Alternative Energy Strategies for the United Kingdom Revisited: Market Competition and Sustainability

Energy and electricity demand forecasts for Britain made in the late 1970s by a research team from the International Institute for Environment and Development (IIED), under the leadership of Gerald Leach, are assessed with the benefit of hindsight. These researchers broke the energy market down into some 400 end-use, fuel, and appliance categories. They then assessed the potential for energy saving in physical terms, using available technical fixes, for each category. The resulting “bottom-up” projecitons of energy consumption departed from the historic correlation with economic growth, or “top-down” approach. It enabled the IIED team to postulate an alternative, low energy strategy for the United Kingdom to 2025. This study subsequently had a great influence on energy planning elsewhere in the industrialized world, although it was not without its detractors.The IIED energy demand projections are reviewed in the context of both the greatly increased market competition in the UK from 1979 onward, and the need to achieve sustainable development. It is shown that, although total primary energy consumption in the mid-1990s was much in line with the forecasts in the Leach report, the reasons for this and the structure of the newly competitive energy market are quite different from that originally postulated. However, the critics of the IIED team did little better. Long-term energy projections (25–50 years) as one-off, static exercises appear to be of little value for energy planning purposes. They can, as in the case of the Leach report, be a great source of data and ideas, as well as stimulating debate about new strategies. It is argued that rolling projections using a rather broad, sectoral approach that is continuously updated at not greater than five-year intervals, in a similar manner to econometric forecasts, are more useful for energy planning purposes.     

The London Business School with Gower Publishing

Collapsing oil prices and a falling dollar set the background to a Budget in which the Chancellor, hamstrung by lower oil revenues, was seen as having little room for manoeuvre. In fact the sharp fall in the sterling price of oil has provided him with the perfect excuse for not making significant cuts in personal income tax that were largely irrelevant to the needs of the economy. Instead of a boost to household demand we have had, thanks to OPEC, a transfer to companies in the form of a reduction in costs. This should enable them to expand output against a background of falling inflation. Our post-Budget assessment of macroeconomic prospects (Section I), made on the Treasury's assumption of a $15 oil price, shows output growing by 2 1/2 per cent this year and inflation falling below 3 per cent in 1987. We are thus less optimistic than the Treasury about output but more optimistic about inflation. How was the Chancellor able, within the confines of the Medium-Term Financial Strategy, to give anything away having lost so much oil revenue? A detailed analysis of the PSBR forecast (Section II) reveals good reasons why non-oil tax revenues should be some £3 1/2n higher than forecast this time last year. But, because we still expect public spending to be above the official figures, our PSBR forecast is £1bn higher than the Treasury's. Although the macroeconomic impact of the Budget was small (especially in relation to that of the fall in oil prices which preceded it), it continued the process of tax reform. We focus, in Section III, on the new proposals to deal with the problem of the pension fund surpluses to which we drew attention in the November issue of Financial Outlook. We conclude that the proposed measures could have a larger effect on tax revenues in the longer term than is indicated by the Treasury's Budget estimates.     

Residential development in an open city

This paper investigates the residential development process using a dynamic model of an open city. The model is used to analyze how the density and timing of development at various sites respond to changes in exogenous trajectories and functions. In particular, the impact of income and equilibrium utility trajectory variations as well as transportation and construction cost changes are evaluated for the general model with no specific functional forms assumed. Sufficient conditions for predicted responses are derived and interpreted.     

Spatial heterogeneity and interregional spillovers in the European Union: Do cohesion policies encourage convergence across regions?

Using a spatial econometric perspective, the speed of convergence for a sample of 163 regions of the European Union (EU) over the period 1981–1996 is estimated. For this purpose, we use a specification strategy which allows an explicit modeling of both spatial heterogeneity and spatial autocorrelation found in the analyzed sample. The estimated final model combines groupwise heterocedasticity, the identification of two spatial regimes and spatial dependence. Our results show how an appropriate consideration of the role of spatial effects can shed new insights into the European convergence process. We find that regions in the EU cohesion-fund countries (Ireland, Greece, Portugal and Spain) are converging separately from the rest of regions of the EU. Our estimations indicate that over the analyzed period, there was a faster conditional convergence in relative income levels of the regions belonging to Cohesion countries (5.3%) than in the rest of the regions of the EU (3.3%). Therefore, our results contrast with other evidence that points to the fact that the convergence process in Europe has weakened or even has stopped at the beginning of the 1980s. Moreover, our work shows clear evidence of separate spatial convergence clubs among EU regions.