Theme interview: Energy and Economy

28 Oct 2020

Prof Jim Watson (UCL) & Prof John Barrett (Leeds), interviewed by Dr James Dixon, (Oxford/Strathclyde)

How can we pay for net zero in a way that ensures equity and fairness in the energy system?

Jim Watson: You have to break down what it is that we are paying for. For supply side changes in energy infrastructures and networks, you would expect to pay by a collective mechanism. However this mechanism does have to change, currently we are using bills, but politically this has reached its limit and the costs should shift to taxation. On the demand side (e.g. energy efficiency in homes), if you are able to pay, then you should pay, though stronger incentives for investment are needed. Those that are unable to pay should receive more help from the government.

There are also inter-generational issues around spending and borrowing, creating issues of inter-generational equity. The UK and other countries are currently borrowing huge sums, and this leads to questions about who eventually has to pay for that. There are also issues of geographical fairness. For example, if the northeast chooses to opt for hydrogen for heating, should UK taxpayers as a whole pay, or just people who live in that region?

John Barrett: It is not all about technology and costs, there is a clear need for social change. Really there is a need for a democratically elected institution to act on the collective behalf of society to distribute costs equitably. It is regressive to add all of the costs for the energy transition onto one energy service, as opposed to all areas. Inequality should not be considered a barrier to a rapid transition.

Since the first industrial revolution, economic growth has gone hand in hand with greenhouse gas emissions. Assuming economic growth is the goal, the challenge would appear to be the decoupling of GDP from emissions. How might we do that, and what do you think such a future would look like?

John Barrett: There is a general obsession with GDP, it is not a great indicator to guide everything, yet despite that, both government and the media are obsessed with it. Clearly, we need to move away from a single measure and the belief that there is a link between economic growth and wellbeing, or that economic growth benefits everyone: 27% of the population is considered to be in poverty, and of those, 60% are in work, so the economy is clearly not working for everyone.

Jim Watson: I agree – it is about what kind of growth and how we measure growth or progress. We need lots of indicators, and we have them already. On the face of it, UK emissions have fallen, but growth has continued (until recently). One mechanism for this has been outsourcing emissions. There has been much debate about how these are accounted for. However, I am not sure how much it matters: if these emissions should be counted as ‘ours’, or whether they should belong to the country which is making the goods we consume. To some extent, this is generating wealth for citizens in that country. I would like to see a more nuanced conversation about this, rather than just statements that we should automatically be responsible for outsourced emissions. Attribution and monitoring are useful, but it is a political decision where responsibility for those emissions should lie.

What are your views on how a sustainable energy system can be part of a sustainable economic system, and can we use the net zero transition as a way into a sustainable economic model for the future?

Jim Watson: Net zero is much more pervasive in its implications than the 80% target because it brings in aspects such as land use and affects the whole economy. To solve net zero we must bring nature and the natural environment into the equation, noting that the Government made an announcement regarding biodiversity this week. But this doesn’t necessarily mean that we need to abandon growth or abolish capitalism. Action to achieve net zero may lead to growth in a conventional sense, and this will be needed to some extent to drive the innovation we need to reduce emissions.

John Barrett: Lots of analysis has shown that growth is only valuable to a certain point, after which an increase in income has only a marginal increase in wellbeing. So if things cost more, as long as it doesn’t add costs onto lower-income households, this is potentially something that could help drive a low carbon and net zero agenda. Alongside that, a focus on 2050 which is still 20 years away and is a single year target can be unhelpful.