So the scrappage scheme...

I'll forego the rest of the budget, at least for the time being, and look at the car scrappage scheme (covered here, here and lots here)

In order to help the car industry and retail trade, I can announce that a scrappage scheme will be implemented next month.

It will provide motorists with a £2,000 discount on new vehicles bought when they trade in cars over ten years old.

It will be a time-limited scheme until March 2010. My Right Honourable Friend the Secretary of State for Business will announce details shortly.

Sounds good surely? Newer models should be more efficient and therefore have less emissions and the motor industry gets a large boost. Except (as in the articles I linked to above) it's full of more holes than a block of swiss cheese.

• Although the full details are published yet, there seems to be no enforcement that the car must be more efficient than the previous one (people tend to upgrade to a more powerful car when they buy a new one)
• If the car is more efficient, the rebound effect means some of the savings (hard to place figures, UKERC suggest 50%) is lost as people drive more
• 80% or so of cars sold in Britain come from abroad, so the boost to British jobs is greatly reduced
• The cost in manufacturing the car isn't considered (defra link here suggests it's 10% of the lifetime emissions based on 10,000 miles per year for 13 years)
• It seems that the traded car is scrapped regardless of how roadworthy it is
• If the Government offers £2000 off, dealers may well reduce the discounts on their cars, reducing the benefit to consumers (who also still need to find £10000 or whatever
  
• It (arguably) continues to subsidise a bloated and environmentally damaging sector
  
• It continues to promote a message to the public that energy usage and climate change will have no impact on the way people can live and that the Government can still meet its legally binding emissions targets even with these policies
  
• No mention of funding or promotion for public transport/cycling/walking
• There might be more but that'll do for now
  

It's like trying to solve fuel poverty by burning money directly, yes it works, but it's hard to think of a more inefficient way of doing it.

Peak Oil again

Is peak oil a problem? Well the Government don't seem to think so, based on a Freedom of Information request by George Monbiot. (Don't worry, his articles won't feature in every one of my blogs, he can get slightly idealistic) The article highlights the stark differences in Government views on risk, between openly encouraging bankers to thorough assessments on smallpox. Reading some of the comments at the bottom of the article, I think it's important to point out Monbiot wasn't criticising the expenditure on smallpox necessarily after all:

"This is what Government is for: to prepare for the worst, however unlikely it may be."

is utterly correct.

Rather he highlights the Government's inconsistent view on one topic they rate as having no current threat but which could have a devastating effect and so requires attention and investment, and other topic they rate as having no current threat but which could have a devastating effect and so requires a head in the sand approach.

In one of his previous articles, (which upon reading again actually has very little different content) he interviewed the chief economist of the IEA, usually a rather conservative group, and he said:

"In terms of non-Opec, we are expecting that in three, four years' time the production of conventional oil will come to a plateau, and start to decline. In terms of the global picture, assuming that Opec will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau"

Which is obviously interesting considering the Governments view:

"The government does not feel the need to hold contingency plans specifically for the eventuality of crude oil supplies peaking between now and 2020."

So the conservative viewpoint is they 'expect' oil not to peak by 2020 which the Government interprets as 100% not going to. This viewpoint seems even worse when the mentioned Hirsh report states 20 years is required to implement a mitigation crash programme.

Why does the Government not believe peak oil to be a problem? Is it because it's outside of political timescales? Is it a belief that the market will provide the solution either by more investment in discovering conventional resources or new technology to improve non-conventional extraction? Are they lying to ease any fears because of the potential impacts it would have on society? (Think of the effect of the fuel protests in 2000 had for what was less than a week long and only a moderate campaign focused on a few key sites. People couldn't get to work, hospitals reduced their activities, schools closed, shops ran out of food. It's not hard to see that if supplies fell sharply for a prolonged period of time the chaos it might have on society. Incidentally if high fuel prices ever became a problem, the fact that UK fuel is something like 70/80% tax makes it a lot more flexible than countries with very little tax, but I guess that's not much consolation for the 99% of the rest of the time)

The truth is I don't know, only the Government does and they seem to want to keep very quiet about it. In my view this seems rather foolish, the Government should consider the real possibility of it in accordance with good practice, and if it does already, to do so openly. While the predictions of peak oil are still some time away, the disruption caused by fear and panic should be minimal and instead open discussion could help promote alternatives and convince the public of the need for change. Why delay what seems inevitable?

Is peak oil really a problem?

Following on from what I said in my last blog about that things aren't always simple, well I forgot to say something else that's crucial. Always be open to ideas, because the scientific method is based upon furthering knowledge by proving ideas wrong. Intuition isn't perfect because if it was we wouldn't need to do any research as we'd know it already, and history repeatedly proves this point.

So I found this article rather interesting because, as the author says, it's generally held that as production of commodities (primarily oil) plateaus and then falls, price will rise and rise since the demand is likely to continue increasing. He states that rather than supply constricted, prices are demand led. OPEC has spare capacity of 5% plus which tempers some price fluctuation, as well as alternative sources take up some slack as the market sorts out its equilibrium again.

It's certainly an interesting read. It's given me some new ideas, but his main argument of there not being a large and continued price increase seems to be okay only in a free market where there are suitable alternatives available and in sufficient quantities. If the fall in oil production isn't matched by increased development of alternatives to compensate (in cost and capacity), then surely prices would rise (although perhaps offset slightly as people reduce consumption where not necessary).

The author says "demand for any commodity is price-elastic" but I would disagree, at least in the case of oil. Oil is rarely used in electricity generation, rather it contributes 98% or so (page 14) to the energy used in transport, and people will usually swallow oil prices rises because of the necessity of getting to work or doing the work (food distribution etc).

The various graphs on this website make for interesting reading as well, the average price has been $20-30 a barrel depending on what timescale you look at. Maybe the peaks are merely bubbles caused for one reason or another (wars, lack of confidence in the market, commercial squabbles, temporary lack of exploration investment?) rather than a sign of long term increases.

So do we think the future is rosy and we don't need to worry about it because the market will find the solutions, or do we need to press the government to make commitments to creating sustainable alternatives?