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Britain To Switch Energy Policy, But How?

Not content with green lighting Britain’s first new coal mine in decades, the United Kingdom’s Prime Minister, Rishi Sunak, has a taken a new stance of energy policy.

“I don’t think that we’re going to get to net zero by telling everybody that they can’t fly anywhere or can’t do this or can’t do that. That’s not my approach to it,” Sunak told the BBC.

Instead he wants a pragmatic and proportionate way, while at the same time staying committed to achieving its carbon-emissions goal by 2050.

The move comes after increasing calls to delay the banning of sales of new gasoline or diesel powered vehicles by 2030. That makes sense given that Britain’s power grid likely won’t be able to bare the weight of demand from increased usage of electric vehicles on top of an already intense demand from households,, businesses and industry.

Past Policy Looks Bizarre

What is rather surprising is the fact that the announcement comes hot on the heels of what amounts to an internally inconsistent energy policy. For instance, the coal mine mentioned above, which was approved late last year, would seem to fit absolutely nowhere inside a green energy policy. Coal typically contains mercury, a known poison, which gets emitted into the atmosphere when burned and can cause nasty illnesses.

At the same Sunak is against the idea of drilling on shore for natural gas due tot he necessary use of hydraulic fracturing, a controversial extraction method. However, natural gas remains far far cleaner than coal as an energy source.

That alone is weird, but its gets more bizarre. Britain increasingly imports masses of natural gas from the United States, much of which is extracted using hydraulic fracturing. I guess its ok when its abroad, even though we all live on the same planet.

The next question I have is what is the pragmatic and proportionate way? That Sunak wants to go?

What Happened to the Natural Gas Bridge

In 2014 it was clear that natural gas would be the bridge to clean energy, but that would take a few decades. It seemed sensible as it meant a fast ditching of coal powered electricity in favor of the far cleaner natural gas.

Then came the COP26 climate summit in Glasgow Scotland and every seemed to have changed. Not the message was extreme — everything carbon needed to get ditched in a trice no matter what the financial cost would be.

While those costs are now coming under increase scrutiny, it seems sensible to revisit the idea of natural gas as a bridge to clean energy. Of course, that will still mean solar, wind and wave energy can be harnessed and the electricity infrastructure built up as fast as the budget will allow.

But the risk currently is that gasoline and diesel vehicles get banned and the existing power grids get overloaded, leading to brownouts and potential blackouts. As people in Texas and California already know these events already occur with banal regularity, especially during heat waves.

Hopefully, sense will prevail and Rishi may just have the ability to that. The only flaw is he may not be in office long enough.

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This article was written by Follow Manika is a macroeconomist with over 20 years of experience in industries including investment management, stock broking, investment...