Array ( [0] => WP_Post Object ( [ID] => 5407 [post_author] => 37 [post_date] => 2020-12-30 12:29:08 [post_date_gmt] => 2020-12-30 11:29:08 [post_content] => It is often said Brexit has exposed deep problems in British democracy. But while this opinion is widely held, there is little agreement on the nature of these deficiencies. Brexit was meant to be all about returning sovereignty to the British Parliament, ‘taking back control’. Since 2016, however, British people have fewer rights and weaker democratic representation than at any point in the last half century. There is no better example of this than the UK-EU trade negotiation. The deal sets out terms for the UK’s relationship with the EU for potentially decades into the future – though a ‘review period’ of the agreement is scheduled for every five years. It is one of the most important international agreements the UK has ever entered into. In 2019, UK exports to the EU were worth £294 billion, accounting for 43% of all UK exports.[1] Yet, one of the first things Boris Johnson did after his 2019 General Election victory, was to drop the previous commitments to ensuring parliamentary oversight of the deal. When Johnson re-tabled the Withdrawal Agreement Bill he removed the provisions requiring the government to seek approval of its negotiating objectives from Parliament, the commitment to a final vote on the deal, and the need for the government to report to Parliament every three months on progress with the talks. The European Parliament, by contrast, was consulted on the EU’s negotiation mandate before talks began, regularly updated by negotiators, and the deal will not be even provisionally applied until MEPs have first considered it. MEPs will also have a ‘final vote’ to fully ratify the deal in the New Year. By contrast, Brexit restored the ‘default setting’ for the UK Parliament’s role in ratifying international treaties. This dates back to the days of absolute monarchy and severely limits parliament's role (as we explain below). In dragging negotiations out until the 11^th hour (arguable unnecessarily), Johnson has massively squeezed the time available for MPs, experts, civil society, businesses and trade unions to read and scrutinise the deal. The trade agreement itself is 1240 pages long and was published in full on the 26^th December. MPs were then presented with a highly technical implementation bill on the afternoon of the 29^th December which ran to 85 pages. The breadth of the issues to be considered is illustrated by clause 29 of the bill. This provides a “Henry VIII” power (a power to override primary legislation without a vote in parliament) to change any law that may conflict with the provisions of the Brexit deal. This measure could potentially impact the entire corpus of UK law. MPs will get just a few hours to debate and vote on these documents on the 30^th December, as the agreement is rushed through Parliament to meet Johnson’s deadline. This is an inherently undemocratic way of working. A complex deal, with huge implications for the future of the UK, rammed through with no time for any serious debate or amendment. Compare, for example, the Maastricht Agreement. Parliament was given more than 100 days over six months to discuss that treaty (which was actually far more limited in its impacts on the UK). So British MPs that had little input into the UK negotiating position were now asked to accept the outcome of Johnson’s negotiation without even a yes or no vote. They are asked only to vote on the implementation. There is no parliamentary vote on the deal itself. The UK’s impoverished democracy: executive dominance in ‘foreign affairs’  The UK has for a long time had a cripplingly centralised system of government. One feature of this is how its parliamentary system tends to be totally dominated by the governing party – something that is only ever mitigated during periods of coalition or minority government. This has created a system where the government has grown use to dictating its will to a Parliament with little independence. As the future Lord Chancellor, Lord Hailsham, put it in the 1970s, the British system was, in effect, an ‘elective dictatorship’ in which ‘the government controls Parliament and not Parliament the government’.[2] One example of this is the control the government has over ‘foreign affairs’. It draws its power from the archaic principle of the ‘royal prerogative’. This is the rump of powers left over from the days in which England was governed as something approaching an absolute monarchy. While once they were exercised by the monarch in person, they are now exercised on their ‘behalf’ by the UK government. In foreign affairs they are particularly sweeping, giving the government the freedom to sign international treaties, declare war, and conduct other international negotiations with no need to consult Parliament. In the twenty-first century this becomes particularly problematic. Whereas it was once the case that international agreements extended to a limited range of areas, today they are all-encompassing, reflecting the complex system of sovereignty and interdependence in our globalised world. Our food standards, consumer and digital rights, and environmental protections, to name just a few areas, are all subject to international agreements. In this sense, Brexit was always built on a contradictory faultline. On the one hand, it declared the need to ‘take back control’, implying a criticism of the globalised system of international treaties and interdependence. On the other, Brexiters held Britain would go out in the world to sign new international agreements and trade deals with other states. But all of these deals will involve a sharing of sovereignty, balancing it with other goals and interests. The trade deal with the EU illustrates this problem. It affects a huge range of areas, from security and judicial matters, to transport and digital regulation, but Parliament has had little input into the deal - and barely has any say at all even over the final outcome. Believe it or not, Parliament doesn’t get a vote on ratifying the UK-EU deal Parliament has no power to ratify or reject international treaties. While the UK was a member of the EU, the European Parliament had a right to scrutinise (and potentially reject) treaties that would bind the UK (as a member of the EU). For example, there