Steven Sorrell

Making the link: climate policy and the reform of the UK construction industry

This paper explores the barriers to energy efficiency in the construction of non-domestic buildings in the UK. The source of the barriers is argued to lie in the organisation of the construction industry, including the linear design process, the reliance on cost-based competitive tendering and the incentives placed upon different actors. The consequences include oversizing of equipment, reduced quality, neglect of whole life costs and lack of integrated design. Each of these problems can usefully be interpreted using concepts from the new institutional economics. While the barriers are well known to construction industry specialists, they are relatively neglected in the academic literature on energy policy. Furthermore, conventional policy measures such as building regulations leave these barriers largely untouched. The UK construction industry is currently undergoing a series of reforms which aim to change the relationship between different actors and to achieve improvements in product quality and productivity. While these reforms have the potential to address many of the barriers, the reform agenda makes practically no reference to sustainability. This paper argues that climate policy objectives must be integrated into the reform agenda if the UK is to begin the transition to a low carbon built environment.

The future of oil supply.

Abundant supplies of oil form the foundation of modern industrial economies, but the capacity to maintain and grow global supply is attracting increasing concern. Some commentators forecast a peak in the near future and a subsequent terminal decline in global oil production, while others highlight the recent growth in ‘tight oil’ production and the scope for developing unconventional resources. There are disagreements over the size, cost and recoverability of different resources, the technical and economic potential of different technologies, the contribution of different factors to market trends and the economic implications of reduced supply. Few debates are more important, more contentious, more wide-ranging or more confused. This paper summarizes the main concepts, terms, issues and evidence that are necessary to understand the ‘peak oil’ debate. These include: the origin, nature and classification of oil resources; the trends in oil production and discoveries; the typical production profiles of oil fields, basins and producing regions; the mechanisms underlying those profiles; the extent of depletion of conventional oil; the risk of an approaching peak in global production; and the potential of various mitigation options. The aim is to introduce the subject to non-specialist readers and provide a basis for the subsequent papers in this Theme Issue.

Interactions between the EU Emissions Trading Scheme and the UK Renewables Obligation and Energy Efficiency Commitment

The recent agreement by European environment ministers on the ground rules for an EU Emissions Trading Scheme (EU ETS) represents a landmark in the evolution of EU climate policy. But this scheme will be introduced into a crowded ‘policy space’ within each Member State in which complex interactions between the EU ETS and existing instruments appear unavoidable. This paper explores one aspect of the problems created by the EU ETS for the UK – namely the potential interactions with the UK Renewables Obligation and the UK Energy Efficiency Commitment. Both these instruments have objectives which go beyond the least-cost abatement of carbon emissions and both utilise trading arrangements in which the trading commodity is denominated in MWh rather than tonnes of carbon. The paper explores the potential interactions between the EU ETS and the UK instruments by comparing in turn their scope, timing, objectives and operation. The coexistence of the EU ETS with the RO and EEC is shown to raise three important issues, namely target setting and double counting, double regulation of electricity and the fungibility of trading commodities. The paper concludes that the coexistence of the RO and EEC with the EU ETS is both possible and justifiable, but more attention should be paid to the non-CO2 objectives of each instrument.

Energy Substitution, Technical Change and Rebound Effects

This paper investigates the relationships between energy efficiency improvements by producers, the ease of substitution between energy and other inputs and the size of the resulting “rebound effects”. Fundamentally, easier substitution leads to larger rebounds. Focusing upon conceptual and methodological issues, the paper highlights the challenges of estimating and modeling rebound effects with the help of production and cost functions and questions the robustness of the evidence base in this area. It argues that the multiple definitions of “elasticities of substitution” are a source of confusion, the most commonly estimated elasticity is of little practical value, the empirical literature is contradictory, prone to bias and difficult to use and there are only tenuous links between this literature and the assumptions used within energy-economic models. While “energy-augmenting technical change” provides the natural choice of independent variable for an estimate of rebound effects, most empirical studies do not estimate this form of technical change, many modeling studies do not simulate it and others simulate it in such a way as to underestimate rebound effects. As a result, the paper argues that current econometric and modeling studies do not provide reliable guidance on the magnitude of rebound effects in different industrial sectors.

