Bordoff [00:00:03] As the birthplace of the Industrial Revolution, the United Kingdom has long played a special role in the evolution of today’s modern energy system. Today, sky high energy prices are contributing to a cost of living crisis for British households, leading the government to spend tens of billions of pounds to protect consumers. At the same time, climate change remains a key policy concern. While the UK has implemented meaningful climate policies and made progress in reducing its emissions. The UK is not yet on track to meet its target of net zero by 2050. How can the UK’s government make progress on climate against the backdrop of an energy affordability crisis? What’s the role of industrial policy in getting there? And what lessons are policymakers taking away from other countries facing similar challenges? This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. Today on the show. Ed Miliband. Ed Miliband is the United Kingdom’s shadow Secretary of State for Climate change and net zero, as well as a member of Parliament. He was the leader of the Labor Party from 2010 to 2015, and before that the Secretary of State for Energy and Climate Change, in which capacity he oversaw the introduction of the Climate Change Act. Outside of his work in Parliament. Miliband is the co-host of the current Affairs podcast Reasons to Be Cheerful. I spoke with the Shadow Secretary about the UK’s cost of living crisis, the role of oil and gas companies and the country’s net zero strategy. We also discussed his push for a national energy company, along with his deeply unfortunate and misguided love for the Boston Red Sox. I hope you enjoy our conversation. Ed Miliband, thank you so much for joining us on Columbia Energy Exchange. It’s good to see you again and an honor to have you with us.
Miliband [00:02:03] Well, the honor is all mine. I’m a I’m a listener. I’m an avid I’m an avid follower of your work and an avid listener to Columbia Energy Exchange. So I feel I’ve made it that I’m on your podcast.
Bordoff [00:02:15] That’s very kind to here. It extends all the way across the pond. I’m pleased to hear it.
Miliband [00:02:20] You definitely you.
Bordoff [00:02:21] Will. I will tell you now that you’re on and we’re recording, this entire invitation was a ruse to spend the next hour reliving the 1986 World Series between the Red Sox and the Mets. One of the greatest moments of my life. And how Well, why is it that a senior UK official is a Boston Red Sox fan?
Miliband [00:02:40] Oh, it is so interesting. This is what this is the best question you’re going to ask in this whole interview, Jason? I was I lived in the U.S. My father was teaching at Brandeis University, and I lived in the U.S. for one semester where I lived for a year in 1977 with him. But I lived for one semester in 1982, and I went to junior high school and I became a massive fan. And believe it or not, I was in Paris on holiday with my mother in 1996, and I listened on the Armed Forces Radio network. At 3:00 in the morning. I woke up in the middle of the night to listen to Game six, and I remember this sort of amazing feeling as I realized the Red Sox were about to win. Except they didn’t. And I had glittering. I had literally nobody to talk to about it. I mean, it was you know, I know I tried to talk to my mother about it the next morning, and she looked slightly bemused that I was and it was a very crack. I mean, I know it’s hard for younger listeners to appreciate this. This is the days before the Internet, obviously, but it was a very, very crackly reception. And you could just have it was a medium wave, I think, and you could just about get out of here like three quarters of the commentary.
Bordoff [00:03:48] Well, I’m glad nearly four decades later, we could. I could. Now you have someone to talk to about it.
Miliband [00:03:53] My kids have actually become Red Sox. I’ve got two boys who are 12 and 13, and they are now Red Sox fans in the morning normally says, as they said to me, oh, God, the Red Sox lost. And they say, yeah.
Bordoff [00:04:04] Well, the Red Sox have had a better run recently than than in the mid mid eighties when the Mets came from way behind for one of the great upsets in Game six and then game seven. We will we’ll talk more about that off line but it’s good to. I was curious about why you’re a Red Sox fan. So good to know. Let’s move to energy and to climate change. And there’s many things I want to go deep into, not surprisingly. But, you know, some of our listeners, I think, will not be that familiar with where what the state of play is in the UK overall right now. I mean, people know obviously there was significant challenges with with energy prices and whatnot across Europe in the last year, year and a half. And of course, the whole world is not making enough progress on climate change. But let’s start by setting the scene at a high level. How would you describe the state of play right now in climate and energy policy in the UK? Where are the differences between Labor and the Conservatives? And tell us a bit about what what the Labor Party would do moving forward.
Miliband [00:05:05] Look, I think the biggest thing that you have to start with is the what we call the cost of living crisis, a consequence mostly of Russia’s invasion of Ukraine and what has happened to gas prices. That’s that’s domestic gas and electricity bills, The utility bills that people pay. Even though the gas price has fallen back somewhat, they are still double what they were 18 months ago. You know, we’re seeing the worst fall in living standards in recorded history in the UK as a consequence of inflation, which is largely driven by what’s happened to energy prices. Worth noting at this moment, Jason, that we only imported about 5% of our gas from Russia. So this is a consequence of the gas that we get, including the home grown gas being sold on the European market. And what happened to that overall price set on the market. And you know, this is in a way got to. The starting point, I think, for the conversation, because it it overshadows everything else in British politics and rightly so. As you talk to my constituents and people across the country, and I think what’s different now from if we’d been having this conversation a decade or more ago, I was Climate Change and Energy Secretary 2820 ten. Is that the answer? To this crisis is the drive for zero carbon power, because last summer renewables in the UK were nine times cheaper than gas. They remain multiple times cheaper. Solar, wind, including offshore wind, onshore wind and. And I think this is what’s so interesting about the the overall argument that the architecture of the argument, which is our argument that we make here, is we want this drive, this green sprint, as we call it, because it will lead to cheaper bills, energy security, which is really, really important jobs, emulating some of what President Biden has done with the Inflation Reduction Act and climate leadership. And I think that, you know, in a sense, climate policy or climate and energy policy has moved from the margins to the mainstream in terms of its central party to the arguments in British politics.
