Climate change and other major risks
Fossil Fuel Depletion
Climate change dominates the motivation for reduction in the use of fossil fuels. But the risk from fossil fuel depletion may be higher than that of climate change.
Risk can be defined as the combination of the likelihood of occurrence and the consequences of a hazard. It appears that there is a high likelihood that carbon emissions will affect the climate of the planet. But there is a great deal of uncertainty about how serious the effect will be. Fossil fuel depletion is however a certainty although the estimates of when this will affect us are varied. The economies of developed counties are deeply dependent on fossil fuel energy – particularly oil. If a country cannot get enough energy to support its economy the consequence is irreversible economic decline.
Some estimates predict that oil production will peak (i.e. that the rate of production will not be able to be increased while demand increases) in a few years time. The price of oil will then rise significantly causing serious balance of payments problems for countries that need to import oil. The same will happen in due course to gas and then to coal.
Such events will have such a serious effect on human lifestyles that we should be taking action now to mitigate this risk irrespective of when it will happen. I seems very unlikely that fossil fuel depletion will not start to affect us within the next 30-40 years. Possibly half of the population of the UK expect to live until 2040-50. Not making preparations for depletion, as is the case, is irresponsible.
Some of the strategies for avoiding climate change are consistent with mitigation of fossil fuel depletion. Reducing the amount of fossil fuel that we use makes a great deal of sense in relation to both risks. But energy from coal reserves will last longer than from oil and gas and coal can be used as a substiture for oil and gas. This would not be consistent with climate change mitigation.
The need for action to mitigate the long term effects of fossil fuel depletion is too hot a potato for politicians. They fear the ‘shoot the messenger syndrome’. Promoting bad news, however important, potentially is a vote loser. This demonstrates the importance of the independent nature of the proposed Energy Commission which would address all risks.
Increase in the UK balance of payments deficit
As the production of gas from the North Sea declines the import of gas to the UK increases. More than 50% of our gas is now imported and more than 50% of electricity production is from gas. These proportions will increase with the following negative consequences:
- The UK balance of payments deficit will tend to increase at a time when it has to be reduced.
- The cost of gas is likely to increase.
- The future availability of imported gas may not be uncertain due to political issues.
The risk in relation to an increase in the balance of payments deficit is very high because, unless mitigation actions are taken, the likelihood that we will need to increase our gas imports is certain and the consequences of continuing to borrow capital to fund the imports will be very negative. We could reach a situation where we will not be able to afford to buy foreign gas. There are actions that can be taken to reduce our dependence on foreign gas but they do not appear to be on the present Government planning agenda.
An obvious strategy to be considered is to reduce coal imports by using more coal from national sources.
For more detailed information on the balance of payments situation see this document.