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Let Them Eat Carbon

Recent coverage of Let them eat carbon

Dec 17th, 2011
by Matthew Sinclair.
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Over the last week we have seen the end of the Durban summit and a new report from the Committee on Climate Change, trying to play down the extent climate policies are set to push up energy prices.  At the TaxPayers’ Alliance, we’ve been arguing online and in the media that the Government shouldn’t ignore the pressure being placed on families and needs to put in place reforms to give families a better deal, building on the case set out in Let them eat carbon.   Here is a round-up:

  • In the immediate aftermath I wrote for the ConservativeHome and Spectator websites about how little progress the Durban summit had made, and the implications for policy here.
  • I debated climate policy in the aftermath of the Committee on Climate Change report and the Durban summit with environmentalist and Guardian columnist George Monbiot on Radio 4′s flagship Today programme.  The debate is available online.
  • I looked at the Committee on Climate Change report and found that many of the assumptions hadn’t been made clear, but what we could see suggested there were some problems.  I set out the issues with the quango producing such an opaque report in an article for the Spectator website.
  • Finally, yesterday I wrote for this website that, as the dust settled after the Durban summit, it was clear that the EU strategy hadn’t worked.  We are left pressing ahead unilaterally to no end.

It is clearer than ever that climate policy needs to change.  We will keep making the case.

What does the Durban summit last weekend mean for taxpayers?

Dec 16th, 2011
by Matthew Sinclair.
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Early last Sunday morning Connie Hedegaard, the European Commissioner for Climate Action, wrote on Twitter that: “We made it.  EU’s strategy worked.”  It was the end of another climate summit in Durban where the parties had been starkly divided into two camps: the European Union and lots of smaller countries pushing for rapid decarbonisation; and major emitters like the United States, China and India who were unable and unwilling to commit to binding limitations on their own emissions.  The same divisions meant that Copenhagen collapsed in acrimony and the negotiators at Cancun limited themselves to addressing details.  Was it really the “breakthrough” that Hedegaard claimed?  Did the EU’s strategy really “work” and secure the global deal to ration greenhouse gas emissions they want?

Taken for a ride...

No.  The EU’s negotiators were willing to accept new commitments under the Kyoto Protocol, which doesn’t include the major emitters.  But in return they initially wanted all the parties to commit to agreeing a legally binding deal covering everyone by 2015.  The major emitters wouldn’t do that and so it looked like the talks were going to break down.  Instead they got creative with the language and now the major emitters are only committed to an “outcome with legal force”.

Enthusiasts in Europe can claim that is basically the same thing, but the reality is that just about anything can be described as “an outcome with legal force”.  If the major emitters don’t want a legally binding deal to limit their emissions in 2015, nothing will stop them rejecting it.  That is why they would sign a deal with the vaguer language but not when it was more specific.

So the EU has committed itself to emissions cuts in return for a Durban Platform that pledges a deal by 2015, but that Platform isn’t made of much stronger stuff than the Bali Roadmap back in 2007 which pledged a deal by 2009.  That certainly isn’t a triumph.  It would be better described as a disastrous performance if it wasn’t for the fact that the EU was planning on going ahead unilaterally anyway with the existing 2020 targets.  The result in Durban was another breakdown, not a breakthrough.

Canada added to the environmentalist gloom by dropping out of the Kyoto Protocol on Monday.  Their Environment Minister Peter Kent said that complying would mean the equivalent of taking every motor vehicle in Canada off the roads, or shutting down their entire agricultural sector and cutting the heat off in residential, industrial and commercial buildings.  The leader of the Canadian Green Party was apparently almost in tears at a press conference responding to the announcement but there is no sign ordinary Canadians care much either way.

The European Union is now the only major economic area still committed to rationing fossil fuel energy.  It has been going ahead without the largest emitters taking equivalent action since the Kyoto Protocol came into effect in 2005.  Even if a new deal is built on the Durban Platform it won’t start until 2020.  Our leaders have already pressed ahead for six years in the vain hope a global deal was just around the corner.  There is nothing to show for it.  The global increase in emissions in 2010 was, according to the US Department of Energy, the largest ever.  Can politicians here really sustain that for almost another decade?

While negotiators in Durban were committing their countries to expensive action to reduce greenhouse gas emissions, others in Brussels were trying to save the euro.  If they are going to have any chance, they will need to credibly commit to fiscal austerity.  And that will be much harder if low and middle income families are struggling to pay higher energy bills, at the same time as benefits are cut or taxes are hiked.  If Europe could ever afford a vain attempt to lead the world into cutting greenhouse gas emissions, it can’t now.

That is why many countries are making cuts in some particularly inefficient climate policies.  Britain recently cut subsidies for small solar installations under the feed-in tariff scheme roughly in half, from 43p per kWh to a still extravagant 21p per kWh.  Environmentalists and lobbyists are up in arms but the Government insist it is needed to keep feed-in tariffs affordable.

