Raphael Stevens

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    Policy experiments have been good for China

    IN MAY 1919 John Dewey, an American philosopher, embarked on a lecture tour of China. “We are going to see more of the dangerous daring side of life here,” he predicted. His celebration of learning by doing and social experimentation was enthusiastically received by the country’s daring reformers and dangerous revolutionaries. At least one of his lectures was attended by a young schoolteacher called Mao Zedong. “Everything through experimentation,” Dewey declared on his tour. Chairman Mao would later repeat the line as China’s ruler.In the scattered bases occupied by China’s communists before 1949, experimentation was unavoidable, points out Sebastian Heilmann in his book, “Red Swan: How Unorthodox Policymaking Facilitated China’s Rise”. The communists lacked the manpower or administrative reach to impose uniform policies. Instead they introduced new measures, such as land reform, in model villages or “experimental points”, before spreading them across the “surface” of their territory. The aim was to learn by doing, without doing anything uncontainably calamitous. These “model experiences”, Mao wrote, were “much closer to reality and richer than the decisions and directives issued by our leadership organs”.A similar “point-to-surface” approach was embraced by China’s leaders after Mao. Indeed, the central government has initiated over 630 such experiments since 1980, according to a recent paper by Shaoda Wang of the University of Chicago and David Yang of Harvard University. It has experimented with carbon trading, fisheries insurance, business licensing and fiscal devolution. A report last month by China’s planning agency referred to pilot schemes covering everything from cross-border e-commerce and housing provident funds to green electricity and recyclable packaging.These trials are not mere formalities. The results can go either way. About 46% of experimental policies are never rolled out nationwide, according to Messrs Wang and Yang. An unsuccessful trial can nonetheless yield useful lessons for future reforms. Failure, as Mao once put it, is the mother of success: “a fall into the pit” can yield “a gain in your wit”.China has indeed gained a lot from using this method. It is a “huge improvement” on a “counterfactual world” in which all central policies are implemented without any experimentation, Mr Wang argues. The point-to-surface technique is one reason why communist China has survived and advanced even as other socialist regimes have stagnated or collapsed, according to Mr Heilmann. Such unexpected outcomes are sometimes described as “black swans”. In China’s case, he argues, red seems the more appropriate colour.This long and celebrated history notwithstanding, China is surprisingly bad at policy experiments. Its trials are not as clean as they could be, skewing the conclusions its leaders draw. One problem is their location. According to China’s planning agency, “sites should be fairly representative.” But contrary to this sound advice, 80% of experiments since the 1980s have taken place in localities that are richer than average, according to Messrs Wang and Yang. Another bias is fiscal. When local authorities experiment with an area of policy, such as education or agriculture, they tend to spend 5% more money on that area than otherwise similar counties that are not taking part in the experiment.Experiments can also be skewed by less measurable factors. Some local officials, for example, simply put more effort into these pilot exercises than others. This is particularly true of ambitious young cadres who have more scope for promotion, because they are still far from retirement age. To measure this extra effort, Messrs Wang and Yang devise an ingenious proxy. They compare the language employed by local governments in describing the experiment. Leaders with more room for promotion differentiate their language from the boilerplate used by their upwardly immobile counterparts elsewhere.Extra effort, more spending and atypical prosperity can all skew the results of a policy experiment. Some of these biases may be well known to seasoned policymakers in Beijing. But if so, national leaders do not act as if they are aware of them. They tend to favour successful trials regardless of the true source of that success. The more prosperous an experimental site, the better the chance the policy will be adopted nationwide. Such backing is also more likely if the host county just happens to enjoy a fiscal windfall during the trial period, say because a fortuitous cut in interest rates raises land values. The central government does not seem to disentangle the merits of an innovative policy from the idiosyncrasies of the places that pilot it.A duck dressed up as a swanThis has national consequences. When new policies are spread across the surface of the country, the localities that most closely resemble the experimental “points” benefit the most, judged by their subsequent economic growth. Since experimental sites tend to be richer than average, the policies that emerge from experimentation may “systematically favour” the richer parts of China, Messrs Wang and Yang argue. That is not an outcome that Mao or Dewey would have welcomed: inequity through experimentation.How can China reform this engine of reform, moving its experiments closer to reality? Another striking calculation by the researchers suggests one useful place to start. They point out that local officials are 22% more likely to be promoted if they take part in a successful experiment. To improve this technique, therefore, China’s leaders will have to fix the politics that attend it. In recent years, under Xi Jinping, experimentation has become “forced and feigned”, according to Mr Heilmann. Local administrators enjoy little “leeway and they are fearful of making policy and ideological mistakes along the way”. There will be no gain in wit if local policymakers fear a fall into the pit. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Red swan over China” More