was significant opposition to an EU-US trade deal from civil society, which was successful in convincing MEPs to wake up to its dangers. This meant that representatives, elected by UK voters, had a genuine vote on many treaties affecting the UK. Brexit brought this to an end. The negotiation and ratification of treaties now is a matter for the UK only and falls within the Royal Prerogative. Since the latter days of the 19th century, there has been a convention that the executive will consult parliament before ratifying a treaty. In 2010 that convention was formalised by an act of parliament: the Constitutional Reform and Governance Act 2010 (“CRAGA” for short). CRAGA requires the executive to lay a treaty before parliament for 21 days before exercising the prerogative power to ratify. Parliament can delay ratification, by requiring the executive to provide further information, but it cannot reject a treaty outright. Parliament’s power to delay requires it to pass a motion. But there’s another twist. The executive also controls the parliamentary timetable. With a few minor exceptions, the government determines what parliament debates, when, and for how long. If, therefore, the executive wants to avoid a delay in ratifying a treaty, it can simply deny MPs the time to hold a vote. So what, then, are MP’s voting on with the Brexit deal? The bill before parliament is primarily an implementing instrument. Law, broadly put, manifests on two levels in this context: international law, and domestic law. Treaties, like the Brexit agreement, take effect in international law. They are basically contracts between states. If the UK is to fulfil its obligations under the Brexit agreement, then it must make various changes to its domestic law. The bill before parliament will give the executive powers to change domestic law so as to implement the Brexit treaty. The best way to describe what MPs are doing is that they are voting on how best to comply with the treaty. The choice before MPs is not, therefore, whether they approve of the Brexit treaty, but what powers they will give to the government to implement the treaty. This is a question that has received almost no consideration in the public debate on the Brexit deal. This is primarily because legislators have been given less than 24 hours to review the bill before considering it in parliament. There should be forensic scrutiny of the extent and necessity of the powers that the government proposes to award itself. In the circumstances, however, this seems unlikely - indeed, perhaps simply impossible. Why a ‘no deal’ is no longer possible It has been suggested that a failure to vote in favour of the Brexit deal is a vote for “no deal”. Such a suggestion is, from a legal and constitutional perspective, entirely wrong. Similarly, a vote in favour of the bill is not a vote in favour of the deal. It is simply a vote to give the executive the powers set out in the bill. But, of course, those who reject the Treaty may choose to use the vote against it to demonstrate their opposition, given that they have not been granted a vote on the agreement itself. What would happen if parliament voted against the bill? First, it would have no effect on the government’s power to ratify the agreement. That power does not flow from parliament and parliament has no legal say over how it is exercised. The effect would, rather, be that the government may lack some of the powers it needs to implement the treaty in domestic law. This may, of course, lead to the UK finding itself in breach of the treaty at an early stage. A breach by a party does not, however, repudiate a treaty. The treaty remains in place. The other parties (in this case the EU) may choose to activate the dispute settlement and remedies clauses in the treaties. In the long term, they may impose sanctions to punish the UK for non-compliance. This, however, is a time-consuming process. More likely, the EU will afford the UK an informal “grace period” in which to make the required changes to domestic law. It’s worth noting that clause 32 of the bill allows the government to bypass the CRAGA procedure and ratify the Brexit deal without first laying it before parliament. This might be seen as a sort of de facto “vote on the deal”. It’s not. CRAGA is not the source of the power to ratify, it merely provides an obligation to consult parliament. Without clause 32 the government will still have the power to ratify the Brexit deal. The CRAGA obligations would remain (requiring the government to lay the deal before parliament for 21 days before ratifying). The deal, however, could be given “provisional application” (meaning it is given effect subject to future ratification) in the interim. It could be, to all intents and purposes, as if the government ratified the deal on 31 December. How to reform UK democracy  The EU trade deal creates a baroque structure of institutional ties between the UK and EU. They demonstrate the on-going importance of the UK relationship with Europe and the impossibility of a ‘pure sovereignty’. Our interdependence with Europe and the world will always require tradeoffs and negotiation with other states. The deal creates a new ‘Partnership Council’ for ministerial negotiations, 19 specialised committees and four working groups. Agreements made at this European level will continue to impact on British domestic law. Yet, the UK government will be subject to next to no democratic scrutiny or oversight on what they seek to negotiate with the EU. They will be undertaken under the auspices of the ‘Crown in Parliament’. This is also the case for the other trade deals on the horizon. A US trade deal, inparticular, threatens sweeping deregulation.[3] But under the current system parliamentary oversight, let alone control, or this, or other, deals will be non-existent. It is a recipe for unaccountable power. This seems like the very opposite of ‘taking back control’. The alternative to this system could be based on simple steps, to restore a position of authority for parliament in international negotiations and either radically minimise or abolish the sweeping authority granted to the Prime Minister under the royal prerogative. We have called this reform agenda the Not In Our Name Principle.[4] It would establish a new role for parliament in foreign affairs and international negotiation based on: 

