Anthony Browne: Net zero. Our politics is focused on the second word. We should think more about how to achieve the first.

10 Jun

Anthony Browne is MP for South Cambridgeshire.

In the forests of media coverage about the UK’s target to be net zero by 2050, very little attention has been paid to that one little word: “net”.

But those three letters leave open the door to huge new policy and technology possibilities – and will make the transition less of an economic challengeIt has also caused alarm in parts of the environment movement: some of which is justified, and some of which is unfounded. 

Net zero means our target is the difference between greenhouse gasses emitted into the atmosphere, and those taken out. Net zero doesn’t mean no emissions at all: it just means these are matched by negative emissionswith carbon dioxide (or other greenhouse gases) being taken out of the atmosphere.

It opens the prospect of the whole planet going to negative emissions at some point in the future, taking carbon dioxide in the atmosphere down to the level it was before the industrial revolution. 

Or rather, it opens the prospect of the planet going back to negative emissions. Because negative emissions is not some newfangled idea, but is actually what nature does if humans stop interfering.

Before life was created 3.5 billion years ago, atmospheric carbon dioxide was around 4,000 parts per million (and there was no atmospheric oxygen – all animals would die instantly, and fire was not possible). But life absorbed the carbon dioxide, turning it into living matter (initially micro-organisms, then plants and animals), and then burying it underground as oil, gas and coal, or as carboniferous rocks such as chalk and limestone.

In the process, it released oxygen into the atmosphere, enabling the evolution of animalsThe sea also played a role, absorbing carbon dioxide into its almost limitless mass. The level of atmospheric carbon dioxide slowly and steadily fell, reaching a low point of 280 parts per million about 20,000 years ago. It then started slowly rising, possibly because of man’s fascination with fire, but it wasn’t until the industrial revolution – and really the last few decades – that the levels really accelerated. Carbon dioxide levels are now over 415 parts per million, up 50 per cent as a result of man’s activities, and rising sharply 

You may wonder why it matters if CO2 levels are going up if they spent billions of years coming down. The issue is that, for the past 20,000 years, the Earth has enjoyed a remarkably benign and stable climate, allowing human civilisation to flourish. Life on earth and civilisation is optimised for this climate. Changing it will cause untold damage. 

If we can increase the amount of negative emissions – take more carbon dioxide out of the atmosphere – we can obviously reach our net zero target quicker than we otherwise would. As chair of the AllParty Parliamentary Group on the Environment, I hosted the global launch of the Coalition for Negative Emissions, a group interested in promoting negative emissions to get to net zero, but it was the environment groups that were most critical 

So why the controversy? There are two main ways to increase negative emissions. The first is nature based solutions, such as planting trees, increasing organic matter in soil, and ensuring that our peatlands are not depleted. These are “no regret policies” – things we would want to do anyway, even if we weren’t concerned about climate change. These are policies supported by all.  

Then there are the “negative emissions technologies”, which is where the controversy arises. This includes such processes as carbon capture and storage, whereby carbon dioxide is stripped from the chimneys of factories, and then buried underground.

Another such technology is direct air capture, which involves literally sucking carbon dioxide out of the atmosphere and sticking it underground. These negative emission technologies are at early stages, but developing rapidly. There are numerous pilot plants around the world, showing that it works (but is not yet economical).  

The negative emissions technologies are supported in principle by the UN’s International Panel on Climate Change, the UK’s Committee on Climate Change, and the UK Government, which is investing £800 million in CCS. Negative emissions are seen by governments as one tool in the toolbox needed to reach the net zero target. 

But many green groups are opposed.  Both Extinction Rebellion and the Green Party have called for negative emission technologies to be excluded from the Government’s net zero target. There is no doubt that many in the green movement are simply predisposed to oppose negative emission technologies. 

One concern is that negative emissions would be an excuse to give up on other measures to reduce emissions. Why develop wind power, ban petrol cars, and install double glazing, if we could keep burning fossil fuels and just suck their emissions out of the atmosphere?

