Policy Papers

Low carbon futures and high carbon pasts: policy challenges in historical perspective

Paul Warde |

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Executive Summary

  • The energy history of Britain shows a series of discontinuities which holds out the possibility of successful future energy transitions.
  • There are two main possibilities for reducing carbon emissions: switching energy supply to renewables, and improving energy efficiency.
  • The proposed pace of switch to renewables is historically unprecedented both in scale and nature. The incentives for consumers to change behaviour that have operated in the past cannot be replicated and therefore policy should focus on forcing energy producers to alter the mix of energy supply.
  • Improved energy efficiency has been the normal condition of economic growth for 140 years, but has not led to falls in consumption. From a historical perspective, expectations that this will change appear highly optimistic.
  • Government policy is likely to have limited effect on transport use, and improvements in industrial efficiency can be expected anyway. It is right for policymakers to concentrate on power generation and the residential sector.


After Copenhagen failed to deliver an international agreement on reducing carbon emissions, all eyes turned to the recent United Nations Climate Change Conference in Cancun. Notwithstanding the agreement to set up a new fund to help developing countries adapt to the effects of climate change, strategies for dealing with global warming will remain largely national, or organised via the European Union.

The British Climate Change Act of November 2008 sets a legal requirement to reduce greenhouse gas emissions by 26% on 2005 levels by 2020, and 60% by 2050. The government's actual plan is even more ambitious. It includes 40% of electricity coming from low carbon sources by 2020, and 15% of our total energy from renewables at this date. The legally-binding targets set by the previous government will be maintained by the Coalition. Around half of the contribution to greenhouse gas emission reductions is hoped to come from changes in power generation, with smaller contributions from savings in domestic heating and lighting, transport, and other uses. The government anticipates that over the next decade, changes in power generation, followed by reductions in domestic energy consumption will be the main route to lowering emissions.

Meeting the targets requires reducing emissions by 1.4% per annum over the next decade, rather than the 1% achieved since 1990. Indeed, the UK can already proclaim itself as one of only two EU nations on course to meet Kyoto targets, having reduced greenhouse gas emissions by 22%. So it might look like the country is already moving in the right direction, and only has to accelerate existing trends.

In reality the UK's achievements are not so heartening. We actually consume marginally more energy than in 1990; and about 6% more than we did in 1970, before the oil crises. Renewables, waste and hydropower accounted for only 2% of total energy consumption in 2008, up from 0.5% in 1990. Clearly there has been no revolution in our energy regime. In fact nearly all the emissions reductions achieved by the UK have come from the increased share of natural gas in energy consumption, which has risen from 24% to 40% since 1990. Per unit of energy, gas happens to emit less greenhouse gases than coal or oil. We cannot expect this rather fortuitous shift based on the proximity of the North Sea gas fields to continue. Indeed, the government projects the amount of gas consumed to fall by a quarter over the next decade.

Transforming energy regimes: a long history

If Britain's apparent recent success in meeting Kyoto targets is fortuitous, and has brought about little change in our energy consumption, how can a transition in the energy regime be achieved? The energy history of past centuries can provide suggestions here. Britain has shifted from a general reliance on plant matter (foodstuffs and firewood) as a source of energy in the sixteenth century, to a regime dominated by coal (over 95% of consumption by 1900), to one heavily dependent on oil by the 1960s and diversified across coal, oil, gas, and nuclear power by the end of the twentieth century. These changes have moved us to 'energy carriers' of much higher quality, linked to new technology: in the eighteenth century one horsepower really meant the work done by one horse was the limit to the mechanical power available for most tasks. Now electricity can provide almost limitless applications in an extraordinarily concentrated form. But these developments have been far from even. A history of discontinuities might give hope for policies to generate rapid shifts in future.

As Figure 1. shows, the biggest ever leap in energy consumption per person in Britain came during the middle of the nineteenth century, during the Industrial Revolution with consumption rising by 115% between 1830 and 1875. We have been less profligate since. Between 1917 and 1933 consumption per person actually fell by a quarter, and total consumption almost as much. But it then rose steadily with the large-scale use of oil peaking in 1979. Since that date energy consumption per person has been steady, and is less than 5% above the levels of the First World War.