• Transparency, not secrecy. Establish a right for parliamentarians, citizens and civil society to know the positions the government is taking in ‘our name’ in international forums and negotiations.
• The right to mandate. Give parliament the right to mandate particular positions taken by the UK government in international negotiations.
• The right to a meaningful vote. Parliament would have to ratify international agreements. This would end the right of government to sign and break international agreements without any input from Parliament.

 We believe that Brexit supporters should in principle back this agenda, which will only become more important as the UK tries to navigate the choppy waters of the post-Brexit era. Dr Luke Cooper (@lukecooper100) is an academic in Politics and International Relations. He is an associate researcher with LSE IDEAS and a co‑host of the Another Europe podcast. His book, the Authoritarian Contagion, will be published by Bristol University Press in 2021. Sam Fowles (@SamFowles) is a barrister specialising in public and constitutional law. He is a member of Cornerstone Barristers and a Fellow at the Foreign Policy Centre. His book on constitutional crises will be published by Oneworld in 2021.[1] Matthew Ward, Statistics on UK-EU trade, November 2020, https://commonslibrary.parliament.uk/research-briefings/cbp-7851/#:~:text=The%20EU%2C%20taken%20as%20a,2002%20to%2043%25%20in%202019.[2] Julian Petley, We are still perilously close to Hailsham’s ‘elective dictatorship’, LSE, September 2019, https://blogs.lse.ac.uk/brexit/2019/09/30/we-are-closer-than-ever-to-hailshams-elective-dictatorship/[3] Nick Dearden, A toxic UK-US deal is just as likely under President Biden, The Guardian, November 2020, https://www.theguardian.com/commentisfree/2020/nov/11/uk-us-deal-president-biden-big-business-boris-johnson[4] Dr Luke Cooper and Sam Fowles, Not in our name: Democracy and foreign affairs in the UK, Another Europe is Possible, December 2019,  https://www.anothereurope.org/wp-content/uploads/2019/12/not-in-our-name-briefing-a4-4pp.pdf [post_title] => Parliament should have a meaningful vote on the EU trade deal. But it doesn’t [post_excerpt] => Contrary to received wisdom Parliament does not have the power to overturn the UK-EU agreement. So, cannot bring about a ‘no deal’ by voting against the implementation bill. [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => parliament-should-have-a-meaningful-vote-on-the-eu-trade-deal-but-it-doesnt [to_ping] => [pinged] => [post_modified] => 2020-12-30 12:29:08 [post_modified_gmt] => 2020-12-30 11:29:08 [post_content_filtered] => [post_parent] => 0 [guid] => https://fpc.org.uk/?p=5407 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 1 [filter] => raw )[1] => WP_Post Object ( [ID] => 1481 [post_author] => 37 [post_date] => 2017-11-24 17:45:14 [post_date_gmt] => 2017-11-24 17:45:14 [post_content] => In his book, More Human, former Downing Street policy chief Steve Hilton argues that, in certain sectors, despite the rhetoric of the ‘free-market’, enterprises succeed by ‘entrenching their advantages through political power’, rather than on ‘their own merits’.[1] For Hilton, ‘capitalism is a force for good, but its distortion into private sector bureaucracy, with uncompetitive markets dominated by entrenched corporations, is a fundamental malaise.’[2] In this briefing I argue that energy is one of those sectors. Companies that produce energy using fossil fuels or nuclear power succeed through rent-seeking behaviour, supported by the power of the state. The, more innovative, renewable energy sector, is, by contrast, generally hampered. This is the case even in states that claim to prioritise addressing climate change. With renewables increasingly competing with fossil fuels in terms of cost[3], now is the time to review our approach to the economics of energy. On both the left and right of the political spectrum there is a growing consensus that climate change cannot be addressed without a fundamental overhaul of the capitalist political-economy. On the right, US Chamber of Commerce President, Thomas J. Donohue says; “There is no way this [ambitious carbon reduction] can be done without fundamentally changing the American way of life, choking off economic development, and putting large segments of the economy out of business.”[4] On the left, author Naomi Klein agrees; ‘As soon as they admit that climate change is real they [supporters of capitalist, free-market economies] will lose the central ideological battle of our time – whether we need to plan and manage our societies to reflect our goals and values, or whether that can be left to the magic of the market.’[5] Klein sees this as a positive opportunity to create fairer global economic structures. Donohue, by contrast, sees climate change discourses as a Trojan horse by which those on the left seek to undermine market capitalism.[6] Both are mistaken. While transitioning to a renewable dominated energy sector will not, alone, halt climate change, it will make a sizeable impact. This transition can be achieved within a traditional market-based political-economy. 

Subsidies

States provide two levels of subsidy for fossil fuels. ‘Pre-tax’ subsidies are direct payments (or discounts) to fossil fuel energy producers. These include tax breaks, the right to offset capital expenditure or losses beyond that enjoyed by other enterprises, logistical assistance, and direct grants. ‘Post-tax’ subsidies occur when governments pay the cost of the externalities of fossil fuel energy. This includes the cost caused by the pollution of rivers, streams and earth, air pollution, and climate change. This may be an indirect subsidy, but it is a subsidy nonetheless. In a functioning market-economy the cost of a product reflects the cost of its manufacture. The cost of manufacture is the loss incurred by the producer in order to create that product. When the product cannot be manufactured by a single producer, the cost of the product will reflect the loss suffered by all those who contributed to production (for example, the salaries of workers and the prices of materials and premises). If they can manufacture their product at a lower price than other market agents are prepared to pay for it, then they will make a profit. If they cannot, they will have no incentive to continue manufacturing their product. In the case of fossil fuels the true cost of manufacture includes the losses inflicted on people by the emissions generated by the burning of those fuels. These include the degrading of the local environment (which can be reflected in land-values or house prices), the cost of air pollution (which amounts to an estimated £10.7bn p.a. in the UK)[7], and the costs of climate change. In the case of nuclear energy, the cost of manufacture includes the losses inflicted on individuals and the state in disposing of nuclear waste. This includes impacts on land values and house prices and the cost of containing radioactive waste, potentially for hundreds of years.[8] These costs are not fully incorporated into the price of fossil fuel or nuclear energy. They are either borne by the victims (such as local property owners) or the state. Governments are, in effect, ‘picking up the tab’ for part of the cost of production. This means that the consumer price for fossil fuel or nuclear energy is artificially lowered because it only has to account for part of the cost of production. Individuals, in effect, pay twice for fossil fuel or nuclear energy: once directly, when they pay their energy bill, and once indirectly, when the money they pay in taxes goes towards covering the costs of the fossil fuel and nuclear energy industries’ externalities. 

