Monday, March 04, 2013

When Green Economics Turn Brown in the UK



The United Kingdom has been the heralded as most   committed country on earth to embrace green economics.  P

Powered by huge government subsidies, environmental   and low-carbon businesses now claim to employ over one million people and   make up 8% of the UK’s GDP – from biofuels, electric cars, wind turbines and   solar installations.  But with the   nation heading into its third recession in four years and UK  losing its AAA credit rating, the British public seems ready to pull the   plug on green economics and join the “Dash for Gas” to begin fracking the nation’s immense deep coal deposits.

Following the Financial   Crisis of 2008-09, the UK government committed to Keynesian deficit-spending stimulus   to “grow” the country into the world leader in green economics.  Through public spending and government direct   guarantees of high returns to private leveraged investors, total investments in   UK renewable energy projects grew from $6.9 billion in 2010 to $9.4 in   2011.  More than 800 MW of wind, 300 MW   of solar and 500 MW of biomass generating capacity was funded.  Phyllis Cuttino, author of the Pew   Charitable Trust Energy Report, Who’s Winning the Clean Energy Race?; stated:   “In part, investment growth in the United Kingdom can be attributed   to investors initiating new projects before policy incentives are   curtailed.  To maintain growth, the UK   must provide consistent, long-term market signals that provide certainty to   investors.”

Despite international media adulation for investing public   funds in the “industries of the   future”, the UK fell back into recession in 2011.  Facing falling tax revenue and rising   feed-in tariff subsidies for solar panels, the government attempted to cut   subsidies to spare slashing social spending.    But the UK Supreme Court ruled cutting solar subsidies was “legally   flawed”.  Despite public protests, the   government’s March 2012 budget cut $14 billion in child and welfare   spending.

With public   scorn against the crony capitalism of green economics mounting, Prime   Minister David Cameron hacked subsidies for future wind turbine, solar and   biomass projects by 50%; causing 2012 green energy investments to fall back   11% to $8.4 billion.  In September, the   Prime Minister, replaced pro-renewable energy minister Charles Hendry with   John Hayes, a known opponent of wind power.”    In Mr Hayes opinion, Britain is already “peppered” with onshore wind   farms and “enough is enough.”

For two hundred   years, Welsh coal mining was the dominant energy source in the UK.  But with the mines and electric utilities nationalized   after WWII, Labor government administration resulted in skyrocketing costs and   the peak chaos of 4583 mine strikes in 1979.  Margret Thatcher was swept into office and   over the next 11 years uncompetitive Welsh coalfields were mostly shuttered   with a loss of more than 85,000 jobs.

The government sold   off the land and privatized the electric companies in the 1990s.  Once freed of political pressure to burn   coal, the electric utilities began converting to natural gas as a feed stock   to benefit from the efficiency of gas turbine power stations and the cheap new   supplies from North Sea natural gas discoveries.

Having decisively   rejected green economics, the UK government fully committed to the Dash for   Gas movement on December 13, 2012 by lifting   its ban on hydraulic fracturing (fracking) for natural gas from shale   deposits on its derelict coal   fields.  Support for fracking now has broad   political support.  Mr. Edward Davey,   secretary of the UK Department of Energy & Climate Change and a   member of the left-of-center Liberal Democrats emphasized the decision to   lift the ban “is based on the evidence.   It comes after detailed study of the latest scientific research available and   advice from leading experts in the field.”

Richard Davies, Director of Durham University’s energy   institute, commented that the U.K. produces about 1.5 trillion cubic feet of   gas a year and consumes roughly 3.3 trillion cubic feet.  “The geology is there but the question is:   How much can we get out?”  Jon Clark, Director of Oil and Gas Transaction   Services at Ernst & Young LLP, said “Shale gas has had a transformational   supply impact in the U.S.”  He   estimated if the recovery is similar to the U.S., the UK could enjoy a 75   year supply of natural gas.

George Osborne, will deliver the 2013 UK budget on March   20 that will slash public sector green subsidies and embrace the private   sector Dash for Gas as the path to create highly skilled jobs, halt gas   imports, increase tax revenues and benefit the environment.  The leftistUK   media responded this morning with the usual demands to increase deficit spending,   increase minimum wage, cap rents, nationalize banks, and raise taxes on the   rich.  But what is conspicuously absent   is any willingness to walk the political plank to keep the green economics   from turning brown.

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