on the horizon here, and that is air conditioning?
As people become more affluent and the summers get warmer they
are going to want more air conditioning. The more people who buy
it, the cheaper it will become, therefore more people will be
able to afford it and that is going to be a massive addition to
the energy demand.
Professor Hammond: Yes, I quite agree. I had
to give a presentation in relation to the Carbon Vision Steering
Group and I was actually thrown by that question, but I fully
accept that that is a possibility. I think we must try and discourage
that as far as we can.
Q264 Lord Lewis of Newnham: I think
there is a cultural factor here as well. I mean, after all the
child is father unto the man. At home when I feel cold I put on
a jumper; my grandchildren put up the temperature on the thermostat.
Professor Ekins: If I may comment, and this
is very much a comment from an economist's point of view, I have
absolutely no doubt at all that human ingenuity in terms of inventing
new ways of using energy will mean that for as long as energy
is relatively cheap we will find ways of using it, and however
efficient we may make certain uses (and I think it is very important
that we should make those uses efficient), we will find other
ways of using it if the price of energy and carbon relative to
other goods and services remains at its current level, which is
frankly very, very low if one looks at its share of expenditure,
whether of businesses or individuals. That seems to me to be an
economic fact of life which is extremely unpalatable politically
and very difficult to cope with, but nevertheless it is an economic
truth which we will need to cope with if we are to make progress.
Q265 Lord Paul: We have an example
in this room. I mean, we have more lights than I certainly feel
comfortable to work with and air conditioning, which I am sure
is an increase in the use of energy. We may be more efficient.
Professor Skea: I am sure we could go on about
this all afternoon, but just to perhaps make one over-arching
point, this is actually, I think, a very complicated picture and
it is actually Paul Ekins's job in the systems and modelling to
pull it together because the evidence you heard from, I think,
UCL was quite clear about the conservatories issue and how the
rebound effect had probably been more than 100 per cent. On the
other hand, it identified in programmes which were addressing
fuel poverty the rebound effect was typically 50 per cent and
I have to say on the back of an envelope if I see myself saving
domestic gas I cannot find any way of spending it on foreign holidays
that will make me increase me carbon dioxide emissions!
Lord Lewis of Newnham: I refer to the
point that you have got a problem here. I do not think the young
think this way. I am not trying to insult you in any way, but
I do believe that my generation takes a totally different view
on energy saving to my grandchildren, who now will automatically
come in and switch things on—
Baroness Platt of Writtle: And shower
every day.
Q266 Lord Wade of Chorlton: On this
Committee we have a number of issues which have been laid before
us where we have been very concerned about the expertise, both
scientific and in other forums, to be able to deliver the policies
and clearly this is an area where you are going to need sufficient
expertise to research into energy efficiency and into energy policy
more generally. As we have just been discussing, there is a wide
range of issues. So what are your comments on that? Do you believe
you do have that necessary expertise or is there a shortage there?
Professor Skea: Well, we are not in a position
at the moment to comment on the availability of gas fitters and
things like that, but in terms of the academic—
Q267 Chairman: This is research expertise?
Professor Skea: Yes, on the research expertise.
It is interesting that in putting the Energy Research Centre together
and also the consortia which are forming under the Research Council's
programmes there is a fair mix between what you might call the
usual suspects, people who have been around in the energy area
for some time, but also a number of new people are beginning to
come into the area who were not there previously, perhaps more
at the mid-career level. I do not think we have the capacity to
double or triple our research funding in this area overnight and
for there to be sufficient people there to carry it, but if there
is a gradual increase in funding I think there are ways of actually
dealing with that to improve the effectiveness of our research.
I flag up in particular the idea of attracting people in from
parallel fields, people who have been slightly adjacent to energy
research, say on the materials side, who could be brought in.
I would emphasis the importance of training people, getting people
moving at the post-graduate level, beginning to develop the courses
again and beginning to create the qualified people. One final
point, which my colleagues may want to pick up on because Paul
and I were just going through applications for jobs at the Policy
Studies Institute this afternoon, which is the question of what
we do about attracting skills from overseas and whether we are
actually bringing skilled people into the country who could contribute
to the energy research effort or whether we end up training people
and sending them back to their home countries. So I think there
are some interesting issues there which my colleagues might want
to follow up on.
