We do hope that Tony Juniper has the right end of this stick
There are two logical possibilities here, two opinions that Tony Juniper might be holding:
Tories making Britain greener than before Industrial Revolution, says Natural England boss
Tony Juniper,
More specifically:
The high water mark for the UK’s biodiversity and natural landscapes was before the Industrial Revolution, when forests covered much of the UK and air pollution was low.
And, well,
The plans could see areas that have been ignored for decades turned into new protected areas, reversing the decline of biodiversity and habitats for the first time since the Industrial Revolution.
“Before” is a long period of time. The high point of - to take one example here - Britain’s forests was about 5,000 BC. After the glacial period and the subsequent tree colonisation and before the arrival of the Neolithic farmers with their copper axes. Given the peering into the past being done here that’s a rough estimate of course.
One possible interpretation of what Juniper is saying is that it was the Industrial Revolution which damaged Britain’s environment and so we must clean it up. The other possible interpretation is that it was not having an Industrial Revolution which damaged Britain’s habitat and it was the arrival of of that enabled us to clean it up.
Given earlier interactions between ourselves and Mr. Juniper on the subject of economics and the environment we’re not hopeful that he’s got this the right way around. It’s precisely and exactly the move from wood to coal, from extensive low input to high input industrial farming, from human and animal labour to artificial energy sources, from reliance on the bounties of nature to manufactured inputs, that has enabled, even allowed, the clean up of the British environment.
The Industrial Revolution is not something to be cleaned up after, it is that process of cleaning up itself.
We really do hope that the boss of Natural England has this the right way around. But we just can’t bring ourselves to believe that Tony Juniper does know of the environmental Kuznets Curve, let alone that he grasps the implications of it. Which is a bit of a problem with having him doing that job on behalf of the rest of us really.
Being able to shut down sugar beet is rather the point of Brexit
There’s clearly a PR campaign going on on behalf of the British sugar beet industry. Too many pieces arriving wailing about how terrible it would be if folks could just buy world price sugar from wherever it strikes their fancy to do so. Not that we’d accuse this specific - or any other specific - piece of being part of a campaign rather than just an independently produced, and excellent, piece of journalism:
This is before growers feel the impact of post-Brexit trade deals with large sugar producers such as Australia. It’s a concern for Lankfer, whose land is in international trade secretary Liz Truss’s constituency. He has twice hosted her at the farm to answer questions from growers.
British farmers hail sugar beet for its role in crop rotation and the timing of its harvest. “It’s a good break crop, and it spreads the workload over the winter,” says Lankfer.
The destination of his beet is visible from the field itself: the factory at nearby Wissington where it is processed, eventually ending up in products such as Coca-Cola and Cadbury chocolate, or bagged and sold to consumers under the Silver Spoon brand.
Being within any state, nation or organisation of either means making a series of compromises. One of the EU ones was that significant support would be given to the continent’s sugar beet farmers by keeping out the cheaper cane sugar available from tropical climes. Hmm, well, think of that as you wish.
One of the points about being out of the EU - as with any other selection of states, nations, or groups thereof - means being able to change that set of compromises. The political balance has changed, who gets to insist upon economic privilege through the powers of the new state does.
Think on it for a moment, the ideal of Scottish independence is driven by the ability to change policy, away from those imposed by the imperialist English and toward those more acceptable to Scots. That’s what we’re told at least. The point of the going their own way being to, err, go their own way. The same was true when Ghana gained independence and so on, it’s rather the point of independence.
Being outside the EU means we now can, if we choose to, stop supporting the sugar beet industry. Leave Britons to buy their tooth rot as they wish. We, of course we do, insist that Britons in aggregate will benefit from that free trade. But that’s not quite the point we’re making here.
Complaining that Brexit means sugar beet might not retain support is ridiculous - the very point of Brexit is to be able to make the choice about whether to support sugar beet or not. Or more generally to accept, reject or modify the series of compromises that belonging to the supranational organisation required.
