Seven myths about green jobs

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Yet more proof that government mandates are not apt at solving problems, be it creating jobs or cutting carbon emissions. A study published today by International Policy Network, titled Seven Myths about Green Jobs reveals the hidden-costs of “green investments”. Resources will be wasted and growth will be slowed, while there is no guarantee that the environment will benefit.

The coalition government has announced a whole range of green measures to both cut emissions and create jobs: from low-carbon business support programmes to a Green Investment Bank. We can expect the initiatives to be cemented in legislation by this autumn, and rolled out through the country by 2012. After all, the Prime Minister pledged to deliver “the greenest government ever”. And best of all, Clegg assures us that he’ll impress us by “quietly getting on with the job”.

Sound too good to be true? That’s because it is.

What we are likely to see are more bureaucratic jobs, more red tape. And yet more resources siphoned away from productive sectors of the economy.

In fact, many green job proposals actively push for resources to be taken away from highly-productive activities. A United Nations report even calls for fruit to be picked by hand, rather than by machine.

As for the cost? Today’s “green investments” will just add to our already colossal national debt. Even the United Nations admits that a full-fledged green transition - the type they dream about – could cost hundreds of billions, maybe trillions of dollars.

Horrible, ghastly, nonsense in the carbon market

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Sigh:

Under the scheme, any company or public sector organisation that consumes more than 6,000 megawatt hours (MWh) of energy a year – meaning a power bill of about £500,000 – must register its energy use by the end of next month. From April, firms will need to buy permits for each tonne of carbon dioxide emitted. For those using 6,000MWh, that could mean £38,000.

The scheme is intended to create a financial incentive to cut energy use, and those organisations that record the biggest reductions will get bonuses, funded by penalties imposed on those with the worst record.

Yes, this is indeed a complex and bureaucratic scheme to do something or other: it was devised by the previous government so of course it is complex and bureaucratic. But that isn't actually what is wrong with it. What is really wrong with it is that it is entirely unnecessary.

No, not unnecessary in the sense that climate change isn't a potential problem, nor in the sense that companies and business shouldn't be encouraged to reduce their CO2 emissions. Unnecessary in the sense that we've already solved this problem elsewhere.

Let us start from where the gorbal wormenists would state we are: excessive emissions are causing the earth to warm. This will impose costs on us in the future. We should therefore reduce emissions now: but this will impose costs upon us now. As the Stern Review points out, we need to balance the costs now against the benefits later. Too much now is as bad as too little now: we should try to ensure that costs and benefits balance.

In more detail, we should have either a carbon tax or a cap and trade system upon CO2 (and CO2 equivalent, CO2-e) emissions. These largely but not exclusively come from the use of fossil fuels. For those emissions that do come from the use of fossil fuels, specifically for those emissions that come from the use of fossil fuels for the generation of electricity, we have such a system. It's the European Union's cap and trade system, the EUTS. We also have, as a belt and braces sort of thing, the renewables obligation, which forces high prices to be paid for renewably generated electricity in order to subsidise this nascent industry.

Excellent, we're done. In fact, we're probably already more than done here as the costs of renewables as they are currently subsidised are more than the benefits of them which Stern says there will be in the future. But we are done: we've incorporated the costs of such emissions in the price of electricity already.

So, what we do not need is a further scheme which says to large electricity users that you should be paying the costs of your emissions from your electricity usage. For they're already paying those costs through their electricity bills. We are now double charging them: something which all of the literature on the subject, yes, including that very Stern Review, says we shouldn't be doing. For now we are increasing the costs of ameliorating future climate change to greater than the benefits which will come from said amelioration.

In short, we should be charging people for their emissions only once. We are already charging large electricity users for their emissions once and should not be charging them twice. Therefore this scheme should be scrapped.

Hopefully that's a sufficiently simple explanation that even Chris Huhne can understand it.

Don't have a cow

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The Food Standards Agency created a considerable row when it announced this week that meat from a cow born in the United Kingdom from the imported embryos of a cloned American cow was sold and consumed last year. British and European regulations prohibit the sale of products intended for human consumption from cloned animals without prior authorisation, which has never been granted. The discovery incensed animal rights activists, and public outrage has erupted due to deep mistrust of cloned and genetically modified food, as well as the failure of the Food Standards Agency to detect the products in a timely manner. Two lessons can be learned from the issue.

