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By coincidence (ha!) the ways being proposed by Stern to reduce CO2 emissions are in many ways the same as the ways proposed to deal with peak oil. Packaging things up with a climate change wrapper is fine by me - what matters is that the use of fossil fuels is driven down.
I don't know if this is deliberate or if it has arisen by accident, but I do discern that there is a sensible long term strategy emerging that could deal (at the UK level) with both climate change and peak oil. If the Stern Review recommendations are followed the impact of peak oil on UK should be substantially ameliorated over the longer term.
Having said this, the high rate of depletion of the North Sea output is still going to create some difficult problems for UK plc until the CO2 reduction measures start to have a significant effect.
http://www.theoildrum.com/story/2006/10/30/11951/613#25
more or less voicing the same question that you raise. If you have read my Lies Damned Lies post you will see that I belive that denial lies at the heart of the problem. Once the reality of UK oil and gas production sinks in, I think the £GBP will take a huge hit - raising the cost of imports and interest rates.
Only way out is for the UK to join the Euro.
CW
I haden't thought about trying to mitigate things by joining the Euro. Maybe if the Supergrid being proposed by Airtricity takes off it would make sense. However, the Euro will probably be heading south along with Sterling then anyway.
It's easy to see a world where the US dollar is 40% devalued (such would be logical, and should have happened, bar domestic Chinese and other South East Asian policies, which prefer to hold down their domestic currencies by holding USD assets).
But a really big devaluation beyond that, when roughly half the world's economy is denominated in dollars, is hard to see.
Also Europe is in a relatively worse position in a PO scenario. Yes we consume less, but we import 80% of our energy (coal mines in eastern Europe, and some renewables, plus of course the North Sea, but that is about it).
The US by contrast is the world's largest or second largest coal producer. Plus it has access to Canadian tar sands, Arctic gas etc. And it has big biomass resources (wood for heating etc.).
Another factor (the same for CO2 emissions) is that the US would find it relatively easy to reduce energy consumption-- simply switching to diesel powered cars, ditching SUVs etc. By and large, Europe has already made those sacrifices.
Eventually Italy will find a way to exit, and Greece also-- both countries are effectively having their economies strangled by deflation.
I don't think many of the EU25 countries that are not in the Euro (UK, Denmark, Hungary, Poland etc.) are likely to rush to join it-- the ones who would benefit (Hungary) are precisely the ones in the worst fiscal position and break the ECB rules.
The euro will revert to what it always was: a Franco-German currency union, with Benelux (and maybe the Irish and the Spanish) along for the ride.
And by now, the banks have gotten used to living without the money they used to be able extract from intra-EU trade, which means that EU wide companies - oh, like Unilever, or VW, or Barilla - find a lot of benefit in the euro.
Whether the euro has a longer term future than the dollar is open, but quite honestly, for the economies within the euro, the negative side is incresinly harder to firmly determine.