Pre-Tax Subsidies

Global pre-tax energy subsidies amount to $500bn per year.[9] This represents 0.5% of the world’s GDP.[10] The UK pays fossil fuel producers a subsidy of £9.6bn per year.[11] In the UK this is delivered primarily through tax breaks and direct spending.[12] £5.9bn of this is given to domestic fossil fuel companies, £3.7bn is given to fossil fuel companies abroad, including in Russia, China, and India.[13] The UK also pays a pre-tax subsidy to the nuclear industry, paying a share of the start-up costs for new nuclear projects or guaranteeing a price for nuclear energy that is above market-value.[14] The UK is the only state in the G20 to actually increase pre-tax subsidies to fossil fuel companies after the 2015 Paris Agreement.[15] Pre-tax subsidies of this kind undermine the concept of a “free market”. It means that, in the energy market, success is not determined by the ability to produce a better product at a lower price than one’s competitors. Rather, it is determined by the ability to convince the government give one a special advantage. The success of energy companies becomes dependent, not on their ability to produce the best product, but on the effectiveness of their lobbying operation. This undermines the market mechanism. The utility of the market lies in its ability to drive innovation through fair competition. When government intervenes and “picks winners”, as it does in the energy sector, the incentives to innovate are reduced. Consumers therefore pay higher prices for lower quality products.[16] Governments do not offer renewable energy an equivalent level of subsidy to fossil fuel companies. Global subsidies to renewables amount to around $120bn per year.[17] In the UK they are capped at £7.6bn per year, this is expected to rise to £9.1bn by 2020.[18] Clearly the UK government is providing an artificial advantage to both renewable energy and fossil fuels. It is not, however, providing the same artificial advantage. The fossil fuel industry receives at least half a billion per year, and as much as £2bn per year, more than the renewable energy industry. This analysis comes with a caveat: fossil fuels provide a substantially larger proportion of the energy consumed in the UK than renewables. The subsidy per kilowatt-hour (KwH) is therefore higher for renewables than it is for fossil fuels, even though it is lower overall. Presenting the data in this way might be construed as a point in favour of fossil fuels: as things currently stand the price the government pays (in terms of subsidy) for one KwH of fossil fuel energy is lower than the price it pays for one KwH of renewable energy. Such an argument, however, ignores the broader macroeconomic picture. Fossil fuels represent a substantially larger proportion of the energy market than renewables. An analysis of subsidies based on the subsidy per KwH will not (and likely cannot accurately) take into account what the subsidy per KwH would be required for renewables if the renewable energy sector enjoyed a market share equivalent to that which is currently enjoyed by fossil fuels. The data to make such a comparison simply does not yet exist so it is difficult to make a fair comparison. There is no evidence to suggest that the level of subsidy is directly proportionate to the total market share. Indeed, the benefits of economies of scale and increased gross income would suggest that, the larger the market share, the less a producer should require subsidy (in a functional market). A purely theoretical (and very basic) analysis would indicate that a renewable energy sector with an increased market share would require a smaller subsidy per KwH than it does at the moment. It would be a mistake, however, to set much store by such speculation because the model does not yet exist that takes into account a sufficient range of factors. In short, while comparing gross subsidies is clearly an imperfect method, it is preferable to comparing price per KwH because it is, at least, based actual data. It is fair to say that the gross pre-tax subsidy enjoyed by fossil fuel producers is larger than that enjoyed by renewable energy. 

Post-Tax Subsidies

The level of pre-tax subsidy to fossil fuels is dwarfed by the level of post-tax subsidy. Globally, states provide the fossil fuel industry with around $5.3tn per year in post-tax subsidy.[19] This amounts to 6.3% of global GDP.[20] The precise level of post-tax subsidy in the UK is unclear. It is, however, obvious that it is significant. All EU states impose a carbon price on fossil fuels. This should, in theory, impose the cost of fossil fuel’s externalities on fossil fuel companies by attaching a price to carbon emissions.[21] Part of the scheme is a carbon price floor, which establishes a minimum price for carbon. In the UK, however, the carbon price floor has been frozen since 2014. The UK government at the time justified this freeze on the grounds that it would reduce costs for businesses. This means that, while the cost of everything else has gone up (as a result of in-built inflation) the cost of carbon has remained static. The UK has, in practice, picked up more of the tab for fossil fuel’s externalities every year since 2014. As a result, a large part of the cost of fossil fuels is borne by the taxpayer. The principle externalities of fossil fuels are climate change and air pollution. Climate change represents around 25% of the post-tax subsidy[22]. Air pollution represents the far larger share. The global cost of air pollution was $225bn in 2015. In the UK air pollution kills around 40 000 people every year the health impacts of air pollution cost between £8.5bn and £20bn per year.[23] Given that the total annual NHS budget was £126.5bn in 2016,[24] this is a significant cost.[25] The headline figures, however, present only part of the picture. While the bulk of global post-tax subsidies are paid by states in the Global South, a sizeable proportion of that subsidy goes to power manufacturing of products for use in the Global North.[26] Rich states have, in effect, outsourced pollution to the global south. Any calculation of the UK’s post-tax subsidy to fossil fuel must, therefore, take account of the subsidy paid by Southern states on the UK’s behalf.[27] Renewable energy, by contrast, receives minimal post-tax subsidy. In general, all the externalities of renewables are included in the price.[28] The externalities of a wind farm, for example, include the visual impact on the environment and occasional bio-diversity issues. These are addressed in the planning process. The costs of this process (which include the legal and administrative costs of the planning application and any subsequent hearings but also the costs of any modification to the development that are required as a condition of approval) are borne by the developer. The developer must, therefore, either bear the cost herself or incorporate it into the price of the energy generated by the wind farm. The combined subsidy for fossil fuels thus vastly outweighs that for renewables. Subsidy means that consumers do not pay the true price for a product. While subsidy distorts the price of renewables as well as fossil fuels and nuclear energy, it does so to a vastly greater extent in the case of the latter. Indeed, certain estimates indicate that solar and wind power are already cheaper than fossil fuels, even within the current structure of subsidies.[29] 

Non-Financial Barriers to Renewables

Governments erect non-financial barriers to renewables and, conversely, offer non-financial assistance to fossil fuels that can’t be quantified in the calculation of pre-tax or post-tax subsidies. Two examples of this are public policy barriers to renewables and the tendency for governments and ministers to ‘talk down’ renewables. Both chill the development of and investment in renewable energy and, at the same time, benefit fossil fuels and nuclear energy. 

