One thing that strikes me more and more following the developments in climate change policy is that the politicians are storing up a huge backlash. There is a cosy political consensus that assumes the various targets that Britain has signed up to for emissions reductions and using renewable energy are inviolate, but it doesn't have any kind of political mandate.
Families have coped for some years now with subdued growth in disposable incomes as taxes and higher housing costs and utility bills have swallowed rises in gross earnings. The necessary fiscal adjustment will, no matter how well it is managed and regardless of the party in charge, put further pressure on household budgets. That will make things difficult, particularly for middle to low earners.
In that context, there is a certain madness about the massive investments that policy makers are expecting the country to finance in order to meet climate change targets. Just in the energy sector, we're talking about £139 billion to meet environmental targets by 2020 according to Citigroup Investment Research. That is more than is needed in Germany, France and Italy combined and paying for it will require doubling profits in the sector and doubling prices. For that reason, Citigroup's research talks about a coming "affordability crisis".
It seems almost impossible that all of the hugely expensive measures that politicians are currently planning can be maintained with resources so scarce. I'm planning on writing a more detailed article shortly about the proposals for a Green Investment Bank, an attempt to get around investors being spooked by the prospect of an affordability crisis. But needless to say it doesn't solve the issue, it just means more money from taxpayers' pockets and people's savings being staked on these unsustainable policies.
So the question is what will a backlash look like. The most rational thing for us to do would be to reform climate change policy to make it less of a burden on families, I set out some recommendations for how that could be achieved in a TaxPayers' Alliance report at the end of last year. Germany, Spain and Italy are all cutting their subsidies sharply at the moment. I wrote about that in more detail in a post earlier this week for the energy policy blog Master Resource.
The alternative is probably a windfall tax on energy companies. The political pressure will just be too great with sharp rises in profits and prices. It might be easier for whoever is in power at the time to blame the companies and impose a new tax on them than to admit that government policies are driving up prices. A windfall tax wouldn't do anything about the problem of high prices, in fact it would almost certainly be counterproductive, but it might be the easiest option politically.
In that context, it is vital that we start communicating to the public what is going on. They need to know about the economic disaster and huge costs that are being racked up by governments of every party, they need to know about the price that the greens are asking them to pay for their ineffective policies. This week I finished reading Chris Horner's book Power Grab: How Obama's green policies will steal your freedom and bankrupt America. As the title suggests, it is a furious blast at how American green policies are getting in the way of the affordable energy that is vital to the American economy and the living standards of ordinary families. It attacks how many measures have been pushed through without a proper, democratic debate, just as they have here.
I don't think there is any longer a question of whether there will be a backlash against the high energy prices that climate change policy is instituting. The question is instead whether that backlash will - as it is likely to in the States thanks to people like Chris Horner - hit the right target.