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    Has the pound become emerging-market money?

    STERLING WAS once the world’s dominant currency. As the American dollar took its crown, it became second-tier but remained elite, and for decades was content with its lot. Yet lately the pound’s shine seems to have dulled again—so much so, says Kamal Sharma of Bank of America, that it has been “acting [like] emerging-market (EM) currencies”.It is not that the pound has suddenly turned into the Turkish lira or the Argentine peso. It remains part of the G5 group of heavily traded currencies, alongside the dollar, the euro, the Japanese yen and the Swiss franc. Yet it has proved more vulnerable to crises than the others.A “flash crash” in October 2016 took its value from $1.26 to $1.14 in less than a minute. As covid-induced panic gripped markets in March 2020, it dropped by 12% against the dollar in the space of a fortnight (the euro fell by just 6%). When British petrol pumps ran dry last September, it plunged again and traders’ expectations of its future volatility soared. The Bank of England’s decision to raise interest rates earlier than most has since held it steadier, but some commentators remain adamant that the pound has not just decoupled from the currencies of other developed economies, but also joined the ranks of EM ones.Such claims are usually made with the speaker’s tongue planted firmly in their cheek. EM currencies’ delightful attributes include capital controls (the Chinese yuan), hyperinflation (the Argentine peso) and “unorthodox” monetary policies (the Turkish lira). Liquidity crunches during market routs can subject sterling to harsh devaluations, explaining why it is not a haven like the dollar or the Swiss franc. But in normal times, call up a bank’s foreign-exchange (FX) trading desk asking to sell half a billion pounds and they won’t struggle to do so. That they might for an EM currency is the category’s distinguishing feature.In fact, sterling is notable for the opposite: it plays an oddly outsize role in FX markets. Britain accounts for 3% of the world’s GDP. Yet over the past 20 years its currency has consistently been involved in over a tenth of FX trades.So why do traders like sterling, if it is so brittle? You might trade a foreign currency if you want to buy goods or services from the country that issues it. Or you might sell something in exchange for it and want to convert the proceeds back to your currency. Neither explains sterling’s popularity: in 2019 Britain accounted for 3.8% of global goods imports and 2.6% of exports. Nor is it prominent in central-bank holdings (it makes up less than 5% of global reserves). The dollar dominates global payments, many governments borrow in it and some markets—commodities—are priced in it. The pound does none of these jobs.In fact it is a means to less grand aims: speculation and cross-border investment. People trade sterling to take a punt on its value, or because they are buying or selling British assets. In this it has more in common with another rich-world currency. Like sterling, the Australian dollar is issued by an open, developed economy that relies heavily on trade. Punters use both to bet on trends that are bigger than their issuers’ economic footprint: sterling is a proxy for risk appetite; the Aussie dollar for commodity prices. And they loom larger in FX markets than either their economies’ heft or trade volumes warrant. Australia makes up less than 2% of world GDP, yet its dollar is present in 6.8% of FX trades.Five years after the Brexit vote, there is little sign of the Global Britain that voters were promised, and declaring sterling an EM currency suits the country’s fondness for declinism. But to understand the role of the pound today, look Down Under. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Not so sterling” More

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    HDFC Bank’s merger with its housing-finance cousin marks a milestone for India