Bordoff [00:07:29] And as you said, renewables often are cheaper than hydrocarbon alternatives, although what we need to do is not only incentivize more zero carbon energy, probably need to incentivize electrifying things that are not electric today. And electricity is still quite expensive, right? Several times higher, I think around three times higher than the price of gas itself. So what does that mean for how policy should be designed and how electricity prices should be set to encourage a transition?
Miliband [00:07:58] Well, look, part of the problem we have here is that as a historical artifact, electricity prices are linked to the gas price. So even though renewables are so much cheaper, that doesn’t at the moment automatically feed through into electricity prices. But but we’re very clear in the Labor Party about where we need to go, which is we need to go all out for the green sprint. So we’ve said that we will decarbonize our power sector by 2030, which is obviously a very, very big made a big commitment that we’ve made and a challenge challenging one. But we think the right, the right commitment, we will have a massive program of home energy insulation. We will move to having heat pumps as a big feature of the way home heating is provided and in a way, I think. One of the ways I think about this is that a net zero, a zero carbon electricity system is the linchpin. You know, it goes with your electrify everything idea. It’s the linchpin of the move to net zero. I mean, we should talk about some of the other challenges, whether it’s in the household sector or land or transport in the UK, where actually policy has done worse than in the power sector. But but unless you get the power sector right, it seems to me, you know, you’re not really going to realize your net zero ambitions. And that’s why we’ve made that such a feature of policy.
Bordoff [00:09:28] So that would presumably require some change to how electricity prices are set, where maybe they are not all linked to the price.
Miliband [00:09:34] Absolutely. Absolutely. That’s what we would do if we were in government. We’ve got to find a way of delinking the gas and electricity prices, because at the moment we’re sort of cheating ourselves out of cheep, cheep, cheep renewables.
Bordoff [00:09:47] And as you said, net zero electricity by 2030 is is a very ambitious goal. Can you talk about how you would do that? There are different instruments. Some might be sticks like a carbon price. And actually the UK has made progress with with putting a price on carbon in a way that frankly the US hasn’t. The other is the route the US is going down, which is enormous subsidies and government spending. And there are other options too. But. But how do you think about what the UK government should be doing?
Miliband [00:10:16] So it’s actually what’s really interesting in this area is that actually. You know, I think there is a big case for government intervention which will come on to for for industrial policy reasons. But when it comes to delivering 2030, there’s an easy way to think about it, which is we need to double the amount of onshore wind we have. We need to treble the amount of solar power and we need to quadruple the amount of offshore wind. Now, the truth about Britain in this is that there is a lot of private sector investment ready to go and do those things, but there are massive blockages in the system. And I know this is a very familiar thing in the US debate as well. So we currently, believe it or not, have a ban on onshore wind in England because the Conservative government will put off by a few of their parliamentarians who said We don’t like the way this looks. And I constituents, by the way, by margins of 20 to 1, the public support for onshore wind. So it’s completely irrational. We have we have massive wider issues of the planning system, which are very slow, what you call permitting. And then we have big challenges in terms of grid. But but actually lots of the achievements, the vast majority of this achievement of 2030, you know, can be done with the private sector playing a leading role. If we can get rid of these blockages in our view and we’ve had this sort of model, then obviously there’ll be some nuclear power as part of it. We have existing nuclear power plants and there will be some some some backup on the system as well. So with a gas with six backup now and will provide a good link to a study we had done on this. But but I think sort of interesting question is lots of this can be done by the private sector. We’ve also said, though, that and are we going to set up a clean energy company? We called GB Energy a publicly owned energy company. Now, partly that is because, you know, sometimes the risks the private sector won’t want to take and GB energy can play a role in relation to that. But it’s also a recognition that the way we have to deliver on this is we’ve got to deliver the cheaper bills, but we also have to deliver. And this is, of course, President Biden’s massive insight on the jobs promise of this clean energy revolution. And we’ve looked at other European countries that have been successful not just in generating offshore wind in Britain that’s been reasonably successful in this, but but but delivering jobs and which we haven’t been successful in. And all of them have a a public energy champion that drives supply chains and jobs and wealth. And it’s an amazing fact, little fact, which is the 45% of Britain’s offshore wind assets we have a lot of offshore wind assets are owned by state owned foreign governments. So, in other words, not just private companies, but state owned private companies, because because of these national champions, you know, companies like Vattenfall or Orsted and others that have invested in UK assets and good luck to them. We welcome that investment, but we want to do that ourselves as part of a proper industrial policy.