However, I really do not detect in the UK or elsewhere any pressure to keep the gas power stations going because negative emissions will come to the rescue. Negative emissions are at too early stage to have such a scale impact in the next 20 years. Governments, in the UK and elsewhere, are setting binding targets to reach net zero come what may. 

There is a valid concern that negative emissions are not robust – that the carbon is not really taken out of the atmosphere and buried. Clearly it needs strong authentication and monitoring, to make sure the system isn’t gamed by cynical companies. There are fears that the carbon dioxide will not remain buried and will seep out.

But geologists are confident: nature stored gas underground for millions of years without it seeping out. The pilots so far show no sign of this happening. Sometimes green groups insist that negative emissions technologies are too new to work at scale, although the same applied to windpower 30 years ago, and that didn’t stop green groups championing that.  

There are strong arguments in favour of negative emission technologies. These are ultimately much more scalable than nature based solutions: there is (at some point) a limit to how many trees we can plant because land is limited, but there is no limit to the carbon that can be buried underground.

Negative emissions also puts a cap on the cost of reaching net zero since, if it is too expensive to reduce the emissions from a certain activity, such as making steel, then these could instead be offset by stepping up negative emissions elsewhere. If it costs £150 to remove a tonne of carbon from the atmosphere, but making steel from renewable energy costs £300 per tonne of carbon saved, then using negative emissions will help us reach net zero at lower economic cost. For the UK, CCS is seen as a huge opportunity, as our gas and oil industry has the skills and technology to put it into operation, and the North Sea geology is ideal for storing carbon.  

There is no valid reason not to push ahead with negative emissions technologies, bring them to maturity, make sure they are robust and do what they claim, and use them to reduce the cost of getting to net zero.

Carbon dioxide molecules are all equal. As far as the climate is concerned, it does not matter if a CO2 molecule is taken out of the atmosphere by a tree or a direct air capture plant. Negative emission technologies also give humanity the prospect at some point in the future of not just of stopping carbon dioxide levels rising, but bringing them back down. That will open up a whole new debate in the future: what is the ideal level of carbon dioxide in the atmosphere.  

Anthony Browne: In the wake of Brexit, Britain goes green while the EU greenwashes

6 Apr

Anthony Browne is MP for South Cambridgeshire, and Chair of the All-Party Parliamentary Group on the Environment. He is a former Europe editor of The Times.

Just how green is the EU? Many green groups were opposed to Brexit because they thought that the EU was a global leader on the environment, and that on its own the UK would slip back to being an isle that is more brown than emerald.

It is true that the EU has driven many environmental improvements, but it also has serious flaws. The main reason I voted Brexit was because I saw successive British prime ministers battling to reform the environmentally flawed Common Agricultural Policy and the Commons Fisheries Policy, but with very limited success because of entrenched vested interests. Free to set its own rules, the UK has quickly replaced both policies with far more sustainable alternatives.

While the UK has made great progress in bringing about a green Brexit in recent months, the EU’s green crown is slipping off. The EU said recently that global leadership on climate change was its “man on the moon moment,” but unfortunately, the bloc is still stuck on the launch pad.

In climate conscious Europe, millions of people have taken to the streets for climate strikes, and a green surge in the most recent elections has resulted in the Greens/European Free Alliance becoming the fourth largest group in the European Parliament.

But the ambitions of its citizens is not matched by the EU’s actions. The EU has cut CO2 emissions per capita by just 24 per cent since the benchmark year of 1990, which is not much better than the US (21 per cent), and about half the reduction of the UK, at 45 per cent.

Ursula von der Leyen has pledged to make the EU the world’s first climate neutral continent by 2050, and has also ramped up its emissions reduction target from a 40 per cent cut to a 55 per cent cut by 2030, relative to 1990.

