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<\/a><\/p>\nFig. 1: Brent Crude was trading at $48.50\/bbl on January 28th 2015.\u00a0 A year earlier it was nearly $110\/bbl. (FT markets<\/a>)<\/p>\n What does the recent price fall mean for the nascent sustainable energy transition?\u00a0 Some see it as bad news; falling oil prices mean higher demand, more carbon emissions and less interest in sustainable alternatives.\u00a0 We\u2019ve already begun to hear tales of increased SUV sales<\/a> in the US, and as the price of natural gas is linked to that of oil (in Europe at least) it might be the case that gas-fired electricity generation could become more attractive, offsetting renewables.<\/br> <\/p>\n When the price of the world’s most widely-traded commodity halves within a 6-month period, it has a tendency to draw attention from governments, industry and the media alike.\u00a0 North Sea oil has recently been selling at around $45 per barrel,…<\/span><\/p>\n
\nOn the other hand, in many regions like Europe, renewable generation is mandated by national and regional policy \u2013 utilities have to derive a certain amount of electricity from these sources \u2013 and many governments have put in place price incentives to do so, with Germany (and others\u2019) Feed-in Tarriffs a prime example.\u00a0 Renewables are thus sheltered to some degree from the kind of market activity we have recently seen.\u00a0 In fact, the whole point of these subsidies is to provide an incentive for their use, and the more we deploy these technologies the cheaper they become; a phenomenon which has been borne out in recent years.\u00a0 \u2018Grid parity\u2019, whereby the levelised costs of renewable energy becomes competitive with coal and gas, is now a reality <\/a>in many places, particularly for solar PV, and is soon to become so elsewhere<\/a>.\u00a0 Meanwhile, it\u2019s becoming ever more apparent that the volatility of oil and gas isn\u2019t going to stop any time soon, leaving this kind of energy use (be it in electricity generation or petrol) vulnerable to short- and long-term fluctuations.<\/br>
\nBut instead of just waiting for cheaper sustainable energy, why not level the playing field?\u00a0 Fossil fuels enjoy enormous subsidies from governments every year \u2013 far more so than renewables.\u00a0 The IEA estimates<\/a> that in 2010 subsidies to the fossil fuel industry amounted to $409 billion worldwide, with those to oil companies representing almost half of the total.\u00a0 These are generally in the form of tax allowances for exploration and production companies, by governments who are keen to see investment in their economy.\u00a0 But, as unconventional oil and gas (such as that from shale or tar sands) is increasingly relied upon, the costs of production are growing which in turn drives up the cost of subsidies.\u00a0 What\u2019s more, many of the highest subsidy rates are in emerging nations such as Venezuela, Algeria and Egypt, which ties up a significant amount of potential government revenue which is much needed elsewhere within their economies.<\/br>
\nIf governments were to begin phasing out these subsidies, companies would pass these extra costs through to consumers.\u00a0 Hence, energy prices would inevitably be driven up \u2013 a politically-challenging issue for any policy maker.\u00a0 However, with recent market events we find ourselves in the very unique situation of falling prices of clean energy alongside the low price of oil, gas and coal; removing handouts to industry now would cause the least amount of pain for consumers worldwide, whilst bolstering the growth of sustainable alternatives.\u00a0 We could go further, too.\u00a0 Effective carbon pricing – much discussed but long unattainble – is unlikely to be much easier to implement in the future than it is now.\u00a0 Though it would drive up (currently low) costs in the short term, it would do wonders in spurring the development of sustainable energy forms, as investors are provided a clear indication of the direction of government policy and an incentive to act.<\/br>
\nAs The Economist recently put it, policy makers should act boldly and \u201cSeize the Day\u201d<\/a>, scrapping \u201cnonsense\u201d energy policy and replacing it with more prudent alternatives.\u00a0 Though it would require significant co-ordination and political will (perhaps bravery), the imperative to act has never been greater; this year\u2019s UN climate talks in Paris are regarded by some as the last chance to make a meaningful and effective global agreement, and recent research <\/a>on unburnable carbon highlights the need to leave the majority of proven reserves in the ground.\u00a0 It seems obvious, then, that governments should begin a concerted effort to reign in an industry whose business model is incompatible with a sustainable future.<\/p>\nBiography<\/h4>\n
<\/a>Jack Miller began his PhD with SPRU and CIED in September 2014, conducting research into the role of energy efficiency in economic growth.\u00a0 His work centres upon the concepts of \u2018exergy\u2019 and \u2018useful work\u2019, or the portions of energy inputs into the economy which can prove useful to economic activity and societal needs.\u00a0 He completed an MSc in Energy Policy for Sustainability with SPRU in 2014, having undertaken a project looking at the prospects for future shale gas development in the US.\u00a0 He has a degree in Physics (MPhys hons, University of Sussex, 2013), and has previously taught maths and physics from KS3 to first-year undergraduate level.<\/p>\nFollow Sussex Energy Group <\/a><\/a><\/a><\/span>","protected":false},"excerpt":{"rendered":"