Climate change

Government-created cartel

It is a commonplace of economics that competition drives down prices. Economies of scale drive down costs. The combination of the two may achieve the lowest prices. But normally one would not expect cartels to deliver low prices, however much the privileged position of the cartel-members allowed them to achieve economies of scale. Rather the reverse.

Not according to this Government, though. In setting up Phase 2 of the Low Carbon Buildings Programme, they have consciously created a 7-member cartel in order to generate economies of scale. Here is the justification from the DTI website:

"Phase 2 has an innovative design – a framework-type arrangement has been set up in order to provide an element of certainty for those suppliers who successfully competed to be part of the framework. Recipients of grants will have to purchase their microgeneration technologies from these framework suppliers. This should allow those suppliers to offer lower costs (with the larger volumes bringing economies of scale) and, in the knowledge they will be receiving large numbers of orders, feel able to make the investments in the supply chain required to develop the microgeneration industry."

The £50 million scheme is limited to five technologies: biomass heating, ground-source heat-pumps (GSHPs), solar thermal, solar photovoltaic (PV) and wind. It is limited to projects of specific size (no more than 50 kW electrical or 45 kW thermal). It is limited to the public sector and charitable organisations. It is limited to seven "framework suppliers".

It does not even treat the selected technologies or suppliers equally (details obscured in the FAQ for the scheme). Some suppliers are eligible to supply some technologies, and some are eligible to supply others. Only one (British Gas) is eligible to supply all technologies. No more than three of the seven is eligible to supply any one type of technology. If you want a combination of more than one technology, your choice is likely to be down to one or two potential suppliers.

Even the technologies included within the limited range of options are treated differently. While some renewable technologies are excluded completely, even those technologies that have been included do not face a level playing-field within this very partial structure. Photovoltaics are eligible for 50% grants, GSHPs and wood-fired boilers for 35% and solar thermal and wind for 30%. The justification provided for this differential treatment is that "The grant percentages are based on analysis by the DTI." Very enlightening.

Trading favours

David Miliband has prepared (with the help of Alistair Darling and some big businesses) a manifesto for the development of the EU Emissions Trading Scheme (EU-ETS) after 2012 (Phase 3). He has circulated it to trade associations and big business (or "British industry", as he likes to call it, forgetting as usual about the majority of smaller businesses), asking them to endorse it. The manifesto and its covering letter are attached.

His attitude to "UK business" is summed up in the following sentence from his covering letter:

"Our initial impression of the level of consensus on EU ETS was confirmed when we met some key industry figures to discuss the manifesto in November."

How can you test a level of consensus by meeting some key industry figures? Isn't the definition of consensus that it includes the many, not just the few? If the few tell you that there is consensus amongst the unconsulted many, are you a wise politician to believe them? Even if it were the view of many, should you do what is wanted by the majority (or even the consensus) amongst a particular interest-group, or what is right without reference to interests? Most of us want taxes to be lower, but his Government seems to care less about the consensus on that subject. How do they decide which consensus to listen to and which to ignore?

It used to be said that "UK business" wanted us to go in to the Euro. Now it is said that "UK business" does not want us to go in to the Euro. What is meant is that the majority of bosses of big City institutions and major corporations used to think that the Euro would be good for their businesses, and now the majority think it would be bad. That is not the same thing as the opinion of UK business (even if the Confederation of Big Industry says it is). The Government's reliance on the self-interested, vacillating, superficial assessments of this "elite" is what makes policy so inconsistent and unprincipled. The attitude to EU-ETS and their alliance to produce this manifesto is just another example.

Give us all your money and we'll save the planet by chauffeur driven car

If ever proof were needed that this government is using the environment debate as a smoke screen to stealth taxes and pushing through their agenda, then just look at how they are acting in their everyday lives. You would think a government overly concerned with the changing climate would be going out of their way to get the public to buy in to the green debate by acting responsibly themselves. But no. The number of miles Ministers are driving each year has risen sharply. And even more worrying, they are making us pay for their luxury travel.

Environmental showboating

Richard Branson is going to create an "environmental showcase for the world" on the Caribbean island of Moskito. He "wants to transform Moskito into the world’s first carbon-neutral holiday resort, complete with wind power, recycling and Balinese-style huts for eco-friendly families."

How are these eco-friendly families going to get there? What are they going to do with the recyclate? What happens when the wind isn't blowing hard enough (which is a lot of the time on the British Virgin Islands)?

The answer is blowing in the wind

I am no fan of wind energy. It is hugely over-rated. But, like most energy sources, it has its place. To dismiss it or condemn it out-of-hand is as distorted a view as to hail it as the solution to all our energy problems.

The Times today printed a damning article on an urban wind installation. A turbine installed four weeks ago at the home of Mr John Large, it reports, "has so far generated four kilowatts of electricity", compared to an average household's consumption of "23kw every day", and offering a return of "9p a week" compared to the £13,000 that Mr Large spent on the installation.

As many were quick to point out in comments on the article at The Times's website, and on many blogs, the journalist's ignorance of basic energy and engineering was revealed by his use of terminology. Kilowatts (or kW - lower-case k, upper-case W) are a measure of potential - the capability to deliver a given amount of energy in a given time if working at full load. Kilowatt-hours (kWh - as above, plus lower-case h) are a measure of energy - specifically the amount of energy produced if an engine with the potential to produce 1 kW is run at full load continuously for one hour. The phrase "has so far generated four kilowatts" is therefore a nonsense - kW contain no notion of time, so one cannot say that any number of kW have been generated "so far".

