This letter from my fellow Green New FDeal Group members, Caroline Lucas MP and Clive Lewis MP, was in the Guardian today, referring to the same article by Aditya Ckarabortty on which I commented yesterday:
Aditya Chakrabortty is right: there isn't one green new deal, there are many versions – and that's a strength, not a weakness (Muddled, top-down, technocratic: why the green new deal should be scrapped, 11 November). What underpins them all is the understanding that a plan of action to avert the worst of the climate crisis won't work unless it also addresses a broken economic model that is not only trashing our planet but failing to deliver for millions of people, increasing inequality and eroding the fabric of our communities.
Aditya draws a false dichotomy between state-led action and a bottom-up approach. The truth is, neither can succeed alone. There are some things that only the state can do, while others are best led locally. Both are required.
We need the state to properly fund our NHS, invest in green technologies and the transformation of our infrastructure. And we need the government to bring an end to fossil fuel burning – it's shameful that Boris Johnson has not signed up to the Beyond Oil and Gas Alliance, launched this week at Cop26.
Aditya urges us to get real: you don't get much more real than the climate assembly process or the Reset Inquiry we ran last year. Both found that the public were well ahead of politicians in their demands for a greener, fairer Britain.
Unless we act, the future may well be a version of business-as-usual, with all the damage it's doing to our society and planet. That is a political choice. Alternatively, we can choose to manage the transition so that it addresses deep-seated inequalities and transforms our broken economy, brings life back to our communities and reduces our damaging impact on the planet. Let's all work together to bring that version of the future into being.
Caroline Lucas MP for Brighton Pavilion; Clive Lewis MP for Norwich South
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Goodness me, how I wish these two were members of a Progressive Alliance government.
However, Labour under its current leadetship, which is staging a rerun of 1997 and adding flat-earther’ economics to New Labour’s effectively neoliberal economics, and its support of Hotovely – the oppressors’ mouthpiece – versus justified dissent on behalf of the oppressed, has an awfully long way to go to justify being viewed as progressive, so as to be included.
And even further to go to be able to claim automatic leadership of such an alliance. Unless someone such as Clive Lewis were Leader.
The tragic lack of urgency in the COP26 final declaration means there must be even more radical action taken by activists to force governments to abandon the fossil fuel/financial love affair which is destroying our planet.
I agree with the point: we need both “state-led action and a bottom-up approach”. The bottom-up approach can be characterised as far more community owned energy schemes. However, that will require state intervention of the regulatory side.
In the case of “state led action” – big stuff, as a first step, the state needs to recognise that energy markets designed for a fossil past will not work for a renewable future. The fossil past uses marginal pricing, sticking with this paves the way to disaster in an auction/CfD-based future where renewables have zero marginal cost, but get compensated based on the results of the bid price @ auction. And for those that say “well abandon auctions/CfDs”, how then does one propose to offer certainty with respect to returns to companies that invest and build renewables? (keeping in mind, these returns are not large).
In the EU, there is a growing split between market fundamentalists, led by Germany, supported by Germany’s poodle, The Netherlands and others. The former take the view that energy markets are perfectly formed, marginal pricing works just fine and no reform is needed (doubtless, the imbeciles in what passes for the Uk gov’ agree). The recent Commission Communication on energy reflected this thinking (whilst at the same time unwittingly pointing to the disaster coming down the track). The others, i.e. the French and the Spanish want energy market reform.
This recent article points to a somewhat unhappy early 2022, as substantive energy bills hit peoples computers/doormats.
https://www.brusselstimes.com/belgium/193230/warnings-of-frighteningly-high-electricity-bills-in-november/
Do not think this will be confined to Belgium. Civil unrest is a possibility.
