Are these people Nimbys or Bananas?
The reason that Lancashire is not going to allow fracking for natural gas:
Here's the wording of the official rejection - all about the impact on the landscape and the noise: 1) The development would cause an unacceptable adverse impact on the landscape, arising from the drilling equipment, noise mitigation equipment, storage plant, flare stacks and other associated development. The combined effect would result in an adverse urbanising effect on the open and rural character of the landscape and visual amenity of local residents contrary to policies DM2 Lancashire Waste and Minerals Plan and Policy EP11 Fylde Local Plan. 2) The development would cause an unacceptable noise impact resulting in a detrimental impact on the amenity of local residents which could not be adequately controlled by condition contrary to policies DM2 Lancashire Waste and Minerals Plan and Policy EP27 Fylde Local Plan.
Wrong decision.
It's worth recalling a few facts about this fracking thing. Carbon related emissions in the US have been falling even as the economy grows. Because that fracking has led to a massive boost in the supply of natural gas, a fall in its price and thus the displacement of he far more polluting coal. Given that the Bowland Shale is three times the depth of the Marcellus, we would rather expect teh same to happen here.
And we've even had reports that it would: the amount of extra gas that Cuadrilla announced as a result of just one well test would lower natural gas prices for all of Western Europe by 4%. That's just the extra from one well test. We do indeed get DEC saying that fracking will not reduce gas prices: but that's because they speak with forked tongue. What they mean is that gas prices won't fall from today's levels: while their own economic models claim that gas prices will double into that same future. Fracking would, by their own admission, stop that doubling, even if not drop prices from today's levels. Forked tongue or what?
As to impact upon landscape: come one, puhleeze, this is Lancashire we're talking about. It's not exactly sticking an oil rig in Lake Windermere, is it?
At which point all we can really wonder about is whether these people are Nimbys (Not In My Back Yard) or Bananas (Build Absolutely Nothing Anywhere Near Anyone) for it's clear and obvious that they are bananas.
The world is not running out of resources after all, says new ASI monograph
The depletion of mineral reserves poses no serious threat to society, a new monograph published today by the Adam Smith Institute has concluded. “The No Breakfast Fallacy: Why the Club of Rome was wrong about us running out of resources” argues that outcries over resource availability from environmentalist groups are based on a misinterpretation of numbers and a misunderstanding of what mineral resources actually are.
The monograph, written by Adam Smith Institute Senior Fellow and rare earths expert Tim Worstall, says that groups that have warned about the world running out of rare mineral resources, such as The Club of Rome, have been using the wrong sets of data, mistaking the exhaustion of mineral reserves for the exhaustion of mineral resources.
Mineral reserves, the monograph explains, are simply the minerals that have been prepared for use for the next few decades; they are minerals that can be mined with current technology at current prices. Some reserves are going to run out in the near future, but this is a normal process. Every generation runs out of mineral reserves.
Mineral resources, however, refer to a concentration of minerals of a certain quality and quantity that have shown reasonable prospects for eventual economic extraction. These are much larger than mineral reserves.
Organic farming, for example, may be a useful idea, the monograph asserts, but the idea that it is a necessity because we’re about to run out of inorganic fertilisers is based on a falsehood. The reserves for minerals used in fertilizers may exhaust in the next few hundred years, but the exhaustion of resources is not estimated to occur for 1,400 years for phosphate and 7,300 years for potassium.
The report concludes that efforts to conserve and/or recycle mineral resources are wasteful and often end up being net harms to society, by diverting economic activity from more productive uses.
Senior Fellow at the Adam Smith Institute and author of the report, Tim Worstall, said:
We have a basic problem in our discussion of resource availability. Which is that most of the people in that discussion are grievously misinformed about what a resource is and how much of any of them we might have. It really is true that Paul Ehrlich, Jeremy Grantham, the Club of Rome, Limits to Growth and the rest are looking at the wrong numbers when they consider how much of any mineral or metal there is that we might be able to use.
