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Cambridge Journal of Economics Advance Access published online on October 12, 2007
Cambridge Journal of Economics, doi:10.1093/cje/bem025
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© The Author 2007. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

New Labour, energy policy and ‘competitive markets’

Ian Rutledge*

* Partner in Sheffield Energy & Resources Information Services (SERIS; www.seris.co.uk). He previously taught on the Energy Studies/Energy Business MA/MSc Program at Sheffield University and the Sheffield University Division of Continuing Education Derbyshire Miners' Day Release Program

Address for correspondence: 19 Fairfield Road, Chesterfield S40 4TR, UK; email: idr{at}seris.co.uk.

By the end of New Labour's first term four central objectives of energy policy had become established: ‘cheap’ energy, the relief of fuel poverty, a major reduction of carbon dioxide emissions, and energy security through maintaining a wide diversity of primary fuel supplies, all to be achieved through ‘competition’. After surveying New Labour energy policy documents, the paper argues that New Labour failed to appreciate (i) the extent to which, under such a laissez faire policy regime, these objectives were mutually inconsistent; (ii) that the apparent successes of energy market liberalisation during the preceding Conservative Governments had little to do with ‘competition’; and (iii) that the transaction costs of injecting increasing ‘competition’ into both British and European energy systems are likely to exacerbate the growing threat to energy security. The paper concludes with a brief examination of the implications of transaction cost economics for the organisational structure of the UK energy supply industry.

Key Words: Energy policy • Energy security • Competition • Nuclear power

JEL classifications: L14, L97, L98, Q42, Q48

Manuscript received January 8, 2007; final version received June 26, 2007.


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