Lots of other countries from Spain to the Czech Republic have taken similar steps, but they need to go further and consider a more realistic approach to climate policy overall.  Right now too many European politicians are still trying to work out what their allotted share of the burden would be if some disinterested world Government set climate policy.  Instead they should be asking what their country can usefully do in the real world, where even when treaties can be arranged they are invariably limited and messy products of self-interested negotiation.

Britain is a good example.  Given that less than two per cent of world emissions are produced here we can make a limited contribution by cutting the amount we emit.  But we do still have significant financial and technical resources at our disposal.  Instead of investing £200 billion in our energy sector alone, as Citigroup argue we would need to in order to meet environmental targets, squandering a large part of it on exorbitantly expensive offshore wind turbines, why not put a far smaller amount of money into directly supporting research that can make low carbon energy more affordable?

Durban definitely wasn’t an example of the EU’s approach to climate policy working, quite the opposite.  The only question now is whether or not the politicians are honest enough to admit it, and flexible enough to consider other options.

What does the Durban summit last weekend mean for taxpayers?

Dec 16th, 2011
by Matthew Sinclair.
Comments are off for this post

Early last Sunday morning Connie Hedegaard, the European Commissioner for Climate Action, wrote on Twitter that: “We made it.  EU’s strategy worked.”  It was the end of another climate summit in Durban where the parties had been starkly divided into two camps: the European Union and lots of smaller countries pushing for rapid decarbonisation; and major emitters like the United States, China and India who were unable and unwilling to commit to binding limitations on their own emissions.  The same divisions meant that Copenhagen collapsed in acrimony and the negotiators at Cancun limited themselves to addressing details.  Was it really the “breakthrough” that Hedegaard claimed?  Did the EU’s strategy really “work” and secure the global deal to ration greenhouse gas emissions they want?

Taken for a ride...

No.  The EU’s negotiators were willing to accept new commitments under the Kyoto Protocol, which doesn’t include the major emitters.  But in return they initially wanted all the parties to commit to agreeing a legally binding deal covering everyone by 2015.  The major emitters wouldn’t do that and so it looked like the talks were going to break down.  Instead they got creative with the language and now the major emitters are only committed to an “outcome with legal force”.

Enthusiasts in Europe can claim that is basically the same thing, but the reality is that just about anything can be described as “an outcome with legal force”.  If the major emitters don’t want a legally binding deal to limit their emissions in 2015, nothing will stop them rejecting it.  That is why they would sign a deal with the vaguer language but not when it was more specific.

So the EU has committed itself to emissions cuts in return for a Durban Platform that pledges a deal by 2015, but that Platform isn’t made of much stronger stuff than the Bali Roadmap back in 2007 which pledged a deal by 2009.  That certainly isn’t a triumph.  It would be better described as a disastrous performance if it wasn’t for the fact that the EU was planning on going ahead unilaterally anyway with the existing 2020 targets.  The result in Durban was another breakdown, not a breakthrough.

Canada added to the environmentalist gloom by dropping out of the Kyoto Protocol on Monday.  Their Environment Minister Peter Kent said that complying would mean the equivalent of taking every motor vehicle in Canada off the roads, or shutting down their entire agricultural sector and cutting the heat off in residential, industrial and commercial buildings.  The leader of the Canadian Green Party was apparently almost in tears at a press conference responding to the announcement but there is no sign ordinary Canadians care much either way.

The European Union is now the only major economic area still committed to rationing fossil fuel energy.  It has been going ahead without the largest emitters taking equivalent action since the Kyoto Protocol came into effect in 2005.  Even if a new deal is built on the Durban Platform it won’t start until 2020.  Our leaders have already pressed ahead for six years in the vain hope a global deal was just around the corner.  There is nothing to show for it.  The global increase in emissions in 2010 was, according to the US Department of Energy, the largest ever.  Can politicians here really sustain that for almost another decade?

While negotiators in Durban were committing their countries to expensive action to reduce greenhouse gas emissions, others in Brussels were trying to save the euro.  If they are going to have any chance, they will need to credibly commit to fiscal austerity.  And that will be much harder if low and middle income families are struggling to pay higher energy bills, at the same time as benefits are cut or taxes are hiked.  If Europe could ever afford a vain attempt to lead the world into cutting greenhouse gas emissions, it can’t now.

That is why many countries are making cuts in some particularly inefficient climate policies.  Britain recently cut subsidies for small solar installations under the feed-in tariff scheme roughly in half, from 43p per kWh to a still extravagant 21p per kWh.  Environmentalists and lobbyists are up in arms but the Government insist it is needed to keep feed-in tariffs affordable.

Lots of other countries from Spain to the Czech Republic have taken similar steps, but they need to go further and consider a more realistic approach to climate policy overall.  Right now too many European politicians are still trying to work out what their allotted share of the burden would be if some disinterested world Government set climate policy.  Instead they should be asking what their country can usefully do in the real world, where even when treaties can be arranged they are invariably limited and messy products of self-interested negotiation.

Britain is a good example.  Given that less than two per cent of world emissions are produced here we can make a limited contribution by cutting the amount we emit.  But we do still have significant financial and technical resources at our disposal.  Instead of investing £200 billion in our energy sector alone, as Citigroup argue we would need to in order to meet environmental targets, squandering a large part of it on exorbitantly expensive offshore wind turbines, why not put a far smaller amount of money into directly supporting research that can make low carbon energy more affordable?

