Stern's absurdity

Richard Tol has written a splendid riposte to Lord Stern's latest attempt to convince us that encumbering the economy with all manner of green "measures" will make us all richer.

The original Stern Review argued that it would cost about one percent of Gross Domestic Product to stabilise the atmospheric concentrations of greenhouse gases around 525 ppm CO2e. The Intergovernmental Panel on Climate Change puts the costs twice as high. Stern2.0 advocates a more stringent target, 450 ppm, and finds that this would accelerate economic growth.

This is implausible. Renewable energy is more expensive than fossil fuels. The rapid expansion of renewables is because they are heavily subsidised rather than because they are commercially attractive. The renewables industry collapsed in countries where subsidies were withdrawn. Raising the price of energy does not make people better off. Higher taxes, to pay for subsidies, are a drag on the economy.

Stern's magical thinking on climate economics has been disastrous for everyone, except perhaps for the man himself, who has become rich on the back of his forays into the climate debate. History will not be kind to him.

Postscript: Tol's article is also posted at the Conversation, where Stern supporters seem unable to respond with rational argument, heading straight for the ad-hominem offensive.

Climate economics

In the post comes a copy of Richard Tol's new textbook on Climate Change Economics, which looks like good stuff.

This unique textbook offers comprehensive coverage of the economics of climate change and climate policy, and is suitable for advanced undergraduate, post-graduate and doctoral students. Topics discussed include the costs and benefits of adaptation and mitigation, discounting, uncertainty, policy instruments, and international agreements. Special features include: in-depth treatment of the economics of climate change careful explanations of concepts and their application to climate policy customizable integrated assessment model that illustrates all issues discussed specific usage guidelines for each level of reader companion website featuring data, extra reading, quizzes, videos and more This book will be an essential text for students of varying levels in economics, climate change and environmental policy, and a resource for researchers and practitioners.

What is energy?

From the journal of the Economic Research Council comes this paper by John Constable of Renewable Energy Foundation fame. It considers the question of whether energy is just another factor input into the economy or whether it has a more fundamental role. The conclusion is that energy is different, the reason being found in the realms of thermodynamics:

...wealth is created by using energy to introduce improbable order into the world, in other words a reduction of entropy in one part of the system at the expense of a greater increase in entropy in another.

Click to read more ...

Thought for the day, Stern edition

If the BBC thinks that non-mainstream or non-expert views need to be flagged as such, will Lord Stern's future appearances on the airwaves be so caveated? Will his funding by the Mr Grantham warrant a mention?

Somehow I think not.

Catastrophe avoided

Matt Ridley has an excellent article in the Financial Post, looking at the IPCC's greenhouse gas concentration pathways. He finds that some of them are a trifle odd and that it's rather hard to produce predictions of catastrophe from them:

...even if you pile crazy assumption upon crazy assumption till you have an edifice of vanishingly small probability, you cannot even manage to make climate change cause minor damage in the time of our grandchildren, let alone catastrophe. That’s not me saying this – it’s the IPCC itself.

This video, of Matt speaking in Canada is also well worth a look.

On Lord Stern and Wayne Rooney

Lord Stern is back into the climate fray, breathlessly telling us that...wait for it...it's worse than we thought. Isn't it always?

Lord Stern, the world’s most authoritative climate economist, has issued a stark warning that the financial damage caused by global warming will be considerably greater than current models predict.

This makes it more important than ever to take urgent and drastic action to curb climate change by reducing carbon emissions, he argues.

It's hard to credit the idea that Stern, alone among people working in this area, should merit a full-page article in a broadsheet newspaper, apart from the fact that his public pronouncements are reliably hysterical. It's also amazing that when climate economists like Nordhaus and Tol have, respectively, pooh-poohed the Stern review as a political document and as being devoid of academic merit, the Independent should choose to describe its author as "the world's most authoritative climate economist". This is like describing Wayne Rooney as the world's most glamorous ballet dancer.

Details on what Stern and colleagues have done in this new paper are thin on the ground, but they have clearly been upping the ante on the climate sensitivity front:

Whereas the standard model usually assumes a single temperature for climate sensitivity of about 3C, the new model uses a range of 1.5C to 6C, which the authors say more accurately reflects the scientific consensus.

If climate sensitivity is 6°C, how much warming should we have had since the middle of last century? It does look very much as a case of garbage in, garbage out.

The ecologist view versus the economist view

Matt Ridley has an excellent article in the Wall Street Journal about the different ways economists and ecologists look at the world.

How many times have you heard that we humans are "using up" the world's resources, "running out" of oil, "reaching the limits" of the atmosphere's capacity to cope with pollution or "approaching the carrying capacity" of the land's ability to support a greater population? The assumption behind all such statements is that there is a fixed amount of stuff—metals, oil, clean air, land—and that we risk exhausting it through our consumption.

"We are using 50% more resources than the Earth can sustainably produce, and unless we change course, that number will grow fast—by 2030, even two planets will not be enough," says Jim Leape, director general of the World Wide Fund for Nature International (formerly the World Wildlife Fund).

Cue outrage

For those that can get behind the Times paywall, Matt Ridley has a good review of the state of play on the climate debate in the aftermath of the IPCC reports.

These IPCC and OECD reports are telling us clear as a bell that we cannot ruin the climate with carbon dioxide unless we get a lot more numerous and richer. And they are also telling us that if we get an awful lot richer, we are likely to have invented the technologies to adapt, and to reduce our emissions, so we are then less likely to ruin the planet. Go figure.