Bordoff [00:13:43] Yeah, I’m very interested in understanding more and for our listeners to in explaining the thinking behind GB energy, I mean, I’ve often written and read about the history of the 1960s, the seventies when the U.S., at least in the U.S. and other parts of the world to government, played a much more active role in the energy sector. And then there was this process of pulling government out in the seventies and eighties across the U.S. and Europe. As you said, you see several state owned companies across Europe. You see state owned companies in other parts of the world that maybe raise questions and challenges about the potential for politicization, or will politics play too big a role where you see big swings every X number of years, you know, in based on political party control? What given what you said, given the strength of of course, there are market failures and you want to price carbon, you want to deal with externalities. But why do you think a state owned energy company is necessary or helpful to accelerate the transition.
Miliband [00:14:48] So politicians anecdotes, you would have to be careful with them. But let me start with that anecdote. So I went to the largest onshore wind farm in England and Wales some months back, and it’s owned by Vattenfall, but it’s 100% owned by Vattenfall. Vattenfall is a Swedish firm, which is 100% owned by the state. And I was saying to people, why is it that other countries recognize the that they can have a state owned actor investing in. Our onshore wind, but we wouldn’t do it ourselves. And there’s really no sort of logic to it now. Now what is the logic for it? And I’d say there are two things, really. First of all, maybe three. But first of all, this is primarily a tool of industrial policy, because what has if you look at, say, Denmark, a country like Denmark, you know, they have something like 1/10 of 1/10 of the population of the UK, but three times as many jobs in the wind industry. Now, why is that? It’s because they had a proper industrial policy and Orsted was at the core of that industrial policy. So driving supply chains, driving jobs and wealth in Denmark. And the question that many people ask about Britain is how can we be the second largest generator of offshore wind in the world but have done so comparatively poorly when it comes to jobs? And lots of promises have been made by politicians about jobs. And this is really important, Jason, because it speaks to the economic dislocation that our country and yours felt we saw with Brexit. We saw it arguably with Trump. People are asked, where are the where are these well-paid jobs for me and for my for my kids? And and we haven’t delivered on them. So, look, first of all, it’s a tool of industrial policy. Secondly, I think it’s just a simple fact to say, you know, if other countries recognize that there are jobs, there’s wealth to be generated, why would we rule ourselves out from that? I mean, yes, we want those foreign firms to be investing, but why shouldn’t we be doing that, too? And then thirdly goes to the point about speed, because I think that, you know, there may well be areas, less mature technologies. Tidal power is one example I would give. Nuclear could be part of this, too, because we’re in favor of new nuclear, where the risks to the private sector on its own are too great for it to invest. And the role of government as a as an investor is really, really important. So that gives you a sense of why we think energy is so important.
Bordoff [00:17:31] I guess that, you know, it comes to the question and I’d love to hear you tell us what industrial policy means to you. I think, you know, some of your counterparts in the U.S., at least in this administration, would say they are pursuing industrial policy. They’re not doing it with national energy companies, but deploying large amounts of government spending, loan guarantees, subsidies, tax credits, and trying to unleash market forces where competition and innovation and we don’t know which technologies are going to win. But let’s have those market forces spurred and directed by government sort of trying to level change the playing field to favor zero carbon energy is going to lead to a lot more spending and and driven by those market incentives for shareholder returns. That’s what’s going to accelerate the transition. What’s wrong with that way of thinking about it?
Miliband [00:18:21] I look I am you know, I consider myself very much part of the movement that President Biden has put in place through the Inflation Reduction Act. Very smart people that you’ve had on your podcasts, like Heather Bouchet and others, Brian Deese, who obviously played an important role in IRA and the you know, in bringing Ira in and and writing its provisions. But the way I put it is this and I maybe this is Brian’s phrase, which is this is about catalytic public investment. So the billions from the public sector need to be matched by tens of billions, hundreds of billions from the private sector. And so 18 months ago, Labor committed to £28 billion a year of investment in the green economy because it is about the jobs of the future. Now VB Energy is part of it, but there are also things and this is this is where it’s really important to understand the market failure piece of this, that there are things which the the private sector on its own gains, the private sector won’t capture, would necessarily have an economic incentive to invest in. So ports, for example, you know, you’d need decent ports to be and ports that are capable of carrying these big turbines. But the private sector on its own might not make the investments you need in that. And, you know, the the preparation, the partnership for Gigafactories Electric battery factories, big part of it, the conversion of steel to green steel. And these are things where the market on its own won’t necessarily provide. And I think I think the shift in thinking that there’s been and there was a, as you will know, a very important speech by Jake Sullivan on this relatively recently. And it reflects what Brian and Heather and others have said. You know, it it does matter to developed country governments whether they have domestic. Manufacturing or not. Our view is not we simply go to the least cost place. Why is that? It’s a matter of security. And, you know, it says one thing that Russia’s invasion of Ukraine taught us. It’s about the, you know, national security implications of your energy policy. It’s about security. But not just national security is about economic security for communities. You know, the the we know just that trade policy. I was on a panel with Joe Stiglitz recently talking about this. We know the trade policy first best trade policy might tell you the rules of comparative advantage. And so might tell you just go to the least cold place and you use your comparative advantage. But this can have massive dislocating effects. And and, you know, the the penalties can be not narrowly focused on those individuals who lose their jobs when when trade goes abroad. And the benefits are very evenly and thinly spread. And so for economic security, it really it really matters to communities. Whether you have a steel industry, you know, we’re not going to stand by and say, well, it doesn’t really matter whether we have a steel industry. We care about having a steel industry. But if you care about having a steel industry, you need to make this transition possible for the steel industry. And that’s just sort of one example in my approach and what automotive sector matters to us on economic security grounds. It’s it’s an essential part of the backbone of many communities in the UK. But whether we have that automotive sector will in part depend on whether we have the gigafactories, and that’s where there’s a big role for government in investing in them. So I think that’s been a necessary change of thinking. I will say one other thing and forgive the long answer. I think all of us face a challenge. Progressives, you know, in the US, UK and Europe face a challenge, is translating this and the kind of philosophy, if you like, of the Inflation Reduction Act into the way the WTO and other institutions work. I think in a sense and you and I discussed this when you were in London recently, you know, in a sense, the sort of the thinking behind domestic policy is something like the Inflation Reduction Act is perhaps ahead of the kind of relatively or relatively neo liberal kind of philosophy informing some of the WTO rules. And that has got to change to it. So it doesn’t just become an excuse for protectionism, but it recognizes the proper role for industrial policy.
