In the face of an uncertain energy future, be suspicious of confidence

January 16, 2014

People often ask what people at think tanks do. Well, apart from scratching our beards and thinking deep thoughts, we spend a lot of time at ‘roundtable’ discussions. Sometimes we are invited because of our expertise, sometimes because we can give a political perspective to a policy issue, and sometimes because the organisers want a ‘centre-rightist’ who takes the increasingly unfashionable view that increasing carbon dioxide in the atmosphere is something we should be concerned about.

I love the format. It is a chance to explore issues in more depth than you get in a panel discussion, to challenge people’s lazy clichés and generally cause trouble. I often come out with new ideas to pass off as my own.

However, the questions I hate are futurology: ‘What is going to happen to Energy Policy after the 2015 election’; ‘Will the power go out in 2015/16?’; and the worst of all ‘Which low carbon technologies do you think will be important/cheapest in the next 30 years’.

I hate these question because not only do I not know the answer, there is no way anyone can know the answer. As the baseball man Yogi Berra is said to have said: “It’s tough to make predictions, especially about the future.”

Part of the problem is that we reward people who make confident predictions. TV and radio producers value certainty over humility when picking guests. Politicians are derided if they are unsure about the impact of policies might be. Only certain predictions of transformational change are seen as newsworthy. Therefore people at roundtables, on panels, on TV are under pressure to make definitive, even hyperbolic statements (by the way, those who make predictions and then check them later to test where they went wrong, are to be much admired. See BNEF’s Michael Liebreich here).

So therefore, when asked a direct question like, ‘What will this policy do to infrastructure investment over the next 10 years?’, my palms begin to sweat and I reach for a cliché, which may get a few heads nodding around the room, but may not provide any true insight (although one prediction I will make is that you can get a room full of energy people nodding if you say ‘The government needs to provide more certainty’). Behavioural psychologists argue about whether there is such a thing as ‘human intuition’ – are there people who are brilliant enough that their instincts are better than rational decision-making. Research has found such intuitive skill only exists in certain situations that have regular, repeatable patterns such as chess playing and anaesthesiology. It is unlikely the future of the UK energy market and climate policy, with all its variables, uncertainties and complexities is such a ‘regularised’ situation.

The question for those of us trying to formulate energy and climate policy is what you do when faced with such radical uncertainty about the future. This is particularly important for two reasons in the climate debate. First, the ecological and economic impacts of increasing carbon emissions are, to a large extent, unknowable from any great certainty, or at least operate within ranges. They certainly present a risk – in my opinion a very significant one – but the size of that risk is unknowable. Second, if you accept there is a large enough risk that we need to do something about it, uncertainty remains about what is the best way of reducing carbon emissions.

Those who claim that all the technologies to cut carbon already exist and all we need to do is just deploy them immediately are right in the absolute sense. We could stop almost all carbon emissions in Britain immediately if we ordered that all cars were banned, fossil fuel power stations closed and gas supplies cut off to homes and businesses now. But it would become a pretty unpleasant place to live.

But the more important and interesting question is which is the best, least cost way to decarbonise.

This is where the crucial divide is in the climate debate. There are many who have decided which technologies will ‘solve the problem’ and there are those like me, who do not have a clue. The best mechanism we have of exploring the future is a lot of small scale experiments. Successful experiments (or technologies) are then rewarded and unsuccessful ones (the majority, if history has anything to tell us) will fail. This process of experimentation is a market process. It removes the ability of lobbyists to gain special deals, it reveals information and it provides feedback. But the outcomes are uncertain and we find such uncertainty hard to deal with.

This blog originally appeared on BusinessGreen

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