Policy Barriers

Renewable energy is increasingly cost competitive with nuclear or fossil fuels even given the disparity in subsidies. In the UK offshore wind producers are able to produce energy for a lower price than equivalent fossil fuel or nuclear projects. The price of building windfarms themselves has fallen by nearly a third since 2012[30] In 2016 solar power was the fastest grown method for energy generation globally and renewables accounted for two thirds of new capacity added to the world’s grids.[31] Policy barriers, however, make it more difficult to pursue renewable projects than it is to pursue fossil fuel or nuclear projects. In Australia, the Clean Energy Finance Corp was established to invest in renewable projects. The Abbot government introduced regulations in 2013 to prevent it from investing in wind or small-scale solar power, both areas with the potential to drive competition and innovation in the sector.[32] This limited competition to fossil fuels and nuclear energy in the domestic energy sector. In the UK, the Cameron government introduced additional planning tests for windfarms, requiring a two-stage test in addition to the procedures to which other planning applications are subjected.[33] This contrasts with that administration’s attitude to the development of a new nuclear power-station at Hinkley, which was granted a Development Consent Order,[34] which speeds up the process of obtaining planning permission. Renewable energy projects thus face additional planning hurdles while projects like Hinkley enjoy a fast track through the normal planning requirements. Government’s also erect policy barriers by giving complaints against renewable projects greater prominence and consequence than complaints about fossil fuels. In Australia the Abbot government established the ‘Wind Farm Commissioner’,[35] an agency dedicated to investigating and acting on complaints about windfarms. There is no equivalent body for complaints relating to fossil fuels or nuclear projects. Local communities in the UK are able to veto new windfarms, even if they otherwise conform to planning requirements and strategies. By contrast, when local communities have opposed planning applications for new fracking sites, the Secretary of State has used her executive power to overrule them.[36] The effect of this public-policy imbalance is that the weight of the state more is more often put behind fossil fuel and nuclear projects than renewables. 

‘Talking Down’ Renewables

‘Talking down’ renewables makes it more difficult for renewable energy projects to secure investment or backing from local communities. Governments give credence to negative myths about renewables, often created by fossil fuel lobbyists.[37] By repeating these myths, even though they often have no basis in fact, governments give them greater credibility in the minds of the public and investors. In the UK the Cameron government promoted the myth that renewables are more expensive than fossil fuels (as argued above, this is not true, fossil fuels are just more heavily subsidised). Cameron himself told the House of Commons that a more stringent decarbonisation target would cost bill-payers an additional £120 per year.[38] At the time this had already been shown to be false.[39] Direct misinformation such as this is comparatively rare. More often ministers engage in a discourse in which the myth is implied rather than explicitly stated. Cameron’s Secretary of State for Energy and Climate Change, Amber Rudd, justified the government’s decision to reduce support for renewables by claiming that the government was focused on offering consumers “value for money”.[40] This was misleading because the alternative, fossil fuels, receive more extensive subsidies and yet did not lose subsidies. Earlier, Michael Fallon (then Business and Energy Minister) argued that freezing the carbon price floor was necessary to cut costs for business. This is a misleading statement. It assumes that there is no alternative to fossil fuels and that the carbon price represented an additional charge, not a mechanism for ensuring the price of energy represents its true cost. The cost myth is enhanced by the structure of subsidies. In the UK subsidies for renewables are added directly to the price of energy and so are reflected directly in an increase in consumers’ bills. Subsidies for fossil fuels come out of general taxation. The cost of the fossil fuel subsidy, although significantly larger than that of renewables, is therefore far less apparent to consumers. This creates the (false) impression that renewable energy is more expensive than fossil fuels or nuclear power. It represents a direct intervention in the market, by government, giving fossil fuels and nuclear energy an artificial advantage by misleading consumers. Another often promoted myth is that renewables damage energy security. In Australia the Turnbull government attributed blackouts in South Australia to that state’s reliance on windfarms. This was contrary to the government’s own expert advice, which suggested the blackouts were, in fact, the result of damage to the grid caused by high winds.[41] This is another example of a government misleading consumers to the detriment of the renewables sector. The combination of regulatory barriers and ‘talking down’ renewables creates an unfavourable and, often, uncertain regulatory climate. This has a chilling effect on investment in renewables.[42] Investment drives research so chilling investment means that progress towards making renewables cheaper and more efficient is slowed. The Abbot government’s regulatory barriers resulted in an 18^th month freeze in investment in the Australian renewables sector. A 95% decline in investment in renewables in the UK since 2011 is attributable to the policies of the Cameron government.[43] Before that administration took office renewables were projected to be cheaper than fossil fuels without subsidy (even with the subsidy for fossil fuels remaining in place) by 2025.[44] By chilling investment in renewables, the Cameron government protected the fossil fuel industry from competition. 