It plans to deliver this through the European Green Deal – a flagship programme to drive the shift to clean energy and create green jobs. But these commitments aren’t yet set in law, and the Green Deal’s centrepiece, the Climate Law, is still being negotiated at a snail’s pace. By contrast, the UK was the first country in the world to set our 2050 net zero target into law.

Now that the US has rejoined the Paris Agreement, and China has committed to net zero by 2060, the EU is rightly aiming to be a major power-broker at global climate negotiations in the run-up to the UN Climate Conference COP26 in Glasgow. But these ambitions are not being realised.

Rather than giving up its dependence on fossil fuels, Germany has abandoned carbon-neutral nuclear power, and proceeded with building a new gas pipeline from Putin’s Russia, despite the risk of locking in high-carbon infrastructure. The EU has also failed to adequately push China to raise its climate ambition, instead signing a Comprehensive Investment Agreement which was a missed opportunity.

Brussels has now caused uproar among green groups by engaging in some egregious greenwashing – marketing something to look environmentally-friendly that isn’t. The EU is currently designing the EU taxonomy for sustainable finance, a classification system for ‘sustainable’ investments in line with the European Green Deal that will mobilise private finance for a carbon neutral economy. A taxonomy should be a useful tool to enable investors, consumers, public authorities and the private sector to ensure they are directing money towards investments that can genuinely deliver net zero emissions.

But a leaked document has revealed that the EU is planning to classify gas – a fossil fuel – as a ‘sustainable’ investment in some circumstances, in particular to ensure security of supply. There may be some scope for some transitional gas investments on the way to net zero, but this is likely to be very minor. Environment groups estimate that up to half of all gas plants would be exempted by this new proposal.

The inclusion of gas within the green taxonomy risks encouraging new high-carbon investment, undermining the Green Deal and the EU’s ability to achieve its Paris Agreement goals. Sebastian Godinot, an economist at the WWF’s Brussels office, is resported by Euractive news website as saying: “This last minute proposal is scandalously opposed to climate science and would destroy the credibility of the whole EU taxonomy. This very proposal is in complete contradiction with President von der Leyen’s ambitions for the European Green Deal and higher EU climate targets, and would discredit the global climate leadership of the EU.” Luca Bonaccorsi from the green campaigners Transport and Environment (T&E) insisted: “It is greenwashing at its worst.”

Mairead McGuinness, the European Commissioner who oversees the taxonomy, is keen to make this the world-first science-based tool to identify green investments the gold standard for sustainable finance globally. Instead, environment groups say the EU has “caved into the gas lobby”, as well as pressure from Eastern and Southern member states who support gas as a transition fuel. The taxonomy, which is supposed to put a stop to corporate greenwashing, has itself been turned into greenwashing. If the EU wishes to deliver its “man on the moon moment”, it should exclude gas from its final green taxonomy.

We shouldn’t be complacent about our own record in the UK. There is still much to do to get on track to our net zero target. But as the UK embarks on designing its own sustainable finance taxonomy outside the EU, let’s make sure we create the gold-standard framework for investment in a zero carbon future, based strictly on science and free from industry lobbying. That would be true global leadership.

Anthony Browne: The Government’s Covid-testing policy for schools seems strange, but rests on good science

12 Mar

Anthony Browne MP is a member of the Treasury Select Committee and former CEO of the British Bankers’ Association.

The usual reaction – not just among those affected, but headteachers and senior politicians – is to bang your head against the wall in incredulity, and shout it is “nuts”. The Times reported one parent denouncing it as “illogical and psychologically cruel.”

The BBC reported it was ruining the return to school, and said the government couldn’t explain it. Matt Hancock, the Health Secretary, and Gavin Williamson, his counterpart at Education, have both been robustly challenged on it.

The source of all the anguish is the Government policy that if a child tests positive for Covid on the less-accurate lateral flow device (LFD) test at school, but subsequently tests negative by the more accurate laboratory PCR test, then the more accurate second test does NOT over-ride the less accurate first one: the child and their close contacts at school still need to self-isolate for ten days.