"23kw every day" is likewise wrong, not only in the spelling, but also in fact - to the extent that averages are in any way meaningful (which is a very limited extent), the figure should be 23 kWh, not 23 kW. 23 kW every day would, according to the best interpretation one could put on it (23 kW of demand continuously for 24 hours) equate to 552 kWh per day, which is way over the top. As it is, even 23 kWh per day is excessive - total domestic consumption of electricity in the UK is around 115 TWh (1 TWh = 1 billion kWh) each year, which is equivalent to around 4,800 kWh per household annually (there are just over 24 million households in the UK), or 13 kWh per household per day.

De-accelerate! De-accelerate!

Everyday it seems we are being told what to do more and more. In the latest attempt to tackle climate change the EU are going to change the way we drive. That is to say, they are going to force us to drive exactly as they want us to. All new cars will be fitted with devices that tell drivers when to change gear, what speeds to drive at and even when to pump up their tyres. You could not make this up – even if your name was George Orwell. I don’t know how this is going to work, but I can imagine the car relentlessly nagging me like the worst back seat driver in a dalek like drone. Of course, it goes without saying that we will have to stump up an extra £2000 (on a typical family car) for the privilege.

Paying for controversy

There has been condemnation today of the stale news (perhaps pumped up to make the new IPCC report more interesting) that the ExxonMobil-funded American Enterprise Institute (AEI) have been offering to fund research questioning the orthodoxy of climate-change science. The Guardian, which "broke" the story, did not see fit to provide the full text of any of the letters sent by the AEI, so we are left to imagine how bad they must have been from the few excerpts provided. These consisted of:

  • a claim that the IPCC are "resistant to reasonable criticism and dissent and prone to summary conclusions that are poorly supported by the analytical work";
  • a request for essays that "thoughtfully explore the limitations of climate model outputs";
  • a figure ($10,000) that would be paid to scientists and economists who provided such essays;
  • a quote from Kenneth Green, the author of the AEI letters offering such funding, defending the offer on the basis that "right now, the whole debate is polarised. One group says that anyone with doubts whatsoever are deniers and the other group is saying that anyone who wants to take action is alarmist. We don't think that approach has a lot of utility for intelligent policy."

Shocking stuff. If these are the highlights, one can only imagine how much more damning would have been the complete letter. How dare anyone in the energy industry fund research that dared thoughtfully to question the intellectual orthodoxy? What right have we to expect the IPCC to pay attention to "reasonable criticism" or to provide thorough analytical support for their conclusions?

Carbon offsetting

Tony Blair has promised to offset emissions from his holiday flights after opposition parties and green groups questioned his leadership on climate change. But offsetting emissions is not a solution to the problem. It is a great idea to pay for plating trees but it won't change our behaviour. Carbon offsetting only allows us to believe we can carry on polluting. Also, the timing is critical: "emissions saved today are far more valuable, in terms of reducing climate change, than emissions saved in 10 years' time, yet the trees you plant start absorbing carbon long after your fact

Ignorant councils

A Guardian survey has revealed that many councils are ignoring the threat of climate change and taking no action to reduce the rising carbon emissions of their residents. "The Guardian contacted all 442 local authorities in England, Wales and Scotland to ask whether they had any schemes planned to change household behaviour, either through incentives or penalties. Of 64 local authorities that responded, 30 said they had no plans to tackle emissions. A further 26 said they had introduced only limited incentives to encourage green behaviour, most of which are aimed at meeting government recycling targets. Only six local authorities said they were taking significant steps to curb household emissions."

Turning green

David Miliband dismissed the rumours of increasing green taxes that would affect mainly middle-income families on BBC's Sunday AM (05 November). He said that any green taxes would have to be accommodated to the Government's overall approach to taxes and spending. 

It is clear that action must be taken to tackle climate change and the Government has committed itself to the fight against global warming. However, it has not yet fully revealed its strategy and seems to consider various options. Mr Miliband mentioned the importance of increasing spending on research and development. Would that mean more support to companies that develop technologies that are consistent with the Government's overall approach? But it is often the case that governments choose the least viable candidate and commit funding to failed projects.

The multifunction carbon tax

I don't know if this is exactly a case of picking losers, but it certainly falls into the category of stupid policy assessments, and they usually end up with more losers than winners. Anyway, it is so stupid that I had to post about it.

I have just watched a recorded episode of Newsnight (from Tuesday, 3 Oct, I think) in which Susan Watts, their Science Editor, made the following pronouncement:

"David Cameron's new green Tories could use a small carbon tax both to pay for new technologies and to raise revenue to let them lower taxes elsewhere."

Amazonian myths

David Miliband wants Westerners to buy the Amazon rainforest (Sunday Telegraph, 1 Oct 2006, News, p.2). We need to ensure that there is a balance between urban and industrial development to provide the goods that people demand, agricultural development to provide the food that they demand, and undeveloped areas to provide the ecological services (such as carbon dioxide absorption) that we need and the habitat to support the biological diversity that may yield untold benefits in the future. Property rights are an important way of encouraging protection of assets. In that sense, a proposal to introduce property rights in rainforests should be welcomed.