Bordoff [00:22:53] Great answer and very, very helpful. The as you said, I think across many countries, people are rethinking some of those basic assumptions of a globalized economy. And maybe if 90% of the critical minerals you need or refined and processed in China or 90% of your iPhone comes from components made in China, that may be a risk to supply chains. At the same time, I think it is probably also the case. Tell me if you disagree, that any one country, the U.K., the U.S., whoever is not going to domestically produce all the copper, all the solar panels on Ethereum it needs, we still will need trade. So how do you pursue that industrial policy and not not veer too far in the direction of protectionism and losing some of the gains of trade and some of what will need for the transition?
Miliband [00:23:40] Well, there’s a number of parts to this also. I think, first of all, to focus on your strengths. If you think about the UK, we are not thinking, well, we can compete in every single area of manufacturing for the green economy. And as you say, the notion that everything should be produced here would obviously be absurd. We’re not about a fortress economy, but there are areas of natural strength that we have. We have the North Sea, which is a relatively shallow and sea which has certain advantages for certain types of offshore wind. We have huge caverns in the North Sea, which are particularly going to play a particular role in relation to carbon capture and storage. I think it’s been calculated that we can store all of the UK’s historical emissions potentially in the North Sea through carbon sinks. Again, hydrogen, green, hydrogen. There’s a real role and we’ve got a leadership in offshore wind generation and the potential for green hydrogen here. There’s also cooperation with some of the other countries situated around the North Sea. So I think I mentioned automotive and steel, which are historical historic industries of the UK and and I think are industries of the future. So I think there are certain areas that we can constrain. I think it is also worth saying a couple to other things though, because I think I have found the European debate in particular about IRA relatively distorted and distorted in in a number of senses. You know, first of all, Ira is a lot about deployment subsidies, not simply manufacturing subsidies. We’ve had deployment subsidies, albeit not necessarily directly from government. But through consumer bills for, you know, 15, 20 years in the U.K., we have something called the renewables obligation, which was subsidizing onshore wind, offshore wind, a feed in tariff subsidizing solar. So let’s get some of the you know, let’s get we’ve had conversations with the framers of IRA about this. Let’s get some of its provisions in. In perspective, everyone talks about the automotive tax credit. That is that’s a particular provision. But lots of the parents aren’t in that category. Secondly, this is a massive market chase. I mean, we $5 trillion a year, The IEA say we need a year in investment in clean energy investment, public and private, from 2013 to 2050. There’s a lot of this market to go round. And then thirdly, something which I think is very important and again, is a fruitful area of future cooperation, is if you think about OPEC as a cartel which restricts production of oil in order to inflate the price. This is a potential Arab corporation which has massive positive externalities for countries that are not necessarily the producing country. In other words, we just to make it concrete. Why have we seen an 89% fall in the cost of solar over the last decade? Because learning by doing we’ve invested public and private in solar. Why have we seen a 60% fall in the cost of wind? Similar reasons. So there are big spillover benefits from a country like the US and indeed the UK and indeed Europe investing in these areas. You know, which I think is a real positive for the for the for the world.
Bordoff [00:27:04] So where do you see these trade tensions resulting from the IRA going? You’re describing an opportunities to cooperate, but there is clearly a tension as well, where many European governments have expressed concern that their companies may not qualify in the same way for the tax credits. The European Union’s talking about carbon border adjustment mechanism. And if you’re trying to level the playing field for your domestic energy intensive industries and you’re imposing a carbon price on them, you may not look favorably on another country that’s, you know, has an incredibly large and generous green hydrogen tax credit, for example. Are we headed toward more trade conflict or not necessarily?