    OUTSIDE INDIA, the union of two entities that share a banal acronym in their name might seem an exercise in bureacracy. But in the case of the acquisition of Housing Development Finance Corporation (HDFC) by HDFC Bank, announced on April 4th, that appearance would be deceptive. The size of the deal, at $60bn, is by far the biggest in India—triple the value of the next largest acquisition (Walmart’s purchase of Flipkart for $17bn in 2018). It is also the fourth-biggest banking transaction in the world ever, according to Refinitiv, a data provider. The resulting entity is estimated to have a market capitalisation of as much as $185bn, which would make it one of the world’s largest banks, after JPMorgan Chase, Bank of America and three Chinese lenders—and well above Citigroup, HSBC and Standard Chartered, the three global banks that once stood at the pinnacle of Indian private-sector finance.As important as the scale of the deal is what it says about the evolution of finance in India. Both institutions are among the most successful private-sector financial firms in a country where state-owned banks still loom large (local lenders were nationalised by Indira Gandhi, then India’s prime minister, in 1969). HDFC was founded in 1977 to provide basic housing finance. In the ensuing 45 years it has financed the purchase of 9m homes.As restrictions on private-sector enterprise were gradually eased, HDFC’s chairman, Deepak Parekh, adeptly launched other financial institutions. Insurance came in 2000, and asset management in 1999. But none was as important as HDFC Bank, which was created in 1994 when private banking licences began to be granted. HDFC kept a 26% stake in the new entity and required the bank to work through it when providing mortgages.For years there were advantages in maintaining separate institutions. Banks had access to cheap funding through deposits, but paid for the privilege through onerous capital requirements and rules that made them devote 40% of credit to “priority” areas, such as farming. Non-bank finance firms were easier to create—thousands sprang up—and faced less-stringent lending or capital requirements, but lacked cheap overnight deposits.It proved a messy, even dangerous development, as many went on a lending and borrowing binge. In 2018-19 several prominent non-banks, including IL&FS and two housing-finance firms, collapsed. There were fears of more failures to come, and funding dried up for many finance companies. That in turn led to a credit crunch.Since then, regulatory changes have been quietly instituted, making life harder for the non-banks. The complex capital requirements imposed on them have been raised, for instance, to bring them largely in line with banks. That has made the operating restraints on finance companies somewhat bank-like, but without the benefits of cheap deposits. Jefferies, an investment bank, estimates HDFC pays 6% for its funding, compared with 3.7% for HDFC Bank. The spread for other finance companies is probably wider.With the merger, that distinction will disappear, providing a meaningful cost saving and competitive advantage. Meanwhile, HDFC Bank, which has a sprawling network of 6,500 branches, ten times as many as its housing-finance cousin, will be able to offer mortgages to its customers directly—something that might have doubled its size had it been able to do so all along, said Sashidhar Jagdishan, the bank’s chief executive, on April 4th. Investors were unsurprisingly giddy at the prospect, with the share prices of both firms rising sharply. The mood in Mumbai’s stately Taj Hotel, where the merger was announced, was equally ebullient, as the city’s leading dealmakers speculated about what other changes might, once again, follow in HDFC’s wake. ■This article appeared in the Finance & economics section of the print edition under the headline “A house united” More

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    Walmart says it is raising truckers' pay and starting a training program as it grapples with driver shortage

    Walmart said it is hiking pay and launching a new training program for the truck drivers that it relies on to replenish store shelves and warehouses.
    The big-box retailer is trying to expand the pipeline of truck drivers amid a national shortage.
    The shortage of truck drivers in the U.S. hit an all-time high of over 80,000 workers last year, according to the American Trucking Associations trade group.

    A Walmart truck departs the company’s distribution center in Washington, Utah.
    Bloomberg | Bloomberg | Getty Images

    Walmart said Thursday that it is raising pay for long-haul truck drivers and launching a new program to train the next generation, as it seeks the staffing it relies on to replenish store shelves and warehouses across the country.
    The retailer said truck drivers will now make up to $110,000 in their first year with Walmart, which the company said will raise their average pay. The company did not provide the current salary range for a new truck driver at Walmart, but said they have made an average of $87,500 in their first year.