It happened at a school I know this week, where 18 A Level students missed their mocks because one student tested positive on the LFD test on Monday despite subsequently being cleared by the PCR test on Tuesday.

I was bombarded by apoplectic parents, and went into battle. Dredging up my maths degree, I created an algorithm for the problem and last night locked horns with the Department of Health mathematicians, plugging in all the real world data.

The headline is that with the virus at its current prevalence (0.5 per cent of people have it nationwide) then the proportion of people who test positive on the first LFD test and subsequently test negative on the PCR test but are actually infected is astonishingly high: 30 per cent. In other words, nearly one third of pupils with a negative
result from the second PCR test after a positive LFD test are actually infected – and that is a big enough risk to justify them being required to isolate.

However, as the prevalence of the virus falls, then that risk goes down rapidly as well. When the prevalence of the virus is down to 0.1 per cent (i.e. one in a thousand people have it), then the proportion who get a positive LFD result then a negative PCR result who are actually infected will be eight per cent – i.e. more than 90 per cent won’t be. So as the virus becomes rarer, we can rely more on the PCR result, and the Government policy will change.

Now, I can almost hear you thinking “this makes absolutely no sense”. The PCR test is much more accurate that the LFD tests. End of. Rely on it. But this is the world of false negatives (a result saying someone doesn’t have a virus when they do) and false positives (saying someone does have the virus when they don’t), and all I can say is that this is a time when good old common sense is a very false friend.

The mathematics is deeply counterintuitive, to the extent that many people even when they do understand the maths cannot bring themselves to believe it. To take a much simpler example than the two tests, imagine a world where 0.1 per cent of people have a virus, and a test which is 99.9 per cent specific (i.e. produces 0.1 per cent false positives), then what proportion of people who get a positive result are actually infected?

It is just 50 per cent. A test is 99.9 per cent accurate but only half of people tested positive are actually infected? Nuts! But true.

In our real world example, it is true that the PCR test is far more accurate than the LFD test, both in producing far fewer false negatives and false positives (it has higher sensitivity and specificity, in the jargon). But – and this is critical – the PCR test is nearly 200 times more likely to produce a false negative result (i.e. tell an infected person they are not infected) than the LFD test is to produce a false positive.

If the PCR test did not produce any false negatives, or if the LFD didn’t produce any false positives, then in either case we wouldn’t have this problem, but they do, and we have.

So crunching through the numbers (and frankly I am amazed you are still reading this), using current real world data from the NHS and ONS, if you test one million people with the LFD then 2,804 will get a positive test result (and 89 per cent of those will actually be infected). If they all go on to get the laboratory PCR test, then 2,375 will be confirmed as positive (i.e. they definitely have it), but 429 will come back negative.

But because about five per cent of PCR results are false negatives, of those 429 in fact 130 will actually be infected and only 299 be true negatives. That is, 30 per cent of those with the second negative PCR test will actually be infected. With millions of kids tested every week, that means there are many hundreds being confounded – and forced to isolate – by this paradox.

You might point out that if the first LFD test is done at home, then the Government allows the second PCR negative result to override it. But LFDs done at home are far less accurate, and full of so many uncertainties (have the identities been mixed up?) that it can he justified relying on the laboratory test alone.

It is mind-boggling, it is not common sense, and it is definitely infuriating. But this policy of not allowing a second PCR negative test to override a school done LFD positive test is based on sound statistics. We are definitely being led by the science, and I am glad we are. As the virus gets rarer, the statistics will change, and the policy can then revert to being common sense. Amen.

For the mathematicians among you, who want to work it out yourselves, here is the data: For the LFD, the sensitivity is 50.1 per cent (i.e. 49.9 per cent false negatives) and specificity is 99.97 per cent (i.e. 0.03 per cent false positives). For the PCR, the sensitivity is 94.8 per cent (i.e. 5.2 per cent false negatives) and specificity is 100 per cent (i.e. if the PCR test says you have the virus, you do, no ifs or buts).

