Energy targets, biscuits and Mao Zedong


When Mao Zedong set national targets for steel production during the Great Leap Forward in late 1950s China, the end result was a massive misallocation of labour and resources ultimately leading to inefficient, poor quality steel production.

It is surprising then that the recent report from the Scottish Parliament Economy, Energy and Tourism Committee into Scotland's renewable energy targets did not ask the simple question - why is a state mandated target for the equivalent of 100% of Scotland's electrical energy production to be generated from renewable resources by 2020 actually necessary?

Clearly, with sufficient production subsidy, capital will be attracted to invest and the target will be met on schedule. But therein lies the problem. Capital from banks or elsewhere needs to be repaid, and with a suitable return on investment. What will no doubt be welcome investment for the renewable energy industry will in the end be a cost to be borne by consumers and other industries. The key question is not whether arbitrary targets can be met, but if the associated investment is productive.