    Walmart has also started a 12-week program in Sanger, Texas and in Dover, Delaware, where people can earn a commercial driver’s license and join Walmart’s fleet. It will cover the cost of earning a license, which can run between $4,000 to $5,000, said company spokeswoman Anne Hatfield.
    The program will initially be open to only supply chain associates who are near the two training locations, Hatfield said. In the future, she said all Walmart employees will be able to apply for the program. She said the company hopes to train between 400 and 800 new drivers this year.
    Walmart, the country’s largest private employer with 1.6 million workers, is ramping up recruiting efforts for truck drivers as the growth of e-commerce changes its business and complicates its supply chain. It is also a tight market for trucking labor.
    The shortage of truck drivers in the U.S. hit an all-time high of over 80,000 workers last year, according to the American Trucking Associations trade group. The lack of workers has stemmed from several factors, according to the trade group, including the grueling hours of long-haul trips, the older average age of current drivers and the small number of women in the industry. The pandemic exacerbated the shortage, it said, as some truck drivers left the industry and fewer people went through training programs.
    Walmart posted about the pay bump and training program on its corporate website on Thursday morning. It has about 12,000 truck drivers in its workforce. The company hired 4,500 truck drivers, a larger number than any time in its history, a spokeswoman said. 

    During the pandemic, more of Walmart’s sales have shifted online as people got groceries delivered to the home or retrieved online orders by curbside pickup. U.S. e-commerce sales rose 11% in the last full fiscal year, ended Jan. 31. They jumped 90% on a two-year basis.
    For Walmart and other retailers, soaring online sales have shaken up the cadence of business and prompted a race to deliver packages quickly and keep items in stock at stores.

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    Demand for used cars drops from a year ago but high prices aren't budging

    Prices on used cars are not dropping because dealers continue to face low supplies of new cars.
    Consumers appear to be balking at prices: The average time consumers spend looking for a used car has jumped 93% to 171 days from 89 days in from March 2021.

    David Paul Morris | Bloomberg | Getty Images

    Used-car prices appear to be stuck in high gear, despite slowing consumer demand.
    Last month, sales of used cars less than 10 years old were down 27% compared with March 2021, according to car shopping app CoPilot, which tracks dealership prices nationwide. The average price during that same time jumped 40% to $33,653. 

    For nearly new cars — those 1 year to 3 years old — sales in March were down by 31% compared to a year earlier, while the average price of $41,000 is 37% higher, CoPilot research shows. In the first two months of 2022, prices for this age group dropped almost by 3% before increasing again in March amid continued production challenges for new cars and uncertainty related to the war in Ukraine.
    More from Personal Finance:1 in 5 workers runs out of money before payday, survey findsPooling money makes couples more likely to stay togetherThere’s still time for 2021 IRA contributions. What to know
    The upshot is that consumers are taking their time buying a used car. The average time spent looking for one has jumped 93% to 171 days from 89 days in from March 2021, resulting in dealer inventories of 1-year to 3-year-old cars returning to pre-pandemic levels.
    However, prices are not dropping because dealers continue to face low supplies of new cars and many would-be new-car shoppers could end up with a used vehicle instead, according to CoPilot.
    “With nearly empty new car lots across the country, dealers have been holding prices of newer used cars high,” said CoPilot CEO and founder Pat Ryan.

    Pre-pandemic, roughly 76% of vehicles would sell for less than $25,000. Now, cars in this price range account for just 35% of inventory. Meanwhile, those priced above $40,000 are 25% of what’s available on dealer lots, compared with 5% in a typical year.
    “The silver lining to the continued high car prices is that it gives consumers with an extra car to sell [an] opportunity to cash in on record-high prices,” Ryan said.
    “Our advice to used car owners is to take advantage of this once-in-a-lifetime trend and sell their vehicle at a profit,” he said.

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    Inside the $87 million hilltop palace for sale in Beverly Hills

    Joe Bryant

    Private drive leading to the main residence at 1420 Davies Dr in Beverly Hills.
    Joe Bryant

    “For a person who likes this style there’s nothing like it, that’s why we feel bullish on the price,” listing agent Aaron Kirman of the Aaron Kirman Group told CNBC.