Figure 1. Energy consumption per person per year in England & Wales, 1800-2000 (Gigajoules)

Figure 1. Energy consumption per person per year in England & Wales, 1800-2000 (Gigajoules)

Thus we can see that large falls in energy consumption have happened before, and consumption per person now shows no upwards trend even though we have become much richer. Yet our total energy consumption is much larger than a century ago, half as high again. This is because population increase has been a bigger factor than individual consumption in pushing up British carbon emissions this century. Replacing old steam engines with electricity played some part in the interwar fall in consumption, but it was mostly a consequence of the shrinkage of extremely energy-intense industries such as iron and steel. To some degree this means we have 'exported' energy intense activities elsewhere, but still reap the benefits of consuming their products. It is not true to say that we have simply exported all of the carbon emissions associated with our consumption elsewhere, because countries from which we import have also become more efficient in their energy use. But this long history reminds us that there are limitations to looking at only national energy statistics. If the money we save from energy efficiency improvements here is simply used to buy manufactured goods from abroad, will not actually reduce global greenhouse gas emissions.

Another commonly used assessment of energy consumption is to relate it to income. How much energy is required to produce each unit of income? This measure, called the 'energy intensity' of an economy, has become an important policy metric for some nations. China, for example, has pledged to cut its carbon intensity (similar to energy intensity, these are the CO2 emissions generated by each unit of income) by 40-45% of 2005 levels by 2020. As Figure 2 shows the energy intensity of Britain has been falling quite consistently since the 1870s, and it is now reasonable to say, even if precise figures could never be produced, that we are now more efficient at generating income out of energy than at any time since settled agriculture came to these islands, many thousands of years ago. Overall, the energy intensity of the British economy fell by two-thirds over the twentieth century, in other words, at a rate of about 1% each year.

Figure 2. The energy intensity of Great Britain, 1800-2005 (Megajoules per US$ at 1990 prices)

Figure 2. The energy intensity of Great Britain, 1800-2005 (Megajoules per US$ at 1990 prices)

Britain's scope for achieving reductions in energy consumption from industry is now much more limited, because most energy-intense industries have already disappeared. Indeed, government projections do not expect industry to make any significant contribution to carbon reduction in the coming years. If shrinking our energy consumption as a result of further changes in the pattern of economic activity, such as shrinking industry and increasing services, is now unlikely - and may be seen as economically undesirable - this leaves policymakers with two main alternatives to reduce our carbon footprint:

1) a switch to renewables as an energy source
2) improvement in efficiency

These two possibilities have very different histories. Renewable sources of energy have been of negligible importance in twentieth-century Britain and a brief, limited government enthusiasm for research that emerged after 1973 was abandoned in 1988. In contrast, improvements in energy efficiency, if measured in economic terms as energy intensity reductions, have a quite venerable past and indeed have been the norm for nearly 140 years.

Real change: the prospect for renewables

Making renewables a serious part of our energy portfolio would be a revolutionary step, but far from the first recent revolution in energy use. The fastest and biggest transition of the twentieth century was the rise in the use of oil. This had been used for many decades on a very small scale, mostly as kerosene for lighting. From the 1920s its use for motor transport grew rapidly. Once the infrastructure was in place, oil became cheaply available and replaced coal for many industrial uses. In the 1960s, industrial use outstripped that by transport - a situation that rapidly reversed after 1973 when oil became relatively more expensive again. There were many stimuli to the use of oil, first as a supremely flexible, non-substitutable fuel linked to a highly desirable and life-transforming piece of technology: the car. Later, simple cheapness added to its allure. But even when oil became more expensive from the 1970s, its use in transportation rose rather than fell. Energy use in transportation has been relatively impervious to price rises, and thus it is changing the source of energy, rather than lowering the miles we travel, which is a more likely strategy for success in reducing emissions. Between the 1920s and 1970s, oil use rose on average 7.5% a year.

Between 1996 and 2002, the renewables sector in Britain expanded by 17% each year, and after the Renewables Obligation of 2002 set targets for the supply of renewable energy for power companies, this has risen to 19% - impressive figures for any sector, although this comes from a very low base and has largely been achieved by the burning of waste products and biomass, not the familiar technologies of wind, wave or solar power. To reach the government's target of 15% of total energy consumption by 2020, however, this rate would have to increase further to a little more than 19% each year. To reach a target of 80% by 2050, the rate would be lower: 9.5%. Both these latter figures assume that our total energy consumption would stay much the same as it is now, roughly the trend of the last thirty years.

The transition to renewables as currently envisaged would be historically unprecedented in scale and pace, much faster than that to oil. Transition to oil (and later gas) came with very clear benefits to the end user. As an energy source, petrol provided unique life-changing services. Later, there were price advantages for oil and gas that squeezed out competitors. The renewables revolution would be utterly different. It makes no practical difference to the end user where their electricity or hot water comes from, whether generated by fossil fuels or wind or solar power, and so the effort of transition from a consumer's point of view would only be worth it if these technologies were very much cheaper than alternatives, or the transition requires very little effort on their part but is borne by large scale producers. Either way, the incentives for this unprecedented change will have to come from either from price or regulation, or a mixture of both. The current strategy for a Low Carbon transition is largely premised on the latter, by using big stick of the European Carbon permits and Renewables Obligation to fine energy companies that do not increase their share of production from renewable sources. Given that virtually none of the drivers of earlier changes operate in the case of renewables, this must be a sensible strategy. The precise mix of renewables adopted is supposed to then be determined by the market, placing the onus on energy generators to make wise investments.