Miliband [00:27:43] Look, I think the truth about this is that, you know, different different governments are feeling their way in response to Ira. You know, I think the people who wrote Ira did that really settled your show. You know, not every provision in IRA is perfect would necessarily have been designed in the way it is when the sausage gets made in your Congress or indeed in our parliament. You know, it’s not always the perfect sausage. So, you know, there need to be discussions. And I think there are continuing discussions with the administration about, you know, the specifics of the way the automotive tax credit is going to work. I think we at all costs should try and avoid a sort of action, which is a kind of retributive action of the IRA. What I think we should be doing, whether it’s Europe or the U.K. and this is what labor will be doing in government, is learning from the provisions of IRA, saying, look, what are the positive things here that we can emulate that could that could help us in domestic manufacturing? And then we’ve got to find ways of working together, you know, working together on supply chains, working together on the crucial issue of critical minerals. And then on C bands, this is a discussion we’re going to have to have. I mean, the ideal is that every country is taking action, but Europe seems to be the you seem to be pressing ahead with sea bombs. It’s something we are looking at. You know, this this may be a route we need to go down, but it’s something you know, it’s not it’s complex. There’s complex things, including for developing countries involved in cbam. So it’s not something you’re going to dive, you know, headfirst into, but it is something that we need to look at so that you can get closer to a level playing field.
Bordoff [00:29:27] You said a moment ago, whether it’s the UK or Europe, obviously those are not the same thing anymore. Can you talk about what impact Brexit has had? Is the UK more or less able to deliver on its climate goals after leaving the EU?
Miliband [00:29:42] Mean I think we were pretty able to deliver it when we were in the EU. We were a quite a major player in the European negotiations. I think we were a very positive force in those European. We negotiated it the cops as part of the so-called European bubble of negotiations and outside. But that argument is settled where we’ve left the European Union. As I say, that’s a settled argument. We will cooperate with the US will cooperate with the EU outside the European Union. There are particular challenges we face on something like in something like the automotive sector because of what is contained, there are the complicated rules of origin and so on that are contained in the free trade agreement with the EU around gigafactories and batteries and where that produced, which makes the situation challenging for our automotive sector. Some people would say, well, Britain is more able to do state AIDS or industrial policy outside the EU. If I’m completely frank with you, I think we we could have done it more than we did while we were in the EU. You know, we took a relatively cut of narrowed restricted view of what was and wasn’t open to us as an option. But but I think the one thing to say to your US listeners is just because Britain is outside the European Union doesn’t mean we can’t cooperate with EU countries and we will. And there’s, you know, we will all do better if something like the North Sea we will we’re part of a club of seven or eight countries. Around the North Sea. I’m glad to say the government recently joined that club. You know, there’s definitely work we could do on grids and cooperation and so on. You know, working out how we’re going to work together on hydrogen carbon capture. So. So, you know, I think we will be cooperating with the EU countries as well as with the US.
Bordoff [00:31:44] A couple of other topics I want to come to. But but just to close the loop on GB energy and make sure I understand it. Do you envision that as a subsidy engine lender, investor or a retail entity or kind of an upstream developer building building offshore wind like Orsted.
Miliband [00:32:01] Generator, which we see is a generator of energy? But the the gap we’ve seen is a domestic national energy generating champion that can provide clean power to the to the grid and to supply companies that can cooperate with local entities, local authorities, municipal authorities. Really interesting lessons from Germany, talking to a company like Iwg about the way they cooperate with municipalities that are doing their own energy. We want to see that as part of GB energy, investing in leading edge technologies. As I said, whether it’s tidal or other technologies like that, potentially green hydrogen. So and and cooperation with the private sector. So it’s in the generation space.
Bordoff [00:32:47] And, you know, you can, of course, had a national energy company and it was privatized. BP And that’s a company that recently announced plans to move quickly, more quickly toward clean energy than some other companies reduce how much oil it was producing. It pulled back somewhat on those plans and was massively rewarded in the stock market by shareholders. I’m wondering what your response to that was and does that kind of make the case, in your view, for why you think a state owned company is needed? Does it need to be one with a different set of timeframes, maybe willing to accept different, different shareholder returns?
Miliband [00:33:26] I mean, it’s a really good point of, look, I think that is positive investments to be made, which are which can generate resources in the renewable sector. I think it’s fairly that’s fairly obvious and that’s mainstream, very mainstream thinking. But the way I think about this oil and gas issue is if your BP or Shell or others, you’re answering to your shareholders and your shareholders are interested in the the the quick return now. And in a sense, that’s why government has such an important role in relation to. You know, understanding that the companies have their responsibility, but government has ours. And he is to think, think from the view of the longer term. And you know, we have a. And I think a really important position on oil and gas, which is will continue to use the North Sea, but we won’t have new oil and gas licenses, new exploration licenses. And I think that’s the right position to take. Why? Because the science tells us very, very clearly that if we carry on as we are, we will bust way through 1.5 degrees and end up with three degrees of global warming. You know, we can all say, oh, well, it’s for somebody else to make the move. But actually, you know, I think we should listen to the science. It’s also the case that the more you invest in new exploration, it doesn’t stop the lower bills because the bills are set internationally. Much of the oil is, in any case, exported, as is our gas supplies. So in a sense, we the the companies take their own responsibilities for their actions and for their shareholders. But we’ve got to think for the point of view of the the wider national interest and indeed, crucially, the long term. The Government of Wales here has something called the Future Generations Act, which is thinking through things through from the vantage point of future generations. What would future generations want us to be doing? I don’t think they’d be wanting us to get off fossil fuels as swiftly as possible and into clean energy.