    The palatial main residence reigns over 90210 from an impressive hilltop that delivers 360-degree views.  

    Joe Bryant

    According to the listing, the eight-bedroom, 14-bath residence unfolds over three floors and 21,800 square feet. The home’s hefty asking price comes to about $3,990 per square foot which is more than double the $1,801 average price per square foot achieved in the neighborhood in the fourth quarter of 2021, according to The Elliman Report. But it’s a relative bargain compared with a record-breaking sale from October, when venture capitalist Marc Andreessen reportedly paid $177 million for an 11,810-square-foot Malibu home, bringing the price per square foot to a staggering $14,987.

    Another one of those mega-deals was the distressed sale of 944 Airole Way, a 105,000-square-foot mega-mansion, which was offered at $295 million before selling at auction last month for $141 million. Kirman was a co-listing agent on the transaction that required bankruptcy court approval.
    Los Angeles has seen 10 single-family home deals close for more than $50 million in the last six months including three homes that sold for over $100 million, according to multiple listing service and deed transfer records.
    “There’s no other market that has those numbers,” Kirman said. “New York doesn’t, Miami doesn’t.”

    He said he hasn’t yet seen an impact from rising mortgage rates, inflation or the war in Ukraine: “Any one of these could have spooked buyers, but they haven’t.”
    He also pointed to low inventory to suggest right now it’s still a seller’s market on the ultra-high end. According to Kirman, the Los Angeles MLS currently shows 27 single-family homes priced over $50 million “That’s tight inventory,” he said. “We usually see 50 or more.”
    This is supported by analysis from Miller Samuel Real Estate Appraisers and Consultants in the fourth-quarter Elliman Report. “Listing inventory fell to the lowest level on record at the largest rate on record,” for all single-family homes and condos in Los Angeles, it said.

    Car park and front entrance
    Joe Bryant

    You might recognize the mansion, which is located on Davies Drive and has been featured in music videos, commercials and by GQ in 2016 when the magazine threw a Grammys after-party at the residence celebrating musician The Weeknd’s birthday and published photos from the home showing Taylor Swift, DJ Khaled, Post Malone, Justin Bieber, and an entourage of A-list celebs partying inside and out.
    Here’s a closer look at what $87 million could buy in Beverly Hills.

    Joe Bryant

    The home’s library unfolds over two levels connected by a spiral staircase. Overhead is a massive stained-glass light fixture framed by an ornately carved-wood ceiling.

    Dining room
    Joe Bryant

    Double pocket doors made with antique Venetian stained-glass windows disappear into the walls to reveal a dining hall that seats twelve. Under a gold leaf-painted domed ceiling and chandelier, the room is dripping in gold accents and vibrant walls upholstered in a deep red silk.

    Billiards room
    Joe Bryant

    The billiards room is also covered in silk, this time the scarlet fabric is framed by dark-stained wood and accented by hand-painted scenes just above the floor.

    Living room bar
    Joe Bryant

    The living room features a wood mirrored bar and more walls upholstered in fabric.

    Owner’s suite
    Joe Bryant

    The giant owner’s suite includes a seating area, king-sized bed and dumbwaiter that can whisk breakfast up from the kitchen.

    Joe Bryant

    The chef’s kitchen includes wood-carved cabinets, stone floors and stainless steel appliances.

    Breakfast room
    Joe Bryant

    Off the kitchen is a breakfast room with floor-to-ceiling hand-painted murals depicting colorful birds and foliage on every wall.

    Home theater
    DroneHub Media

    On the home’s lowest level is a red-velvet-clad cinema room. 

    Wine cellar with English saloon facade.
    DroneHub Media

    According to Kirman, the facade of an 18th-century saloon was shipped from England and reimagined as the entrance to the home’s wine cellar.

    DroneHub Media

    The massive ballroom also has a stained-glass light fixture built into the ceiling and French doors that lead to the pool.