This is not some arcane economic point. It is not some mystery explained only to the illuminati. Quite simply, most people assume that mineral reserves are what we have left that we can use. This is not so: mineral reserves are only what we have prepared for us to use in the next few decades. As such, it's really no surprise at all that mineral reserves are generally recorded as being going to last for the next few years.
This book explains this simply enough that even a member of the Green Party should be able to grasp the point. We are no more going to run out of usable minerals because we consume mineral reserves than we are to run out of breakfast because we eat the bacon in the fridge.
To read the full press release, click here.
The Swansea Barrage is still an absurd idea
As Christopher Booker points out, the Swansea Barrage is an absurd idea. Not because the idea of tidal power itself is absurd, but because we've actually studied this version of it and come to the conclusion that it is, well, absurd:
Yet, as I reported on April 18, under the headline “Will Welsh eels scupper the craziest 'green’ project ever?”, in practical terms this scheme should be a non-starter. On the developer’s figures, the 16 tidal-powered giant turbines, built into a six-mile long breakwater round Swansea Bay, will intermittently generate only a pitiful amount of the most expensive and heavily subsidised electricity in the world. They will require constant back-up from fossil-fuel power stations for all the many hours when they are producing little or no power. In return for the developers receiving a mind-boggling £168 per megawatt hour for electricity, including a subsidy of 240 per cent, even more than that for offshore wind, we shall on average get just a derisory 57 megawatts. Yet the £1 billion gas-fired power station recently built down the coast at Pembroke can produce 35 times as much electricity, whenever needed, without a penny of subsidy.
As one of us pointed out some time ago this really does not make economic sense.
There's been a large study of all of the different variations of a plan to generate tidal power from the Severn Estuary. They compared the cost of that tidal power against the cost of natural gas fired stations. And they included the cost of the gas rising into the future, the taxes that would have to be paid on CO2 emissions and so on and on. It was a proper cost benefit analysis done properly. And they found that the larger we built the tidal power plant the more money we lost on it. This being indicated by the net present value of each of the different variations of the plan. The larger it was the greater the negative amount showing up as that net present value.
We can get to the same result by looking at the price for that contract for difference for the energy to be produced. All in costs (including carbon taxes!) for gas fired plants are in the £80 to £100 level. Anything that costs us more than this loses us money. We might, maybe, perhaps, accept small installations that are loss making as a method of encouraging a new technology. Vast monsters of plants designed to work for a century and more do not meet this test, of course.
It's really very simple indeed. Whatever is it that we need to do about climate change deliberately setting out to do so in a manner that makes us poorer just isn't the right way to start. Yet that's what the Swansea Barrage does, as we can see from the two sets of numbers we can use to check it. It has a negative net present value and a requirement for a contract for difference vastly above other potential power sources.
We just shouldn't even be entertaining the idea of building it. Well, not with our money, at least. Someone wants to go and lose their own on it then fine: but that means no contract for difference.
So Britain has solved climate change then
As regular readers will know we're pretty simple in our approach to climate change around here. If it's happening, we're causing it, then the thing to do about it is a carbon tax. That lovely Pigouvian Tax on externalities, just as Mssrs. Stern, Nordhaus and Tol tell us is the solution. And, for the sake of argument, while we think it's too high, we're willing to at least consider Stern's rate of $80 per tonne CO2-e. Which brings us to:
Environmental taxes hit a new record high of £44.6 billion in 2014, official figures show, as the bill for renewable energy levies rose to almost £3 billion. The data from the ONS shows that the green tax burden has more than doubled over the past two decades, from £19.4 billion in 1994. Last year saw the ninth consecutive increase in the tax burden, which stood at £43 billion in 2013. The vast majority of the taxes are those levied on transport fuels such as petrol and diesel, accounting for £27.1 billion. Vehicle duties accounted for £6 billion of the total and air passenger duty £3.2 billion. The cost of renewable energy taxes to subsidise wind and solar farms rose by more than a fifth to £2.9 billion.
