A need for nuance

17 Aug 2015 | Ian Thomas

Investors in the energy and environmental space know that, for better or worse, policy matters. Some examples are obvious, like direct government subsidies for renewable power generation. Others are equally recognisable but have a more indirect impact, like landfill tax. And then there is a large number of ‘micro’policies such as industry- and product-specific standards covering things like chemicals used in consumer products, energy efficiency standards in electrical goods and recycled water quality. Whilst these ultimately manifest themselves as legal or regulatory requirements, they are often preceded by consultation, debate and lobbying.

To many people, lobbying brings up an image of vested interests (like ‘Big Oil’) trying to preserve the status quo. But, of course, in the environmental sphere there is a range of actors who lobby on behalf of renewables, clean fuels, low-carbon housing and so on. Certainly they are smaller and more diverse than their counterparts who represent the incumbents in these industries but nonetheless they have an impact. However, is it always the right impact?

Politicians may say that the public audience has a limited appetite for detail and prefers clear, strong messages. Lobbyists may say the same of most politicians. This leads us down the path where every issue is black or white and all interested parties are good or bad.  Even  though  the  subjects  are  complex,  the  nuances  get  lost  in  the  heat  of  argument.  So  if  central  government  assumes responsibility  for  approving  wind  farms,  fracking  sites  or waste-to-energy  plants,  it  is  either  confronting  the  nimbyism  which  is holding back necessary development or it is riding roughshod over the reasonable concerns of local communities. If government devolves these decisions to the regions but allows commercial interests to offer a share in the profits to local communities then that is either a win-win for localism or encouragement of corruption and bribery.

The  European  biofuels  sector  provides  an  excellent  example  of  the  often  perverse  impacts  of  lobbying.  Having,  in  the  face  of opposition  from  the  oil  industry,  promoted  a  biofuel  industry  as  a  way  to  partially  decarbonise  transport  fuels,  the  European Commission  was  subjected  to  a  bombardment  of  criticism  from  a  range  of  environmentally-minded  parties  including  prominent NGOs.  Their message met  all  of the  effectiveness  criteria: food-based  biofuels  were  bad  because  they  caused  starvation  in  the developing world,  served to increase carbon emissions not reduce them and were responsible for sweeping deforestation in Asia. There was little-to-no differentiation between various types of biofuels and their respective feedstocks, at least partly because that kind of subtlety would have undermined the simplicity of the message.

On  the  other  side  of  the  debate,  the  response  was  equally  lacking  in  nuance.  Because  industry  lobby  groups  represented producers of all biofuels, they too were unable or unwilling to differentiate between them. So the only possible response was that all biofuels  were  good  because  they  substituted  for  carbon-intensive  fossil  fuels,  they  reduced  dependence  on  imported oil,  they created markets for European farmers and they did not have a material impact on global supply and demand for foodstuffs.

A more considered analysis might have argued that, taking into account all of the relevant criteria, some biofuels were better than others and that policy should favour those products. It might have said that the impact on emissions would depend on where the feedstocks  were  sourced  (and  the  farming  practices  in  those places)  and  what  kind  of  energy  generation  was  used  in  the processing plants. It might have said that Europe had significant excess wheat production capacity that could be used to support bioethanol production. And it might have said that the impact of bioethanol demand on the global grain market was small relative to biodiesel demand on the much smaller oil seeds market (contributing to both price volatility and deforestation).

At the time, the situation was far from clear and there were some legitimate concerns on most sides of the argument. But most of the lobby groups were not interested in highlighting the complexity of the issues; all that mattered was the clarity of the m essage which had to be yes or no, one or zero. The result was years of uncertainty in policy-making during which time the European biofuel industry ground to a halt and little progress was made in reducing the carbon intensity of transport fuels.

We should be able to do better.

Ian Thomas

Managing Director