GWPF Newsletter: Corbyn's Power Grab

Climate Hysteria Morphs Into Energy Socialism 

In this newsletter:

1) Jeremy Corbyn Draws Up Plans To Seize Control Of UK's Energy With Sweeping Nationalisation Of Networks
The Daily Telegraph, 15 May 2019
 
2) Labour Weighs Up Delisting UK Firms If They Fail To Fight Climate Change
The Guardian, 10 May 2019 


3) Corbyn’s Power Grab: Prospects For Public Ownership Of The Uk Energy Sector
John Constable, GWPF Energy, 15 May 2019
 
4) Falling Renewables Investment Stalls Paris Climate Goals
Financial Times, 14 May 2019
 
5) Mighty Greenland Glacier Slams On Brakes & Grows Again
BBC News, 14 May 2019
 
6) Half Of 21st Century Warming Due To El Nino
Roy Spencer, 13 May 2019

Full details:

1) Jeremy Corbyn Draws Up Plans To Seize Control Of UK's Energy With Sweeping Nationalisation Of Networks
The Daily Telegraph, 15 May 2019
Jillian Ambrose, energy editor

Jeremy Corbyn has drawn up plans to take control of Britain’s energy networks in a multi-billion pound power-grab modelled on the nationalisation of Northern Rock.

A leaked Labour party document has revealed plans for a swift and sweeping renationalisation of the country’s £62bn energy networks at a price decided by Parliament.

The blueprint, seen by the Telegraph, lays bare for the first time Mr Corbyn’s plan to bring all energy network companies under public ownership “immediately” following a Labour election win.

The party is planning to employ the same legislative tools used to nationalise Northern Rock in order to justify naming its own price for the companies.

Those in Labour’s sights include the FTSE 100 energy giant National Grid, which is worth over £29bn, and the transmission arms of Big Six energy companies SSE and Scottish Power.

The nationalisation agenda will also include all 19 of the UK’s smaller regional gas and power grids and the massive subsea power cables linking the UK to Europe.
In return Mr Corbyn is prepared to offer the world’s biggest infrastructure investors, banks and pension funds Government bonds at a value decided by parliament.

City sources have warned that any move to “underpay” for Britain’s gas pipes and power lines risks undermining investor confidence in the UK, and could ignite a legal backlash against the Government.

The Labour Party believes that the legal precedent set by Northern Rock means it could offer a price below the market value of the company by deducting a range of costs from the final price.

These could be based on the company’s pension fund deficits or by clawing back “state subsidies” awarded to the energy companies since privatisation. The ultimate price tag would also strip out the value of infrastructure which the Government deems in need of repair or redundant.

Under the plans the energy companies will fall under the control of a newly formed public body, the National Energy Agency. The quango will control the energy system while operating the high voltage wires. It will also oversee a matrix of so-called “regional energy agencies” that will advance Labour’s plans to tackle climate change.

The agencies will be tasked with sourcing low carbon or renewable sources for 60pc of all energy use by 2030. They will also oversee the rollout of electric vehicle charging networks and new energy storage projects across the country.

Full story

2) Labour Weighs Up Delisting UK Firms If They Fail To Fight Climate Change
The Guardian, 10 May 2019 

UK companies failing to tackle climate change would be delisted from the London Stock Exchange under radical plans for greening the economy being drawn up by Labour.

John McDonnell, the shadow chancellor, said he would consider changing the law if necessary to force UK-listed firms to take adequate steps to fight the “climate emergency” facing the planet.

In an interview with the Guardian, McDonnell said much of the City was already aware of the need to make faster progress towards a zero-carbon economy, but his proposals were about “weeding out those that are not taking it seriously”.

“We’ve got to signal now that we’re being serious about tackling climate change. And we’re going to use every lever of government we possibly can to enable that to happen,” he said.

The shadow chancellor said that as a backbench MP he had proposed that the criteria for a listing a company on the stock exchange should include human rights, trade union rights and environmental policy.

“We’re now going to discuss how we can insert tackling climate change as one of the criteria for listing on the London stock market.”

Full story

3) Corbyn’s Power Grab: Prospects For Public Ownership Of The Uk Energy Sector
GWPF Energy, 15 May 2019
Dr John Constable: GWPF Energy Editor

The Labour Party’s plans for the nationalisation of the UK energy sector are becoming clearer.



Proposals leaked to the national press suggest that compensation to shareholders will be discounted not only on the basis of the expenditure required to rectify supposed underinvestment in maintenance, but because of the scale of public subsidies paid to the sector in recent decades. Suspicions that economically coercive climate policy is a precursor to nationalisation are confirmed.

