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Dirty subsidies

[Re: We just need the political will to reduce destructive energy prices, Friday]
Matthew Sinclair’s long rant against climate change policies showed a remarkable ignorance of the economics of energy. As the energy regulator Ofgem has pointed out, the primary driver of electricity price rises over the past eight years has not been green taxes, but the UK’s increased dependence on imports of natural gas. And both the European Union’s emissions trading system and the UK’s proposed carbon floor price seek to correct a huge market failure – the prices of goods and services that emit greenhouse gases do not always reflect the costs imposed on others through the impacts of climate change. Similarly, temporary subsidies for low carbon technologies, like renewable energy sources and carbon capture and storage, are designed to correct other market failures. New, innovative energy sources, seeking to compete on a level playing field against established fossil fuels, face huge obstacles. Established fuels already benefit from previous learning and economies of scale. Perhaps Sinclair should devote his next article to justifying the £3.4bn in support that UK taxpayers provide to the oil, coal and gas industries every year?

Bob Ward, policy and communications director of the Grantham Research Institute on Climate Change and the Environment, London School of Economics

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