Category Archives: Economics

UK Referendum on the EU

Margrethe Vestager

Margrethe Vestager leading the struggle to get corporations to pay their fair share of tax

On Thursday 23rd June there will be a simple in or out referendum on Britain remaining a member of the European Union. I shall be voting to stay in, but it’s not at all for the same reasons as David Cameron.

The last 70 years have been the most peaceful in Europe’s history. Of course this modern era has not been perfect, but compared say to the preceding 75 years of carnage, from the Franco-Prussian War through to the First and Second World Wars; this has been a blessed time to be alive. These recent decades of peace were achieved largely due to the vision of the founding fathers of the European Union: so thank-you Robert Schuman, Winston Churchill, Konrad Adenauer and the rest.

One of the faults of the EU is that it is too close to the big corporations. However the UK outside the EU would probably be like the USA, considerably worse in this regard. If we want to hold the big corporations to account and make sure they actually pay their taxes it is to European politicians like the Dane Margrethe Vestager and British Molly Scott Cato that we need to be supportive and to give thanks.

Most of the best practice about how to live in a sustainable and socially just manner is being pioneered within the European Union. 2700 cities and regions have signed up to the Aalborg Commitments, which pledges them to strive toward ever greater sustainability, social justice and democratic accountability. Of course not all the institutions within the EU are anywhere near as good as they should be and some of the policies are bonkers, but then so too are many of the policies that our government is solely responsible for.

Of course we need more democratic accountability within the EU, as we do within the UK, the USA and in pretty much any level of governance from Herefordshire Council to the United Nations. Abolishing or leaving these organisations is not the answer: reforming them from within is. Let’s vote to stay in the EU, and to work with our many friends across Europe to continually improve how it functions.

When we in the UK discover incidents of pollution of our watercourses or of local air quality it is to European law that we can appeal. That for me, but probably not for David Cameron, is evidence enough to stay in Europe.

Yanis Varoufakis in the Guardian

Molly Scott Cato and Margrethe Vestager on corporations and tax

Uruguay: Well done!

Ramon Mendez

Ramon Mendez, until recently climate and energy minister of Uruguay and responsible for excellent policies.

Last week I blogged about who was showing leadership in reducing carbon emissions and mentioned that several small countries were well ahead of any of the larger countries. This week let’s just look one of them: Uruguay. Uruguay has a small population of only 3.4 million people whose per capita carbon emissions are a very modest 2.3 tonnes. Uruguay can hardly be said to be responsible for much in the way of climate change yet is certainly leading the world in helping solve it.

In Paris this week the Uruguayan minister of energy and climate, Ramon Mendez, pledged Uruguay would reduce its emissions by 88% by 2017 compared with a baseline average for 2009-13. An 88% reduction is something a few countries are contemplating by 2050 or thereabouts. To achieve it by 2017 will be an extraordinary achievement. However Uruguay is well on track to achieve this and to do so while reducing power cuts, bringing down the cost of energy and creating many economic and employment benefits. How are they doing it?

Uruguay has long had hydropower providing about half of its electricity, more in wet years, less in dry years. Formally the rest came from coal, oil and gas. About 7 years ago they brought in auction contracts, rather than feed-in-tariffs, for renewables and are getting very good value for money, meaning both carbon emissions and energy bills can fall simultaneously. The speed and scale of wind deployment has been dramatic, rising from 50 to 500MW installed capacity during 2014 alone. By early 2016 they expect to have 1.4GW installed: enough that during windy weather 100% of their electricity will come from the wind and that the hydro can be just used in less windy weather. Together the wind and hydro combination will provide the vast bulk of Uruguay’s electricity. They are also adding significant solar and biomass to the mix. Uruguay used to be a net electricity importer from both Brazil and Argentina: now they earn good money from exporting renewable electricity to their neighbours. As Uruguay decarbonises and modernises its energy system it is not surprising that it has hired in expertise from the Danish grid company Energinet, as the Danes have long been pioneering efficient, reliable, renewables based energy infrastructure.

It is extraordinary to think that just over 30 years ago Uruguay was a military dictatorship. Now it is one of the best governed countries on Earth. It scores very well on all the indexes of corruption, equality, literacy, social progress and tolerance. Under the sensible yet inspirational political leadership of Tabare Vazquez and Jose Mujica it is setting the standard for other countries to aspire to.





Lack of corruption

Per capita Co2 emissions

Municipalization: Localization made real

Trianel Windfarm: The worlds largest wind farm in community ownership.

Trianel Windfarm: The worlds largest community owned wind farm.

