Wrong decision Prime Minister, wrong decision

No, this is wrong:

Offshore wind projects to receive subsidies boost after auction flop

Claire Coutinho to announce 70pc increase to guaranteed price offered to developers

There are detailed complaints being made about it. For example, one claim (which we do not endorse, nor claim is either true or wrong, merely present it):

Remember its not £73. That's in 2012 money.

The new cap is more like £96 in current money.

The European spot price for gas is around €60 per MWh currently.

But whether that’s true or not the decision is still wrong. It violates the basic logic about climate change, that sort of wrong.

To start with the very basics. The claim is that emissions cause costs. We’ve certainly no problem with the idea that there are externalities - markets are great things but many things are not included in markets and are therefore not great. The answer is to include those things in markets so that markets can work their greatness upon them.

So, how much should we do about something? Our aim is the maximisation of human utility over time. The universe - sadly, the cow - imposes limitations and constraints upon us in that task. Resources are, after all, scarce. We also know that doing anything has costs - at very minimum there are opportunity costs, near always there will also be direct costs. So, whatever the thing, problem, constraint or externality we should do the amount that maximises that utility. This means balancing the costs of doing the thing - no, costs here do not mean mere money, they mean those other things we cannot do because we devote our scarce resources to do this thing - against the benefits of doing that thing to so maximise utility.

So, the price of wind power changes. Why doesn’t matter. A bait and switch by developers, a change in real world prices, makes no difference. Therefore the optimal amount of wind power to maximise utility changes.

That is, wind power changes in price therefore we should have a different amount of wind power - not change wind power prices via subsidy so that we get the same amount of wind power.

This is true of every decision about climate change. Whether to do adaptation or mitigation, which specific energy technology to use - solar, wind, fossil, geothermal, whatever - which transport, what foods to eat and everything. When prices change we should be changing the quantity demanded of each of them - that’s in fact what prices are for, to tell us about quantity.

It’s not economic to stick towers of steel in the North Sea environment? Well, then it’s not economic is it, we should do less of that. We’re even willing to agree - for the sake of this argument - that it’s no one’s fault, this change in offshore wind power prices. It is still true that the change itself, the rise, means we should have less of it. Instead, more whatever - fossil, carbon capture, solar, tidal, geological hydrogen, geothermal and on and on.

Prices have changed, as is obvious. Therefore the correct answer is that both supply and demand should.

We therefore present how that meeting with Ms. Coutinho should have gone:

Offshore Wind Developers (for it is they): “Minister, we can’t build at these prices, just can’t.”

Ms Coutinho: “Well, thanks for trying, Guys. Goodbye.”