Two years ago, Britain enjoyed the best of all worlds. Economic growth outstripped most of our competitors, our energy prices were below the European average and our carbon emissions of carbon were falling while many others were struggling to prevent theirs from rising. This year, economic growth has fallen below trend, our energy prices have risen rapidly to among the highest in Europe and carbon emissions have started to rise again. Stories of potential power shortages this winter causing factory shutdowns that once seemed alarmist now have a ring of credibility.

We therefore need to ask ourselves some questions. How did we get here? Do our targets to reduce carbon emissions still make sense? And what should we do now? Much can be explained by what has been happening with gas. Over the past year, Britain has become far more dependent on imports of gas, exposing us to distortions in largely unliberalised energy markets on the continent that leave us paying more for their gas than they charge their own customers. The government is rightly pressing our European partners to liberalise their energy markets but this may take decades. The next two years will also see the construction of significant pipeline and storage capacity, though we will have to endure two difficult winters before this is complete.