Durban definitely wasn’t an example of the EU’s approach to climate policy working, quite the opposite.  The only question now is whether or not the politicians are honest enough to admit it, and flexible enough to consider other options.

Double taxing holidaymakers

Nov 19th, 2011
by Matthew Sinclair.
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Earlier this week, I appeared on Sky News to debate aviation taxes with John Stewart, Chairman of Airport Watch. We were asked whether we supported scrapping Air Passenger Duty – a tax that, according to the Government’s own research, is excessive compared to the emissions aviation creates.

In addition to this, the Government plans to extend the EU Emissions Trading Scheme – which I have written about previously – to aviation, effectively taxing holidaymakers twice. This is not only unfair, but hits tourists, and the tourism industry, at a time they can afford it least.

You can watch the debate below:

Let them eat carbon gets raised twice in a week on the floor of the Commons

Oct 25th, 2011
by Jonathan Isaby.
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Matthew Sinclair’s recent book, Let Them Eat Carbon, continues to attract the attention of parliamentarians at Westminster. Last week it was mentioned twice in the House of Commons chamber, firstly by Wycombe MP Steve Baker during a debate on Wednesday, while explaining his concerns that government-backed EU climate change policies are distorting energy prices and increasing bills for every British family. Watch what he said here:

Then on Thursday, there was an exchange at Energy and Climate Change Questions between Bury North MP David Nuttall and DECC minister, Charles Hendry. The clip below begins with the minister’s reply to David Nuttall’s question asking what the Government is doing to reduce the cost of gas and electricity for consumers:

It was somewhat surprising to hear Charles Hendry so merrily dismissing the figures on the relative costs of meeting environmental targets as cited in the book: they come from table four on page seven of this Citigroup analysis which the Department for Energy and Climate Change itself has used as a source – see footnote 9 on this official DECC document, for example.

I await Mr Hendry’s response to my email pointing this out with interest…

The Government’s rhetoric has changed on energy, but not its policy

Oct 17th, 2011
by Matthew Sinclair.
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David Cameron and Chris Huhne have written for the website MoneySavingExpert.com this morning and argued that “everything that can be done will be done to help people bring their energy bills down”. It is a fine sentiment but not matched by their actions. They are continuing to impose regulations that will drive up bills, and are no friends of consumers. Attacks on energy companies are thinly veiled attempts to distract from politicians’ complicity in rising in energy prices by attacking a sector which will enjoy higher profits as a result of the regulation they have put in place.

Prices have risen for a number of reasons including instability in the Middle East; rapid rises in demand with strong growth in major developing economies; and climate regulation. But with instability in the Middle East subsiding for now and oceans of shale gas being discovered there should be every reason to be a bit more optimistic about the pressure on households easing a little. Unfortunately, they are going to have to pay for hundreds of billions of pounds in investment under draconian climate regulations, in order to meet Brussels targets. Citigroup estimates suggest Britain has to invest around £200 billion. That is far more than our European competitors, let alone the rest of the world:

Paying for that investment will require the energy companies to make more profit. That will drive up prices by over 50 per cent in real terms according to Citigroup. Even with greater efficiency, they think we will have to pay over a third more in dual fuel energy bills in real terms, and that is before paying for the extra insulation.

There is no way of making £200 billion cheap. Fiddling around the edges trying to bring down energy company margins might help some people in the short term but won’t address the fundamentals.  Any politician who was serious about helping to bring energy bills down would reconsider some of those regulations and targets. There are a few ways they could do that: stop picking losers and giving extravagant subsidy to the least efficient sources of power; scrap the renewable energy target and just focus on the emissions target; scrap the new carbon price floor that Credit Suisse think will mean £7 billion more in profit for energy companies while just shifting emissions from Britain to other European economies according to the IPPR.

If they want to be more ambitious, and really do all they can to ease the burden on consumers, they could rethink the fundamentals of our energy policy. Instead of trying to deploy expensive sources of energy now we should focus on research. Even if we were happy to pay higher prices for our energy, major emitters aren’t going to do the same so developing new alternatives is the only way we make a practical contribution. After all, our paltry under two per cent of global emissions won’t make much difference to the climate. There is a lot more detail on how to do that in Let them eat carbon.

Article about the Solyndra scandal and “green growth” in City AM

Oct 12th, 2011
by Matthew Sinclair.
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I’ve written an article for City AM about the Solyndra scandal, mentioned before on this website, and the implications for draconian climate regulations. It looks at the price we’re paying for these policies; the financial challenges they are facing; and the fact they don’t deliver jobs.

I conclude the article arguing that:

“The particularly sad and venal story of that loan guarantee is just one example of how attempts to secure green growth so often end in disaster. The pattern is clear. Huge amounts of consumers’ and taxpayers’ money wasted; the promised boon to employment not living up to its billing; and a nasty aftertaste of cronyism.”