The case for ending assistance

The economic case for ending subsidies for fossil fuels and nuclear energy is simple: it will stimulate competition in the energy market and save treasuries considerable sums. Ending pre-tax subsidies is relatively simple. It requires ending direct payments, tax breaks, and other preferential treatment. For example, the UK government has promised EDF Energy a price of £92.50 per megawatt hour for electricity generated at the Hinkley C nuclear power station.[45] This represents a premium of more than 100% over the market price per megawatt hour (£45). The fossil fuel industry also benefits from tailored tax breaks.[46] Ending pre-tax subsidies requires ending schemes like these. 

Ending Subsidies

Ending post-tax subsidies requires imposing the cost of pollution on polluters. Although there have been steps, most prominently by the EU, to address this, these generally only address a small portion of fossil fuel’s externalities.[47] The IMF recommends a ‘Pigouvian tax’ on fossil fuels.[48] This is a direct tax that imposes the full cost of externalities on the payer. Critics of Pigouvian taxes argue that they represent government intervention in free markets. But markets cannot be free if they are not also functional. Regulatory intervention is acceptable in a free market if it ensures the market functions more effectively by ensuring costs are correctly located. Environmental externalities are a paradigmatic example of a situation in which a government should intervene. As Milton Friedman, one of the last century’s leading proponents of free-market economics and an inspiration to both the Thatcher and Regan governments, put it: "The man who pollutes the stream is in effect forcing others to exchange good water for bad. These others might be willing to make the exchange at a price. But it is not feasible for them, acting individually, to avoid the exchange or enforce appropriate compensation."[49] A Pigouvian tax on emissions would not, then, represent a distortion of the free market, but a restoration of market functionality. It will impose the true cost of production on companies, and thereby ensure the price of fossil fuel and nuclear energy reflects the true costs of production. The IMF estimates a Pigouvian tax, combined with the end of pre-tax subsidies, will raise $1.8 trillion[50] globally. The principle purpose of the tax is not, however, to raise revenue. Rather it is to ensure the correct market agents bear the cost of pollution and to cease state-aid for fossil fuels, thereby restoring functionality to the energy market. While savings from the end of pre-tax subsidies will remain static, revenue from a Pigouvian tax will likely decline as nuclear and fossil fuel projects become unaffordable without the assistance of subsidies and are cancelled. 

Market Space for Renewables

Ending subsidies to nuclear and fossil fuels will, in the short term, likely increase prices for consumers. If energy is more expensive to produce (because the government no longer picks up part of the cost), it will appear more expensive to buy. In reality the cost will not have changed, it will simply have been consolidated into the consumer price, rather than split between the consumer price and general taxation. The increased consumer price is unlikely to have a negative effect on the spending power of individuals because there will be a corresponding easing of the pressure on public finances. This creates space for targeted welfare provision for poorer households (who tend to spend a larger proportion of their income on energy) in the short term. Higher fossil fuel prices can be offset by tax cuts or improved public services paid for with the public money that would otherwise have been spent on the subsidy. Further, any increase in the consumer price of fossil fuels will be largely or completely offset by the increase in investment in renewables and the consequent decline in the cost of renewable energy. When the Abbot government’s regulatory attacks on renewables were counterbalanced by state support, after a series of power outages, investment picked up and the cost of generating large scale solar declined by 50% in two years.[51] If fossil fuels and nuclear power bear their true cost this will also stimulate the market for household solar. While the higher cost of fossil fuel or nuclear based energy will increase the incentive to make the (relatively) high upfront investment required for rooftop solar, the increased investment in the sector will also create more space for the development of innovative financial products to defray these costs. Increased investment will also create more space for research and development of battery and other energy storage technologies, hastening the point at which the (expensive) national grid infrastructure is less necessary. The medium-term (or, with appropriate public policy measures, short-term) impact of eliminating subsidies to fossil fuel and nuclear energy will, in reducing both the price of energy (as a result of the technological change driven by the short-term increase in the price to represent the true cost) and the tax burden, therefore be overwhelmingly positive for consumers. 

