Energy Policy- The Unintended Consequences

Energy Policy
The Unintended Consequences

Lord Goldsmith’s resignation as minister has put energy back in the spotlight. Goldsmith says the Prime Minister is ‘uninterested’ in climate problems. Here, as Syed Kamall explains, energy and linked policy can be complex and well-intended plans often have unwished consequences.

Economists, sociologists and philosophers including John Locke, Adam Smith and Friedrich Hayek have all written about the phenomenon of unintended consequences – that the well-intentioned actions of individuals or governments may lead to unexpected or unintended results.

History is full of examples of negative unintended consequences, where governments have introduced measures to solve a problem, only to make the situation worse. As governments set net-zero targets and seek to curb pollution, will they heed the lessons from previous initiatives that ended up harming the environment?

When Mexico City banned cars on certain days, depending on the last number of their number plate, carbon monoxide (CO) measurements initially fell by 11 per cent. However, when locals responded by buying second older cars with different number plates, to drive when their first car was banned, CO levels rose by over 13 per cent.

When the UK government announced a ‘dash to diesel’ by changed car taxes to incentivise motorists to buy diesel cars to reduce CO2, the number of diesel cars did increase. However, they were later found to emit larger quantities of harmful pollutants such as nitrogen oxides and particulates.

When subsidies were offered to encourage consumers in New York and Vermont to buy newer energy-efficient fridges, a study revealed that approximately 44% of older refrigerators remained in use as a second fridge, increasing overall energy consumption.

Some unintended consequences were foreseen. UK government ministers were warned about the dangers of diesel when they announced the dash to diesel, but it took over a decade and a change of government to correct this error.

Similarly, there are now some proposed environmental policies where negative unwished consequences are already foreseen.

Some environmentalists and vehicle manufacturers suggest that governments pay drivers to scrap older more polluting cars to encourage them to buy newer less-polluting models. However, manufacturing electric vehicles uses more energy and produces more emissions than manufacturing conventional vehicles due to their batteries. In addition, the electricity to recharge them may come from power stations burning fossil fuels.

Research shows that the average electric vehicle in Europe produces between 28 to 72 per cent less life-cycle greenhouse gases over the first 150,000 kilometres, depending on local electricity production. However, if the car does much lower mileage, running the older car for longer may be better for the environment overall, especially if there is increased adoption drop-in of biofuels or synthetic fuels that work with existing engines.

The environmental benefit of electric vehicles will improve as more of our energy comes from greener sources. Also, there are companies that convert old cars to electric, but this is currently an expensive option. Until the technology improves it may be environmentally friendlier for low mileage drivers to keep older cars for longer, especially if greener fuels become widely available, and for higher mileage drivers to convert their vehicles to electric rather than scrap them. The unintended consequences of a scrappage scheme can already be seen.

Increasing awareness of plastic waste damaging marine wildlife has led British supermarkets to reduce the use of plastic packaging. However, even here there are foreseen unintended consequences. While UK cucumber growers use 500 tons of plastic in the UK annually, this extends the shelf-life of cucumbers from 3 to 14 days, reducing the energy and water required for growing, transporting and storage.

There will probably always be some unintended consequences. As governments pass more environmental laws, they should heed warnings and have safeguards in place to adapt policies as negative consequences become obvious. These safeguards should complement market mechanisms, since learning from mistakes is part of the market discovery process.

While this may be easier said than done, e.g. new diesel cars are still on sale today nearly 20 years after the ‘dash to diesel’ policy, a failure to acknowledge that some well-intentioned environmental policies may fail could make things worse.

This blog is adapted from a chapter in the forthcoming Politeia publication, Making the Energy Markets Work for the UK: Moving to a mixed energy supply.

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Lord Kamall is a Professor of Politics and International Relations at St Mary’s University, Twickenham. He became a life peer in 2021, serving as minister for Technology, Innovation and Life Sciences at the Department of Health and Social Care (Sept 2021- Sept 2022 ) and minister at the Department for Digital, Culture, Media and Sport (Sept-Oct 2022). Previously, he represented London in the European Parliament (2005-2019) where he served as leader of the European Conservatives & Reformists (ECR) group. He has been Academic and Research Director at the IEA.
For Politeia he is co-author of Banking on Recovery: Towards an accountable, stable financial sector (2016).