In other news, reports from Australia suggest we might see yet another vindication of the Second Law of Climate Change Politics soon, which I coined in Let them eat carbon: Climate change regulation will tend to proceed by the least democratic route.  This video explains what has happened pretty simply:

Clean Development Mechanism just gets worse

Sep 28th, 2011
by Matthew Sinclair.
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In Let them eat carbon I looked at some of the problems we already knew about with the Clean Development Mechanism (CDM).  The idea is that sometimes it will be cheaper for richer countries like us to pay poorer countries to cut emissions on our behalf.  It doesn’t matter to the climate where emissions are produced so why not do that to meet our targets?  So how does that end in the New York Times reporting families in Uganda being driven off land at gunpoint and an 8-year-old child being burned to death?

Unfortunately the simple idea has in practice been a corrupt attempt to buy the notional involvement of poor countries in the Kyoto Protocol, in particular.  Huge subsidies are available for a project that can be approved by the United Nations body charged with overseeing the scheme as having cut emissions.

Most of the Certified Emissions Reductions (CERs) issued so far have gone to schemes to destroy particularly potent greenhouse gases like HFC-23 produced as byproducts in industrial processes (in that case, the production of HCFC-22). Academic study suggests that the scheme have been so generous that they have encouraged companies to produce more of these byproducts in the first place, making the whole scheme monstrously inefficient.

There are massive conflicts of interest in the critical validation process deciding whether or not projects will actually cut emissions, and whether they would have gone ahead anyway without subsidy.  Two of the biggest validators have received temporary suspensions and reviews suggest many projects don’t provide evidence that CDM funding makes a difference.

But now the New York Times reports a particularly disturbing case where the prospect of carbon credits seems to have driven an ugly land grab in Uganda:

“I heard people being beaten, so I ran outside,” said Emmanuel Cyicyima, 33. “The houses were being burnt down.”

Other villagers described gun-toting soldiers and an 8-year-old child burning to death when his home was set ablaze by security officers.

“They said if we hesitated they would shoot us,” said William Bakeshisha, adding that he hid in his coffee plantation, watching his house burn down. “Smoke and fire.”

According to a report released by the aid group Oxfam on Wednesday, more than 20,000 people say they were evicted from their homes here in recent years to make way for a tree plantation run by a British forestry company, emblematic of a global scramble for arable land.

The firm in question, the New Forests Company, has high profile investors like the World Bank and HSBC.  Of course, this isn’t the first violent land grab in a developing country, and the Ugandan government is probably right that it is a failure of the rule of law as much as anything, but this is yet another example of how climate policies that sound fine in comfortable offices in London can have awful effects in practice.

Setting up a generous subsidy for emissions reductions in the developing world with limited accountability was always a recipe for a waste of money at best, corruption at worst.  British families and businesses pay for all of it in their energy bills.

Clean Development Mechanism just gets worse

Sep 28th, 2011
by Matthew Sinclair.
Comments are off for this post

In Let them eat carbon I looked at some of the problems we already knew about with the Clean Development Mechanism (CDM).  The idea is that sometimes it will be cheaper for richer countries like us to pay poorer countries to cut emissions on our behalf.  It doesn’t matter to the climate where emissions are produced so why not do that to meet our targets?  So how does that end in the New York Times reporting families in Uganda being driven off land at gunpoint and an 8-year-old child being burned to death?

Unfortunately the simple idea has in practice been a corrupt attempt to buy the notional involvement of poor countries in the Kyoto Protocol, in particular.  Huge subsidies are available for a project that can be approved by the United Nations body charged with overseeing the scheme as having cut emissions.

Most of the Certified Emissions Reductions (CERs) issued so far have gone to schemes to destroy particularly potent greenhouse gases like HFC-23 produced as byproducts in industrial processes (in that case, the production of HCFC-22). Academic study suggests that the scheme have been so generous that they have encouraged companies to produce more of these byproducts in the first place, making the whole scheme monstrously inefficient.

There are massive conflicts of interest in the critical validation process deciding whether or not projects will actually cut emissions, and whether they would have gone ahead anyway without subsidy.  Two of the biggest validators have received temporary suspensions and reviews suggest many projects don’t provide evidence that CDM funding makes a difference.

But now the New York Times reports a particularly disturbing case where the prospect of carbon credits seems to have driven an ugly land grab in Uganda:

“I heard people being beaten, so I ran outside,” said Emmanuel Cyicyima, 33. “The houses were being burnt down.”

Other villagers described gun-toting soldiers and an 8-year-old child burning to death when his home was set ablaze by security officers.

“They said if we hesitated they would shoot us,” said William Bakeshisha, adding that he hid in his coffee plantation, watching his house burn down. “Smoke and fire.”

According to a report released by the aid group Oxfam on Wednesday, more than 20,000 people say they were evicted from their homes here in recent years to make way for a tree plantation run by a British forestry company, emblematic of a global scramble for arable land.

