The Stern Report described climate change as "the greatest case of market failure" the world has seen. In fact the market has not failed – there is no market at all. There is no market in war, either, which some think more devastating then climate change. Markets deal with transactions, not with human behaviour in general. Where there are no exchanges, there are no markets.
Markets can prompt and regulate human activity by signals they send about scarcity and prices. They allocate scarce resources in ways that encourage people to consume less of them and produce more of them. When some resources, such as air, water, and ocean fish stocks have no price on them, there are few restraints on their use. Sometimes production causes 'externalities,' such things as pollution and noise disturbance, and the depletion of resources.
The way to have markets protect the environment is to put markets into place. If some activities contribute to climate change, there should be a price to pay for doing them. The habit of environmental campaigners of picking out relatively trivial symbolic targets such as "food miles" or budget air travel obscures the fact that agriculture, industry, and power production are among the greatest emitters of "greenhouse gases."
Markets can be introduced by putting a price on previously unowned resources. Fish quotas can be set and then traded, giving the buyer ownership of the fish and an incentive to conserve them. Tradable emission permits can discourage emission by raising the price of doing it. They raise production costs to those who emit more, and reward efficient, cleaner producers.
Markets can be used to promote the development of clean technologies by giving them a price advantage, encouraging people to produce more cleanly by making it more attractive financially to do so. Markets can protect the environment if they're properly introduced.
Genetically modified (GM) plants are helping to adapt to climate change. This is mostly because of drastically minimizing water use compared to non-GM plants. Worldwide 1.4 billion acres are already cultivated with DNA-modified crop varieties in 22 countries. However the same agency that took the lead in climate change alarmism is now seriously considering a moratorium on all field-testing and commercialisation of GM tress. This comes on top of already extant heavy-handed over-regulation that stifles innovation in biotechnology. According to a new paper from the Hoover Institution the UN may actually be worsening the global environment with its policy:
Irrigation for agriculture accounts for approximately 70 per cent of the world’s fresh water consumption… so the introduction of plants that grow with less water would allow vast amounts to be freed up for other uses. Especially during drought conditions…even a small percentage reduction in the use of water for irrigation could result in huge benefits, both economic and humanitarian.
GM crop varieties could accomplish exactly that if only the UN would give up its unscientific, anti-innovative approach to regulation of biotechnology. With its numerous policies and programs the UN inhibits the development of important tools indispensable for the adaptation to a changing climate. Finally, DNA technology does not require new resources. It’s all there. The UN needs simply to shed its hypocrisy, get out of the way of farmers and plant breeders, and hand the mettle over to the market.
Ferrovial's misfortunes may be London travellers' gain. The Spanish infrastructure group, which controls Heathrow, Gatwick, and Stansted (plus four Scottish airports) through its ADI (Airport Development and Investment) consortium, is under pressure from all sides.
The airport regulator (and recent ASI Power Lunch guest) Harry Bush seems likely to cut the return on the consortium's capital. The Competition Commission is also looking at the London airports monopoly, and may force the consortium to sell Gatwick. The economic slowdown has alarmed aviation executives, since holidays and business travel are some of the first things that people cut down on when times are tough.
All of which means that Ferrovial's shares have halved since last year, and its debts have soared. It needs to restructure fast. But the credit crunch has made that pretty difficult. Some commentators are speculating that Ferrovial will have to sell Gatwick, even if it isn't forced to by the regulator, just in order to make ends meet.
That would be good for travellers. When the Adam Smith Institute proposed the privatization of Britain's airports in the Airports for Sale back in the 1980s, we did not even contemplate the idea of the London and Scottish airports being packaged as a single unit. We were sure that a competitive structue with different owners would serve customers better. Now, more than two decades later, the regulators seem to be coming to the conclusion that we were right. It's a conclusion that air passengers - especially those who have to face the hell of Heathrow - came to a long time ago.
In this last week I have been stuck in an underground tunnel for half an hour, had my local tube station shut down for flooding and been trapped behind a ticket barrier in Canary Wharf station for forty minutes with a group of other desperate valentines day commuters. It is at such times that one considers the prospect of purchasing a car to avoid the nightmare that is the daily nightmare on London’s underground system.
