Macroeconomics: UK economy, IB Economics

Another article that highlights the seemingly fragile nature of the UK's energy security with the government apparently committed to building new gas fired power stations to stop blackouts. The problem is that many renewable sources are weather-dependent, so the UK needs some reserve capacity on days that the wind doesn't blow, or the sun doesn't shine.

However, there are concerns that gas-fired power stations aren't the answer - not only is it a fossil fuel but it also increases our dependence on the supply of gas, something seen as risky in a post-Ukraine world. 

Richard Partington makes the case for green energy, arguing that geopolitical events have revealed the fragility of fossil fuel-powered energy systems, and that the current government's unwillingness to fully commit to greening the economy, and the energy sector represents a missed opportunity. Clearly, this sort of view will be popular. 

But does it make it good economics? Or is the real solution to  ongoing energy problems more nuanced - and what role does nuclear power play in this. Either way, the low price elasticity of supply for energy means that we've probably missed the boat to some extent. 

The sort of story that can be spun two ways - either it's an environmental catastrophe, in that despite our commitment to net zero carbon, we're continuing to extract fossil fuels or it's good news for our productive capacity, our supply-side and our potential growth.

Economics should be teaching you how you might navigate this sort of story with meaningful analytical tools. 

The development of new oil and gas fields is a controversial topic at the moment and this article suggests one of the reasons why: apparently some experts believe that the new sources of fossil fuels only have the potential to provide a tiny fraction of the UK's energy needs. However, it might be the case that the energy extracted is exported, but even so, environmentalists are opposed to any new fossil fuel development. 

The Labour Party's energy strategy is going to ruffle a few feathers today - ruling out new exploration of the North Sea and making it easier to build new onshore windfarms in England. However, what are the macroeconomic implications of this?

Does less exploration of North Sea fossil fuels mean that the economy will be operating beneath its productive capacity.  

There's a cold snap on the way, and it's going to test the capacity of the UK electricity generation capacity. Or are we likely to experience power cuts this winter?

Certainly the UK accounts for relatively little of Europe's stored gas, and we're more dependent upon fossil fuels to generate power than we ordinarily would at this time of year. And if the lights go out, it would represent a severe supply-side shock.

The long-term planning has begun already, with the supply chief of Britain's electricity sector already making plans for the winter, amid the ongoing conflict in Ukraine. 

It's likely that any deal is likely to rely upon a mixture of energy sources - including fossil fuels such as coal or gas - and renewable energy too. But the worst case scenario is likely to see households being asked to reduce electricity consumption.

The Guardian's energy editor with a damning indictment of the government's energy strategy, in line with the general criticism. He argues that the focus on nuclear power, and hydrogen and fossil fuel production and lack of concern about energy efficiency border on the criminal. 

In particular, he's scathing about the degree to which the Prime Minister is committed to investment in hydrogen. You would have thought that the man who wanted a Thames Estuary airport, a garden bridge in London and was apparently pondering either a bridge or tunnel connecting the UK with Northern Ireland, might reflect upon his capacity for picking winners. 

A Guardian editorial calling for another look at a windfall tax on North Sea oil producers to lower bills for consumers. But is it good economics? I've had a really interesting couple of lessons this week, moving from the implications of the low PED of energy to the large profits of energy companies and the case for a windfall tax. Lots of really interesting economics - and - lots of opportunities to evaluate with respect to opportunity cost, the risk of government failure, distributional issues and the law of unintended consequences.

The key issue is that whilst such taxes have intuitive appeal, there are many reasons for questioning whether they would generate the returns that you'd expect. 

The recent uptick in global oil prices has far-reaching consequences, particularly for Scotland. This BBC piece highlights the fact that there might still be £330bn worth of oil and gas in the North Sea, something that has the capacity to have a significant multiplier effect.

One caveat, however, is that demand for fossil fuels is declining, so is it likely to be the case that the economy is able to make the most of this, given the calls to ban petrol-driven cars, for example?

The Guardian has carried two articles that have made a similar point about whether or not Labour should press ahead with its policy of accelerating the green transition. Here, Larry Elliott draws a distinction between a government seemingly committed to offering new fossil fuel licences and an Opposition looking to encourage renewable energy. 

He argues that, rather than being cautious, the Labour Party should adopt be prepared to stick to its guns. And who knows, they could end up on the right side of history. That said, history hasn't always been kind to the Labour Party. 

Caroline Lucas writes in the Guardian calling out the government's hypocrisy in changing tack on climate change, arguing that the decision to grant a licence for the exploration of the Rosebank oilfield is immoral.

There's not much obvious theory here but it rather highlights the present uncertainty in, and this will undoubtedly impact the UK's ability to hit its climate change targets, in my view. 

Just a quick overview of how the UK generates its electricity. The majority of the UK's energy - nearly 80% - is still generated by fossil fuels, notably natural gas, oil and coal. However, going forward,  it is clear that if the UK is going to meet its climate change targets, we are going to have to pivot towards renewable energy. 

The Labour Party's energy policy has committed the party to halting the exploration and exploitation of new North Sea fossil fuels - something that has been hailed by environmentalists but which others have argued isn't rooted in economic sense. 

This BBC article looks at the risks of relying on existing fossil fuel reserves, and the risks associated with this in the current energy environment. 

More on the UK's newly announced energy strategy - little of it complementary - and the chaos that led up to it. 

Critics are suggesting that the policy is incoherent, overly reliant on fossil fuels and as yet unproved technology in carbon capture and storage, and with little in the way of innovative adoption of green technologies. 

Another look at potential solutions to the energy crisis with the suggestion that the industry might be on the point of separating energy prices depending upon the source of generation, with lower prices for renewable and other non-fossil fuel sources, whose supply contracts are currently pegged to gas prices. 

The delay and increased cost of Sizewell C nuclear power station highlights the fact that looking to reduce our dependence upon fossil fuels isn't going to be straightforward. But does it call into question the dash for nuclear more generally.

It could be Microeconomic, it could be Macroeconomic, but either way, this week sees the announcement of the government's energy strategy, and Rob Davies speculates in today's Guardian about what it's likely to contain - the mix of investment in renewables, nuclear and more traditional power will determine the economy's energy security going forward and, by definition, have massive supply-side implications. 

It seems that there are any number of reasons why a trade deal with the US might not be a great idea - however, rather than food standards, this article focuses on the environmental implications of any such deal, arguing that the US will try to protect its fossil fuel industries.

As for President Trump's earpiece - it's simply telling him "Breathe in...breathe out"