Professor Ekins: Well, certainly from the energy
modelling side of things, which I have been involved in in this
country now for a number of years, it is very disparate and frankly
it is rather small at the moment, but the injection of resources
that is represented by the Energy Research Centre in this area
is very significant and we will be recruiting highly skilled modelling
people in order to take forward the UK effort in this field and
we have had some terrific applications from the United States
and from mainland European countries. My belief and certainly
ambition is that at the end of two or three years the UK will
be well-established in this field. It is a very policy-relevant
field. You will know that in the Inter-governmental Panel on Climate
Change discussions economic models are referred to all the time.
One of the things I hope we will do is get much more transparency
into how these models are constructed and how they deliver the
results that they do deliver. But certainly in this field I have
been aware of a very significant buzz going on internationally
and an awareness that there is a new initiative and that we are
placed quite fairly to make a decent contribution. So I think
we are acting as a skills magnet in that sense.
Chairman: That is excellent news.
Baroness Platt of Writtle: What about
the skills though? You said you do not know about gas fitters,
but if you are going to get buildings to be more efficient you
are going to need a tremendous army, not only of gas fitters but
all sorts of people, and my feeling is that those skills are not
present.
Q268 Chairman: We are hoping to devote
one day of evidence to the issue of training for the trades and
professions involved in building. I think perhaps now we should
turn to the second part of our agenda. We touched lightly on financial
and fiscal incentives earlier in the discussion and we are very
well aware of the range of views on this issue. The recent PSI
study which you co-authored, Professor Ekins, looked at carbon
taxes and Mr Starkey's evidence from the Tyndall Centre, for which
many thanks, which put the case for domestic tradable quotas.
We have had other evidence recommending stamp duty and council
tax rebates, and so on. Perhaps we could start off the discussion
on this topic by asking how much research is being done in this
field. Can the range of views we have heard be the sum total of
possibilities or are there further possibilities emerging, and
is there some coordination of all these different views?
Professor Ekins: Well, perhaps I can answer
first. I would hope that at an Institute like the Policy Studies
Institute we take very much an overview, a kind of holistic view
of policy both in terms of regulatory instruments, economic instruments
and information instruments, in terms of voluntary agreements
and the whole range of policy because broadly it is a horses for
courses situation, as I am sure you are aware. Very often to address
a complex set of issues one needs a range of policies and one
needs them to be combined in the right way so that you do not
get unintended consequences and you do get the right incentives
to the right places that are of an adequate size to achieve the
results you are wanting to achieve. Having said that, when one
does individual pieces of work in order to keep them manageable
very often one has to concentrate on one policy measure as opposed
to others in order to really hunt that one down and see what its
implications are. In this particular piece of work that you refer
to one part of it was indeed looking at the way in which a carbon
tax might increase energy efficiency but its principal purpose
was to look at its distributional effects, especially its effects
on people in low income households, and to discuss and recommend
ways in which those effects could be mitigated; in other words
how you could implement a carbon tax on households without having
disproportionate effects on low income households, which is the
stated reason at least why this Government does not implement
carbon taxes on households. So it seemed to us important to illuminate
the fact that were there to be a will to implement carbon taxes
on households (and our household taxation rate on energy in this
country is much below that in many other countries both in terms
of VAT and in terms of not adding anything on top of VAT) then
it would be possible to do so in a way in which the great majority
of low income houses were not made disproportionately worse off.
That was kind of the headline message of that particular piece
of research.
Q269 Chairman: That is very important
indeed. What about the coordination of all these various different
proposals? Is there any part of your centre which is bringing
together the people who are working on fiscal incentives?
Professor Ekins: Well, I do a lot of work on
fiscal incentives. I have done a major study through the Tyndall
Centre of the Climate Change Levy, which of course is related
to industry, and the climate change agreements, which are part
of the voluntary agreements system, and obviously I am very much
engaged in discussions on the building regulations, for example,
which is a way in which through regulatory means one is trying
to do these things. Part of our study too looked at the issue
of Domestic Tradable Quotas in the transport sector so we were
trying to bring that into our discussion as well, but obviously
Richard Starkey is involved in a project which is looking just
at that and is going into that issue in much more detail than
we were able to do.
Mr Starkey: Yes. I agree with everything that
Professor Ekins says. It is important to have the right mix of
policy instruments and it is very much horses for courses. My
reading of the literature is that the message comes out time and
time again that what you need is a combination of price instruments,
either taxes or some sort of rationing, and what are referred
to as the non-price instruments, energy efficiency standards,
voluntary agreements, and so on and so forth, which Professor
Ekins talked about. You get a lot further if you mix the two rather
than just using one or the other. So Professor Ekins has been
looking at taxes as a price instrument and I have been looking
at Domestic Tradable Quotas, and I can say a little bit about
Domestic Tradable Quotas if you would like me to.