In the past it was relatively simple to decide which car to buy, now one has to factor in the latest whim of the mayor of London, Ken Livingstone. The latest caprice of Ken is that owners of vehicles emitting more than 225g of carbon dioxide per kilometre will be charged £25 every day. This means an increase for residents of a cost from 80p, an increase of 3000%. As I live and work within the congestion zone, these are clearly not the cars for me. Sadly for the people who have already bought such a car, they have invested in something that will cost them a small fortune to use.
Perhaps a smaller car? From October the smaller band A and B cars will be exempt from charges. Sales rose in response to this upcoming exemption. However, Ken Livingstone may cancel it for band B cars (which emit between 101g and 120g of carbon dioxide per kilometre) because in response to his decision to allow them to travel free of the congestion charge people went out and bought these cars en masse. According to TfL official band B car owners may have to start paying the congestion charge in less than two years.
What is all this uncertainty worth? A recent report by TfL has predicted that emissions charging will reduce CO2 by just 100 tonnes next year, equivalent to 0.001 per cent of total annual emissions from surface transport in London. So the environmental arguments are not even credible by their own CO2 obsessed terms. For my part I will have wait until we have a new mayor before I risk the expense of buying a car.
The RMT and TSSA – the underground's biggest trade unions – have threatened to ballot their workers for strike action tomorrow, if Transport for London (TfL) does not meet their demands (which is basically impossible, given the time constraints).
The unions object to ticket office closures and the employment of non-union, agency, security or sub-contractor staff on the tube network. That is not surprising. They know that private-sector workers could do a much better job, at a much lower price. Frankly, they could hardly fail to do so. Unfortunately, the fact that TfL is a public-sector monopoly makes it easy to hold them to ransom and commuters suffer as a result.
Using the tube is a nightmare. According to statistics obtained under the Freedom of Information Act, the average commuter on the Metropolitan Line wasted three days, 10 hours and 25 minutes in 2006 due to delays. I hate to think what the figure would be on my (notoriously unreliable) branch of the district line.
These problems are not insurmountable: the Docklands Light Railway (DLR) provides a good model for the future. First of all, it is computerized and driverless. That blunts the power of the unions but also makes it more reliable, since trains can run a set distance from one another, arriving and departing at set times, without reliance on an antiquated human-signalling system.
Secondly, the DLR is operated and maintained by a private franchise, which means better management and greater efficiency. Our report Underground Revolutionadvocated a similar structure for the rest of the network, which would be split into four vertically integrated businesses (Metropolitan, District, Circle, Hammersmith & City lines; Jubilee and Bakerloo lines; Piccadilly and Central lines; Northern and Victoria lines). Splitting the tube up would promote competition in ideas on innovation, marketing and efficiency, as well as weakening the hand of the unions. Vertical integration would encourage investment in infrastructure and capacity building.
In short, no other policy would make such a difference to Londoners' quality of life.
The Project Better Place is a joint venture by Israeli-American entrepreneur Shai Agassi and the Israeli government. With the aim to reduce significantly Israels dependence on foreign oil from undemocratic regimes, a nationwide network of electric cars will be available by 2011 if everything runs on schedule. Nissan and Renault will build the cars and the government will offer tax incentives to purchasers.
The innovative model, developed by Agassi, would provide consumers with inexpensive cars, and they would pay a monthly fee for expected mileage, like minutes on a cellphone plan. Project Better Place will provide infrastructure including parking meter-like plugs on city streets or service stations along highways at which batteries can be replaced.
This annoucement coincides with a rebirth of electric vehicles, thanks to a breakthourgh in energy storage based on nanotechnology. New Lithium batteries are developed from a family of different chemical combinations and have enabled new features such as charging cycles in excess of 20,000 while still retaining 85 percent of their capacity. The time required for recharing has been cut down to only 10 minutes, instead of many hours previously. Most importantly, the new batteries can store four times more electric energy than conventional ones and operate safely from -50° C to 75° C. With 3,000 charging cycles a battery would provide enough energy for a car to do 150,000 miles at 80 percent capacity.