The firm in question, the New Forests Company, has high profile investors like the World Bank and HSBC.  Of course, this isn’t the first violent land grab in a developing country, and the Ugandan government is probably right that it is a failure of the rule of law as much as anything, but this is yet another example of how climate policies that sound fine in comfortable offices in London can have awful effects in practice.

Setting up a generous subsidy for emissions reductions in the developing world with limited accountability was always a recipe for a waste of money at best, corruption at worst.  British families and businesses pay for all of it in their energy bills.

Solyndra and the green jobs debacle

Sep 19th, 2011
by Matthew Sinclair.
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At the time I wrote Let them eat carbon, Solyndra was already struggling.  Since then the American solar panel company cited by President Obama as “a testament to American ingenuity and dynamism” – and given a loan guarantee for half a billion dollars – has collapsed and is now being investigated by the FBI.  Jon Stewart talks through the entire gory story for the Daily Show.

This isn’t the only example of green jobs built up at huge expense failing to last.  The German solar sector has been in dire straits for some time.  Just look at the share price of major firm Q-Cells over the last five years.  In October 2010, wind firm Vestas announced major job losses in Denmark.

In the end, the people who get the green jobs will be the ones selling all the wind turbines and solar panels, not the mugs buying them.  Draconian climate regulations cost more jobs than they create.

To find out more about this issue, read the book.

BBC Daily Politics discussion of Let them eat carbon

Sep 16th, 2011
by Matthew Sinclair.
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This Wednesday, I appeared on the Daily Politics presenting a soapbox piece about rising energy prices, and how climate change policies are making the problem much worse.  That was followed up by a discussion in the studio with Grant Shapps MP and Tessa Jowell MP.  There is an expanded version of the argument I made in the soapbox as an article on their website which you can read here.

There have also been two prominent blogs about the report.  First an article by respected commentator Jim Manzi for the National Review Online. He wrote that:

Taxes, fees, restrictions and other economic costs imposed in the name of ameliorating climate change are vastly larger in the U.K. than in America.  There is a stifling consensus between left and right on the subject among the British political class. There are a few freethinkers, however, who just won’t get with the program. Among the most persuasive of them is Matthew Sinclair, director of the Taxpayers Alliance. 

Then I’ve written a piece for the Spectator website about the book, arguing that:

After a Spectator debate on climate change in March, Fraser Nelson wrote about whether or not we should try to engage in the debate ourselves or “trust the expert”. Simon Singh had argued in the debate that the most credible experts supported the view that the human contribution to potential global warming was real and serious. The response to my new book Let Them Eat Carbon shows how much that kind of debate is turned on its head when it comes to policy.

The book is available in paperback and Kindle editions.

 

Matthew Sinclair on the Daily Politics Soapbox

Sep 14th, 2011
by The TaxPayers' Alliance.
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The big energy companies have put their prices up – but not everyone realises they are also paying for the government’s green initiatives as well.

Matthew Sinclair, TaxPayers’ Alliance director and author of Let Them Eat Carbon visits a former power station, to give his take on rising energy costs and what he thinks we can and cannot afford.

Matthew will be appearing on today’s Daily Politics, where he will debate his ideas with Labour MP Tessa Jowell and Conservative MP Grant Shapps after his film is shown about 12:40. The programme runs on BBC Two from 11:30 to 13:00, or later on iPlayer.

Talking to the One Show about energy prices

Sep 13th, 2011
by Matthew Sinclair.
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Yesterday evening I appeared as part of a panel for the One Show responding to consumers’ questions about high energy prices.  With electricity and gas bills putting so much pressure on their finances, it is important that people are aware of just how much government climate regulations are already costing them, and set to add to their bills this decade.  We need to get rid of failing climate change policies but that won’t happen if the public aren’t aware of the price they’re paying.  Here is the clip, and there is a lot more detail in the book.

One thing that came up in that clip, which it is worth saying a bit more about, is Chris Huhne’s suggestion that we won’t get higher bills because of the measures they are taking to improve the energy efficiency of our homes.  When you think about it, that argument is somewhat absurd.  He can’t conjure £200 billion of investment in the energy sector out of nowhere.  Who does he think will pay for that massive investment?

When Citigroup looked at this issue they found that even with major efficiency improvements prices will still rise by well over a third in real terms, and then we have got to pay for all the insulation and double glazing too.

He was also misleading when he said that this investment was needed to keep the lights on.  Replacement and renewal to maintain supply is only a small share of projected investment.  It is attempts to cut greenhouse gas emissions that are driving the huge costs expected here.  Particularly building, connecting and backing up massive amounts of offshore wind.

Let them eat carbon cited in the Lords

Sep 9th, 2011
by Matthew Sinclair.
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In chapter eight of Let them eat carbon I look at why major developing economies that emit far more greenhouse gases than Britain aren’t going to follow our lead.  And at politicians’ farcical attempts to buy their support with our money.  One example of that is the Clean Development Mechanism, and earlier this week Lord Reay discussed at that scheme in Parliament, citing the book and saying it “dissects brilliantly most of the ramifications of renewable energy policies.”

For more information about the Clean Development Mechanism, and other climate change policies, read the book (now also available on Kindle).