Q270 Chairman: Well, I think we will
move on now, so perhaps we can deal with it as we come to it.
Mr Starkey: There is one further point I would
make on the policy mix issue. On the way down here I was revisiting
a study of how the US could meet their Kyoto commitments for 2010[6],
and this study found that if you tried to do it just through taxes
alone it would require a tax of $230 per tonne of carbon and the
economy would lose $110 billion in 2010. If you did it with a
mixture of price and non-price instruments the price of the carbon
was much lower, I think $130 per tonne, and the economy ended
up gaining up to $50 billion in 2010. Of course, you can question
the assumptions in all these modelling exercises but nevertheless
it is a very interesting contrast, I thought.
Chairman: Thank you.
Q271 Lord Paul: I think, as the Chairman
said, we are aware of the PSI study on the energy efficiency.
Can you summarise for us the main conclusions and how do you think
you will be able to get it transmitted to the Government?
Professor Ekins: Well, the main conclusion was
that although if you simply levied the carbon tax in an undifferentiated
way across households and made no attempt to compensate low income
households you would make low income households disproportionately
worse off and you would increase fuel poverty, and given Government
policy commitments in that area that therefore is a very unlikely
policy and as such it is indeed not Government policy. What we
hypothesised was that there were ways through the benefits system
and in other ways in which one could compensate low income households
with the revenues which were received from the carbon tax in order
to ensure that this effect did not happen and for 80 per cent
of the lowest income households we were indeed able to do that,
so that 80 per cent of these households ended up better off than
they were before the measure started. This was a revenue-neutral
measure so there was no extra Government expenditure going into
that. That of course meant that 20 per cent of households were
made worse off. Because there is enormous variation in energy
use between households at the low income end (in fact it varies
by a factor of more than six within the lowest income decile,
which is a very high factor of variation within these very poor
households) it means that some households, even with those compensatory
measures, those very high energy using households, would have
been made very much worse off and so fuel poverty would still
have been deepened. So we recommended that actually until one
can sort out that problem—and that problem is largely a
function of the extreme energy inefficiency of a lot of the UK
housing stock—then probably a carbon tax was going to be
a relatively unpopular government measure. But if we were able
to increase the energy efficiency of the housing stock it very
possibly could contribute to a curbing of this ever increasing
household use of energy which we are currently seeing.
Q272 Lord Lewis of Newnham: This
is a point to which you have actually referred previously, but
in addition to your statement the point has been made to us on
more than one occasion that the energy prices are too low to stimulate
significant investment in energy efficiency. What is the consensus
amongst researchers that further fiscal incentives are necessary
if the Government is to get targets which are going to in any
way represent the targets they have got placed at the moment?
If one simply relied on, shall we say, the market force situation
what sort of energy price increases would be required in order
to make a significant impact on the domestic energy use?
Professor Ekins: Well, those are two complicated
questions and I will be as simple as I can in responding to them.
I am not sure that researchers have a consensus about very much
in this area. I would venture to claim that probably among economists
there is a perception, to put it no more strongly than this, that
unless the price mechanism is used in order to encourage energy
efficiency in the context of economic growth we will not manage
to curb the secular trend of increasing energy demand, and that
while one might try to do that through regulation one is unlikely
to be successful, and if one were to be successful one would only
achieve it at greater cost than one would if one was using economic
instruments. I have to say that among economic instruments I do
include trading schemes, permit schemes. It is a question of whether
one tries to ration by price or ration by quantity, but of course
very soon if you ration by quantity it feeds through into the
price. We are all familiar with black markets when things are
rationed by quantity and people try to get around those quantity
rationings. In respect of the first question I suppose I am quite
a conventional economist; in respect of the second on how much
energy prices would have to rise, I am bit heretical because economists
tend to look at the way in which prices have affected energy use
in the past and postulate that there is something called a price
elasticity, which will tell you how prices will affect demand
in the future. I actually think that that elasticity is a very
variable quantity, and that the context within which prices are
increased and in which people are asked to change their behaviour,
and whether they understand why they are being asked to change
their behaviour, whether they buy into the reason (say climate
change or whatever it may be) could make an enormous difference
to the responsiveness of people's demand to these price effects.