Two years ago a Japanese team built a car called Eliica, short for Electric Lithium-Ion battery Car. This eight-wheeled, 600kW rocket served as proof that electric cars can be fast and fun. It boasts a neck-snapping 0-100kmh time of just four seconds and a 0-160kmh time of seven seconds - faster than a Porsche 911 Turbo. And for our American readers, the attractive new Teslasports car, built in Northern California, is now being marketed for $100k.
I was interviewed on Sky News yesterday morning, giving my take on the European Parliament's plan to prohibit the sale patio heaters. Unlike the other guest, Friends of the Earth's Tony Juniper, I thought this was a ridiculous idea.
First of all, the only reason so many people are using patio heaters is the smoking ban. Attempting to outlaw patio heaters is a classic example of one ill-conceived and illiberal piece of legislation having to follow another, with little thought for the unintended consequences. In this case, the pub industry thinks it could lose as much as £250 million pounds a year in lost trade if outdoor heaters were banned.
My second point was that no one actually believes banning patio heaters would make the slightest bit of difference to the global climate anyway. Yes, these heaters are inefficient, but their emissions are miniscule in the grand scheme of things. Tony Juniper said we should lead the world by example, but it didn't think our banning patio heaters would really make much difference to the Chinese. They're going to build a coal-fired power station every week for the next ten years anyway.
Patio heaters are just the latest symbolic thing for environmentalists to get worked up about, like food miles or budget airlines. It's not about being practical, or actually improving the environment, it is just another way to tell people that they should stop being so wicked and 'live more simply'.
I suggested that instead of banning outdoor heaters, the EU should focus on reforming its emissions trading scheme so that it actually works, encouraging the development of clean technologies. And since agriculture contributes 17 percent of global emissions, they might like to abolish the common agricultural policy too. The developing world would certainly thank them for it.
21. We are using up resources for the future; we should all learn to live more simply.
Although it might seem obvious that the supply of resources is limited, and that they grow more scarce as we use them up, this is not in fact true. It costs money to locate reserves of scarce resources, so we tend to search for more as the price rises. In other words, as they grow scarce, we can often establish more supplies.
Furthermore, as materials grow scarce, the price rises and it becomes more economic to mine marginal reserves. Not only that, it becomes cheaper in some cases to use or develop substitutes. As supplies appear to dwindle, so does the rate of use. Instead of the world suddenly waking up one morning to find the last ounce of aluminium gone, it turns gradually to glass filaments and to carbon fibre as substitutes. New methods of extraction and reclamation become economically viable. The question is whether our development of new sources and substitutes is faster than our use of resources.
There is one reliable indicator. No one knows what new sources will be developed, or how fast our use will be. We do know, however, that price is a guide to the ability of supply to meet demand. Over many years the real price of most commodities (excluding oil) has been going down. This means that they have been becoming progressively more available, and that our relative supply has been increasing rather than diminishing.
We do not have to live more simply. On the contrary, we have to keep on developing new technology to make better use of our resources and to extract from more difficult locations. In this way our relative supply of them will continue to increase. If we start to "live more simply" we may lose the ability to economize on them and replace them.
The EU Commission has decided to increase the use of biofuels as part of Wednesday's €60 billion (0.5 percent of Europe’s GDP) plan to 'save the world'. The goal is that biofuels will account for 10 percent of all European energy needs by the year 2020.
Given the extensive bad press that biofuels have recived, this decision makes little sense. The environmental damage of biofuels is fast becoming clear. It often takes more energy to create biofuels than they produce – which means they create more emissions than they replace. They are also inefficient: the crops needed to fill the tank of a 4x4 with biofuels could feed someone for a year. Perhaps most importantly, biofuel production drives up food prices, worsening the plight of the world's poor.
The intransigence of the Commission in continuing to support biofuels in the face of the criticism is testament to its continued attachment to the European farm lobby, and its failure of it to engage with the outside realities of the world. This "Fortress Europe" mentality is also refelcted in its protectionist decision to inhibit the likely response of industries wishing to move out of Europe to avoid excessive EU regulations.
