Corbyn’s Class Act is a Climate Game Changer

On September 12, 2015, Jeremy Corbyn was elected the leader of the Labour Party in Britain. Supported by several key unions, the victory of the veteran socialist member of Parliament (MP) has shocked the political establishment and dealt a crippling blow to the neoliberal consensus that has dominated British politics for over three decades. Corbyn won the support of thousands of younger activists who were not even born when the Labour Party began its rightward drift in the 1980s. For the perennially demoralized British left, Corbyn’s initials “J.C.” have invited enough “savior” quips to fill a stack of New Testament bibles.

Business as Usual Won’t Work

Taken together, Corbyn’s policy commitments amount to a declaration of war on the existing “austerity-lite” platform of the parliamentary Labour Party.

Making headlines during the leadership battle was his Protecting Our Planet statement on energy and climate change, which pledged to break up the Big Six cartel and to essentially nationalize the sector. The Big Six refers to a handful of companies that dominate the country’s energy market: the UK-based SSE (electric- and gas-producer and distributor), the gas giant Centrica, German-owned companies E.ON and Npower, ScottishPower (which is Spanish-owned) and the French corporation EDF Energy (EDF). Corbyn’s nationalization pledge comes at a time when energy policy in the U.K. is widely regarded to be in a shambolic state. North Sea oil and gas are running out, and as much as 64 percent of U.K.’s electricity is generated by imported fuels. The recently elected Tory government has announced a full on “dash for gas” and has recently granted licenses to gas companies to start fracking in large parts of the England, Scotland, and Wales. The government has been heavily criticized for facilitating a contract with China General Nuclear Power Corporation, the state-owned Chinese company, to build a massive new nuclear power plant at Hinkley Point in South West England. Meanwhile, support for onshore wind and solar power has been removed and the government plans to sell its majority state in the Green Investment Bank it established in 2010 to promote renewable energy.

In complete contrast, Corbyn boldly asserts public ownership and the need for an inclusive, democratic, and equitable energy transition from fossil-based power to renewable sources of energy (renewables). Corbyn wants to ban fracking, phase out nuclear generation, and restore investment in energy infrastructure to pre-privatization levels. Corbyn will convene an energy commission to develop a full-on transition to a new energy system that is “open, democratic, sustainable, and accountable” and be able to deliver 100 percent carbon-free electrical power by 2030.

Protecting Our Planet and other policy statements have been dismissed by other politicians as naïve and dangerous. Former Prime Minister Tony Blair has said that Corbyn’s politics exist in some kind of “parallel reality akin to Alice in Wonderland.” But on climate change and energy, what Corbyn understands far more clearly than any of his establishment detractors is that “business as usual” projections for emissions levels will lead to catastrophic levels of atmospheric warming. Energy-related emissions are expected to double between now and 2035, and renewables are growing only incrementally when compared to the global expansion of coal, oil, and gas. Recent U.K. governments have maintained a stubborn faith in aspirational targets and public-private partnerships (P3s) to address these alarming trends. The results have been miserable. Neoliberalism’s monumental failure in the face of climate change means that Corbyn’s “parallel reality” is decidedly more authentic than the one to which his opponents subscribe.

Hitting the Big Six

To the majority of the public, the Big Six energy companies act like a cartel, raising prices in lock-step coordination in order to maximize profits. Several have been heavily fined for essentially tricking customers into paying more for electricity and for willful tax evasion. Electricity costs in the U.K. are 18 percent higher than in Germany and 25 percent higher than in France, according to a 2012 study by the Organisation for Economic Co-operation and Development (OECD).

Corbyn’s nationalization commitment is therefore more than an expression of nostalgia for the post-war socialism implemented by the 1945-1949 Labour government (which nationalized a number of key industries). Rather, it is decidedly in tune with contemporary public opinion. Most U.K. residents consider the Thatcher-era privatization of energy to have been a complete failure. The 1988 sell-off was supposed to introduce competition and lead to better service and lower prices, but today the idea that “consumer choice” exists in the gas and electricity markets has become a national joke. Around 70 percent of the British public want energy renationalized—and this level of support pre-dates Corbyn’s election by more than a year. This combines with rising concerns about climate change. The 2012 record-breaking floods in Southern England and other expressions of “extreme weather” have made a lasting impression. Today 75 percent of U.K. residents feel the U.K. should support an ambitious global agreement to reduce emissions, and support for renewable energy is high.

