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The green economy: blessing or curse?

The panel: from left, Professor Paul Ekins, Jeremy Nicholson, Oliver Letwin, David Hone and Ben Goldsmith Photo: Philip Hollis

By Samantha Downes

At a special debate to mark the culmination of the Telegraph’s Age of Energy series, a panel of experts answered readers’ questions on how a greener economy can be achieved.

The green economy is one of the most important debates of our time, but has there been a move away from commitments to create it?

At a reader debate chaired by Kamal Ahmed, business editor of The Sunday Telegraph, panellists were asked whether the “vote blue go green” message had been “diluted”. Was this a temporary shift or a more fundamental change?

Oliver Letwin MP, Minister for Government Policy, said the Government was committed to building a green economy. Professor Paul Ekins, of University College London, added there was no alternative.

Some of the greatest economic leaps and industrial innovations came as a result of human need for clean air, clean water and energy, he said. “Just look at the Clean Air Act (1956) or the removal of lead from petrol in the Eighties to see that innovation brings economic and environmental benefits.”

Jeremy Nicholson, director of the Energy Intensive Users Group, said industry would generate opportunities. The only thing standing in the way of a green economy was the cost to business.

Ben Goldsmith said large companies which put sustainability at the top of their agenda were those that would eventually become more profitable.

He said: “The Bill Gateses of the future will be those that are energy efficient entrepreneurs.”

Replying to whether more government intervention was needed, Mr Goldsmith felt much was out of government control — commodity prices were beyond reach but the Government could control feed-in tariff regimes, for example. This would reassure investors.

David Hone said the term green economy was a misnomer. “We live in an economy which needs energy for growth but has a very real carbon constraint.

“The focus needs to shift back to ensuring a robust carbon price, so that companies such as Shell can commit to long-term projects such as Carbon Capture and Storage (CCS) techology.”

Telegraph blogger Greer Nicholson asked what could be done to prevent the current economic situation from shifting priorities away from the green economy.

Prof Ekin responded by saying the solution was simple: “Technology and a fixed price on carbon.”

Subsidies missed the point and the cost to the taxpayer had confused the issue, said Prof Ekin. “The government put 18 months into persuading companies they were serious about wind power. They were about to put hundreds of billions of pounds into depressed areas. A lot of what we hear about cost is wrong and needs to be challenged.”

Mr Letwin pointed out that the government had still committed to spending £1bn on carbon capture.

One reader asked whether a global deal on emissions was necessary to allow the UK to introduce technology such as CCS. Prof Ekin said it was necessary but emerging economies still needed to be reassured that it would not stop their development.

Mr Nicholson added that carbon capture remained an unknown. “We have not rolled it out on an industrial scale.”

Another question posed was whether banks were capable of playing a part. Mr Goldsmith replied that banks still needed equity investors. He said: “A pension fund manager will not want to be the first to allocate three per cent of his fund to renewable energy when others will not go there.

Banks, Mr Goldsmith said, could do their bit by not lending to companies which ignored the environmental cost of their business practices.

To sum up, the panel felt the green economy was worth striving for. But, said Mr Hone: “We need to correct the balance between price and bringing technology into play.”

Prof Ekins said he believed the green economy needed wind farms and was by far the most promising opportunity.”

Oliver Letwin expressed the most optimism: “In five or 10 years from now, we will have a full scale example of carbon capture and, I know, British industry has the capability to turn gas into a zero carbon fuel. In this we will be world leaders.”

The Green Economy panel members

Oliver Letwin, MP Minister for Government Policy
Ben Goldsmith Partner, WHEB Ventures
Professor Paul Ekins UCL Energy Institute
David Hone Senior climate change adviser, Shell
Jeremy Nicholson Director, Energy Intensive Users Group

Original source: Telegraph online - http://www.telegraph.co.uk/sponsored/earth/the-age-of-energy/9119627/Green-economy-debate.html

Iran’s Oil Embargo – A Cause for Concern?

The threat of Iran developing a nuclear weapon is becoming an ever more realistic possibility. Although Iran categorically deny that they are enriching uranium for anything more than commercial energy development, the recent trip by U.N delegates indicates other wise.

The European Union and America have placed a trade embargo on any imports of Iranian oil as well as prohibiting any organisations dealing with Iranian banks. It is worth noting that Iran is the third largest oil producing economy on the planet and is the second biggest member of the Organisation of the Petroleum Exporting Countries, formally known as the OPECs. The OPECs was setup in 1960 by 5 original member states; it now consists of 12 members mainly from Africa and the Middle East. The OPECs generally hold 2 meetings a year, one in March and one in September, and the main topic of conversation is deciding what their output should be for the forthcoming 6 months. The decision on output is predominantly to control the price of oil to protect their long-term interests. They hold 79% of the world’s crude oil reserves and 49% of the world’s crude oil production.

With Iran being the current leading state of the OPECs, there is cause for concern that the embargo instated by the EU and America will have a long lasting effect on energy prices. It is also worth noting that Iran controls one of the world’s most strategically important straits, a strait that 20% of the world’s oil runs through, this is the Strait of Hormuz. The bigger picture needs to be understood. Iran is head of the OPECs; the OPECs controls 49% of the world’s oil production and the embargo could affect the world’s largest producing conglomerate to alter their production and this will subsequently increase the price of oil. There is evidence that this is already happening. For the first time since July 2008 the price of Brent Crude oil surpassed $128 per barrel and there are predictions that it will surpass $150 per barrel this year. The price of crude oil is always a good measuring stick for energy prices across the board.

The basic price of anything is determined by simple economics. Supply and demand. As soon as demand out weighs supply, there will always be a surge in price. When a singular country has the power of being the world’s third largest oil producer, controlling an oil passage that 20% of the world’s oil runs through and is also head of a conglomerate that controls 49% of the world’s oil production there is a worry that it will be able to control basic economics when it comes to oil prices.

With the wheels in motion and the price of oil surging, can this be controlled? This week there have been reports that Singapore and India have started to re-enter into contracts with Iran to purchase their oil. On one hand there is a moralistic objection to this, equally there is a need to relieve the rest of the world’s oil producing countries to ensure the price of energy is maintained at a feasible level.

In a day and age where we scrutinise over a few pennies here and there on our balance sheet, it’s important to remember that the cost of energy affects our profit margins by thousands of pounds. It is therefore hard to criticise India and Singapore for buying Iranian oil when it inevitably will help reduce the average companies energy costs. On one hand you have Iran controlling the supply, but for there to be equilibrium in economics you need to have someone controlling the demand; that is where we can give thanks to India and Singapore.