Conclusion

The transition to renewable energy does not require a wholesale redesign of our political economy. It can, and should, be achieved within a traditional, capitalist, market-based system. Fossil fuels and nuclear benefit from extensive state aid. This comes in the form of subsidies, regulatory assistance, and political support. By contrast, while renewables benefit from a limited subsidy, this is not on the same scale as that enjoyed by fossil fuels and nuclear. Further, renewable energy faces significant regulatory and public policy hurdles that are not imposed on fossil fuels and nuclear power. The transition to renewable energy, and its consequential impact in the fight against climate change, can therefore be achieved within the assumptions of a capitalist political economy. Removing subsidies to nuclear and fossil fuels and reducing government intervention in the market to the limited role of ensuring the costs of energy production are imposed on the correct market agents will represent a significant boost to renewables. Indeed, if applied in a functional manner, capitalism may yet prove to be the saviour of the environment.[1] Scott Bade and Steve Hilton, More Human, (New York; W.H. Allen, 2015), p. 196[2] Ibid. p. 196[3] See, for example, Damian Carrington, “Spectacular drop in renewable energy cost leads to record global boost”, The Guardian, (6^th June 2017), available at https://www.theguardian.com/environment/2017/jun/06/spectacular-drop-in-renewable-energy-costs-leads-to-record-global-boost (last accessed 4th October 2017)[4] Quoted in Naomi Klein, This Changes Everything: Capitalism vs the Climate, (New York; Penguin, 2015), p. 31[5] Ibid., p. 40[6] Ibid., pp. 30-63[7] House of Commons Environmental Audit Committee, “3 costs of poor air quality”, available at https://publications.parliament.uk/pa/cm200910/cmselect/cmenvaud/229/22906.htm (last accessed 30th September 2017)[8] Union of Concerned Scientists, “Nuclear Power Costs”, available at http://www.ucsusa.org/nuclear-power/cost-nuclear-power#.Wc_i2q10fBI (last accessed 30^th September 2017)[9] D. Coady, I. Parry, L. Shears, and B. Shang, “How Large Are Global Energy Subsidies?”, IMF Working Paper, WP/15.105, p. 17[10] Ibid, p. 17[11] E. Bast, A. Doukas, S. Pickard, L. van der Burg, S. Whitley, “Empty Promises: G20 Subsidies to Oil, Gas, and Coal Production”, (Overseas Development Institute and Oil Change International, 2015), analysis synthesised by Damian Carrington, “UK becomes only G7 country to increase fossil fuel subsidies”, The Guardian, (12^th November 2016), available at https://www.theguardian.com/environment/2015/nov/12/uk-breaks-pledge-to-become-only-g7-country-increase-fossil-fuel-subsidies (last accessed 30th June 2017)[12] Ibid, p. 2. The authors of the ODI report apply the World Trade Organisation definition of subsidies as (a) ‘national subsidies delivered through direct spending and tax breaks…’, (b) ‘investments by majority state-owned enterprises…’, and (c) ‘public finance from majority government owned banks and financial institutions…’. The subsidies provided by the UK fall primarily into the first class.[13] Ibid[14] See, for example, the case of the Hinckley C nuclear power station as described in Andrew Ward, “Subsidy for Hinkley nuclear power station quintuples to £30bn”, Financial Times, (13^th July 2016), available at https://www.ft.com/content/b8e24306-48e5-11e6-8d68-72e9211e86ab (last accessed 30th June 2017)[15] Bast et al., n. 8[16] For a more detailed exposition of this idea see Milton Friedman, Capitalism and Freedom, 40^th Anniversary ed., (London; University of Chicago Press, 2002), pp. 22-37[17] Damien Carrington, “Fossil fuels subsided by $10m a minute says IMF”, The Guardian, (18^th May 2015), available at https://www.theguardian.com/environment/2015/may/18/fossil-fuel-companies-getting-10m-a-minute-in-subsidies-says-imf (last accessed 30th June 2017)[18] “Controlling the consumer-funded cost of energy policies: The Levy Control Framework”, “National Audit Office”, HC 725, Session 2016-17, 16^th October 2016, p. 4[19] Coady et al. n. 4, p. 4[20] Ibid., p. 4[21] This has limited utility as fossil fuel companies are still allowed a certain base level of emissions “for free”.[22] Ibid., p. 6[23] Environmental Audit Committee, “Air Quality”, para. 22, available at https://www.publications.parliament.uk/pa/cm200910/cmselect/cmenvaud/229/22906.htm (last accessed 30th June 2017)[24] Kingsfund, “The NHS Budget and How it Has Changed”, available at https://www.kingsfund.org.uk/projects/nhs-in-a-nutshell/nhs-budget (last accessed 30th June 2017)[25] Coady et. al. (n. 4) do not provide a country by country breakdown but, given the costs listed above, it is safe to assume that the UK subsidy is substantial.[26] “European Union CO2 Emissions: Different Accounting Perspectives”, European Environmental Agency Technical Report No. 20/2013, (2013), pp. 7-8[27] The exact level of post-tax subsidy in Northern states, adjusted for the contribution of Southern states, is not available and the required research and calculation, while undoubtedly a valuable exercise, is beyond the scope of this paper.[28] It has been argued that hydroelectric energy has environmental and social costs that are not included in the price of energy (see, for example, Ryan S. D. Calder, Amina T. Schartup, Miling Li, Amelia P. Valberg, Prentiss H. Balcom, and Elsie M. Sunderland, “Future Impacts of Hydroelectric Power Development on Methylmercury Exposures of Canadian Indigenous Communities”, 50 Environmental Science and Technology 23, pp. 13115-13122), as hydroelectricity represents a relatively minor (and decreasing) proportion of renewable energy generated in the UK (see Department for Energy and Climate Change, “Digest of UK Energy Statistics”, (2012-2016)), this has only a minor bearing on this analysis.