Bordoff [00:35:32] Yeah, you anticipated. One of the things I was going to ask you, you talked about the opportunity in the North Sea for offshore wind, for carbon capture. Of course, there’s opportunity for oil and gas and has been for for a long time. And and it is a process of transition. The world is going to use oil and gas for an extended period of time still to come, hopefully in declining amounts if we’re on track for our climate goals, although that’s not happening yet. Oil demand is going up this year. Gas, gas use is going up this year. So that the criticism I sometimes hear when I’m talking with people in London is that that production is going to happen somewhere. And even if it starts to be declining amounts every year, is it preferable for the UK or for the U.S.? You hear this argument to for that to happen in the Gulf, in Saudi Arabia, the UAE, elsewhere, instead of, say, in the North Sea. Are you worried that oil and gas investment will leave the UK with that licensing posture and and tax rates, including the windfall tax? Is that a concern and or is that kind of what should happen for a transition?
Miliband [00:36:39] Look, look, we’re going to continue to use existing fields in the North Sea and it will carry on serving us for decades to come. But just to go straight to your question, the demand side matters, but the supply side matters. Do you know if we carry on producing and the government’s current government’s position in the UK? Every last drop, which I know is not the by the administration’s position, we will, I think, busted budgets seven times over something, something extraordinary. And in my experience of these climate negotiations is that. Your your domestic policy matters in the authority you exercise in the negotiations. I was with Sultan al-Jarba, who is the president of COP 28. As you know, the UAE is also the head of the oil company. I know him well from my time as climate change secretary. And, you know, I said, look, you got to one of your jobs here is to show that an oil and gas nation is serious about the transition now. His question to me was, well, what are you you know, what was your position then? And I was able to say to him, well, this is our position. Yes, we’re going to carry on using the North Sea. But but but no, we’re not going to grant you licenses because the science could not be clearer. And I think what’s so interesting about this, Jason, is that I think this this is going to be this demand is only going to grow. You know, the IEA says this is what the science tells us. Hundreds of scientists wrote to newspapers recently in the U.K. and said this. The U.N. secretary general says this. Now, what is the single most important thing we learned from our experience in the climate world? We’ve got to follow the science. If we say, well, well, look, we’ve got to get out. We’re going to carry on doing it as we are, it’ll be for someone else to do the right thing. We’re never going to get we’re never going to take ourselves forward. And then the answer is, I’m not looking to have more imports. I’m looking to get off off these areas as quickly as possible. Just to give you one example, in order to get the North Sea investment, the government is giving massive tax breaks, £11 billion, which by our standards is quite a lot of money to north the oil and gas companies. So we have a a new field, the Rosebank field, where the government is going to be contributing something like 3.75 billion to that to the field in tax breaks. Now, wouldn’t those tax breaks be far better used in renewables, green hydrogen, the fuels of the future? So, look, this isn’t an easy position to take and it’s something we’ve thought about very deeply. But my lesson in politics is, you know, you really have to do the right thing. And and and in this area, above all, we can’t you know, we all say these the decisive few years, what we do in these few years will shape the next, you know, decades, hundreds of years to come. And and different countries face different compelling constraints. So this is no criticism of the US or other countries. But for us in Britain, you know, we can take this decision and I think it’s the right decision. Yeah, part.
Bordoff [00:39:54] Of what I think Dr. Sultan might say as well is, you know, the UAE is going to invest a lot in clean energy at home and abroad. But even in a scenario as ambitious as 1.5 degrees, the IEA tells us the world’s using 25, 30 million barrels of oil. We’re not on track for that. Maybe maybe it’s more we’re going to be low cost, low carbon. You know, piece of that will be 4 million of those 25 or 30 plus whatever.
Miliband [00:40:19] But that’s what everybody and.
Bordoff [00:40:20] That’s what I was going to say. But the problem is everybody says the same thing and they can’t all be right. But but that was sort of the question I was asking you. You know, how do people think about whether the North Sea should be part of that? But I guess your point is it can’t be true for everyone.
Miliband [00:40:35] So it carries on being part of it. You know, carries will be part of it. It’s just you know, you can’t you can’t say, well, we’ll just carry on extracting every last drop.
Bordoff [00:40:45] By the way, you’ve just on the topic of production, you’ve also called oil profits windfalls of war recently. And you know, some say it’s always been a boom and bust business. There are down, down years where you lose money and then there are years where you make a lot of money. That’s what it looks like right now. How do you think about windfall profits? And are these windfall profits and should a windfall profits tax remain in place for an extended period of time? And are you worried about what that would do to investment?
Miliband [00:41:13] I mean, these are definitely unexpected, an honor. And, you know, prophets, when, you know, we’re talking about a gas price that was multiple, multiple times higher than it was before the war started. I think it’s interesting that the government here was very opposed to windfall tax, but in the end, e, you know, agreed to put one in will be it with these big loopholes because they just the pressure was too great. And just to be clear, Jason, this is money that’s going direct, you know, from people’s bills into the into the profits of these companies. It’s not like there’s some indirect relationship here. This this, you know, this this gas that is being produced at very, very, very high prices. It’s it’s the thing people are paying for. Look, we’ll obviously say more about the tax rates that we have in place when we get closer to a a general election. You need to have, you know, fair, fair tax rates. But but I certainly think for this for this period where there are these big windfalls, I think it’s perfectly justified. And by the way, I think even some people in the companies think it’s justified. I mean, Bernard Looney, the chief executive of BP, did us a favor because he said when asked, will it affect your investments, these windfall taxes? He said no. So, you know, he was in a more sort of forward position on this than the government at various moments.