Real continuity: improving energy efficiency

The second option is improved energy efficiency, for which a target has been set of a 20% improvement on 2005 levels by 2020.

Energy efficiency is not an easy thing to measure. To take just one example, we could use boilers in our houses that are very efficient - 80 or 90% of the energy consumed in modern boilers goes into heating the house, with very little waste. But if the house is poorly insulated, this heat is simply radiated into the outside air - not an efficient use of energy by any measure. An alternative is to compare energy consumed by a boiler, for example, to the minimum required to do the work needed (i.e. to keep a well-insulated house heated at the desired temperature). By any such measure, most of our technology is very inefficient, and it is questionable how close we could ever get to 'ideal' efficiency.

To avoid the many technical problems in measuring energy efficiency, I will use an economic measure: how much energy is required to produce one pound in income? This calculation, of 'energy intensity', is more straightforward and can be generalised across the economy. We have already seen that energy intensity has been falling for 140 years. The government's target of a 20% improvement on 2005 intensity levels by 2020 implies a 1.4% annual gain in efficiency. This is actually lower than the average gain since the late 1950s. Strangely, the government's Low Carbon strategy does show any awareness that it has set itself targets below the long-term trend. The Chinese government has pledged to move from the late twentieth-century trend of a 1% fall in energy intensity per annum to 3% in the next decade, a far more ambitious target.

The energy intensity of most European countries has converged to a little under 10 MJ/$ (the international measure, of Megajoules needed to produce each 1990 US$). More surprisingly, the energy intensity of leading developing nations such as Brazil, India, Mexico and China is also at much the same level. Does this mean we now share a global energy regime and that everyone can expect efficiency improvements to continue? The answer is no, because energy intensity trends have been driven by different factors in different places.

In Europe, the improvement in energy efficiency has been driven partly by the disappearance of the old industrial sector (as in Britain), but mostly by technological improvement within industry. This is not very surprising. Industrial goods are traded internationally, and for firms to remain competitive they have to use the best technology and cut costs. This means that most of our energy consumption now comes from our own houses, workplaces, and transport. In contrast, in the developing world, energy intensity is low because as these countries have industrialised, people have not increased their domestic energy use nearly as much as in the developed world. So the industrial energy use of these countries is still quite high, but domestic energy use is very low.

This means that in both the developed and undeveloped worlds, the key area for improving energy efficiency in the future must be residential uses and transportation: in the former, because this represents most of our consumption; in the latter, because as income rises in these countries we can expect people to demand more heating, air conditioning, gadgets, personal travel and so on. After changes in power generation, the second major plank of government policy in the next decade is, rightly, the lowering of residential consumption. We can expect competitive pressures to continue to improve efficiency in industry the world over, but without strong regulation, or very large increases in the price of energy, it is less clear whether domestic users will become more efficient. Thus a major effort has gone into tighter building regulations and subsidies for improved insulation and other efficiency measures.

Rebounds and other unanticipated effects

But would improving energy efficiency make things much better? Overall the Low Carbon strategy rests on the premise that increased energy efficiency will permanently lower demand, and thus make easier the transition to renewables demanded of the power generation companies: the expansion of renewables will not be chasing a constantly receding target of rising overall energy demand. Indeed, the government predicts actual falls in consumption over the next decade; the decline in electricity consumption occasioned by the recession is expected to be permanent.

Such a shift is not unprecedented. We have already seen that it happened in the interwar period, but was largely a result of changes in industry. Now, the government hopes for a 27% fall in domestic energy consumption by 2020, even though the number of households will rise by 10%. If current population trends continued until 2050 - 0.7% growth each year - the population would be a third higher than today in 2050. The challenge is to avoid sheer numbers of people increasing the UK's overall energy consumption as they did during the twentieth century. That population would also be, on average, significantly older. If current trends persist this would make Britons more likely to live by themselves, or in small households, further pushing up the demand for energy.

Efficiency improvements leading by themselves to permanent falls in total energy consumption, especially against the backdrop of a growing population, would be a development that flew in the face of everything we have experienced hitherto. We have seen how dramatic energy efficiency improvements have been a constant part of our society and economy since Victorian times; and dramatic increases in total energy consumption have accompanied our lives too. Indeed, some would make what seems a counter-intuitive claim: improvements in energy efficiency actually drove economic growth, which in turn leads us to consume more energy. The case was famously put by Stanley Jevons as long ago as 1865:

'[It] is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is true.'