Corbyn regards the route to nationalization to be via “government majority shareholding in order to establish public control.” He supports the large-scale deployment of onshore wind and locally generated or “distributed” solar photovoltaic (PV) power. He also sees a role for small producers and cooperatives, with municipal authorities playing a part of the new ownership and governance structures. While Protecting Our Planet is conservation-focused and concerned to create jobs, the statement also openly references the union-backed One Million Climate Jobs campaign that calls for the dramatic scale up of climate-friendly jobs in order to create employment while at the same time reducing emissions.

Contradictory Policies

Corbyn’s call for a “fundamental shift” in energy policy will, of course, face many challenges. First, it is sharply at odds with European Union energy policy, which has been anchored in two core priorities. The first priority was electricity market liberalization and a fixation with the so-called “contestable market.” This entailed the “unbundling” of the state-owned public utilities so that different companies, performing different functions, could compete against each other at the level of production and sales. Wholesale markets were created and private power producers were granted access to formerly publicly owned and operated grids.

The second policy priority originates from the desire for the E.U. to be a world leader on climate change. By way of the 2009 Renewable Energy Directive, the E.U. hopes to achieve a 20 percent share of renewable energy in overall gross energy consumption by 2020. The Directive also mandated a 20 percent reduction of Greenhouse Gas (GHG) emissions, and a 20 percent savings in energy consumption by the year 2020 (based on 2005 levels). These are the so-called “20-20-20 targets” to which each member state is expected to comply.

The U.K. has actually tried to do more than most of the E.U. The 2008 Climate Change Act legally obliged the U.K. to reduce its emissions by at least 80 percent (from the 1990 baseline) by 2050. The Act was the world’s first legally binding climate change target. The U.K. has reduced its emissions substantially since 1990 and 8 percent in 2014 alone. But, as with the U.S., the U.K.’s emissions reductions look good only if one ignores that fact that they are largely due to the offshoring of manufacturing along with reduced demand for energy due to the 2007-2008 recession and warmer winters. Established by Parliament, the Committee on Climate Change, in its 2015 Progress Report, concluded that the underlying emissions trends for the U.K. still point in an upward direction when viewed over the longer term. “Without significant new policies, progress (in emissions reductions) will fall behind what is required to meet legal obligations through the 2020s.” A similar story is playing out across most of the E.U.

Risky Business

A fundamental problem with the U.K. and E.U.’s “targets and markets” approach is that it wrongly assumes that liberalized energy markets can happily co-exist with government playing the role of ringmaster. But this is not working. Liberalization has led to an oligarchic situation across the E.U. where just a handful of energy companies are dominant. Firmly anchored in fossil fuels and nuclear power, these companies spend an inordinate amount of political capital resisting the push for renewables. In their view, political support for wind and solar power has undermined their capacity to attract investors. The top 20 European energy utilities were worth roughly €1 trillion at their peak in 2008. In 2014 they were worth less than half that amount. Today utilities are no longer a “safe bet” investment, and many utility companies fear that if renewable energy continues to be protected by increasingly ambitious E.U. targets, then lower sales and profits are inevitable.
But renewable energy companies are also in trouble. While the 2020 targets initially gave a boost to the industry, it was clear that meeting the targets required government support in the form of power purchasing agreements, “capacity mechanisms,” and other subsidies. Governments have therefore acted as a life support system for renewable energy companies—one that (as the Tory government recently demonstrated) could be switched off at any time. At the end of 2014, E.U. investments in renewables had fallen a staggering 55 percent from the 2011 peak. The slide occurred as soon as governments across Europe concluded that falling prices for solar modules meant that the industry could compete against fossil fuels on its own. But this reaction somehow overlooked the fact that coal, oil, and gas prices had also fallen dramatically. The main message is this: The prevailing neoliberal approach means that all energy investments are today exposed to “political risk,” which has resulted in low investment in the sector across the board. This is not only a problem for energy companies, but also calls into question who will provide electrical power in the future (a “capacity crunch”) with so many private investors running for the exits.