I think one has seen across a range of issues that where people
perceive there are substitutes, in other words if they were aware
of energy efficiency opportunities which they are currently not
aware of, where they perceive that this is for a good cause (for
example, as they were convinced that taking lead out of petrol
was for a good cause and they changed their behaviour very fast
indeed in response to a very small price differential), then I
am not sure that prices would have to go up very much in order
to achieve quite significant changes. If you simply raise prices
without any kind of explanation of what it is you are doing and
then look at historical price rises to see how people have responded,
probably household demand is quite inelastic and the prices would
need to go up a long way in order simply to squeeze out the carbon
by that means, but that would not seem to me to be a very sensible
policy.
Q273 Chairman: Mr Starkey, is this
an appropriate time for you to say something about your domestic
trading scheme? Would you like to tell us something about how
you see that contributing to a fiscal incentive?
Mr Starkey: Well, we have been talking about
the need to combine price and non-price instruments. Tax is one
way of giving a price signal. Another way of doing it is through
personal carbon allowances and this is the scheme which I have
been working on. In principle what Domestic Tradable Quotas does
is it sets a very clear framework for carbon emissions reduction.
It sets a carbon budget every year. The budget is set twenty years
in advance and there is a long-term emissions reduction signal
for the market. It also couches the solution in terms of the problem.
The problem is carbon emissions and the solution is couched in
those terms. Everybody gets a personal carbon allowance. This
carbon allowance is on an equal per capita basis, so domestic
tradable quotas arguably approaches emissions reduction in an
equitable way. It is based on the principle endorsed by the Royal
Commission of Environmental Pollution that all human beings are
entitled to emit into the atmosphere the same quantity of greenhouse
gases. Finally, I would say that it makes citizens stakeholders
in the environment because it gives them an equal share in fact
of a limited atmospheric sink. So I think in principle that is
what the scheme does. In practice there are some definite implementation
issues that I have been looking at in terms of the enrolment of
fifty million people in the scheme, in terms of the information
technology that you would need, in terms of Government procurement
(we have heard rather a lot about that recently), in terms of
card fraud and in terms of rating electricity. So I think domestic
tradable quotas have a lot to offer in principle and so what I
am looking to do is see how feasible it is in practice.
Chairman: Lord Lewis of Newnham, did
you want to ask a question?
Q274 Lord Lewis of Newnham: The question
I think could wait, but may I pose it and then you may decide
that you would rather wait. It is just simply that it does seem
to me that all the schemes that we are talking about are possibly
applicable if one is talking about a 20 per cent reduction. But
if we do take, as you rightly pointed out, the Royal Commission's
suggestion of a 60 per cent reduction this seems to me to put
in a totally different system altogether when you start talking
about controlling it by any form of taxation or by quantities
of this nature. I mean, 60 per cent is a tremendous reduction
in the potential energy scale for the country.
Professor Ekins: Well, I will certainly respond
to that. I think we have to be clear first of all that we are
talking about 60 per cent carbon, not 60 per cent energy, so that
alongside demand reduction one is talking about the promotion
of non-carbon sources of supply, which will mean that the actual
demand reduction in energy needs to be rather a lot less than
60 per cent, and one is also talking about a very long time. 2050
is a long way away. I was rather a small boy in the 1950s so I
do not remember that much about it, but I have read a fair bit
about it and I know that the transformations that our society
has gone through in the last fifty years have been truly astonishing,
technologically, behaviourally and in every other kind of way.
I can imagine that under systematic influences (incentives as
an economist would say) we could find that technologically and
behaviourally our society gradually transformed itself in such
a way that actually by the time we got to 2050 we could be finding
that we had a very, very low carbon system indeed and we would
not even experience it as a loss or a sacrifice, it would just
be the way the world was, and because we would be aware of the
benefit of a stable climate we would be rather glad that we had
done what needed to be done in order to ensure that that was there.
One knows that we currently have a tax on road fuels which is
about 70 per cent of the price at the pumps, or a little more
than that. If one had thought of moving from a zero taxation regime
to 70 per cent overnight that would clearly have been perceived
to be completely impossible, intolerable and politically unacceptable.
We know that it is still a political problem but it is more or
less sustainable to keep it at that level and people more or less
accept it and I have absolutely no doubt at all that it is one
of the things which have meant that we can still move anywhere
on our roads at all, which has to be said to be an advantage.
So if one is talking about systematic change over long periods
one finds that one can arrive at quite dramatic results almost
without people noticing it and being very comfortable when they
actually get there.