Anthony Browne: Why the Chancellor is right to increase Corporation Tax

5 Mar

Anthony Browne MP is a member of the Treasury Select Committee and former CEO of the British Bankers’ Association.

There is a change of direction in the Budget that is causing murmurings on the low-tax side of the Conservative Party: the increase in Corporation Tax (CT).

A decade of sharp cuts to CT were justified by saying that they not only boosted investment and growth but also actually increased tax revenues. Ireland too is cited as an example, where the sleepy Celtic moggy cut CT rates to 12.5 per cent, the lowest in the industrial world, and was transformed into a Celtic tiger.

I too want low taxes, and this Laffer curve argument is appealing because it suggests that tax cuts can pay for themselves. But the Government is now planning a sharp rise in CT from 19 per cent to 25 per cent in 2023 for the most profitable firms, with the Budget Red Book showing the Treasury expects this to raise more than £17bn extra a year by 2025. But hang on! If lower CT rates increases revenue, then raising them can’t. Why the change?

So, in technical language, just what is the peak revenue-raising rate on the Laffer curve on Corporation Tax?

Laffer curves exist for all taxes, and their peak rates depend on many factors, such as the substitutability of the product, the elasticity of demand, mobility of production, the fungibility of capital and labour, and what other tax authorities are doing. Tax on sugary drinks probably has a very low Laffer curve peak because a small tax just prompts people to drink otherwise identical zero-sugar drinks. The Laffer curve on fuel is very high – well over 100 per cent – because people can’t do without fuel to drive.

On Corporation Tax, the Laffer curve would be lower for highly mobile sectors that can shop around for the lowest tax regimes in the world, and higher for ones that can’t easily move.

It is absolutely true that CT receipts have increased dramatically since George Osborne started cutting the rates, from £36.3bn in 2010-11 to £55.1bn in 2018-19. But that is largely because corporate profits were hugely depressed in 2010 in the wake of the deepest recession for a century. Corporation tax profits – and so CT revenues – are super-cyclical: exaggerated versions of the underlying economic cycle. Aggregate company profits on which CT is charged fell from £203.6bn in 2006/7 to £151.6bn in 2010/11, and then bounced back to £267bn in 2018/19.

After both the 1990/91 recession and the dotcom crash, CT revenues took just three years to return to their long run average as a percentage of GDP, but after the financial crisis, it took eight years, presumably because of the lower rates. Other changes have also increased CT revenues since the financial crisis including the corporation tax surcharge on banks (about £2bn a year), and widening the base of corporation tax. As it happens, CT revenues also rose sharply before the financial crash, and that had nothing to do with their rates because they were static throughout the entire period.

But CT is one source of tax revenue – what about the others?

Lower CT rates leads to lower cost of capital for companies, and so should increase investment and thus increase jobs, wages, GDP growth and consumption, leading to higher rates of income tax, VAT and so on. HM Treasury started doing dynamic modelling on the effects of cutting CT tax, to take into account the overall effects. In 2013, HMT and HMRC published a detailed analysis from the dynamic modelling, showing an increase in investment, in GDP (between 0.6 per cent and 0.8 per cent) and wages (£405-£515 per household). That lead to greater tax revenues, but only enough to reduce the loss of direct revenues by between 45 per cent and 60 per cent.

In other words, even a Treasury analysis, presumably designed to support Treasury policy, admits the CT cuts reduce overall tax revenues rather than increase them. It also surveyed the academic literature from around the world on this, and they all estimated that between 45 per cent and 90 per cent of the revenue loss would be made up – not enough of an impact to actually increase revenues.

There are other reasons to cut CT taxes than raising revenues. Another argument used is that cutting CT increases investment, but that also isn’t really supported by the evidence. Business investment is the same now when CT is 19 per cent as it was in the late 1990s, when CT was 30 per cent. Between 1997 and 2017, we had the lowest CT in the G7, but also the lowest average non-government investment at 14.3 per cent of GDP (compared to G7 average of 17.3 per cent).