[29] Andrew Griffin, “Solar and wind power cheaper than fossil fuels for the first time”, The Independent, (4^th January 2017), available at http://www.independent.co.uk/environment/solar-and-wind-power-cheaper-than-fossil-fuels-for-the-first-time-a7509251.html (last accessed 30th September 2017)s[30] Adam Vaughan, “Nuclear plans should be rethought after fall in offshore windfarm costs”, The Guardian, (11^th September 2017), available at https://www.theguardian.com/environment/2017/sep/11/huge-boost-renewable-power-offshore-windfarm-costs-fall-record-low (last accessed 4th October 2017)[31] Adam Vaughan, “Time to shine: Solar power is fastest growing source of new energy”, The Guardian, (4^th October 2017), available at https://www.theguardian.com/environment/2017/oct/04/solar-power-renewables-international-energy-agency (last accessed 4th October 2017)[32] Jennifer Macey, Australian government attacks renewables, Deutsche Welle, (5^th October 2015), available at http://www.dw.com/en/australian-government-attacks-renewables/a-18626227 (last accessed 30th June 2017)[33] House of Commons: Written Statement (HCWS42), Ref. ID: 5-033-150618, 18^th June 2015, para. 33[34] Hinkley Point C (Nuclear Generating Station) Order 2013[35] Macey, n. 17[36] See, for example, Adam Vaughan, “Fracking given UK go-ahead as Lancashire council rejection overturned”, The Guardian, (6^th October 2016), available at https://www.theguardian.com/environment/2016/oct/06/uk-fracking-given-go-ahead-as-lancashire-council-rejection-is-overturned (last accessed 30th June 2017)[37] Irene Quaile, “Fossil fuels: is the empire striking back?”, Deutsche Welle, (25^th April 2017), available at http://www.dw.com/en/fossil-fuels-is-the-empire-striking-back/a-38574879 (last accessed 6th July 2017)[38] House of Commons, “Prime Ministers Question’s: 9^th October 2013”, available at http://www.parliament.uk/business/news/2013/october/prime-ministers-questions-9-october-2013/ (last accessed 30^th June 2017)[39] Will Straw, “How a decarbonisation target will lead to lower energy bills”, Institute for Public Policy Research”, (4^th March 2013), available at http://www.ippr.org/news-and-media/comment/how-a-decarbonisation-target-will-lead-to-lower-energy-bills (last accessed 30th June 2017)[40] Emily Gosden, “Amber Rudd: end to pursuit of green energy at all costs”, The Telegraph, (15^th November 2015), available at http://www.telegraph.co.uk/news/earth/energy/11994954/Amber-Rudd-end-to-pursuit-of-green-energy-at-all-costs.html (last accessed 30th June 2017)[41] Gareth Hutchens, “Turnbull ignored advice that renewable energy not to blame for SA blackouts”, The Guardian, (12^th February 2017), available at https://www.theguardian.com/australia-news/2017/feb/13/turnbull-ignored-advice-that-renewable-energy-not-to-blame-for-sa-blackouts (last accessed 30th June 2017)[42] Coady et al. n. 4, p. 4[43] Adam Vaughan, “Renewables investment in UK will fall 95% over next three years – study”, The Guardian, (4^th January 2017) https://www.theguardian.com/environment/2017/jan/04/renewables-investment-uk-fall-95-percent-three-years-study-subsidy-cuts-emissions-targets (last accessed 30th June 2017)[44] Ibid.[45] Andrew Ward, “Subsidy for Hinkley nuclear power station quintuples to £30bn”, Financial Times, (13^th July 2016), available at https://www.ft.com/content/b8e24306-48e5-11e6-8d68-72e9211e86ab (last accessed 30th June 2017)[46] See, for example, Tom Bawden, “UK Government Pays £6bn a year in subsidies to fossil fuel industry”, The Independent, (12^th November 2015), available at http://www.independent.co.uk/news/uk/politics/uk-government-pays-6bn-a-year-in-subsidies-to-fossil-fuel-industry-a6730946.html (last accessed 6th July 2017)[47] See, for example, the discussion of the EU “cap and trade” scheme above.[48] Coady et al., n. 4, p. 5[49] Friedman, n. 12, p. 30[50] Coady et al., n. 6, p. 5[51]  Ineke Mules, “Australia launches overdue shift to solar”, Deutsche Welle, (5^th April 2017), available athttp://www.dw.com/en/australia-launches-overdue-shift-to-solar/a-38307153 (last accessed 30th June 2017) [post_title] => FPC Briefing: The capitalist case for renewables [post_excerpt] => Mainstream discourse about energy assumes that renewable energy is more expensive than fossil fuel energy. Recent research suggests that this is no longer the case. Recent research on fossil fuel subsidies indicates that, from a free market perspective, the case for renewable energy is overwhelming. [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => fpc-briefing-the-capitalist-case-for-renewables [to_ping] => [pinged] => [post_modified] => 2019-06-13 16:12:15 [post_modified_gmt] => 2019-06-13 16:12:15 [post_content_filtered] => [post_parent] => 0 [guid] => http://fpc.clearhonestdesign.com/?p=1481 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw )[2] => WP_Post Object ( [ID] => 985 [post_author] => 37 [post_date] => 2017-05-11 15:15:23 [post_date_gmt] => 2017-05-11 15:15:23 [post_content] => In this FPC Briefing Sam Fowles argues that human rights are the ultimate arbiter of the relationship between the state and the individual, yet a new generation of trade and investment agreements are increasingly subjecting human rights to the interests of international investors.Fowles writes that this ’Second Generation’ of agreements has transformed provisions intended to protect investors from state overreach, into guarantees of preferential treatment. This allows investors to exert an unprecedented level of influence on governments. This has often been brought to bear in relation to human rights, with international investors able to compel governments to abandon or roll back measures indented to protect and promote rights. Fowles believes that with Brexit approaching, the UK must shortly embrace Second Generation treaties. Negotiators must, therefore, take account of the risks such instruments pose to fundamental human rights. [post_title] => FPC Briefing: How Investment Treaties have a chilling effect on Human Rights [post_excerpt] => Sam Fowles argues that human rights are the ultimate arbiter of the relationship between the state and the individual, yet a new generation of trade and investment agreements are increasingly subjecting human rights to the interests of international investors. Fowles writes that this ’Second Generation’ of agreements has transformed provisions intended to protect investors from state overreach, into guarantees of preferential treatment. This allows investors to exert an unprecedented level of influence on governments. This has often been brought to bear in relation to human rights, with international investors able to compel governments to abandon or roll back measures indented to protect and promote rights. Fowles believes that with Brexit approaching, the UK must shortly embrace Second Generation treaties. Negotiators must, therefore, take account of the risks such instruments pose to fundamental human rights.[post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => fpc-briefing-how-investment-treaties-have-a-chilling-effect-on-human-rights [to_ping] => [pinged] => [post_modified] => 2017-11-28 13:15:07 [post_modified_gmt] => 2017-11-28 13:15:07 [post_content_filtered] => [post_parent] => 0 [guid] => https://fpc.clearhonestdesign.com/fpc-briefing-how-investment-treaties-have-a-chilling-effect-on-human-rights/ [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 1 [filter] => raw ))