Estimating direct rebound effects for personal automotive travel in Great Britain

Direct rebound effects result from increased consumption of cheaper energy services. For example, more fuel-efficient cars encourage more car travel. This study is the first to quantify this effect for personal automotive travel in Great Britain. We use aggregate time-series data on transport activity, fuel consumption and other relevant variables over the period 1970-2011 and estimate the direct rebound effect from the elasticity of vehicle kilometres with respect to: a) vehicle fuel efficiency (km/MJ); b) the fuel cost of driving (£/km); and c) road fuel prices (£/MJ). We estimate a total of 54 models, paying careful attention to methodological issues and model diagnostics. Taking changes in fuel efficiency as the explanatory variable, we find no evidence of a long-run direct rebound effect in Great Britain over this period. However, taking changes in either the fuel cost of driving or fuel prices as the explanatory variable we estimate a direct rebound effect in the range 10% to 27% with a mean of 18%. This estimate is consistent with the results of US studies and suggests that one fifth of the potential fuel savings from improved car fuel efficiency may have been eroded through increased driving. We also show how the normalisation of distance travelled (per capita, per adult or per driver) affects the results obtained.

Fuel efficiency in the UK vehicle stock

Abstract Despite low real oil prices, interest in car fuel efficiency is undergoing a revival in recognition of its role in determining passenger transport CO 2 emissions. This paper analyses some recent UK trends and attempts to disaggregate the changes between technical improvements, and shifts in model availability and consumer purchase patterns. The importance of car engine size is identified, together with the role played by recent emission regulations. The slowdown in the rate of improvement in fuel efficiency over the past decade is highlighted.

Interaction between environmental policy instruments: carbon emissions trading and Integrated Pollution Prevention and Control

As the number of environmental policy instruments grows, so the potential for interaction between different instruments increases. This interaction can be detrimental or beneficial. To avoid conflict, it is essential that the potential for interaction be assessed during the formulation of new policy instruments. This paper illustrates this through an analysis of how the European Directive on Integrated Pollution Prevention and Control might interact with future schemes for carbon emissions trading. Both instruments encourage industrial energy efficiency, but in fundamentally different ways. This is demonstrated through a detailed comparison of the two policy instruments, followed by the development of three implementation scenarios for IPPC, in which the interaction with potential carbon trading schemes is assessed. The paper concludes that the interpretation of the IPPC energy efficiency requirements could either constrain or facilitate the participation of regulated installations in any carbon trading scheme.

The Meaning of BATNEEC: Interpreting Excessive Costs in UK Industrial Pollution Regulation

The paper examines how the concept of ‘excessive costs’ has been interpreted in the implementation of industrial pollution control in the UK. Since 1984, industrial air pollution regulation in the EU has been guided by the framework concept of Best Available Technology Not Entailing Excessive Costs (BATNEEC). With the introduction of the Integrated Pollution Prevention and Control (IPPC) Directive in 1996, this has been replaced by the concept of Best Available Techniques (BAT). Despite the absence of the NEEC qualification, IPPC BAT includes excessive costs in its definition of ‘available’. Both concepts require interpretation and both devolve potentially controversial decisions to the level of the individual site regulator. A central issue in interpreting ‘excessive costs’ is the relative importance of environmental cost–benefit analysis versus the ability of a sector to ‘afford’ environmental improvements. Also important is how such concepts can be operationalized by regulators who lack resources and depend upon industry for information. The paper provides a historical account of how these issues have been dealt with in the UK and argues that the key difficulties are far from being resolved. The paper concludes by assessing the implications for the future implementation of IPPC. Copyright

Introduction: climate policy is energy policy

Avoiding dangerous climate change is the defining challenge for humanity in the twenty-first century. Since the energy system is both the primary cause of climate change and the primary means of mitigation, the future evolution of energy policy is of critical importance. But energy policy is undergoing significant change for other reasons, including unstable and substantially higher oil and gas prices, conflict and instability in key producing regions such as the Middle East, fears of the economic consequences of declining world oil production and a rising perception of energy insecurity, especially within industrialised countries. While there are precedents for managing these developments, effective response to them all while at the same time redically reducing carbon emissions requires a major rethink of conventional assumptions and practices.

An upstream alternative to personal carbon trading

An upstream trading scheme is described that could operate alongside the EU Emissions Trading Scheme (EU ETS). In this proposed scheme, fossil fuel producers (or suppliers) surrender allowances for the carbon contained in their fuel sales. Since the administrative costs are relatively low, such a scheme could provide a simpler, cheaper and more practical alternative to personal carbon trading, while at the same time delivering comparable economic and environmental benefits. The incentive effect for downstream consumers would be similar to a carbon tax. However, instead of a fixed and visible tax rate, the carbon price would be variable and largely hidden within the price of fuel. Consideration is given to the distributional impacts of the scheme and the potential benefits of linking to the EU ETS—including improved liquidity, reduced price volatility and reduced scope for exercising market power. It is argued that an upstream scheme is likely to have greater political acceptability, while at the same time delivering comparable performance in terms of economic efficiency, environmental effectiveness and social equity.