First, the issue highlights the inability of the government to regulate effectively, even in matters as trivial and simple as the one at hand. That the farmer involved in the controversy, Steven Innes, appears not to have tried to circumvent the law, further highlights the elusiveness of effective regulation. If the government is unable to draw up intelligible and enforceable regulations on mundane issues, it is unlikely that it will be able to fare much better with more complex regulatory schemes.

Second, it is high time that Britain and the European Union become more accepting of scientific advancements that have improved, and will continue to improve, agricultural productivity. Cloning of animals is one such improvement. Farmers and scientists in the United States have experimented with the cloning of animals in order to increase milk and meat production. Meat and other products from cloned animals have proven to be just as safe as products from naturally conceived animals, and the cloning of animals does not affect any other individuals other than those who choose to produce and consume such products. If the ban were lifted, those who do not wish to buy products derived from cloned animals would remain free to do so, the costs of related regulation would be eliminated, and agricultural productivity could improve.

The shock over the cloned cow should be over the observation that there was shock at all. That Britain outlaws a non-offensive and potentially productive enterprise that is successfully practiced elsewhere in the world without incident is unfortunate, and harms the country and its farmers.

Greenpeace vs. BP

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Greenpeace protesters successfully stopped the flow of oil to around 46 BP stations in London yesterday. It was an effort to convince BP to “go beyond petroleum.” Yet this does little to solve any real problems, instead it was just a publicity stunt for special interest policies and increased the revenue of BP's competitors’ for the day.

The means of communication Greenpeace choose may be more infantile than others, but the central idea of the protest is often vocalized in the media. Voters and non-profits worry about our society’s reliance on oil and its harm on the environment. Common arguments mention how we are sucking our oil dry because of our addiction and obsession. The harm the BP spill had on the environment was indeed horrible, however this is not a reason to push policies dictating the amount and quality of oil allowed into a country.

The fundamental fallacy in the argument is the scarcity of oil. Studies and foundations have been predicting when oil will be completely consumed for a long time. However, these dates given are never correct. Critics of oil as a means of energy sometimes look at only scarcity, not the price system. As oil decreases in supply, the price will rise naturally. There is no need to regulate quantity for fear of overuse. As price increases, there will be more incentive to find undiscovered oil. So, the price mechanism will not only decrease consumption if depletion is near, it will increase innovation.

Greenpeace and others also overlook the importance of innovation. There are clearly the technologies to dramatically decrease consumption, as Greenpeace well knows. However, there are various problems with each of these. Electric, wind, and other popular alternatives are expensive compared to oil. There’s virtue in cleaner energy, but its viability can’t come from policy. It must come from actual changes in consumer preferences and relative prices through innovative technology. After all, the reason we use oil and electricity today instead of kerosene, is not because of policy but because innovative technology created a cheaper alternative. So, instead of vandalizing central London BP stations and shifting demand to Shell stations, Greenpeace should search for ways to make cleaner energy cheaper. It certainly has the resources to do so.

Chris Huhne's subsidy sleight of hand

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Following on from yesterday's little piece about how Chris Huhne is playing smoke and mirrors games when he says that there should be no subsidy for nuclear generation plants, there's a further consideration.

Feed in tariffs.

Over and above the Renewables Obligation, which is in itself already vastly more expensive than any possible cost of subsidising nuclear power stations, we've just adopted the German/Spanish system of feed in tariffs. If you're generating electricity from a variety of renewables technologies, you get a guaranteed price for you power. The list of technologies and prices is here.

Note again that this isn't money that is being paid out by Mr. Huhne, or his department, or being funded from tax revenue. No, this appears on our electricity bills and so is largely hidden from us. We've still got to pay it, we still bear the economic cost, but no politician has to stand up and state that they're raising taxes in order to pass on this subsidy to someone. It is, in short, a stealth tax.

Look at the numbers there: solar PV gets a guaranteed 30 to 40 pence per unit of electricity generated. Small windmill installations get 25 to 30 p. Small hydro gets 20 p. But how have they reached these numbers? Given that the unti of electricity has the same value to us as consumers, what on earth possessed people to offer different subsidies? All we care about is that non-carbon emitting electricity is flowing through the wires, surely?