One reason for high elec bills is the way electricity markets function: marginal pricing – where the highest cost energy sets the overall price. Even when gas only accounts for 3 or 4% of the overall electricity mix – it still has a disproportionate impact. Our proposal is to take a basket approach, the wholesale output price is the average of the basket, by price and volume. Or to put it another way – wholesale markets are folded. They have passed their sell-by date and we move back to something akin to the old Nat Grid system where power stations are pulled on to the system based on efficiency – in this case CO2 emissions/price. (& as an aside: yes I & others have looked closely at wholesale price formation in a range of markets – France is the outlier – most of the rest tend to be +/- based on day-ahead – with the results that one would expect).
Sadly, the above thinking is not mainstream and politicos (& their advisers) for the most part are clueless, either with respect to how markets function or what reform is needed.
For the avoidance of doubt, the above views are a collective view: I have been in fairly intensive discussions with a number of people for more than two years. Some of these are in the Commission, others are in lobby groups. Several are economists. In the case of the UK, some politicos wanted to have a chat with me on the above, but they seem to have gone quiet.
I am happy to supply those that are interested with papers and discussion documents generated over the past year or so. We need wholesale market reform asap & as part of any “Green New Deal”..
Your suggestion makes a lot of sense
I am interested in your papers on energy market reform Mike as I have an active interest in community owned renewables. My email address is jim.osborne@talk21.com Thanks
I, in company with many, do not have the technical knowledge of Mike and I see clearly the relevance of his argument. However, am I incorrect in assuming that energy markets are totally commoditised and entirely open to speculative money? Am I wrong to assume one can gamble in the futures markets on energy like everything else? Am I wrong to assume the hedge funds are somehow deeply involved in all this? As I say, I can make no claim to having forensically examined my assumptions and will recant without hesitation if confronted by contrary facts. If only one of my assumptions is half correct, then I would suggest we are looking at rather more than technical adjustments to existing market mechanisms if we actually wish to avoid the direct, exploitative milking of the income of hundreds of millions of ordinary citizens that the present energy markets are achieving. The effects are highly deflationary and mirror directly the effects of a huge hike in taxation. The difference is that states are not the primary beneficiaries.
Richard, I asked some time ago if you could find the time to write something on the commodity markets and I wonder if the current topic might add an urgency to such a project?
That market is not my area of expertise- sorry
In response to PaulHenry, electricity & gas markets have two broad types of “players” – those that take physical delivery of gas or elec & those that don’t. Those that don’t tend to be banks via their commodity desks. Considering an electrical power connection where “markets rule OK”: the HVDC electrical link between Uk and Netherlands – BritNed. This was built as a 100% merchant venture between Tennet and Nat Grid. I spent a day there a few years ago. Nothing much happens in the main control room in terms of human intervention – everything is driven by “the market” which in turn determine power flows. The control room staff have a screen which shows what is happening. What happens? most of the time low cost elec flows from NL to UK. If I was in government, I’d be asking why that is. Why is there often a 50% difference between Uk elec and that in the EU. Oddly, the Nordpool website includes UK wholesale prices, one supposes this relieves the tedium of long Scandinavian winters – take a look at UK prices, look at Nordpool prices and…. bust out laughing.
However, to focus on speculative plays/players is to miss the broader picture which I tried to cover in summary fashion. The problem is the current market design and, does one need “markets” to define whiolsale electricity prices? We think not, others disagree. But we know that sooner or later, there will need to be a move away from current market “structures”. As for the “speculators” – they love “volatility” (enables them to make more money) but to blame them for the current situation is wrong. Nope, if you want to know who to blame – blame the Tory imbeciles that thought (& still think) that everything can be marketised.
The Guardian article was untypical of the author. He’s normally very good. This one was an awful mess. It seems obvious to me that climate interventions have to be led by governments. Ground up activism will only go so far. Interestingly, Will Hutton (https://www.theguardian.com/commentisfree/2021/nov/14/where-voters-and-consumers-lead-on-the-climate-crisis-businesses-will-have-to-follow?CMP=Share_AndroidApp_Other) was more optimistic on Cop26 than many commentators. He argued that business will follow the direction set by governments, who are pointing the way to future markets. I’m not sure I completely share his optimism, but it did at least offer an alternative to all-or-nothing accounts of Cop26, where failure results inevitably in the destruction of the planet.