In Britain we are caught up in an outdated debate about whether services, from the health service, to banks, railways or the energy infrastructure, should be nationalized or privatized. Neither of these models seem ideal to me. We in UK have much to learn from our European neighbours who have a much more pluralistic, localized and democratically controlled mix, with a huge ‘not for profit’ sector. Germany and Sweden both, at least to some extent, followed Britain in the 1980’s fashion of privatization. Now they are both undergoing a process of ‘re-communalization’.

When I was working in Frankfurt last year I was impressed by Mainova, the local municipally controlled provider of electricity, heat, gas and water. Many German cities and some smaller places have their local Stadtwerke, municipal organisations that run a huge range of local services and feed any profits back into long term local investments usually with a range of social, economic, ecological objectives. In Britain we’ve been hampered by a short term profit maximizing privatized industry since the 1990’s and before from 1946 to the 1990’s by an over-centralized and remote nationalized industry. In the 1930’s we had a greater municipal sector, which it might be time to revive, along with a whole raft of new coops and international joint projects. A recent academic study comparing the German and British systems of finance and ownership of energy infrastructure by Hall, Foxon and Bolton is well worth reading. It shows the extraordinary range of difference between the German and British systems. A vast range of local ‘not for profit’ banks and energy organisations are at the heart of the German Energiewende. Here is one example.

The first phase of the Trianel wind farm Borkum has just opened. This is a 200MW plant, with another 200 MW due to follow soon in phase 2, making it by far the biggest community owned wind farm in the world, with an estimated total cost of 1.3 billion Euros. The ownership and financing are utterly unlike anything we are used to in Britain. It is owned by 33 local municipal utilities, mainly owned and controlled by local city and town councils spread all across Germany, Holland, Switzerland and Austria. Collectively they formed Trianel to develop a rapidly expanding portfolio of energy infrastructure. They are supported by a huge range of banks, many themselves locally controlled, democratically accountable and in the not for profit sector. Trianel’s membership is expanding so in future many more than the current 33 cities might be stakeholders in ever more ambitious energy projects, which increasingly will be low carbon. Can we imagine British cities having the organisational capacity and ambition to join-in? Let’s hope so!

Hall, Foxon and Bolton’s paper ‘The new ‘civic’ energy sector: implications for ownership, governance and financing of low carbon energy infrastructure.’

Trianel, structure and membership

Trianel wind farm Borkum

Many other places all over the world are looking at the benefits of municipal energy; here is one example, Davis, California.


Glasspoint: concentrating solar power for enhanced oil recovery

Glasspoint: concentrating solar power for enhanced oil recovery

Lots of people I meet in the Transition Towns movement and elsewhere talk a lot about Peak Oil. The argument goes that as geological reserves become exhausted oil demand will exceed supply and prices will go up, causing economic chaos and even wars. There has been much speculation whether oil addiction was a determining cause of the American led invasion of Iraq.

To me climate change was always the main reason why we needed to quit fossil fuels. Proven reserves have long been known to be five times more than enough to cause climatic catastrophe. However the Peak Oil people would respond by saying that the easy to reach resource had been used up and the cost of newer sources would be very much higher. With oil rising to $146 per barrel back in the summer of 2008, and seeming to be on an upward trend, this looked like it might be the case. Today the oil price is at $42 per barrel, and talk is of it falling to below $40. Why has this happened?

There are many factors. Political factors like a downward bidding war amongst OPEC producers, and the imminent re-emergence of Iran as a major oil exporter as sanctions are lifted, are important. Technological factors are also playing a part. Fracking has, in the short term brought down the price of gas, and renewables are beginning to bring down the cost of electricity, and enhanced oil recovery is bringing down the price of oil.

Miraah, the world’s first large scale solar powered enhanced oil recovery project is just being built in the Amal oilfield in the deserts of Oman. Glasspoint, a Californian start-up has designed a super light weight aluminium parabolic trough system that operates within a protective greenhouse. It will supply solar generated steam to force oil out of the ground, effectively increasing the oilfields economically recoverable reserves.

Personally I’d like to see humanity quit fossil fuels as quickly as possible. We need to anyway, of course, due to climate change: so no need to worry about Peak Oil. Then we could use the Glasspoint technology to generate steam for more useful things, like generating electricity, desalinating seawater or directly driving industrial processes.

Good chart on oil price


Economics: Theory & Action

Natalie Bennett of the Green party

Natalie Bennett of the Green party

A couple of days ago there was a Radio 4 programme that revealed how narrow the discipline of economics has become at universities around the world. This is tragic as these students go on to be the key decision makers. The Neo-Classical model is totally broken, yet stuck in their ivory towers, unable to see an alternative and divorced from reality; they continue to teach this planet destroying and socially destructive nonsense.