Parallel articles in the Times and Telegraph discuss Labour’s “leaked” plans for nationalisation of the energy networks for both gas and electricity in the United Kingdom, networks the market value of which would be somewhere in the region of £62 billion:

Labour leak reveals plan to nationalise energy network” Times (15.05.19)

“Jeremy Corbyn draws up plans to seize control of UK’s energy with sweeping nationalisation of networks” Daily Telegraph(15.05.19)

“Labour’s plans to nationalise the UK energy industry surpass the City’s worst fears”, Daily Telegraph(15.05.19)

The Telegraph, which appears to be the primary source of this material, reports that powers created by legislation enacted in response to the banking crisis will be used to take possession, and to justify below market value compensation to shareholders on two grounds: a) that the networks have been neglected and need repair; and b) that much of the shareholder value is the result of subsidies. Payments would be made not in cash but in the form of government bonds.

These reports are somewhat confusing and perhaps confused. The energy transmission and distribution networks have not been in receipt of major consumer or taxpayer subsidy though of course there are very generous subsidies to the electricity generation sector.

Without sight of the “blueprint” that the Telegraph has examined it is difficult to be certain precisely what the Labour party actually intends, but it seems likely that the plans actually propose a much broader nationalisation program, covering both network and generation assets, in which case the remarks about subsidy make some sort of sense.

In other words, the Labour Party intends more or less comprehensive public ownership of the gas and electricity sectors, making compensation to shareholders in the form of government bonds, and at values that are reduced on the pretext of, variously, either public subsidies and or poor maintenance.

The Telegraph suggests that the City is surprised by this news. They certainly shouldn’t be, and one suspects that this is an attempt by the journalists concerned to dramatise their story. It is hard to believe that City analysts have been unaware of either the Labour manifesto statement on this matter in 2017, or the confirmation of those intentions in Mr Corbyn’s widely publicised closing conference speech in February 2018 (the  implications and character of the speech were discussed on this blog at the time: “Labour’s Energy Nationalisation Plans”). The general drift of Labour policy has been clear for some time: nationalisation was on the cards.

Even the suggestion that shareholders will be forced to accept discounted compensation is not that surprising. It has been clear for some time that the way in which the energy sector was enthusiastically co-operating in delivering climate policy was making it vulnerable, both to public anger at rising prices and ultimately to nationalisation. I have myself said so explicitly in this blog, writing in December 2018 that:

A very large part of the public perception that energy companies are greedy and ruthless results from the industry’s short-sighted decision to allow itself to be used as the cat’s-paw of climate policy.

The hazards of this situation must have been obvious to the main board directors concerned, but the temptation to collude was certainly extreme. The express-service renewables target timetable required subsidies so large that the increased turnover and de-risked profit made the danger of bad public relations seem tolerable.

The industry may well come to regret this lack of caution. A market sector debauched by subsidies, and already held in contempt by the public, will be in a very weak position to resist nationalisation by a radical socialist government.

No one will step forward to protect a persecuted tax farmer, and the expropriators could be expropriated without any resistance, with the only public outcry being one of approval. --“Coming Clean About Electricity Prices”

In the current circumstances, the public will almost certainly welcome the Labour plans, and it is probable that the employees of the energy sector would also be content with the move because of the increased security that it seems to offer.

The only resistance is likely to come from shareholders fearing low compensation, and government’s answer will be that they have done very nicely out non-market consumer levies and have nothing to grumble about. This will be hard to argue against.

The scale of the discounting on the basis of subsidy disbursed can be estimated by reflecting on the cumulative payments so far. The Renewables Obligation, introduced in 2002 by the then Labour government, has to date transferred over £30 billion of subsidy derived from consumer bills to renewable energy generators, and this is only one of the subsidy mechanisms.

In view of this government might buy out shareholders in renewables at rather low prices.
The Telegraph and Times stories, then, although ostensibly about network assets only, are more significant in many respects for shareholders in generating companies and funds, pension funds amongst them, with large renewable holdings. The Conservative Party, on the other hand, should be asking itself how the Tories’ ‘greenest governments ever’ of Mr Cameron and Mrs May can have been so negligent that they thoughtlessly adopted Labour’s illiberal climate policies that have been an obvious precursor to nationalisation.

The markets will make up their own minds how serious the threat of Labour nationalisation is, but it is obvious that shareholders will be asking their management teams to review contingency plans in the light of the emerging danger.

However, we need not feel too sorry for threatened shareholders. Firstly, they have only themselves to blame, and, secondly, being bought out of long-term ownership of what may in any case be dubious assets, could be quite attractive, even at discounted prices.
Ironically, the interest that is most threatened by energy sector nationalisation is that which is most likely to believe that government is offering salvation, namely the consumer.