This isn’t even to acclaim Brexit as being worth it for offering that freedom. It’s just to insist upon the outcome of that process. Some parts of society gained economic privilege under the old system. The move to this new one means re-examining whether we wish to accord such privilege again.
So, do we all want to have to pay more for our sugar in order to support some few thousands farmers? No? Well, at least that’s a choice we get to make now.
George laddie, if government takes something then it's got to pay for it
George Monbiot is getting very het up - again - about the idea that governments should be held to the contracts they sign:
Or are they? On behalf of commercial interests, governments are all too happy to be constrained. A UK oil company is currently suing the Italian government for the loss of its “future anticipated profits”after Italy banned new oil drilling in coastal waters. Italy used to be a signatory to the Energy Charter Treaty, which allows companies to demand compensation if it stops future projects. The treaty’s sunset clause permits such lawsuits after nations are no longer party to it, so Italy can be sued even though it left the agreement in 2016. This is one of many examples of “investor-state dispute settlement”, that makes effective action against climate breakdown almost impossible. It represents an outrageous curtailment of political choice, with which governments like ours are entirely comfortable. I’m not sure how we can escape such agreements, but government lawyers should be all over this issue, looking for a way out. Otherwise, future corporate profits remain officially more important than life on Earth.
The Italian government, or any other, can ban drilling any time it likes. As the British one has effectively banned fracking. The only restriction is that it must stand by, live up to, whatever contracts it has already signed:
According to the company’s boss, Rockhopper is not just claiming compensation for the money which it actually spent on exploring Ombrina Mare (US$40-50 million). It also wants an additional US$200-300 million for hypothetical profits the oil field could have made had it not been banned.10 While many countries’ constitutions do not consider anticipated profits to be protected private property, in investor-state disputes companies regularly receive compensation for alleged lost future profits.
The Italian state did take the fee to allow the exploration in the first place. It was perfectly happy to see that $40 to $50 million spent on something that might increase its own revenues through royalties. OK, so, now, it changes its mind. Fair enough - it does though have to pay up for the money that it previously received and the amount it encouraged to be spent. On the grounds that the contract it signed, entirely voluntarily, said that it would if it did change its mind.
Whether prospective profits will also be paid out is a matter for that arbitration process. Such arbitration processes necessarily taking place outside the courts controlled by the government being sued of course. Skipping over much of the detail Cairn Energy was charged $1 billion and more in tax by India. Tax which wasn’t actually due under the law at the time. The Supreme Court of India even agreed (in a different case) that it wasn’t due. So Parliament retroactively changed the law to make it so. It’s only that ISDS process outside the Indian political system that has led to even an offer by India to accord with the contractual relationships it voluntarily agreed to.
Just like any other economic actor we need to be able to hold government to the contracts that it signs.
Yes, it’s entirely true that reasons of state do sometimes mean that contracts will be revoked. Or that property will be forcibly acquired. Compulsory purchase of your house to build a railway can indeed happen - but you are to be paid market prices for the property when it is taken from you. As the American Constitution points out the government can’t demand your spare bedroom to house the Marine Corps - but it can pay for and hire as many hotel rooms as it likes.
Any government can change its mind. It can even repudiate contracts. It’s just that when it does so it has to pay for what it is that they’re taking away when they do so. Not paying for such political choices does have a name - theft.
Blowing with the Wind
Is our energy minister, Anne-Marie Trevelyan, deliberately misleading us, or simply relaying the party line when she says “although it was too early to say how much the transition to hydrogen would cost individual households, it was likely to be ‘very small’”? Where are the quantification of comparative costs and a rational analysis of practicalities? One would expect Mrs Trevelyan, as a Chartered Accountant, to have models for how much electricity will be needed in 2050, by what sector (homes, road traffic etc), safety, suitability (batteries are fine for cars but a bit heavy for aircraft) and what the alternatives would cost us. If she has, we have not seen them. During the pandemic, we have been battered by models of Covid infections, hospital admissions, deaths and R numbers. SAGE was publishing the models and the government, we were assured, was being guided by the science. When it comes to climate change however, the science is focused on the proximity of the end of the world as we know it, not the evaluation of alternative palliatives. Government tells us not to worry, a zero carbon 2050 will provide electricity from wind farms, hydrogen will replace North Sea gas, the economy will be stimulated thereby and the impact on consumers’ pockets, whilst they have no idea of what it will be, will be very little. One could regard that as blowing with the wind.
