Back From The Dead? The Return of Energy Policy

Among all the momentous events in the world in 2002, one more parochial happening which is, nonetheless, of considerable significance for energy economists is the revival of energy policy in Britain. This year has seen a flurry of activity on the energy front. In February the Performance and Innovation Unit produced its detailed ‘Energy Review’, following which in May the government published its ‘Key Issues for Consultation for the White Paper’, in advance of a White Paper on energy policy which is promised around the end of 2002. It will be the first such White Paper for thirty five years. In this lecture, I started with a potted history of British energy policy in the post-war period since the lessons which might be learned from earlier efforts at policy are in danger of being neglected. Then I discuss the theory of intervention by government in the energy sector. Finally, I consider the main issues which are emphasised in the new form of energy policy and whether or not they constitute a genuine basis for government action. My view is that, in energy policy as elsewhere, we should beware of attempts to look into the far distant future and, in vain search for ‘optimal’ solutions, propose interventionist measures to combat supposed market failures, providing another excuse for government encroachment. The intention is entirely well-meaning but the outcome is unlikely to be so benign.