Having been required to pay through the nose for intrinsically and increasingly expensive climate policies over the last sixteen years, the consumer could now be faced with the prospect of those climate goals becoming still more expensive as the result of direct state administration and all the inevitable costs and inefficiencies that this implies.

The upside to all this, a single ray of sunshine but real, is that government would no longer be able to blame private enterprise for the costs of its extravagant climate policies. It’s almost enough to make public ownership of energy attractive.

4) Green Flop: Falling Renewables Investment Stalls Paris Climate Goals
Financial Times, 14 May 2019

The world is moving in the opposite direction of the Paris climate pact goals, with investment in renewable energy falling for the second consecutive year in 2018 and spending on fossil fuel extraction rising, the world’s energy watchdog has warned.

Spending on renewable power such as wind, solar and biomass projects slipped 1 per cent in real terms to $304bn in 2018, the lowest level since 2014, according to an International Energy Agency report published on Tuesday.

Investment in coal mining rose by 2.6 per cent compared with the previous year — the first uptick since 2012 — to $80bn, while capital expenditure in oil and gas extraction saw a 3.7 per cent increase to $477bn.

Under the Paris accord, nearly 200 countries pledged to limit global temperature rises to less than 2C above pre-industrial levels.

“Compared to 2015 when the Paris climate agreement was signed, the appetite to push low carbon investments and policies is slowly fading,” Fatih Birol, IEA executive director, told the FT.

Last year, carbon dioxide emissions from human activities reached a record owing to increased fossil fuel consumption.

Full story

5) Mighty Greenland Glacier Slams On Brakes & Is Growing Again
BBC News, 14 May 2019

European satellites have detailed the abrupt change in behaviour of one of Greenland’s most important glaciers. The glacier’s trunk is thickening by 20m a year.

Change in height: There was a marked change after 2013

In the 2000s, Jakobshavn Isbrae was the fastest flowing ice stream on the island, travelling at 17km a year.
As it sped to the ocean, its front end also retreated and thinned, dropping in height by as much as 20m year.

“The question now is: what’s next for Jakobshavn? Is this just a pause, or is it a switch-off of the dynamic thinning we’ve seen previously?”

But now it’s all change. Jakobshavn is travelling much more slowly, and its trunk has even begun to thicken and lengthen.

“It’s a complete reversal in behaviour and it wasn’t predicted,” said Dr Anna Hogg from Leeds University and the UK Centre for Polar Observation and Modelling (CPOM).

The glacier is sited in southwest Greenland. It’s famous for its spectacular production of icebergs – colossal blocks calve from its terminus and drift down its fjord, out into Disko Bay and onwards to the North Atlantic.
More than likely, it was Jakobshavn that spawned the iceberg that sank the Titanic.

Scientists’ interest in the glacier lies in its role as a drainage outlet for the Greenland Ice Sheet. It’s a key channel for the export of ice that can then raise global sea levels.

Full story

6) Half Of 21st Century Warming Due To El Nino
Roy Spencer, 13 May 2019

The observed rate of warming is only about one-half of that projected by climate models at this point in the 21st Century.

A major uncertainty in figuring out how much of recent warming has been human-caused is knowing how much nature has caused. The IPCC is quite sure that nature is responsible for less than half of the warming since the mid-1900s, but politicians, activists, and various green energy pundits go even further, behaving as if warming is 100% human-caused.

The fact is we really don’t understand the causes of natural climate change on the time scale of an individual lifetime, although theories abound. For example, there is plenty of evidence that the Little Ice Age was real, and so some of the warming over the last 150 years (especially prior to 1940) was natural — but how much?

The answer makes as huge difference to energy policy. If global warming is only 50% as large as is predicted by the IPCC (which would make it only 20% of the problem portrayed by the media and politicians), then the immense cost of renewable energy can be avoided until we have new cost-competitive energy technologies.

The recently published paper Recent Global Warming as Confirmed by AIRS used 15 years of infrared satellite data to obtain a rather strong global surface warming trend of +0.24 C/decade. Objections have been made to that study by me (e.g. here) and others, not the least of which is the fact that the 2003-2017 period addressed had a record warm El Nino near the end (2015-16), which means the computed warming trend over that period is not entirely human-caused warming.

If we look at the warming over the 19-year period 2000-2018, we see the record El Nino event during 2015-16 (all monthly anomalies are relative to the 2001-2017 average seasonal cycle):

Fig. 1. 21st Century global-average temperature trends (top) averaged across all CMIP5 climate models (gray), HadCRUT4 observations (green), and UAH tropospheric temperature (purple). The Multivariate ENSO Index (MEI, bottom) shows the upward trend in El Nino activity over the same period, which causes a natural enhancement of the observed warming trend.

Full post

The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.