Europe Should Subsidise Gas, Says ESCP Economist
Given that neoclassical economic models are based on the assumption of perfect information, Natural Gas Europe wants to investigate to what extent additional information on the demand side can increase efficiency in the market and for the industry. We shed some light speaking with Sylvie Geisendorf, Professor of Environment and Economics at the ESCP Europe Berlin Campus.
Do you think that increasing the information available to the public would automatically increase the efficiency of the energy markets?
People might be better informed about the consequences of the consumption, like for example climate change and other environmental issues. But is that information available? Yes. We have many reports. There is more information than people are actually using. But it is quite easy for people not to believe it. That is why it is not about generating information, but more about finding ways of getting this information across to people.
But how to make this information more appealing to people?
Yes, the issue here is how to make this information more believable.
In a sense, speaking about energy issues is like speaking about unemployment rate. In a moment of high employment rates, it is difficult to convince people that in the future jobs could be lost due to changes and long-term imbalances.
As soon as people will really have problems, they will find solutions. That is true.
Do you think that the politicians should have a role in conveying this information? Do you think that the industry should do so, cooperating with people from different fields and other industries?
Politicians certainly have the responsibility to deal with that. I think that it is debatable whether an oil company has the responsibility to tell people that it would be really unadvisable to use all the oil that is still available. That would kill them. They are an oil company. Can we really ask them to kill their own business?
Do you think that there could mechanisms to be more informed about energy issues? Is the referendum a viable solution?
No. A referendum would be possible, but it would not help. A referendum does not mean that people actually get more informed. Maybe badly informed people will just vote for the wrong things. They could be simply captured by the marketing of the influential groups such as the oil and the nuclear industry. In this sense, I don’t think that referendum could be a solution.
Do you see any ways to increase the interest of people about energy issues?
Unfortunately, I think that the easiest way to increase the interest of people is the price. If the energy gets so expensive that people have problems paying the fuel for their car or for the house, then people get interested.
In a sense you are saying that an energy crisis would be a solution to European on-going energy problems?
I am not saying that we should do something to make it happen. I am saying that it is always the easiest way to convince people that they should do something about it. But then there is a completely different idea known as “nudging,” which has been discussed by an economist called Cass Sunstein. The idea is that if you switch the default option for electricity from fossil-based electricity to green electricity and you still offer the option for the consumers to choose the other. Some cities have already tried it. Formerly they only had 10% people choosing green electricity, now they have only 10% people choosing the fossil option. So this is not about educating people, but it is about gently pushing people into the right direction. And I think that there is a lot of potential in that. In Germany, we are starting to investigate it. Informing people, hoping that they will understand it and will change their behaviour, is hard.
Could the concept of nudging also apply to gas? How to increase gas as a transition fuel?
No, that is different. Using gas instead of nuclear, coal or lignite in electricity generation, that is not something the end consumer can realistically decide. He simply buys the electricity from the utility. It is the utility deciding which generation capacity to use.
And what about transportation?
There are engines doing so, but it would be extremely difficult. For gas, for example, there should be some government subsidies. For gas it is not a matter of information. Gas is more expensive, it’s better CO2 wise, so we need subsidies. It would be better to subsidize gas than nuclear.
Sergio Matalucci