It reminds me of my travels in communist Eastern Europe in the 1970’s. Most of the critical thinking population could see Marxist theory didn’t fit with perceived reality, yet the tired old politicians kept spouting the same old mantras. I recall a conversation with a judge in East Berlin in 1977 who told me the whole system would come crashing down. It was twelve years before it did, but it was inevitable.

In the 1970’s I frequently discussed politics and economics with my grandfather, who’d been sympathetic to Marxist ideas in his youth, but had mellowed to be a Keynesian Labour party type socialist by the time I knew him. Keynesian economics hit the buffers of stagflation in 1978-79. As Thatcher promoted a revival of the Neo-Classical economics of the 1920’s my grandfather said it would inevitably end in crashes, crisis and chaos. It has. We lurch from crisis to crisis.

Neo-Classical, Marxist, Keynesian, economic grand theories have failed us. We need new economic models rooted in the real world that recognise our utter dependence on a functioning biosphere. Without clean air, unpolluted water, healthy soils, treasured biodiversity and a stable climate we will never have economic stability. Without life there is no economy. Without social justice, political and economic stability is both unlikely and undesirable. Many Green economists have been writing about this over the last forty or fifty years: it is time to bring them centre-stage into the teaching of economics.

Meanwhile we need to take practical steps right now to set the economy moving in the right direction. Here are two practical suggestions. Yesterday Natalie Bennett of the Green Party made the very sensible suggestion to cut rail and bus fares by 10% and to pay for this by scrapping the £15 billion road building programme. Now, with cheap oil and gas prices is the time to introduce a Carbon Tax. In a UK context this could raise £20 billion per year. This could be put into developing and implementing a serious energy demand reduction strategy: building efficient district heating networks, insulating houses and investing in a sophisticated mix of renewable energy infrastructure and legislating to improve energy efficiency of appliances and technologies from kettles to cars, power stations to houses. A huge number of jobs could be created, fuel poverty eliminated and carbon emissions massively reduced, and it might even help economics re-engage with the real world.

BBC Radio 4 on teaching economics

George Monbiot on economics

Natalie Bennett in the Guardian

Lawrence Summers writing in the Financial Times on why now is a good moment to bring in a Carbon Tax

Challenging Money and Growth

Today, Thursday 20th November, the House of Commons is having a debate titled ‘Money Creation and Society.’ This is long overdue: the last time such a debate was held was in 1844. The interesting Conservative rebel backbencher Steve Baker proposed the debate, with cross party support from Caroline Lucas (Green) Michael Meacher (Lab) and Douglas Carswell (UKIP). It will be an opportunity to discuss taking the power to create money as debt away from commercial banks, which is what the Positive Money organisation has been demanding for some years.

The headlines this week are of David Cameron saying the world is on the verge of another financial crisis. George Monbiot yesterday posted an excellent blog on the inevitability of another crisis and the damage that is being done to society and the planet by humanity’s headlong pursuit of growth at all costs.

My recommendations would be to follow the Positive Money line and take the power to create money as debt away from commercial banks. My take on growth is that we need to abandon it as a policy objective. We need to prioritize other goals: ecological survival, social justice, human wellbeing. Then we need to plan policy that will promote these goals. That will mean the growth of some areas of the economy and the contraction of other areas: whether this results in overall growth or contraction is of secondary importance. I find Stephen Harding’s distinction between suicidal growth and intelligent growth to be more useful than the growth/ no growth debate.

Humanity needs to leave 80% of known fossil fuel reserves in the ground to avert climate catastrophe. Managed contraction of the carbon generating industries must become a policy goal, and that is impossible given the political consensus to blindly follow headlong growth at all costs. Our survival may depend on changing the economic model, and I welcome today’s debate as a way to begin that necessary change of direction.


Parliamentary debate

Positive Money has excellent video clips and info

George Monbiot’s blog

Stephen Harding

The Carbon Bubble

In my last blog I cited three reasons for the impending death spiral of fossil fuels: the need to take action on climate change, the falling price of renewables and the rising price of fossil fuels. Currently stock markets value oil, gas and coal companies as if they were actually ever going to be able to economically exploit all known fossil fuel reserves. This simply will not happen. Probably 80% of known reserves will never be used and therefore the stock market valuations of the fossil fuel companies are massively inflated. This overvaluation is often referred to as the Carbon Bubble. Like all bubbles it will someday burst. The financial analysts Kepler Chevreux estimate the potential losses over the next two decades to be in the region of $28 Trillion.