So, the UK has already solved climate change. We're done and dusted. Emissions are of the order of 500 million tonnes a year in this country. That's $40 billion in taxes righteously required in order to adjust market prices. We're already charging ourselves more than that. We're done.
This is of course somewhat in contrast to the repeated squeals that much more should be done. But this is absolutely the mainstream scientific opinion here that we are cleaving to. If climate change, then carbon tax. And when the appropriate tax is in place then no more need be done, we can just wait for that alteration of prices to work through the market system.
So, what's it like to live in the first country that has actually dealt with the major environmental challenge of our times? And wouldn't it be just lovely if those who rule us realised that they've already managed that feat?
Why William Nordhaus was right and Nick Stern wrong
Given that coal fired power stations seem to be closing down left right and centre we might think this is a victory in the fight against climate change. Sadly though what we're actually seeing is the result of people following the advice of thwe wrong economist. It was William Nordhaus who was correct, Nick Stern who was wrong. Ambrose:
The British electricity group SSE (ex Scottish and Southern Energy) is already adapting to the new mood. It will close its Ferrybridge coal-powered plant next year, citing the emerging political consensus that coal "has a limited role in the future".
The IMF bases its analysis on the work Arthur Pigou, the early 20th Century economist who advocated taxes to stop investors keeping all the profit while dumping the costs on the rest of society.
So why has the power station closed early, citing soaring running costs, when coal prices are at an eight-year low and when it was modernised to stay open until 2023?
The Carbon Price Floor is arguably one of the most hidden and unknown but ultimately damaging pieces of modern industrial taxation. To use a shorter and more descriptive title, this carbon tax is slowly forcing the premature closure of the backbone of our electricity generating base.
As we regularly say around here, if there is an externality, one which cannot be dealt with by market or private means, then yes Pigou and his tax can be the right solution.
However, there's a difference possible in the way that it's applied. Roughly speaking the UK government has followed Stern's advice: here's the amount the tax should be, impose it now. Which is why these plants are closing at such great expense in stranded assets.
What should have been done is the Nordhaus approach. Sure, we need the tax but it would be better to work with the capital and technological cycle than against it. Thus, have a low tax now rising into the future. In this manner we'll still get the use of those capital assets that we've already built while also making sure that the next generation, to replace the current as they fall to bits, are non-emitting.
Don't forget, we're not imposing this tax to raise revenue: we're imposing the tax to reduce future emissions. And we obviously want to do this in the cheapest manner possible. Which is, as above, to use the current installed base until it falls apart and then rebuild it differently. Not, as the Stern prescription makes us do, close down perfectly good plant right now.
We should, obviously, be at least somewhat grateful that the government did listen to economists on this. It's just rather sad that they listened to the wrong one.
When a fossil fuel subsidy is not a subsidy
You may have seen an IMF report in the news last week claiming that fossil fuels are subsidised to the tune of over five trillion dollars every year. This made good headlines, but only because the IMF chose to describe untaxed externalities as 'post-tax subsidies'. This is unusual and misleading. I wrote about why in The Daily Telegraph:
The IMF’s idea of “subsidies” to fossil fuels refers to something completely different. They have taken the indirect costs to society of using energy – air pollution, traffic congestion, climate change – and, if governments haven’t imposed special taxes on one, called it a “subsidy”. The problem is, we already have a word for these things: externalities. And there is something rather Orwellian about describing a failure to tax something as a subsidy. Here’s an example of what we’re talking about: when my neighbours play loud music at night, it makes me worse off. I’d pay, maybe, £20 for them to shut up, if it wasn’t so awkward to go to the flat downstairs, knock on their door and start negotiating prices. Economists would say that they are imposing a £20 externality on me, and that in a perfectly efficient world, my building would charge residents around that much to play music, and give it to sleep-deprived neighbours like me. But, in the absence of that charge, nobody would say that those neighbours are being subsidised by me. It’s just not what the word means. Except, apparently, to the IMF.