Bordoff [00:42:41] You mentioned earlier when you talked about net zero electricity by 2030, doubling onshore wind, tripling solar or quadrupling offshore wind. You didn’t mention nuclear. What role does nuclear have in meeting those goals?
Miliband [00:42:55] So the reason I didn’t mention new new nuclear is because we’re in favor of new nuclear. But it will take a lot beyond 2030 to build these new stations. We have Hinkley Point, which will be coming on stream in the later part of this decade and also a new station at Sizewell. The the again, only full of the sites we are lucky to have in the UK under the Climate Change Act that I passed in 2008, something called the Climate Change Committee, which gives independent advice to government. And what they say is that on what they call the balanced pathway to net zero, we need something like ten gigawatts of new nuclear. So that’s like the equivalent of three large nuclear stations. So the thing I would say to be said to people when I was energy secretary and I continue to believe is to to make this transition happen, we need everything. I mean, we need to electrify as much as we can, but we also need all the power sources we can get our hands on, you know, and if it’s safe and if it’s zero carbon, which I think that a nuclear is, then we should be doing it. And then it’s just simply a question of cost and how it competes on in terms of cost. So we see nuclear as having a really, really important supporting role. I would say for a system, you know, the majority of which will come from renewables, but of course it provides firm power, nuclear, which is really important.
Bordoff [00:44:21] And part of that plans in the past had included Chinese investment is that people are rethinking that. Is that fair to say?
Miliband [00:44:28] I think people are rethinking that, and rightly so. I mean, you know, all of the pre preceding conversation about, you know, security and national security and so on, people are rethinking that. I think it’s the right thing to do.
Bordoff [00:44:39] Is hydrogen overhyped or do you think its role is going to it should have as big a role as everyone is talking about these days?
Miliband [00:44:46] I mean, look, I think Hodgson’s got a really important role in particular for industry and I’d say the industry is at the front of the queue when it comes to you, hydrogen and the hydrogen we need. So no, I think hydrogen is really, really important. And again it goes to my point, which is, you know, I think hydrogen will really be a really important source of storage as well. In a way that’s one way of thinking about hydrogen in the future. So I think it’s I think it’s it’s got a really, really important role in the system. And it’s, again, one of these areas where catalytic public investment from government can help bring down the cost, because obviously the costs at the moment are you know, they’re not it’s not sort of cost competitive with other forms of of of energy provision. But but it will be it will become more so. And I think Britain could do really well in green hydrogen in the future.
Bordoff [00:45:39] Coming back to the, you know, security and trade issues we talked about earlier, how should the US and the UK work together, other countries in Europe perhaps or other parts of the world on critical mineral security? I know Rishi Sunak’s proposed sort of a narrow trade pact on critical minerals or something like that. A good idea, or how do we how do we change that situation and excessive dependance on China?
Miliband [00:46:00] Well, there’s look, there’s issues about the relationship with China, but there’s also issues about where are these critical minerals, minerals coming from? What are the labor standards in those places, I think. You know, we must have let this critical minerals issue sort of somehow become a barrier to moving forward with with green investment. But I think it’s a really, really important way that we can work together as countries. And we and and, you know, again, I think discussions are sort of in a way at the base camp stage. But I think thinking about, you know, what what are the supply chains that we can rely upon? What are the supply chains that will give us, you know, good standards and indeed security of access to those critical minerals? What are the critical minerals that we can be using in our technologies? Because some critical minerals are much more scarce and others others have greater abundance. So, look, I think it’s the thing that we are working on and I think the world needs to be working on. And again, cooperation in this area is absolutely crucial. You know.
Bordoff [00:47:02] This conversation so far has followed, I think, the way a lot of these conversations go with a lot of discussion of options on the supply side. And we haven’t talked maybe enough yet about how to curb demand and increase energy efficiency. I lived in the U.K., and I remember old, notoriously leaky buildings. What? But retrofitting is expensive. So how can the government achieve that? How much of that and how much of that decarbonization of buildings is about electrification or putting putting hydrogen into heating or something else. But but also just how to reduce demand?
Miliband [00:47:37] Yeah. Look, we we are so rubbish efficiency as a country as anyone who stayed here knows. I think I’m right in saying that many houses, this goes back a long way were partly because they were using coal. Gas were designed to be drafty in order to sort of avoid people being sort of poisoned by the fumes. But anyone who has visited the UK knows we have drafty homes. We’ve made a big bet on this, which is we have set aside 6 billion a year of investment, about 28 billion a year, which will invest in a big insulation retrofit program, partnering with the private sector, but obviously, you know, providing the lion’s share of that help to low income people in particular. And we face a massive fuel poverty challenge in the UK. And, you know, the best way of tackling that challenge. Yes, subsidy can play a role, but the best subsidy on bills, but the best way of checking the challenges with energy efficiency, it can cut bills in a very, very significant way. And what’s more, if you think about the deployment of heat pump technology, which is going to play a really, really, you know, the central role, I think in lots of home energy, you know, you need a degree of insulation to make that happen. So when we come into if we come into government after the next election and next election will be next year, we will embark on an emergency program of home energy insulation. We believe we can. We’ve got 90 million homes, about half of our homes, a bit more, which are kind of cold, drafty, below the kind of requisite standard. We believe we can insulate 2 million of those a year. And it will make and this goes to the bigger argument, I think, Jason, which is why climate is not a sort of, you know, an issue just about climate. This is about lower bills for people. It’s about better quality of life. It’s about yes, it’s about using, you know, less gas imports and so on. But it’s about hundreds of thousands of jobs. And I think this is the big picture here. I feel like, you know, we’re in the better Lives business and it’s really, really important to always remember that, yes, we want to solve the long term challenges of the climate emergency, which, you know, we all take incredibly seriously, but we’re also about the better lives in the here and now. And if you like, the insight of the Green New Deal, the Inflation Reduction Act is that point, which is by rising to the climate emergency, we can make better lives for people now. And that is the political coalition I think is available in this area. And that’s you know as well as the principled reasons for doing it. That’s why I think, you know, it’s such an important now part of progressive politics here and in the US.