Sometimes us Green campaigners are accused of saying some rather outlandish things. However the massive and rapid change from fossil fuels to renewables is being urged on by some pretty big and hard headed organisations, including two of the World’s largest banks, UBS and Citigroup. In a recent report UBS claim that in Europe big power stations could pretty well all be redundant in 10 to 20 years, as decentralised solar and other renewables, battery storage and electric cars replace existing fossil fuel technology.

The death spiral of fossil fuels will not happen evenly or in a planned way. Market forces will kill off those projects with the highest capital requirements and the riskiest production forecasts. Arctic and Deep Ocean drilling, tar sands and fracking for shale gas are obvious candidates to be first to become uneconomic and consigned to history. Many other oil, gas and coal projects will rapidly follow, with only the lowest cost gas and oil fields and coal mines able to complete with the falling costs of renewables. This is the line that UBS and Citigroup seem to be saying. I’d argue for the global introduction of carbon taxes to help hasten the process. I’d also argue that managing this transition so as to minimize economic chaos, while also speeding the process along to prevent climate catastrophe, will be a tremendous challenge, but one full of positive opportunities.

The renewables revolution is not happening evenly around the World or even within countries as my last blog on the uneven deployment of photovoltaics in the USA demonstrated. The UBS group cites Germany, Spain and Italy as likely leaders in the European context, as their energy prices are higher than some countries and regulatory support has been stronger. I would add a lot of other countries to this list, both in Europe and globally.

Both the economic and the ecological case to transform the global economy are becoming ever clearer by the day. UBS say “It’s time to join the revolution”. Welcome to the barricades! Achieving historic change often requires some pretty strange alliances! Bankers and eco-activists, unite! Onward, together!  (Jeremy Williams blog)


The Death Spiral of Fossil Fuels

Photovoltaics in USA

Photovoltaics in USA: declining price and rising deployment 

Solar in top 10 states pie chart

Solar in top 10 states (including photovoltaics and concentrating solar power but not solar hot water or space heating)

Those of us concerned about Climate Change and other environmental issues have long advocated a shift from fossil fuels to renewables. My interest in this began even before the 1974 energy crisis. I, like many others, became very concerned about the Earth’s capacity to deal with all the pollutants we were releasing into the air, the water and the soil. We started advocating a Gandhian renunciation of materialism, a shift to simpler lifestyles and experimentation with renewable sources of energy. Using the sun and the wind to generate electricity had been known about since the late Nineteenth Century. Renewables didn’t take off because fossil fuels were too cheap and abundant and the macro level ecological crisis was too slow to be obvious to mainstream opinion.

All that is suddenly starting to change: Climate Change is beginning to manifest as a clear and present danger, the incumbent fossil fuel economy seems ever more unfit for purpose and technical innovation in the Cleantec/Renewables sector is happening at breakneck speed. The death spiral of the global fossil fuel industry may happen more suddenly than anyone anticipated. The growth of solar power in USA is quite a revealing example of the growing rapidity of change.

The blue graph above shows that the annual rate of installation of photovoltaics was 4 MW in the year 2000. At that time those of us advocating solar were dismissed. Solar was perceived as insignificant, and in terms of actual production of course it was. The price of solar has fallen steadily, the price of fossil fuels has been erratically upward, and key tipping points have been passed. By 2013 the annual installation rate had risen to 4,751 MW, over a thousand fold increase in thirteen years. One wonders what it’ll be in another thirteen years. Nobody is dismissing solar as insignificant these days!

The red pie charts reveal much about how this solar revolution is unfolding in USA. The individual states within USA are developing divergent energy economies not based upon their renewable energy potential so much as on their differing levels of political, economic and legislative support. In 2013 just ten states, which account for only 26% of the population, installed 89% of all new solar capacity, whereas the other 40 states, with 74% of the population, installed just 11% between them. These top ten states include sunny California and Arizona, as one might expect, but they also include Massachusetts and Delaware from the cold grey Northeast. Large sunny states like Texas and Florida are not in the top ten, as the dominance of Climate Change denying Republican politicians and the lobbying power of the fossil fuel industry still holds sway in these states.

The falling price of renewables and the rising price of fossil fuels are already impacting on businesses in interesting ways. Paradoxically the process of creative destruction, which is at the core of capitalism, is playing out in ways that favour the environment. Old inefficient power stations are following Concorde into rapid obsolescence, and the companies with investments in these technologies are losing money and going bankrupt. Money invested in fracking wells, deep sea oil and a host of other outmoded technologies are looking increasingly like stranded assets. Coupled with this is a massive lobbying effort from a host of environmental groups to promote disinvesting from the fossil fuel industry, just as civil society organised disinvestment from Apartheid South Africa.