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Worthington versus Tol

I was interested to see a Twitter exchange between Bryony Worthington and Richard Tol last night in which the noble baroness revealed a deep-seated wish for a public debate with Richard Tol.

Worthington: @RichardTol perhaps can have debate at more convenient time. Do you stand by your comments in FT about UK? or were they a kind of bad joke?

Tol: @bryworthington I'm happy to debate the impacts of climate change in the UK and elsewhere.

In intellectual terms this would be something of a David-versus-Goliath outing, but I'm sure it would score highly for entertainment.

2020 Tories want central planning

The 2020 group of Conservative MPs has apparently submitted a paper to the Conservative manifesto project, which demands that the economy generate motherhood and apple pie in equal proportions:

The group’s first submission to the Tory manifesto process, published Monday, calls for a major drive to boost productivity by making better use of resources instead of relying on cutting labour costs. It says that Britain is lagging behind its rivals in areas such as recycling and “remanufacturing” so that materials or parts have a second or third life. It urges the Government to transfer responsibility for waste from the Environment to the Business department.

Laura Sandys, the Tory MP who wrote the report, “Sweating our Assets,” said such a push could result in a 12 per cent increase in annual profits for manufacturers; create more than 300,000 jobs in the “remanufacturing sector”; improve Britain’s balance of payments by £20 billion by 2020 and save £3 billion by reduced landfill costs and retaining the value of resources.

Whether efficiency gains are actually achieved from recycling depends, of course, on whether it is actually more efficient to recycle. We are already, for example, grinding up waste glass at vast expense, a process that everyone agrees is a waste of resources. My belief is that this comes about through a wicked combination of politicians wanting to be seen to do something, intellectually challenged greens thinking they are saving the planet, and bureaucrats trying to expand their empires.

Reading between the lines, the 2020 group's idea seems to be to have more of the same: to expand the reach of central planning in the economy, give further ground to the greens and to recruit more bureaucrats.

Mr Farage will be pleased.

The Stern letter

Some months ago I asked the Treasury for copies of correspondence relating to the Stern Review in the year up to that paper's publication. I put in my request under EIR and was told, surprisingly (or perhaps not), that there was only a single document that could be construed as environmental information. After much to-ing and fro-ing they have decided to release this to me.

Here it is.

It's a letter from Stern to Gordon Brown sent shortly before the publication of the report and outlining Stern's ideas for possible policy initiatives that could follow the publication of the report. It's not desperately interesting. Nevertheless, while I find it hard to put a finger on the problem,  I don't get a warm feeling from what I see there.

No hope, no change

The foolhardiness of the current government's energy policy need hardly be reiterated, but word is getting round the political and economic mainstream that Labour is potentially just as bad. Last week Liberum Capital put out a briefing note estimating the damage done to the UK economy by the party's proposed price freeze:

The heightened political risk faced by the UK utility sector following the announcement of the Labour Party’s price freeze has materially impacted on the valuation of the sector and reversed the five year utility sector trade of Long UK / Short Europe. Total shareholder value lost so far amounts to between £7bn to £11bn. In our view, if the UK government is successful in politically neutralising Labour’s price freeze policy then some of this loss, but probably not all, could be regained. Some of the loss is likely to be permanent in our view because it is now apparent that UK politicians (like those in Europe) are unwilling to stand by the logic of their own energy policy and enforce the higher costs onto consumers that naturally follow from their de-carbonisation strategy.

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Cheap energy, lots of jobs - the LibDems are going to hate this

Poyry Consulting have issued a report on the impact of shale gas exploitation across Europe, considering what happens if we do a bit of it or a lot of it. They say things like this:

In the Some Shale Scenario, net employment increases by 0.4 million by 2035 and 0.6 million by 2050. In the Shale Boom Scenario, net employment increases by 0.8 million jobs by 2035 and 1.1 million jobs by 2050.

A million jobs by 2050 sounds pretty good to me

As does this:

Household spending on energy costs by 2050 could be lower by up to 8% in the Some Shale Scenario and by up to 11% in the Shale Boom Scenario, when compared to the No Shale Scenario. Over the period 2020 - 2050 total cumulative savings could be €245bn in the Some Shale Scenario and €540bn in the Shale Boom Scenario.

Stern and his gang

Lord Stern appeared before the House of Commons Energy and CLimate Change Committee this morning. It was amusing to see him arriving with his posse of assistants, Bob Ward among them. Why on earth does he need a PR man to go to the House of Commons with him? [Update - just seen one of his minions passing him the answer to a question]

Lilley from 10 mins with a few fireworks, Stern accusing him of being misleading, Lilley referring to Stern's "attack dog". Smashing stuff. The bit about discount rates is fun too, with Stern denying using different rates for costs and benefits and then flannelling furiously. I can't wait to see the transcript.

Graham Stringer was there, alongside Peter Lilley; questions from 10:43.

Disagreement over nothing

One of Matt Ridley's ancestors was burnt at the stake for refusing to toe the line on the religion of the day, and those in positions of power today seem to have the same distaste for dissent as the Marian persecutors of yesteryear.

The ire of the metropolitan "liberal" elite has been prickled by Ridley's article in the Spectator, which describes the consensus among economists that the effects of small amounts of global warming will be beneficial.

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