    Pool house
    DroneHub Media

    In the estate’s luxurious backyard is a two-story pool house.

    Joe Bryant

    The ornate in-ground pool is surrounded by manicured shrubs and dolphin-shaped fountains. 

    Joe Bryant

    Steps away from the swimming area is a koi pond that features two red-painted bridges leading to a small rock island at its center.

    Joe Bryant

    The property also includes a tennis court, putting green and oversized chess set.

    Outdoor chess set
    Joe Bryant

    If the home sells for its asking price Kirman says the real estate taxes would total $1,087,500 per year or more than $90,000 a month.

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    Stocks making the biggest moves premarket: Conagra, Levi Strauss, Rite Aid and others

    Check out the companies making headlines before the bell:
    Conagra (CAG) – The food producer’s stock tumbled 5.5% in the premarket after issuing a weaker-than-expected forecast for the fiscal year ending in May. Conagra’s results are being hit by higher transportation and raw materials costs.

    Levi Strauss (LEVI) – Levi Strauss beat estimates by 4 cents with an adjusted quarterly profit of 46 cents per share, and the apparel maker’s revenue also topped Wall Street forecasts. The company saw strong demand for its jeans, tops and jackets while successfully raising prices and cutting down promotions. Levi Strauss rose 3% in premarket trading.
    HP Inc. (HPQ) – HP is surging 15.2% in premarket trading following news that Warren Buffett’s Berkshire Hathaway took an 11.4% stake in the maker of personal computers and printers.
    Rite Aid (RAD) – The stock tumbled 18.3% in premarket action after Deutsche Bank downgraded the drugstore operator to “sell” from “hold.” Deutsche Bank said Covid hastened the decline of the retail pharmacy segment, and there’s a possibility that Rite Aid may not be able to generate enough earnings to continue as an operating company.
    Wayfair (W) – Wayfair slid 4.1% in the premarket after Wells Fargo downgraded the stock to “underweight” from “equal weight.” Wells Fargo said the high-end furniture retailer will be hurt by waning demand, overly optimistic consensus estimates and other headwinds.
    Rent the Runway (RENT) – Rent the Runway stock jumped 3.9% in the premarket after the fashion rental company announced a price hike for its subscribers.

    CDK Global (CDK) – The provider of automotive retail technology agreed to be bought by Brookfield Business Partners for $54.87 per share in cash. The price represents a 12% premium over CDK’s Wednesday closing price.
    SoFi Technologies (SOFI) – The online personal finance company’s shares slid 5.1% in the premarket after cutting its full-year outlook. The cut follows the White House announcing a student loan payment moratorium will be extended.
    JD.com (JD) – JD.com announced that founder Richard Liu has left the chief executive officer position and President Xu Lei will take over as the Chinese e-commerce company’s CEO. Liu will remain as chairman. JD.com fell 1.1% in the premarket.
    Teladoc Health (TDOC) – The provider of virtual doctor visits saw its stock gain 1.5% in premarket action after Guggenheim initiated coverage with a “buy” rating. Guggenheim said health care access is moving more toward digital interactions and that Teladoc has a broader service portfolio than other providers.

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    UK targets more nuclear, wind power — and fossil fuels — in bid for energy security

    The British government has called its Energy Security Strategy “bold,” but it has drawn ire from some quarters.
    It announced plans to target as much as 24 gigawatts of nuclear power by 2050.
    It also envisages up to 50 GW of offshore wind and 10 GW of “low carbon” hydrogen capacity by 2030.

    Alongside a ramp up in nuclear power, the British Energy Security Strategy envisages up to 50 GW of offshore wind and 10 GW of hydrogen – half of which would be so-called green hydrogen – by 2030.
    Christopher Furlong | Getty Images News | Getty Images

    The U.K. government has revealed details of its long awaited, “bold” energy security strategy, but critics have derided its inclusion of fossil fuels and what they view as a lack of ambition.
    In a release Wednesday, the government heralded a “major acceleration of homegrown power in Britain’s plan for greater energy independence.”