Q275 Lord Lewis of Newnham: You have
a great belief in fusion!
Professor Ekins: The fusion of what particularly?
Professor Hammond: Nuclear fusion.
Professor Ekins: Oh, nuclear fusion. Well, unfortunately
that seems to me to be proceeding at rather a slower rate than
even I have been talking about.
Chairman: Well, we were told 20 years.
Q276 Lord Lewis of Newnham: We had
Sir David King in front of us, who told us he views this as 2030.
Professor Hammond: I used to know the late John
Collier, who was chairman of Nuclear Electric, very well. He used
to give some lectures for me in a previous era. Obviously he was
a supporter of nuclear fission, but I always remember him getting
up and saying, "You know, nuclear fusion is going to be 40
years away but it doesn't matter where you start, it's always
40 years away!"
Chairman: Well, you see, that is why
the new head of the facility in Culham is saying 20 years!
Q277 Lord Wade of Chorlton: I would
just like to come back to what Mr Starkey was talking about, because
having read your paper on that what you have got to do is move
wealth from the economically active to the non-economically active,
from the wealth creators to the non-wealth creators, and I was
just wondering if you have done an investigation to properly understand
the implication of that. What effect does that have upon those
who are the wealth creators and who create the wealth for everybody
if in fact they are heavily taxed to the benefit of those who
are not going to be economically active no matter whether they
have got any money or not? I just wondered what you looked at,
because clearly without an understanding of the impact of that
then you have not really understood what the implications might
be.
Mr Starkey: I think I would phrase it slightly
differently. I think there would definitely be a movement from
those on high income to those on low income.
Q278 Lord Wade of Chorlton: It is
exactly the same words that I have said, from the economically
active or the wealth creators to those who are the non-wealth
creators. So the guy who sits in front of the television all day
gets money paid to him by somebody who is running a business in
China and America and everywhere else and making a hell of a lot
of money for the country. Now, how do you balance that out? If
you do not understand the impact of that you have not looked at
the implications of what it is all about.
Mr Starkey: Well, we use slightly different
terminology but we agree in principle that it would be a movement
from those on, let us say, a higher income to those on a lower
income. The question is -
Lord Wade of Chorlton: No, I am sorry,
I disagree with that way of putting it. It is not a question of
moving it from the wealthy to the poor, it is a question of moving
it from those who are the wealth creators to those who are not
the wealth creators and once you start disadvantaging the wealth
creators you produce wealth for everybody. That is the key, and
if you do not see it in those terms you will miss the impact of
what you are proposing.
Chairman: Perhaps we should just agree
to let you go away and think about that one.
Q279 Baroness Sharp of Guildford:
I think we have talked quite a lot about reduction in fuel poverty
and the impact on low income households. There is, however, one
question which picks this up, which I would quite like to put
to the panel, and that is if we were to use Domestic Tradable
Quotas it creates a system which gets slightly complicated. Now,
if you look at the way in which people have reacted to, let us
say, the introduction of competition in the energy market and
the degree to which the average man in the street is still totally
perplexed by this situation, they are confronted by a whole load
of energy suppliers and they are confronted by different prices,
and the prices of course change constantly so that from one six
month period to another it is a different supplier who might be
the right one to supply you and you have got the rather odd situation
whereby it is the person who you think should be supplying gas
who should supply you with electricity and vice versa if
you want to get the best market, but it is also changing. How
does somebody who is not, if you like, on top of this all the
time going to cope with tradable quotas?
Mr Starkey: Yes, that is a good question. The
scheme certainly will not come out of the blue in order to enrol
everybody into the scheme. There would be a very long lead-in
period and so there would be a definite chance to get familiar
with how the scheme works and it would require (quoting from the
Government's document on energy efficiency) "leadership,
awareness raising and education". I think that is a mantra,
"leadership, awareness raising and education". So certainly
there would be time for people to become familiar with the scheme
and there would also be an incentive to become familiar with the
scheme because if you can conserve energy you can become a low
user and you will have surplus carbon units that you can sell
on the market. So it will be an incentive to take up the information
that Paul was talking about earlier. Information is necessary
but not sufficient. There needs to be a motivation to actually
-
6 Krause F, DeCanio S, Hoerner A and Baer P (2003)
Cutting Carbon Emissions at a Profit (Part I): Opportunities for
the United States, Contemporary Economic Policy, 20, 4,
pp 339-365. Back
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