Three factors are coming together which may well trigger rapid and profound change in how humanity generates and uses energy: the growing need for massive and rapid action on Climate Change, the falling costs and rapid technical innovation in renewables and the depleting accessibility and affordability of fossil fuels. The possibility of a modern, affluent, urbanised future for humanity seems to be emerging based entirely on renewable forms of energy, and it may now at last be beginning to happen at breathtaking speed.

52 page report on top ten solar states

Mark Jacobson, the Solutions Project and 100% renewables

Jeremy Leggett and a video interview with him

Waitrose & Employee Ownership

Last week I looked at the way disruptive change is happening in the electricity supply industry. Today it’s time to look at supermarkets. Here in Herefordshire the new Cattle Market development has just opened. I had been very much against it. The last thing Hereford needs is yet more shops, especially when there are so many empty ones already. We need to wean ourselves off identifying ourselves as consumers and off our debt fuelled excessive and wasteful consumption patterns. That said one of the new stores is a branch of Waitrose, which operates under a different business model from the big four; Tesco, Asda, Sainsburys and Morrisons.

Waitrose doesn’t have shareholders. It is part of the John Lewis Partnership and all its staff are partners in the business, sharing in the profits via an annual bonus paid as an equal percentage of salary. This means that the 91,000 people who work for the group should in theory be much more motivated, engaged and enjoy their work more than staff in other supermarkets. Looking at carbon emissions and other sustainability criteria, Waitrose out-performs the big four, but not Marks & Spencer or the Coop. Next time I go shopping I’ll pop into Waitrose and see if I can have a chat to one or two of the staff in our new store and see what they think about all of this.

It seems important to me that we need alternatives to the shareholder-driven profit-maximization principle behind our big companies, be they supermarkets or electricity suppliers. We want organisations that are more ethical, more concerned to help reduce their environmental footprint, more concerned to help put funds into charitable causes and into treating their staff well and not into the endless greed of shareholders. I and many others are switching our purchasing power to reflect these preferences. I see Waitrose’s market share has risen pretty steadily over the last 20 years, and is now just under 5% of the UK grocery spend: plenty of scope for them to grow, and for more ethical and innovative new entrants to the market.

Displacing the big incumbents in the supermarket sector may prove a slower process than in the electricity supply sector…but disruptive change is coming. Let’s work to make it as positive as possible!

Breaking the Power of the Big Six

Stephen Fitzpatrick

Stephen Fitzpatrick, founder of Ovo Energy

The UK electricity market is currently dominated by six very large companies, who in general are very little trusted by energy consumers and who have been slow to embrace the challenges and opportunities that climate change and fears over energy security present them with. In Germany there were just four big incumbents. Things are changing. First in Germany, and now in the UK, we are seeing the emergence of a great abundance of innovative new players, most of whom have a very different ethos and business model from the old monolithic companies. In the UK the big six still control 95% of the market. I would expect their market share to plummet over the next few years.

Jeremy Williams, who writes the excellent Make Wealth History blog, wrote a good piece about this recently, titled ‘The four ages of electricity supply’, showing how from the 1880’s to the 1920’s we had up to 600 decentralized companies, which in 1948 were nationalized, reducing the figure to one, then following privatization in 1989 the current big six emerged. Jeremy predicts that by 2030 the UK might be back at 600. I think it may well be many more and much sooner, but it all depends on what you call an energy supplier. Thousands of households now supply rooftop solar to the grid, hundreds of renewable energy coops are being established and a few really innovative companies are challenging the power of the big six.

Ovo energy is one of the most extraordinary new kids on the block. Stephen Fitzpatrick started the company in 2009 and it has grown exponentially over these five years. They aim to be cheaper, greener, more efficient and helpful than the big six. Key differences are that they welcome more competition and are keen to work with a plethora of micro suppliers. They’ve recently published a 31 page Community Energy White Paper which is well worth a read.

Boris Johnson declaring that London should generate 25% of its own electricity by 2025 is welcome news. Creating Energy for London to buy energy from municipally controlled generators and sell it to Transport for London and the Metropolitan Police is similar to the situation in Germany, where many municipal authorities generate and sell energy, often with a wider range of social and environmental aims, rather than just profit maximization.

We buy our electricity and gas from Good Energy, who buy 100% renewable electricity from over 500 suppliers and have just opened the four turbine, 8.2 MW, Hampole Wind Farm near Doncaster. Good Energy, like Energy for London and Ovo Energy are all expanding and biting into the market share of the big six. Good luck to them!

Jeremy Williams’ blog

Ovo’s Community Energy White Paper

BBC on Ovo

Boris’s plan

Energy for London

Good Energy