There has been substantial press comment based on the exchanges between Treasury and the Business Department on the one hand and Mr Huhne on the other. We are led to believe that they have settled for demanding targets for carbon reduction over the next two decades, as well as confirming the exacting 2050 target. In addition they have all signed up to a £16 carbon tax on CO2 producers.
The government has two aims which have to be reconciled. The one is to drive down the UK’s output of CO2. The other is to rebalance the economy towards much more industrial output. The government suggests that these aims can be compatible one with another, because they are planning a massive greening of industry and business generally.
It is true that new factories and new processes can use less energy per unit of output than older processes and plant. It is of course true that jobs can be generated to put in renewable power generation, high speed trains, home insulation and the rest that they say will cut the UK’s carbon emissions.
However, it is also true that most manufacturing is energy intensive, and if you manufacture more you will use more power. Manufacturing more cement to put in the concrete foundations for windmills or the railway sleepers for new train track is a very energy intensive process. Making more glass in the UK to put in better windows and solar panels entails substantial energy burn. Were we to make the trains for the high speed tracks, or make the steel for the tracks themselves, those too are very energy intensive activites. Whenever you make steel, forge components, shape, weld and rivet steel parts and put metal through an automated factory process, you naturally need to use substantial power.
I would suggest the UK needs to be aware that single country CO2 targets can be misleading and may be unhelpful both for the domestic economy and for the green aims behind them if implemented in certain ways. A country can hit its targets to lower its own CO2 emissions if it turns to importing large quantities of enegry intensive product. If, for example, the UK imported more steel, glass and cement our domestic energy use would be cut and therefore our CO2 output. If we still used the same quantities of these products total world CO2 output would still be the same – or it might even be higher if those products were made in countries less committed to driving down the CO2 output in their plants.
It is true new capacity to make energy intensive goods can be more energy efficient than older generations of plant. Some could even be powered by electricity generated from renewable sources, or imported from French nuclear reactors. However, there will remain furnaces and plants that have to burn gas or oil, or need to rely on the preponderance of fossil fuel electricity the country currently generates. When you rely on more wind energy there will be periods when the wind is not blowing when you need to use fossil fuel power. Building the stand-by power stations also creates CO2. It is important that any new target takes into account the impact of rebalancing towards more energy intensive activities.
It is also important that the carbon tax is levied and fixed in such a way that it does not price basic industry out of the UK. I am not surprised that steel and chemical manufacturers are complaining about the tax, and saying they may move their activities abroad as a result. The government needs to make sure it has done its sums correctly, and designed a tax which is fair and sustainable, so it does not conflict with the policy of increasing industrial activity. Each project that is said to cut CO2 output needs to be analysed on a full life basis, including the initial production of the trains, windmills and the like, and the complete patterns of use of those who come to rely on these investments. When calculating the CO2 impact of train travel, for example, it is important to do journey start to journey finish, which may include car and taxi as well as train and is very influenced by the average occupancy rates for all the trains in the timetable on that new route.