Thatcher’s Ghost

A strong case for energy nationalization was made recently by the Center for Policy Studies (CPS), a think tank founded in 1974 by none other than the late Margaret Thatcher. A March 2015 CPS assessment noted how it is “impossible to integrate large amounts of intermittent renewables”—markets cannot predict how much the sun will shine or the wind will blow on any given day—“into a private sector system and still expect it to function as such.” Furthermore, “private investors end up having to price and manage political risk, imparting a further upward twist to costs and prices.” And the conclusion? “You can have renewables. Or you can have the market. You cannot have both….If renewables are a must-have, then nationalisation is the answer.” Nationalization “removes political risk thereby cutting the public sector’s cost of capital. Together with the savings from abolishing retail competition”—thought to add $1.3 billion a year to electricity prices in 2013 alone—“it would cut average (per capita annual) bills by around £72 a year now, and £92 by 2020.” Nationalization, says CPS, would also improve accountability and transparency, granting the Treasury “greater incentives and ability to control and scrutinise costs.” Similarly, a recent World Bank report acknowledged that scaling up renewable power to meet climate goals will depend on “a public sector-led proactive planning effort” in order to address the problem posed by the private sector underinvestment.

That both an avidly Thatcherite think tank and the World Bank would reach these conclusions merely draws attention to the compelling logic behind Corbyn’s commitment to public ownership. Indeed, Corbyn’s Protecting Our Planet statement is also informed by the fact that renewable energy has made real headway in Germany and Denmark as a result of an expansion of municipal control and public investment. In recent years many German municipalities have decided to reclaim their local grids from private corporations. Germany has thus seen a major expansion of direct municipal provision of energy services.

Climate Protection and the Public Good

Corbyn’s nationalization commitment is certain to ignite a major debate inside the labor and environmental movements. Some unions have begrudgingly come to terms with energy privatization and have maintained a strong bargaining presence in the energy sector and established sufficient relationships with the private companies. Other unions will unequivocally welcome Corbyn’s commitment to re-nationalization because it will provide a platform for economic development in economically depressed regions such as those in the north of the country. As the union UNISON has pointed out in a recent study, the U.K.’s aging housing stock, if fully weatherized and insulated, could reduce energy consumption in buildings by as much as 20 percent and generate many thousands of jobs. Unions involved in initiatives like One Million Climate Jobs and Trade Unions for Energy Democracy will see Corbyn’s victory as an endorsement of the kind of bold policy interventions the situation demands.

But the most important idea embedded in Corbyn’s Protecting Our Planet is that it views climate protection and emissions reductions as a public good, one that should be beyond the reach of the market. Corbyn’s climate commitment is grounded in the knowledge that, for many decades, public ownership and management of health, education, sanitation, transportation, and—of course—the provision of electricity were all hugely successful endeavors that improved the quality of life and economic prospects of millions of people. Such an approach is urgently needed now to address the climate crisis. “Markets and targets” have failed. There is, it seems, really no alternative.

 

^[1]http://www.theguardian.com/environment/2015/jul/16/government-makes-outrageous-u-turn-over-fracking-in-precious-wildlife-sites
^[2] http://www.theguardian.com/environment/2015/jul/24/the-9-green-policies-killed-off-by-tory-government
^[3] Source: OECD/Nuclear Energy Agency (2012), Nuclear Energy and Renewables: System Effects in Low-carbon Electricity Systems, Table 4.7.
^[4] Guardian, Jan 29^th, 2015, see also: http://www.goodenergy.co.uk/press/releases/2015/08/05/new-survey-shows-strong-public-support-for-renewable-energy
^[5] http://www.climate-change-jobs.org/
^[6] Digest of UK energy statistics (DUKES), published in July, state that UK emissions of greenhouse gases between 2011 and 2012 increased by 4.5%.
http://www.theautomaticearth.com/2013/10/energy-is-a-power-game-3-they-cheat-and-they-lie/
^[7] http://www.investingdaily.com/19316/lessons-from-european-utilities-wires-have-what-it-takes/
^[8] http://fs-unep-centre.org/sites/default/files/attachments/14008nef_visual_12_key_findings.pdf
^[9] Marcelino Madrigal and Steven Stoft, Transmission Expansion for Renewable Energy Scale-Up: Emerging Lessons and Recommendations, The World Bank, June 2011.
^[10] https://www.unison.org.uk/news/article/2014/06/unison-launches-its-solution-to-the-energy-crisis