That isn't to say that externalities should never be taxed, if a private solution can't be found. But we already have high fuel taxes in most of the developed world, and in the developing world these taxes will hold back growth. Since economic development has positive externalities, it's not obvious that the negative externalities of fossil fuels outweigh the positives. You can read the whole piece here.
An interesting and important question for Nick Stern
We're willing to go along with the concept here but can we please have an actual number?
With oil prices currently at a low level, now would be the ideal time to introduce levies that remove the implicit subsidy for pollution from petrol and diesel. The revenue from these levies could more than compensate the poorer members of the community for the price increases, give a boost to research and innovation, and contribute to the cleaner and more attractive investments that we need.
We know, we're rather keener on Pigou Taxes than many others are. But, following the IMF report on subsidies to the energy sector (please note, it wasn't an IMF paper, it was a paper by people at the IMF. It's not purely about fossil fuels, it's about the energy system. And it does depend on the idea that the tax system should be hugely regressive in order to reach its totals about how much tax should be raised by consumption. For example, it argues that the lower rate of VAT for domestic fuel is a subsidy. And you can think of it that way if you like. But two points: that subsidy also applies to renewables and can you imagine the furore from the usual suspects if we argued that to save the planet we must charge 20% on domestic fuel?) we have the above from Lord Stern. And the obvious question is, well, how much?
For there's a very important point about Pigou Taxes. The entire logical case for them, the justification, is that there is one just and righteous rate at which that tax should be levied. Add up the costs of all of the externalities and that is that tax rate. You cannot, not if you are being intellectually consistent, march around shouting "more". You must, in each circumstance, calculate what the rate is.
So, some 80% of the cost of petrol these days is tax. Is that enough? For example, Stern's $80 per tonne translates into a righteous carbon tax of 11 p on a litre of petrol. Ken Clarke introduced the fuel duty escalator to "meet our Rio committments". Which we take to be a synonym for a carbon tax. That escalator has added 23p or so to a litre of petrol. So, purely on the carbon emissions basis we are already paying too much in the UK.
This newer calculation tells us that there's more. Air pollution and so on. OK, that's fine, so, what's the number? What's the righteous Pigou Tax for that? They also say that a significant portion of the costs of petrol is congestion, accident damage etc. That's not something that can be attributed to the fuel: if we were all driving electric cars those things would still be there. That's a cost attributable to the transport system, not the fuel. And by far the largest part of the costs they attribute to this sector is the idea that consumer purchases should be taxed in order to raise revenue. And that if the tax is less than the amount they declare is correct, then that's a subsidy. But no one can say that UK petrol isn't paying tax. So that's out too.
So, in our calculation of what the correct petrol tax is in the UK we've got those two things. Carbon emissions, which are already being overpaid for, then pollution costs. So, what's the number, what should be the tax? And as above, "more" isn't a serious answer.
We have a very strong suspicion here. The reason we're not told what the number is is because that correct, just and righteous, number is actually lower than we're all being charged currently. Which is why Stern, the IMF and everyone else doesn't actually calculate it. Of course, we're willing to change our minds if they would calculate it and also let us see their workings....
The perils of fake Fairtrade products
It's just so difficult to be a properly concerned middle class social justice warrior these days, isn't it?
Well-meaning shoppers may be wasting money on groceries bearing fake Fairtrade or organic logos, after police in Europe identified counterfeit food labels as one of the fastest growing frauds.
Fairtrade or organic bananas, vegetables, tea and other items are bought by millions of people concerned about the provenance of the food on their plates.
But the certification logos on packaging can be “easily replicated and affixed” by experienced counterfeiters, the Europol law enforcement agency said.
Its experts warn that organised crime groups have “joined forces” to run counterfeiting operations inside the EU.
They are forging quality labels on “everyday products” that can then be sold at a premium, as opposed to the traditional fake handbags and medicines.