Well, they've decided to guarantee an 8% return on capital to those who install such systems. So if solar PV is more expensive, requires more capital, then the guaranteed price must be higher in order to encourage the installation. Which is nonsense, of course. We want a system of subsidy which operates entirely the other way around (assuming we want any subsidy at all of course). We want people to be installing the lowest cost technologies, not people being encouraged to install the highest cost ones. That is, we'd like a flat level of subsidy and thus people will be encouraged to install low cost, not high cost, systems.

But what makes this entire system entirely insane is that, while nuclear has similar carbon emissions to hydro and wind (and some one third of solar PV), nuclear is not eligible for either this system of feed in tarrifs nor the still extant Renewables Obligation. If we guaranteed the nuclear utilities 40 p per unit  they'd have plants up by Wednesday next week: their return on capital wouldn't be 8%, it would be the biggest bonanza in the history of electricity generation. Even if we only guaranteed an 8% return on capital employed (inflation protected, as are the other feed in tariffs) they'd still build as many of the concrete boxes as we could desire.

Now, whether we need a subsidy to nuclear or not is not my point: nor is whether we need a subsidy to renewables, not even whether climate change is real or not. No, my point is that we've got a great deal of sleight of hand, smoke and mirrors going on here.

We're told that there will be no subsidy to nuclear while all of the competing technologies, the renewables, have cash pouring from their ears as a result of the subsidies being stuffed into their gaping maws. The politicians are simply not being honest with us over this matter.

Worse than just the subsidies though is this: we actually tax nuclear as if it is a fossil fuel. Yes, the Climate Change Levy is not paid by users of renewably generated power but is paid by consumers of nuclear.

The basics of economic efficiency (to say nothing of political honesty) tell us that if we wish to subsidise non-carbon forms of energy generation then we should set a single level of subsidy and then watch as the best technology wins. Not pick and choose favourite technologies because some thing nuclear is a bit icky. And most certainly not allow politicians to play games by insisting that there's no money for subsidies while they've changed the law to ransack our pockets, through our electricity bills, for hidden subsidies to their favoured technologies.

Chris Huhne's "no state subsidies for nuclear"

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There's something really rather strange about Chris Huhne's announcement that there will be no state subsidies for nuclear energy generation:

Mr Huhne, one of the leading Liberal Democrats in the cabinet, used an interview with The Sunday Telegraph to speak out in favour of harnessing both onshore and offshore wind power in comments likely to alarm Conservatives and place further strain on the coalition.

The Energy Secretary, ahead of a key Commons statement on energy policy on Tuesday, also stressed there was "no money" for state subsidies for a new generation of nuclear power plants – the favoured option of both the Conservatives and Labour.

The strangeness is that every other form of non-fossil fuel generation is getting massive subsidies, so why this prissiness over some to nuclear? The answer lies in how the other subsidies are calculated and paid, not in any principled objections or even any acknowledgment of economic rationality.

Let us start from where we can usefully assume Huhne is now. Climate change is happening and something must be done. That something is that the use of fossil fuels must be discouraged and of non-fossil fuel methods of energy generation encouraged. There is no such thing as a "no carbon" energy system but there are a number of low carbon ones. Wind, hydro and nuclear have roughly equivalent emissions, solar perhaps two to three times these technologies but all are much lower than any fossil fuel based ones.

So, what is it that should be done? Huhne has, as above, stated that there will be no state subsidies to nuclear: but that is what is so odd. There are huge subsidies to both wind and solar.

However, the difference comes from who has to write the cheques for these subsidies. With nuclear it would be Mr. Huhne having to convince his Cabinet colleagues to take some from the tax pot and offer it to the nuclear industry. With wind and solar, it is us the consumers of electricity who have to pay directly, as a result of the Renewables Obligation raising the cost of the electricity we consume. A hidden subsidy, one which a politician can say about "Ooooh, no Guv', not me!" is obviously more attractive than having to raise taxes to fund a subsidy.

It is also convenient for a politician emotionally opposed to nuclear power to be able to dole out the hidden subsidy to renewables while using the directly seen cost of a nuclear subsidy as a reason to balk at such.