Kindle edition of Let them eat carbon released

Sep 8th, 2011
by Matthew Sinclair.
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If you have an Amazon Kindle reader – or otherwise read Kindle books on your computer, phone or tablet – you can now get hold of an electronic copy of Let them eat carbon.  The digital version is available from Amazon here.  If you would prefer a printed copy instead, the paperback is available here.

Further evidence green policy will push up household energy bills

Sep 6th, 2011
by Liz Holliday.
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A cautionary, yet familiar, tale on how Coalition energy policies will affect homeowners was published this week in The Daily Telegraph. The article centres on a six-page document, entitled the “impact of our energy and climate policies on consumer energy bills,” and suggests that the Government’s move to increase alternative energy (like wind turbines and nuclear power) will increase the average family’s yearly energy bill 30 per cent by 2020.

The figures in the paper, written by David Cameron’s senior energy advisor, Ben Moxham, reportedly now have the PM “very worried.” The document asserts the simple logic that increasing energy bills, at a time when most household budgets are already tight, might not leave voters at their happiest.

The notion that Coalition green policies will increasingly impact consumer household bills in the long-term is not new. Our Director, Matthew Sinclair, has been imploring the Government “to give families a better deal and cut unfair green taxes” for quite some time now. The threats of green taxes and subsidies on taxpayers are covered in details in Sinclair’s new book ‘Let them eat carbon’ In the book he discredits the claim that green taxes were “justified by the need to cut greenhouse gas emissions,” with new figures that show the taxes as “excessive compared to the harms they are meant to address”.

It looks like the message may have finally gotten through to Cameron and his team. The Daily Telegraph reports that “Ministers and officials from the Treasury, DECC [Department of Energy and Climate Change] and the Department for Communities and Local Government are expected to be called into No 10 for a high-level meeting to discuss how to pursue the policies.”

However, whether or not Cameron will finally heed the warnings have yet to be seen. Perhaps he should pick up a copy of ‘Let them eat carbon’ before taking the meeting.

Article about Let them Eat Carbon in City A.M.

Sep 1st, 2011
by Emma Boon.
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This morning there is an article by Matthew Sinclair in City A.M. about Let them eat carbon. He discusses who will really be paying for investment in the energy sector to make it greener and concludes that it will be already heavily burdened households.

He also highlights that:

Benefits for poor and elderly households are the biggest item in the government’s budget. Higher energy bills will make it much harder for them to stomach the long term fiscal adjustment that the country needs.

By and large the public do not realise what is going on in the lucrative world of climate policy. How informed taxpayers are will decide whether or not the current, failing agenda is reversed.

Read the full article here.

Article about Let them eat carbon in the Daily Express

Aug 24th, 2011
by Matthew Sinclair.
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This morning the Daily Express has printed a comment article I’ve written based on the book.  It looks at how green taxes ranging from Fuel Duty to the regulations driving up electricity bills are a burden families just can’t afford with so many other pressures on their finances right now.

Here is the introduction:

ALWAYS beware politicians who hit upon a cover story for higher taxes. They’ll seize it with gusto.

In 1993 the then chancellor Ken Clarke was the first to use climate change as an excuse to take your money – he invented something called the fuel duty escalator.

Since then we have had three more chancellors but no change in the final result. Families are still getting hit with ever-higher taxes on everything from driving to work to lighting and heating their homes and even taking hard-earned holidays.

Read the rest of the article here.

Article about Let them eat carbon in the Wall Street Journal Europe

Aug 22nd, 2011
by Matthew Sinclair.
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Last Friday the Wall Street Journal Europe ran an article I wrote about Let them eat carbon.  It looks at the pressure climate policy is putting on families and how it makes it harder for our industry to compete.  With so many pressures on European economies they can’t afford to bear that kind of burden.  I conclude that:

Reforms to climate-change policy—to focus on research, adaptation and resilience—have been a good idea for some time. With so many other financial and economic challenges facing European economies they are becoming absolutely essential. The only question now is how long the politicians can hold out against a skeptical public that is footing a growing bill in the name of climate-change virtue.

Buyer beware with environmental policy, or you might accidentally ban water

Aug 22nd, 2011
by Matthew Sinclair.
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As the US magician-comedians Penn and Teller make clear in this classic clip, you need to be careful with environmental policy.  It’s quite legitimate to be concerned about chemicals affecting what you eat and drink, but if you don’t find out more it’s easy to be lead astray and wind up signing a petition to ban water.

There is a similar problem with climate change policy.  Many people see a threat of sea levels rising; more frequent and damaging storms; or even fewer polar bears, and want to do something about climate change.  They still need to look very carefully at what politicians are doing to curb greenhouse gas emissions.  The debate over the science isn’t nearly as critical as it is made out to be, and the most important reasons to be sceptical have nothing to do with the effect you think carbon dioxide has on the climate.

In Let them eat carbon I’ve set out how climate change policy is going very wrong.  The taxes, subsidies, regulations and targets are costing a fortune, putting people out of work and failing to deliver.  They are sustained by activists with generous grants at our expense; special interests making hefty windfall profits; and leaders who don’t want to admit that the current agenda has failed.  It isn’t banning water, but politicians have signed us up to some very bad ideas.