The evidence points to him being right. Although energy intensity has fallen rapidly since 1960, Britain still consumes around 25% more energy than it did then. How can this be? This results from what is called the 'rebound' or take-back' effect.

Firstly, as we improve energy efficiency, we save money. Some of this money is then spent on buying more things that require energy to produce (quite possibly imported). The overall fall in energy consumption is therefore not as large as we would expect, although generally it is still a fall.

More importantly, increasing energy efficiency has a perverse effect on what we do in the future. As efficiency improves, the price of the service we get from energy: heating, lighting, power, etc. - actually falls. We are getting more bang for our buck, which is what we mean by energy intensity falling. This makes energy consumption cheaper relative to other goods. So when we choose to make an investment, a rise in energy efficiency makes us more likely to choose to invest in an energy-intense way of doing things in the future, especially against a labour-intensive alternative. Labour is expensive. Energy is quite cheap, and efficiency gains make the energy service cheaper. It is generally easier to make improvements in the productivity of energy and machines through technology than it is in the productivity of people, which thus encourages more use of energy.

Over the past two centuries, British labour has become steadily and consistently more expensive than energy use, and much of this trend is actually driven by improvements in energy efficiency. The trend to produce more goods in China is precisely because labour there is cheap, and investors have prioritised economising on labour, being prepared to pay the costs of the energy to then transport the goods around the globe. Unless this trend is somehow broken, then efficiency improvements may not lower our energy consumption. This overall economic logic is just as true in our domestic life. At an apparently trivial level, it has been easier, and apparently not a monetary burden, to turn up the thermostat rather than go upstairs and get an extra jumper. The idea that energy efficiency gains even in the household sector will lead to permanent falls in energy demand are based on the assumption that our propensity to use more energy-guzzling technology will not outpace the improved efficiency of that technology - in other words, an assumption that runs against all the trends of modern life.


Let's return to our policy options for creating a Low Carbon economy. We can increase the use of renewables, or we can improve efficiency. Given that using renewables gives no clear direct benefits for the end user (they are still just getting electricity, or heat), the only policy likely to work here is through coercion (banning high carbon options) or price (making low carbon options much cheaper). An alternative or parallel policy is to try and create higher energy efficiency - a process that historically has happened without government intervention, but that has not lowered consumption. Increasing efficiency may actually have the effect of also increasing our consumption, and thus making the first option, a transition to renewables, more difficult.

The policy enshrined in the Climate Change Act of 2008 and continued by the Coalition, by which emphasis was put on switching to renewables in the electricity generating sector, relying on changing producer rather than consumer behaviour, is a sensible one. Yet in an era of economic volatility it remains doubtful whether the incentives are sufficiently clear for producers to actually make the necessary investments in renewables; at the moment, actual realisation of plans is running behind the desirable schedule. A problem for producers is that in the absence of any clear guidance from consumers as to which technology they would prefer, the electrical output being identical, it is a risky proposition to invest heavily in any particular technology without the guarantee of an affordable infrastructure, as was key to the expansion of oil use after World War II, or gas in the 1970s. As each month goes by the chances of successfully expanding the use of the very small amount of wind, wave and solar power, at the unprecedented rates needed, becomes smaller.

  • Experience suggests that government intervention on efficiency would be most useful in setting standards that affect residential and transport consumption. This is because these have been resistant to change in the past, and equally because commercial pressures have tended to encourage change in the industrial sector anyway.
  • Setting a 'floor (minimum) price' for carbon and raising this over time is only likely to have limited effects in many sectors, unless the price advances much more rapidly than any increase in wages. This is especially the case in transport if there are no affordable substitutes.
  • The key area to effect a transition is in the electricity generating sector, aiming at producers rather than consumers.
  • A transition to renewable electricity generation on the scale currently envisaged would be of far greater magnitude than any previously attempted, and the direct incentives to do so for producers and consumers are small. Removing the nuclear option from the energy mix would make an already unprecedented task considerably more difficult in turn.

In a historical perspective, current government predictions of reduced energy demand and effective transition look optimistic. By 2020, carbon emissions are expected to have fallen by 14%. The great majority of this effect comes from the EU carbon cap and trading system largely affecting power generators. UK policy initiatives are only predicted (if they take effect) to have reduced emissions by some 5%. Successful implementation of current policies would be an unprecedented success, yet its impact on emissions in the coming years would still be marginal, even in the most optimistic scenario.

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