So much for the politics, what about the economics?

Well, there's not much difference between having to pay more tax to pay for getting nuclear going and having to pay more for electricity to get renewables going. Given that we all pay tax and we all use electricity, the incidence of either subsidy is most certainly upon all of us. What we really want to know is what is the total subsidy necessary to produce the power that we want? It's at this point that nuclear looks like being much the cheaper option.

By 2020, the government hopes to have 25 GW capacity in offshore wind farms – attracting 1.5 times the standard ROC, on top of 14 GW of onshore capacity. With ROCs paid out at a rate of £53 per MWh, the total annual sum for British electricity consumers will amount to a staggering £6 billion – a total of £155 billion paid to wind subsidy farmers over the expected life-times of the projects (equivalant to the cost of building over 50 nuclear power plants).

Assuming those numbers are right even by an order of magnitude it appears that Huhne is making the wrong decision. But the only reason he can get away with that decision is because any nuclear subsidy would be handed over as a cheque from the taxpayers, and thus be visible, while the subsidy to renewables is hidden in our electricity bills.

So, we'll end up spending massively more than we have to to get a non-carbon electricity generation system and all because the Minister can play smoke and mirrors with the size of the subsidy.

Why we shouldn't be using biofuels

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Among the various sillinesses that have been proposed to deal with climate change is the idea that we should start sticking corn or wheat into cars rather than people. That there are a number of problems with this idea hasn't stopped politicians in the EU and the US making it mandatory. Problems like the thought that rising food prices, inevitable under such a plan, aren't really all that good a thing for those who cannot afford food now. Or the problem that, as David Pimentel has been shouting for decades, just as much oil is used raising the crops as is displaced by the use of the crops.

But the real reason we shouldn't be doing this is that it doesn't make sense at the most basic level. As the Congressional Budget Office tells us:

Similarly, the costs to taxpayers of reducing greenhouse gas emissions through the biofuel tax credits vary by fuel: about $750 per metric ton of CO₂e (that is, per metric ton of greenhouse gases measured in terms of an equivalent amount of carbon dioxide) for ethanol, about $275 per metric ton of CO₂e for cellulosic ethanol, and about $300 per metric ton of CO₂e for biodiesel. Those estimates do not reflect any emissions of carbon dioxide that occur when production of biofuels causes forests or grasslands to be converted to farmland for growing the fuels’ feedstocks (the raw material for making the fuel). If those emissions were taken into account, such changes in land use would raise the cost of reducing emissions and change the relative costs of reducing emissions through the use of different biofuels—in some cases, by a substantial amount.

The CBO is as close as we're going to get to a dispassionate and unaligned analyst on such matters. There's one other number we need to see how silly the entire idea is though. The Stern Review told us (and yes, we can all argue about the faults with that Review but let's just take this official number as a given for the moment, shall we?) that the damage done by a tonne of CO2-e is $80. So we are paying, at minimum, betweem $275 and $750 to prevent damage of $80. That is, remember, using all of the official numbers.

This is known as "making us poorer": that is, that the policy fails the very cost benefit test that the politicians themselves have insisted we should be using to determine our actions. We are told that we must do something about climate change because the benefits will be higher than the costs of doing so. However, doing something does not mean that if this is something then this is what we should do. Courses of action must be weighed by the same process used to reach the original decision that we should be doing something: are the benefits greater than the costs?

No, the benefits are not greater than the costs: and yet the politicians in both places, the EU and the US, have insisted, mandated, that we should all make ourselves poorer by doing this profoundly silly thing. Indeed, they force us to become poorer, even while the decision to make us do so fails the politicians' own purported decision making guidelines.

It's true that Nicholas Stern called climate change the largest market failure ever. But we should remember that the substitute for market failure is not necessarily competent government. Legislated idiocy is just as, if not more, likely.

We need to look at these things in the round

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It has to be said that there's a certain giggleness to this story about how all those shopping bags for life are poisoning everyone:

Bags for life could be a threat to shoppers' health because they harbour potentially deadly food poisoning bugs, according to research.