    The plans — known as the British Energy Security Strategy — mean that more “cleaner” and “affordable” energy will be produced in Great Britain, the government said, as the country seeks to “boost long-term energy independence, security and prosperity.”
    The government is now targeting as much as 24 gigawatts of nuclear power by 2050, which it said would represent around a quarter of the country’s projected electricity demand. The strategy could see as many as eight reactors developed.
    Alongside nuclear, the plans include up to 50 GW of offshore wind and 10 GW of “low carbon” hydrogen capacity, at least half of which would be so-called green hydrogen, by 2030. The government also said solar capacity could be set to increase fivefold by 2035, up from 14 GW today.
    When it comes to onshore wind — a divisive subject for Prime Minister Boris Johnson’s Conservative Party — the government said it would consult on “developing partnerships with a limited number of supportive communities who wish to host new onshore wind infrastructure in return for guaranteed lower energy bills.”

    Read more about clean energy from CNBC Pro

    However, in a move that sparked outrage among environmental campaigners, the government also said its strategy would be “supporting the production of domestic oil and gas in the nearer term,” with a licensing round for new oil and gas projects in the North Sea slated for launch this fall. The government claimed its strategy could result in 95% of Great Britain’s electricity being “low carbon” by 2030.

    “The simple truth is that the more cheap, clean power we generate within our borders, the less exposed we will be to eye watering fossil fuel prices set by global markets we can’t control,” Kwasi Kwarteng, the country’s business and energy secretary, said.
    “Scaling up cheap renewables and new nuclear, while maximising North Sea production, is the best and only way to ensure our energy independence over the coming years.”
    The strategy’s publication comes at a time when Russia’s invasion of Ukraine has heightened concerns about energy security. Russia is a major supplier of oil and gas, and its actions in Ukraine have caused a number of economies to try and find ways to reduce their reliance on it.
    In response to the invasion, the U.K. has said it will “phase out imports of Russian oil” — which meets 8% of its total oil demand — by the end of this year. Russian natural gas, the government says, made up “less than 4%” of its supply, adding that ministers were “exploring options to reduce this further.”
    Fool’s gold?
    While Business Secretary Kwarteng was bullish about the strategy and its prospects, the plan drew ire from some quarters.  
    “This fails as a strategy, as it does not do the most obvious things that would reduce energy demand and protect households from price hikes,” Danny Gross, an energy campaigner at Friends of the Earth, said.

    More from CNBC Climate:

    “Delving deeper into the UK’s treasure trove of renewables is the surest path to meeting our energy needs — not the fool’s gold of fossil fuels.”
    While the acceleration in offshore wind developments was “welcome,” Gross said ministers had to “go further and make the most of the UK’s massive onshore wind resources.”
    Meanwhile, Lisa Fischer, programme lead at climate change think tank E3G, argued that the future of the North Sea lay in renewables rather than oil and gas.
    “A push for offshore wind is welcome, but embracing oil and gas at the same time will act as a drag on the UK’s leap towards an affordable and clean energy future,” she said.
    ‘Moral and economic madness’
    The British Energy Security Strategy is being published in the same week that the Intergovernmental Panel on Climate Change released its latest report.
    “Limiting global warming will require major transitions in the energy sector,” the IPCC said in a news release. “This will involve a substantial reduction in fossil fuel use, widespread electrification, improved energy efficiency, and use of alternative fuels (such as hydrogen).”
    Commenting on the report, U.N. Secretary General Antonio Guterres pulled no punches. “Climate activists are sometimes depicted as dangerous radicals,” he said. “But the truly dangerous radicals are the countries that are increasing the production of fossil fuels.”
    In March, the International Energy Agency reported that 2021 saw energy-related carbon dioxide emissions rise to their highest level in history. The IEA found energy-related global CO2 emissions increased by 6% in 2021 to reach a record high of 36.3 billion metric tons.
    The same month also saw Guterres warn that the planet had emerged from last year’s COP26 summit in Glasgow with “a certain naive optimism” and was “sleepwalking to climate catastrophe.” More