Carbon Brief response on the cost of the EU ETS and Renewables Obligation

Aug 19th, 2011
by Matthew Sinclair.
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Hopefully at some point environmentalist website Carbon Brief will continue the debate over excessive green taxes.  You can see my response to their attack on those figures in the book here.  Today they have attacked another set of figures, which address the cost of the European Union Emissions Trading Scheme and were reported in the Daily Mail earlier this week.  They have made a few mistakes that I wanted to correct:

Attributing the costs of the Renewables Obligation – which is the UK government’s main mechanism for supporting large-scale generation of renewable energy – entirely to the EU seems a bit tenuous and perhaps says more about the Mail’s attitude to the EU than anything else.

The Renewables Directive sets out – at the EU level – the amount of renewable energy each country has to use.  The Renewables Obligation is, along with the Renewable Transport Fuels Obligation, the way the Government plans on getting us to that target.  Firm enough a connection?

Leaving that aside, the figures quoted by the Mail are wildly at odds with government estimates. When we asked DECC for their figures on the impact of the Emissions Trading Scheme and the Renewables Obligation on domestic bills, they pointed us their latest figures in Appendix D and E of this document (pdf).

The Daily Mail quoted the cost to consumers, not the contribution to domestic electricity bills.  Residential, industrial and commercial consumers of energy are all affected by these regulations.  The misapprehension, probably due to earlier debates with the newspaper over electricity bills, appears to be the source of most of Carbon Brief’s confusion over my research.

Businesses don’t ultimately pay energy bills, any more than they drive a car.  People do.  Rory Meakin discussed this issue in a different context on this site recently.  If the restaurant at the end of the street pays more to keep the lights on, and it is in a competitive market and all the other restaurants face the same burden, it will pass the cost on to you.  That is why the cost of up to £115 a family imposed by the EU ETS and the cost of the Renewables Obligation was given.

The area where there is uncertainty, as Carbon Brief rightly identify, is the extent to which the carbon price is passed on to consumers.  In the Appendix to the book I set out a number of reasons why all of the cost won’t be passed on.  Manufacturing firms, for example, might compete with rival firms in places outside the EU ETS who don’t face the same burden and therefore can’t pass it on without losing market share.

The best academic research that I’ve seen in this area suggests that in the electricity market in the Netherlands and Germany the critical pass-through rate was 60 to 100 per cent.  Other research has suggested that more of the carbon price is passed through in relatively competitive markets.

What I did for the book was run the numbers on two assumptions.  First, I assumed 80 per cent of the carbon price was passed through.  Second, I again assumed 80 per cent was passed through, but only the carbon price the regulation put on emissions at combustion installations with a rated thermal input exceeding 20 MW (Main Activity Type Code 1 in the CITL).  That second assumption produced a total pass-through rate of 65 per cent for the UK.  The figure quoted is based on that lower number.

I noted in the book that the category isn’t perfect – and some other installations aren’t included – but it is mostly composed of power plants which face little competition from outside the EU and can be expected to pass on the vast majority of the carbon price.  The estimate is conservative because the pass-through rate for other installations probably isn’t zero.

New articles about Let them eat carbon on ConservativeHome and Public Service Europe

Aug 18th, 2011
by Matthew Sinclair.
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I’ve written two new articles based on the book for the websites ConservativeHome and Public Service Europe looking at the politics of climate change and the effectiveness of a key regulation, the European Union Emissions Trading Scheme.

In the article for ConservativeHome, I look at the political price that the Conservatives, indeed all the three major parties, are paying for embracing radical climate change policies and argue that “it means missing out on the opportunity to be the party of lower energy prices and get the kind of electoral advantage conservatives in Australia, Canada and the United States have enjoyed” and will make “the fiscal adjustment feel a lot less like a gentle squeeze and a lot more like painful austerity.”

For Public Service Europe I’ve looked at the EU Emissions Trading Scheme, a major regulation whose cost we released a press release about earlier this week.  I summarise the failure of the scheme in the introduction to the article, describing it as “like a cargo ship stranded on a beach. Expected to play its vital part in an international carbon economy, it is grounded on the hard economic realities facing Europe. It sits there looking lonely and pointless thanks to the failure to secure an international deal. Instead of lucky locals picking over crates of consumer goods, there are big businesses and financiers making handsome profits at the expense of poor consumers. Instead of an insurer picking up the bill, families get higher electricity prices. Too many manufacturing workers play the role of the crew, and will be looking for a new job.”

There is lots more on both these issues in the book.

Carbon Brief response to Let them eat carbon finding green taxes are excessive by £500 a family

Aug 17th, 2011
by Matthew Sinclair.
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It is good to see that Let them eat carbon is starting an interesting debate about the issues raised in the book.  Guy Shrubshole looks at the green taxes result that was covered in the media earlier this week for the website Carbon Brief, and makes two criticisms.  He argues that:

  • The concept of the social cost of carbon is flawed as a means of appraising policy, on the basis of a short paper from Paul Ekins in 2005.  The Government now prefers a marginal abatement cost approach.
  • The Stern Review gave a much higher Social Cost of Carbon.