In sum, the Commission’s plan consists of limiting the opportunities for people in poor countries to work their way out of poverty, whilst continuing to undermine the possibility of Europe benefiting from free trade with them. Just as they are demonstrably damaging the environment they claim they are seeking to protect, the EU's member states are decreasing Europe’s economic potential through excessive taxation (thus making technological advances less likely). Saving the world? No, quite the opposite...
What gives motorists a thrill gives archaeologists - well, some of them - distress. The busy A303 one of the main roads from London to the Southwest of England, goes right past ancient Stonehenge (see picture). It's a magnificent view as you drive past, and I'm sure that many tourists are moved to turn off and go to the visitor centre, which is right next to the stones, and have a look round.
I think that's wonderful, but the opposing point of view says that the stones lose much of their majesty when you have nose-to-tail traffic grinding past - for this is one of the few remaining sections of the A303 that has not been made dual carriageway. Stonehenge isn't just a pile of stones in the middle of nowhere - it lies in a landscape teeming with ancient earthworks, and folk worry that any road widening, or even a diversion, would irretrievably harm that landscape.
There have been dozens of proposals. Twelve years ago a conference proposed a 4km bored tunnel; but the government baulked at the cost, proposing a cut-and-cover alternative (right out because it would destroy a huge area of the ancient landscape). I was glad: a 4km tunnel would have meant denying motorists that magnificent view - not that the state-dependent heritage bodies and professional archaeologists worried about that. Driving by is how thousands of people see Stonehenge, and we should rejoice in that; but the quango-crats can't stand it. They're only interested in getting people immersed (apart from those who see the public as just a complete nuisance).
The government came back with a 2.1km bored tunnel suggestion, which would have preserved something for the motorist to look at, while still removing the traffic right next to the stones. Now it has shelved even that idea, on cost grounds.
This is a mixed blessing. It seems to put paid to English Heritage's plans for a new visitor centre, far away from the stones, which would require people to spend several hours just to visit them. A typical producer-driven solution. The present visitor centre and car park is right beside the stones, and all the archaeology round there is pretty shot anyway, so expanding that would seem a much cheaper and easier solution, which would allow people to go right up to the stones in just a short time.
This whole saga is testimony to what happens when governments and quangos are in charge of things. No doubt we'll still be talking about it a dozen years from now. Why can't we just have a people-driven solution?
Genetically modified (GM) plants are helping to adapt to climate change. This is mostly because of drastically minimizing water use compared to non-GM plants. Worldwide 1.4 billion acres are already cultivated with DNA-modified crop varieties in 22 countries. However the same agency that took the lead in climate change alarmism is now seriously considering a moratorium on all field-testing and commercialisation of GM tress. This comes on top of already extant heavy-handed over-regulation that stifles innovation in biotechnology. According to a 
Ferrovial's misfortunes may be London travellers' gain. The Spanish infrastructure group, which controls Heathrow, Gatwick, and Stansted (plus four Scottish airports) through its ADI (Airport Development and Investment) consortium, is under pressure from all sides.
In this last week I have been stuck in an underground tunnel for half an hour, had my local tube station shut down for flooding and been trapped behind a ticket barrier in Canary Wharf station for forty minutes with a group of other desperate valentines day commuters. It is at such times that one considers the prospect of purchasing a car to avoid the nightmare that is the daily nightmare on London’s underground system.
The RMT and TSSA – the underground's biggest trade unions – have 
I was interviewed on Sky News yesterday morning, giving my take on the European Parliament's plan to prohibit the sale patio heaters. Unlike the other guest, Friends of the Earth's Tony Juniper, I thought this was a ridiculous idea.
Although it might seem obvious that the supply of resources is limited, and that they grow more scarce as we use them up, this is not in fact true. It costs money to locate reserves of scarce resources, so we tend to search for more as the price rises. In other words, as they grow scarce, we can often establish more supplies.
The EU Commission has 
What gives motorists a thrill gives archaeologists - well, some of them - distress. The busy A303 one of the main roads from London to the Southwest of England, goes right past ancient Stonehenge (see picture). It's a magnificent view as you drive past, and I'm sure that many tourists are moved to turn off and go to the visitor centre, which is right next to the stones, and have a look round.