Whatever the impact of low corporation tax in Ireland, it is really not comparable to the UK. When it introduced them, it was a much more agrarian economy with little inward investment and a major exporter of skilled people. There was not a big corporate base, and so it had little to lose from cutting CT.

If you want to use tax policy to increase investment, then it is better to target the tax cuts directly at investment decisions, as the Budget is doing with its “superdeduction” on investment, which will mean the Government will write off 25 per cent of any investment any business makes against its tax bill. Here is a suggestion for the corporate world: cutting corporation tax has not lead to a surge in investment, and it is now it is going back up. If you want to keep the “superdeduction” investment relief and make it permanent, prove to the Treasury that it works.

Anthony Browne: Why the UK’s fall in GDP is not the worst of the G7, but in the middle

13 Feb

Anthony Browne is MP for South Cambridgeshire and a former Europe Editor of the Times.

There is no doubt that the UK has suffered a severe economic hit as a result of the pandemic, but just how bad? In particular, is it true, as opposition politicians claim, that we not only have the worst death toll in the world, but also the worst economic slump? The short answer is: no.

Yesterday’s headline figure from the Office of National Statistics shows a fall in real GDP of 9.9 per cent in 2020, the largest in history, and certainly the largest among the major economies. There may be particular underlying economic reasons we are worse hit, such as that our service-based economy is particularly dependent on people being able to meet, compared to countries that are more dependent on manufacturing and mining. But the more significant issue is that we calculate our GDP in a different way from other countries, actually following what is usually agreed to be international best practice but is rarely followed.

We have been taking evidence about it at the Treasury Select Committee, and I asked the deputy national statistician to provide internationally comparable measures of GDP. The evidence provided by the ONS to the TSC shows that if you do that, it turns out we are no longer the worst hit in the G7, but right in the middle, with a decline smaller than that of Canada, Italy and Germany, but larger than Japan, France and the US.

The fundamental issue is that the UK measures the public sector from its outputs (eg how many hospital visits, how many school lessons) not from the inputs (money spent), which is what other countries normally do. So when we carry on paying for the public sector but close a lot of it down, then we show a decline in output but other country’s don’t. This does not affect the measurement of nominal GDP (ie in current money terms), but only when it is adjusted to create “real GDP” which supposedly has the impact of inflation stripped out. That real GDP is normally used for international comparisons, but because of the extraordinary circumstances of the pandemic, it is presently highly misleading. The ONS letter to the TSC said: “Current Price or nominal estimates of GDP are not affected and therefore more internationally comparable”.

So what happens when we look at the internationally comparable figures? For most countries, there is little difference between real and nominal GDP. But because of the UK’s methodology, there is presently a huge difference: the decline in real GDP is more than twice the decline in nominal GDP. In particular, from the Q4 2019 to Q3 2020, the UK suffered an official 8.5 per cent decline in real GDP, but only a 3.5 per cent decline in nominal GDP. That is less than Canada and Italy, with declines of over four per cent, and Germany with a decline of just under four per cent. As the ONS puts it: “while the UK’s performance on the volume measure is the weakest, the current price measure puts the UK in a more comparable position.”

None of this makes any difference to businesses, many of which are genuinely suffering a real crisis or have already gone under. I absolutely don’t want to play down their difficulties. But it does mean that opposition politicians are wrong when they say the UK has the worst record in the G7 in its economic response to the pandemic. Despite being harder hit by the pandemic, large doses of government support have meant that our economic hit is in the middle of the G7.

One last thought: if you want to stick with the real GDP figures that makes our slump look exaggeratedly bad by international comparison, then when the system goes into reverse, real GDP figures will make our bounce back look particularly strong. I look forward to opposition politicians congratulating the Government on that.