Ekins is the head of the Green Fiscal Commission and I have debated these issues with him before.  Some of the arguments he makes are spurious.  For example, this argument that a marginal concept such as the social cost of carbon is inapplicable to climate change:

SCC is what economists call a ‘marginal’ concept. Marginal analysis works best when a small change in one variable, for example emissions (e.g. 1t of carbon), produces a relatively small change in impact. It works least well, and is generally thought to be inappropriate, when largescale impacts and whole-system changes are involved, especially when these might be triggered by crossing thresholds related to the variable concerned. Yet, as TD05 (p.64) reports, in respect  of climate change “Large scale impacts, such as migration, can be triggered by relatively modest climate changes in vulnerable regions.”

He has elided changes in emissions and temperature there.  Whether or not small changes in temperature have a significant effect, which is debatable, there is no question of a small change in emissions doing so.  One tonne of carbon dioxide makes an absolutely negligible difference to the climate.

Yes the social cost may not be linear, but that is why most studies find it changes over time including the one I used for our release.  To the extent that there could be unknown tipping points around the corner, that would cause problem for any attempt to balance the costs and benefits of climate change policy – not just the social cost of carbon.  Ekins suggests that we need to make a “precautionary determination” to limit emissions and avoid dangerous climate change, but we can’t junk the need to balance the costs and benefits in that way.

The most robust example of the kind of argument Ekins is making has come from Martin Weitzman.  He has argued – to put a complicated argument about long tailed risk in simple terms – that even a small chance of a potential catastrophe is a good reason to take radical action to curb emissions.  That doesn’t just mean risk – which is embedded within many calculations of the social cost of carbon already – but as yet unknown risks.  As we can’t know that there isn’t a small chance of a complete catastrophe, we need to take action.  I consider Weitzman’s argument in more detail in the book but, to put it simply, the problem with it is that there are lots of unlikely, unquantifiable and potentially catastrophic risks.  It would be wrong and utterly impractical to base major economic policies on them.

He also talks about the impact on the poor, and the need for appropriate equity weighting.  But given that the overwhelming majority of the harms expected from climate change - particularly in high estimates of the cost of climate change like the Stern Review – affect people living some time in the future and much more prosperous than we are today, it is hard to make that an argument for implementing radical and expensive climate change policy now.

The marginal abatement cost approach appeals to politicians.  It basically says that we should accept after some high level analysis, like the Stern Review, the targets are a good idea, and that there is a cost-effective means of achieving them out there.  Then just argue about whether or not each individual policy is a relatively expensive or inexpensive way of reducing emissions compared to other policies.  The problem is that means entirely neglecting the question of whether actual climate policies are proportionate, whether the harms they are addressing justify the cost they impose on families.  I don’t think we should write a blank cheque like that.

Yes the Stern Review did contain a higher estimate of the social cost of carbon.  But it wasn’t intended for use in policy appraisal and researchers at DEFRA therefore adjusted it to the Shadow Price of Carbon that I’ve used.  And anyway, surely we shouldn’t just be looking at one study?  We should take the IPCC approach and look across the academic literature.

Fortunately, and as I report in the book, Richard Tol has done that.  This is what he found:

The best available knowledge – which is not very good – [suggests a] government that uses the same 3 per cent discount rate for climate change as for other decisions should levy a carbon tax of $25 per metric ton of carbon (modal value) to $50/tC (mean value).

That estimate uses the social cost per tonne of carbon, which can be converted to the social cost per tonne of CO2 by a ratio of 100:27.29 (1 tonne of CO2 contains 0.2729 tonnes of carbon). The mean value of $50/t C is therefore equivalent to $13.65 (roughly £7.70) /t CO2.  In other words, most of the literature finds that the social cost of carbon is lower than that in the study which I used.  And as was reported on Monday even that high estimate of the social cost implied green taxes are excessive by £500 a family.

Matthew Sinclair speaking at the Freedom Association’s ‘Free Spirits’ event

Aug 16th, 2011
by The TaxPayers' Alliance.
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Last night, TPA director Matthew Sinclair joined the Freedom Association at their regular ‘Free Spirits’ event to discuss his new book ‘Let Them Eat Carbon’. Here are his opening remarks, which provide a short overview of the issues raised in the book.

To pre-order a copy of Let Them Eat Carbon, click here.

Coverage for Let them eat carbon findings on green taxes

Aug 15th, 2011
by Matthew Sinclair.
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There has been a lot of coverage in the media this morning for Let them eat carbon.  The Sun, the Daily Mail and the Daily Express have all covered the book’s finding that green taxes are excessive by over £500 a family.  The Daily Mail calls the book “hard-hitting” and the Sun Says: “Ripping taxpayers off gives the green cause a bad name.”

There is a lot more to come and many other burdens on taxpayers are covered in the book, along with detailed analysis of how these policies are failing, the special interests benefiting and the ideological motivation driving them.

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