As it happens we don't think this is a particular problem. Fairtrade makes virtually no difference at all to those poor, third world, producers. It has a marginal value as a form of indoor relief for the dimmer scions of the upper middle class. But the real value gained from it is the near holy righteousness that a certain type of shopper feels as they proudly display their status by showing off the correct, socially approved, labels of "organic", "Fairtrade" and so on. Given that this, the main effect of the system, still applies to fake labels it seems to be a most efficient way of achieving that main effect.
Greenpeace should be allowed to say it even if they're wrong
We find ourselves a little bit conflicted here. That Greenpeace has been spouting lies making incorrect statements does not surprise. But we are rather absolutist on this free speech thing. Absent incitement to violence and libel we're pretty sure that anyone should be allowed to say whatever they wish. And we're most certainly not happy with some organ of the State deciding what it is that people may or may not say. Thus the conflict:
A Greenpeace advert opposing fracking has been banned for claiming experts agreed that the process would not cut energy bills.
The national press ad said: "Fracking threatens our climate, our countryside and our water. Yet experts agree - it won't cut our energy bills."
The Labour peer Lord Lipsey, who said he understood there was a range of views on the subject, complained that the ad was misleading for claiming experts were in agreement.
Greenpeace said the claim was made in the context of a public debate on Government policy, and cited quotes from David Cameron, who has repeatedly backed fracking and claimed that it could bring down energy bills.
The organisation provided quotes from 22 people, groups or organisations supporting the view that fracking would not reduce energy prices.
That Greenpeace are wrong is something we've proven here and elsewhere before. However, there is that free speech issue. And as we say, we don't think that such speech should be banned.
Quite apart from anything else if people are banned from spouting obvious lies then how can we spot them when they're being a bit more disingenuous and spouting non-obvious lies?
What just about everyone is getting wrong about climate change
The Telegraph has an interesting report today on the costs of decarbonising Britain's electricity generation system over the next 15 years. It's vast and it's not a sensible thing to do. But in their discussion there's this, which shows just how badly everyone is approaching this question:
All political parties (apart from Ukip) support the 2008 Climate Change Act which commits Britain to reduce emissions by at least 80pc from 1990 levels by 2050. Analysis by the Department of Energy and Climate Change has shown that, to hit those targets, there must be significant decarbonisation of the power sector by 2030. The Committee on Climate Change has set a target of reducing carbon intensity from 450g of carbon dioxide per kilowatt hour to 50g by 2030.
This is entirely the wrong way around.
Let's not get into the science of this, that's always a boring and unproductive shouting match. Instead, let's just say the IPCC is correct and then look at the economics of it. And there we find that this approach is *still* wrong. Because it is not correct to announce a target for emissions: it is correct to announce a cost that we're willing to pay to reduce them.
This is the Stern Review argument. There's some future damage to come from emissions. How much should we be willing to spend now to reduce such damages? We reach our answer (which translates into that $80 per tonne carbon tax) and that's it. We should not spend more than that to reduce emissions. We should not have a target for emissions: we should be targeting only those emissions that we can reduce below that cost.
And yet every political party except Ukip is targeting the emissions number. This is simply wrong, it's an entire misreading of what the settled science on this issue is. The settled economic science as laid out in that Stern Review and backed up by every other economist who looks at it (Nordhaus, Tol and so on). We set the price of the actions we're prepared to undertake and go and do those things that cost less than that to do.
The reason for this is that the actual logic that says we should be doing anything rests upon that estimation of the cost of future damages. Spending more than that cost makes the future poorer than it could or should be. It is quite literally impoverishing our grandchildren.
It's not the first time this has happened of course. When the political classes have entirely misunderstood the entirely reasonable (please note, economists might differ on what the price of emissions should be but not on the logical approach itself) result of economic research and so garbled the implementation as to end up doing the opposite of what they should be doing. But it's impressive to see them doing so all the same.