Meanwhile, the electorate is being softened up by an immediate increase of at least £139 a year for millions of households in electricity prices. The outlook is complicated by a new era of inflation which the Bank of England does not appear to recognise. The Bank predicts 3 percent inflation which would mean that, in 2050, it would take £236 to buy what costs £100 today. Others forecast an immediate increase to over 4 percent and remaining at that level. In that event, it would need £312 in 2050 to buy what costs £100 today. Clearly the man in the street will have difficulty in distinguishing increased energy costs due to government zero carbon policies from general inflation.
The reluctance of the Business Secretary, Kwasi Kwarteng, to come clean about the arithmetic manifested itself in last December’s Energy White Paper. Pages 60 – 63, of this 170 page document, are devoted to modelling. Only one actual model is presented (Figure 4.1) which depicted all sources of electricity production having decreasing carbon emissions, reaching zero by 2050 – except whilst the total does indeed reach zero MtCO2e/year, the subtotals seem to add up to about 100 MtCO2e/year. The rest is motherhood about the government’s commitment to modelling, which will all be open and published (except when they will not be). No specifics are provided on the variables, their hypothesised relationships nor when the models will be published.
Although energy can be produced in other ways, the story is really all about electricity. Hydrogen is not a source of energy; it is a storage intermediary because whether it is produced from natural gas (and water) with carbon capture and sequestration (blue) or from the electrolysis of water by renewable electricity (green), it takes more energy to make than it delivers as energy carried by the hydrogen. These losses are inevitable; the 2nd Law of Thermodynamics applies. Its value for policy lies in its ability to decarbonise otherwise intractable sectors, such as heavier transport and industrial process heat. Its value as storing energy excesses from renewables such as wind power is overstated because the economics are concerning; very expensive electricity results in extremely expensive hydrogen.
Electricity can be produced in only two ways, renewables (mostly wind and sun) which are better termed “uncontrollables”, and controllables (nuclear, biogenic waste and other power stations). Models need to show the likely available output from controllables and uncontrollables in the run up to 2050. The Department for Business, Energy and Industrial Strategy (BEIS) must have such models but they do not seem to have been published and subjected to independent audit. Given the lead time needed for the large conventional nuclear power stations envisaged today and the fossil fuel power stations which are unlikely fully to have been decommissioned by then, these data should be readily available. One should add the potential output of electricity from small modular nuclear reactors, molten salt reactors and from biogenic waste. Several of the small-scale alternatives to large scale nuclear should be producing electricity in Canada and the USA well before Sizewell C. The White Paper has 15 references to small modular, e.g. that proposed by Rolls Royce, and molten salt reactors. The White Paper has 15 references to the modular ones but only about research and innovation, none to their predicted output or costs. There is no reference to molten salt reactors despite the many presentations made to BEIS, nor to biogenic waste. A former president of the World Biogas Association (no, that is not the United Nations) reports that “capturing half of this waste would cut greenhouse gas emissions by 10 percent and generate energy equivalent to 32 percent of the natural gas used worldwide.”
One has to suspect that the government’s infatuation with hydrogen owes more to lobbying by the big gas companies, who want to produce it from natural gas, than it does to independent analysis. Unfortunately for them, the kind of hydrogen they would like to produce (from their natural gas resources) not only uses more energy than it replaces but, according to research reported this month in Fortune, could also produce 20 percent more carbon emissions than conventional natural gas power stations. Yet “according to the [UK] government’s projections, the British domestic hydrogen industry could...power 35% of the UK’s energy consumption by 2050.” We might be not only better off burning the natural gas but cleaner too.