The reason is that some foods will be contaminated with E. Coli: not usually a problem when you cook your food. But if some of that comes off on the inside of the bag then it will grow and fester and thus contaminate all of the other food which is put into it, some of which of course will not be cooked before being eaten. Especially if you're properly green and insist on purchasing fruit and salads loose, rather than packaged.

So, what are we all supposed to do about this?

Professor Charles Gerba, who led the study said: “Our findings suggest a serious threat to public health, especially from bacteria such as E.coli, which were detected in half of the bags sampled. “Consumers are alarmingly unaware of these risks and the critical need to sanitise their bags on a weekly basis.”

OK, so we should all wash out bags in nice hot water: or perhaps pour a little bleach over them.

However, and there is a serious point here other than just giggling at those who would insist we should risk poisoning for the sake of the planet. Which is that it is exactly those Greens, greens and environmentalists who tell us that we must look at things in a holistic manner, include all of the effects of our trampling upon Gaia's skin, who have told us that we must not use plastic bags because of the resources used in doing so. But in their analysis of using bags for life they have not included the resources used to produce hot water, nor the effect of bleach poured down drains across the country.

We don't actually know whether any resources have been saved: for those shouting that we must act in a holistic manner have, as is so often the case, failed to analyse the point holistically.

Pylons: a blot on the landscape

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One of the ironies of UK renewables generation – designed to be so environmentally friendly - is the requirement to add substantially to the 22,000 pylons currently in operation.

Many wind plants are located in remote coastal areas, where new transmission infrastructure is needed to connect their output to the grid.

Hence, National Grid is now planning a major extension of its network to accommodate both new renewables generation as well as preparing, perhaps optimistically, for new nuclear plants. Indeed, this investment will be the largest since the 1960s, when the Central Electricity Generating Board (CEGB) undertook a massive nationwide electrification programme.

To help finance its UK investment uplift, National Grid – with net debt of over £22 billion - has just raised c£3 billion through a well-supported rights issue.

Environmentalists will be very concerned about some of the sites in the West Country and East Anglia where new pylons may be erected. They include not only the picturesque Mendip Hills in Somerset but also Dedham Vale in Suffolk – John Constable’s one-time stomping ground and therefore the cradle of English landscape painting.

Of course, blots on the landscape – in the form of pylons – can be avoided by extensive undergrounding; but there is a heavy cost.

National Grid estimates that it costs £1.6 million per mile to erect pylons and wires. The comparable costs for undergrounding and tunnelling are over 12x as much – at over £20 million per mile.

In fact, current transmission costs account for below 5% of a domestic consumer’s bill, which is highly sensitive to generation costs. Clearly, if there were widespread undergrounding of transmission lines, this percentage would rise.

Hence, rural Britain - already unhappy with wind turbines - could face further intrusions with additional pylons.

Should consumers pay higher electricity prices to prevent further blots on picturesque rural landscapes?

28 days later

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And so, much like of the opening scenes of an apocalyptic movie, science has reached a great milestone: on May 20th, Doctor Craig Venter and Doctor Hamilton Smith announced the creation of a bacterium with an artificial genome, the first living organism with a synthetic DNA able to reproduce. The era of bioengineered creatures has officially begun, bringing with it the end of disease, hunger and maybe even poverty.

But in all apocalyptic movies the great invention inevitably goes wrong. The environmentalists seem to have picked up on this: only a few days have passed since the discovery was revealed and they are already demanding a ban on synthetic biology. Enter regulation, the obvious answer to all of mankind’s problems.

Yes, bioengineering has negative externalities and poses a threat if misused. However, prohibitions are rarely effective and instead induce markets to go underground. Bans require reinforcement, which some countries do better than others. If someone were planning to use the technology for evil ends, they could very well do so and easily get away with it. Bioterror knows no barriers: viruses can spread in the blink of an eye.

The fact is that the technology is already out there: we would only make ourselves vulnerable by closing our eyes to it. As this Economist article argues, “knowledge cannot be unlearned, so the best way to oppose the villains is to have lots of heroes on your side”. Some regulation and monitoring maybe necessary to discourage the occasional hooligan or two, but further research is crucial so that we can better understand the benefits as well as the dangers of this technology.

Also, quite selfishly, I’m looking forward to a stroll around Jurassic Park.