Energy and climate change: Questioning the invisible hand | The Economist

Energy and climate change:

Questioning the invisible hand | The Economist
Away from the spotlight, though, another industry is facing its own crisis of confidence in laissez-faire liberalism. Climate change, a looming shortage of electricity and worries about the risks of relying on imported energy are causing many to doubt whether Britain’s vaunted liberalised energy markets are up to the job.

The most recent salvo was fired on October 12th, when the Committee on Climate Change, chaired by Lord Turner (who is also a financial regulator), published its first report. The CCC was appointed to advise the government on how to meet its targets for greenhouse-gas emissions, which call for an 80% reduction, relative to 1990, by 2050. It concluded that far too little is being done. Although recession is holding emissions back, they are dropping at an average annual rate of under 1%, rather than the 2-3% needed (see chart).

The committee’s diagnosis was stark: the market, left to its own devices, is failing to deliver. Consumers are not buying energy-efficient appliances or insulating their houses, carmakers are failing to get emissions down and power companies still prefer fossil fuels to greener alternatives. A bracing dose of re-regulation was prescribed: the CCC suggests compulsory emissions caps for cars, feed-in tariffs to help green-power producers and a state-enforced minimum carbon price to encourage nuclear and “clean” coal power stations. David Kennedy, the committee’s chief executive, put it plainly: “We’ve stuck with the market a long time,” he said. “We don’t think we can stick by it any more.”

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