Bordoff [00:50:20] I want to close by asking you to look outside the UK. You mentioned earlier the 5 trillion, 4 trillion a year that we need. And you know, at least half of that is in parts of the world that are using very little energy today. And, you know, the late, late 18th, early 19th century, the UK was the industrial revolution for which from which much of the emission emissions that had accumulated were born stemmed from that. That was that that emerged in the UK. Talk about what you think that means in terms of who bears the cost of this, the historical responsibility that developed countries have. Obviously that was front and center at the COP this year in Egypt. It will be next year. What should countries like the UK be doing for the transition in lower income emerging and developing economies?
Miliband [00:51:07] I think you’re right to point out the. History, I think is also their worth focusing on the present, which is if you take the continent of Africa, its emissions are the lowest of any continent in the world, but it’s going to be the hardest hit by the effects of the climate emergency. And, you know, again, one of the differences from us having talked a decade ago is the climate emergency is here now, You know, whereas in 2008 we’d be saying, yes, we see the signs of it. Yes, we’ve seen some terrible events. I don’t think anyone can doubt that it’s now here. And so I kind of prefer to focus on the present and say, okay, so how do we move forward as a world and. You know, the one fact I like to cite comes from the someone at the local Kingsmill bond that the Rocky Mountain Institute is for 90% of the world. New renewables are cheaper than new fossil fuels, but that estimate is based on the idea that the cost of capital is a reasonable one. And so I think front and center of this agenda and hopefully for COP 28 in the UAE is MDB reform, multilateral development bank reform, because I think, you know, the World Bank, the IMF and others can be playing a much, much bigger.
Bordoff [00:52:26] What does that mean to you? Like, what would that look like?
Miliband [00:52:29] Well, in the Bridgetown agenda, which has been championed by Mia Mottley, she has talked about the way that the World Bank and IMF balance sheets could be used much more strongly to finance clean, clean energy investment and bring down the cost of capital for developing countries. And that that is an absolute prerequisite of moving forward because we are, as you say, we are saying to countries, look, we went down this fossil fuel route, you need to go down a different route. And the truth is that is the economically sensible way for those countries to go, but only if they’re forced to borrow at 14% a year, then it’s not going to happen, you know, but if they’ve got reasonable borrowing rates of it’s put this potential. So that’s the first thing. Secondly, and it’s not just about mitigation. So so moving to a different way of providing energy. It’s also in reducing your emissions. It’s also about adaptation for countries. We are still to deliver on the famous $100 billion of support that was talked about the Copenhagen summit many moons ago in 2009. We will hopefully be delivering on that soon and it’s essential that we do. And then discussions need to continue about issues like loss and damage and so on, which is a serious which is a serious issue. But, you know, every country is quite is very constrained in terms of their fiscal situation. But but these are really important discussions that we need to have about the obligations and responsibilities we owe to the developing world. But I suppose the point I would end on here is, you know, of course there are difficult decisions and I you know, politicians pretending it’s all win win is is not right. But I think there is a very optimistic side of this. You know, if we get this right, you know, the many countries where people don’t have access to electricity, you know, don’t have access to some very, very basic necessities, this clean energy revolution can be really good for those countries. But justice is really, really important in this.
Bordoff [00:54:41] Ed Miliband, you’ve been very generous with your time, which I know is scarce. Thanks for really a fascinating, thought provoking conversation. Almost as much fun as reliving the 1986 World Series game between the Red Sox and the Mets. But appreciate your time. It’s been great.
Miliband [00:54:55] Thanks. It’s been great film.
Bordoff [00:55:01] Thank you again, Ed Miliband. And thank you for listening to this week’s episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. The show is hosted by me, Jason Bordoff, and by Bill Loveless. The show is produced by Stephen Lacy and Erin Hartig from Post Script Media. Additional support from Daniel Prop, Jon Elkind and Sophie Corbo, Akash Lohse, Gautam Jain, Harry Kennard, Natalie Volk and Q Lee Roy Campanella, engineer of the show. For more information about the podcast or the Center on Global Energy Policy, please visit us online at Energy Policy dot Columbia dot edu or follow us on social media at Columbia U Energy. And please, if you feel inclined, give us a rating on Apple Podcasts. It really helps us out. Thanks again for listening. We’ll see you next week.