Hydrogen enthusiasts believe that the answer lies in producing green hydrogen from renewable electricity and the electrolysis of water. This too requires more electricity than it replaces but it generates only low levels of CO2 emissions. Commercial green hydrogen plants have been announced rather than realised. 2030 is regarded as a start date and becoming a substantial part of the market by 2050 might seem a bit ambitious.
Even if the emissions problem is cracked, the inefficiency of hydrogen relative to electricity, not to mention safety issues, remain. Road traffic has been using batteries for over a century; their technology and production are racing ahead. Fuel cells are charged by hydrogen (usually) and have pluses and minuses when compared with batteries, mostly lighter weight and longer use, but can be regarded as subsidiary to the main hydrogen issues.
The only point in converting homes from gas to hydrogen when electricity is already wired in and could be cheaper, is to cope with spikes in home usage, e.g. in cold weather. And one has to worry about sending the much more flammable hydrogen down 100 or more year old pipes, many designed for coal gas. A high pressure hydrogen network would be much more demanding – and expensive. There have been quite enough gas explosions already. There has been only one major problem (in Norway in 2019) with hydrogen and petrol sharing the same forecourts to date but it is an alarming combination.
There will surely be a place for green hydrogen in the zero carbon economy, perhaps for aircraft, but it will certainly not be the saviour BEIS is touting it to be. Electricity will be used directly where it can be and stored in a variety of ways when immediate usage is not feasible, hydrogen merely being one.
What is of greater importance is that BEIS should publish their models of our electricity needs, by sector, which will be far greater than now, given a rapidly increasing population and reduction of other forms of temperature control and energy provision. We need to see the arithmetic of how those needs will be met, the alternatives and comparative costs. Those models need independent challenge to the point where there is consensus on the realities. We need a reduction in the government’s blowing with the wind of fashionable ideas. As Mr Gradgrind would have put it, “Now, what I want is, Facts.”
An interesting exposure of the cost of trade barriers
Of course, the writers here manage to get the benefits of trade the wrong way around but still, a useful estimation of those phytosanitary trade barriers can still be derived:
Exports from Ireland to Great Britain soared in the first six months after Brexit as imports sent in the opposite direction declined, according to Irish government figures.
In a sign of post-Brexit imbalances in trade, the Irish Central Statistics Office (CSO) said goods exports to Great Britain (excluding Northern Ireland) rose by 20% to €6.7bn (£5.7bn) in the first six months of 2021, an increase of more than €1.1bn compared with the same period in 2020.
However, imports from Great Britain fell by more than €2.5bn, or 32%, to stand at €5.3bn in the same period.
Imports are the benefit from trade, they are the thing that we do trade in order to gain. So, Ireland - the Irish consumer - is losing out here as a result of the increased barriers to trade while the British consumer is benefiting from the not increase in barriers to trade.
British exporters have been hit harder by Brexit because they faced border checks from 1 January on shipments to the EU, while Irish and EU exporters to Britain have benefited from a phased in approach the UK government opted for over a 12-month transition period.
It means while all food and plant exports to the EU have been subject to sanitary and phytosanitary checks since January, countries including Ireland selling into the UK are not being subject to the complete panoply of red tape until January 2022.
This may go some way to explain why exports of food and live animals from Ireland to Great Britain rose from €315m in June 2020 to €322m in June 2021, while imports to Ireland almost halved from €243m to €119m.
When the Irish - or the EU - put barriers in the way of trade then they benefit less from trade. This is not exactly a startling finding given the underlying logic here.
Just another proof that unilateral free trade is the only logically or morally useful stance to have on that subject of trade.
Facebook and antitrust
As all too many keep telling us, Facebook really is just the monopolist of our online time. Something must be done. That something being more political power over Facebook of course - the cry through the ages of those who would exercise political power.
If it all reminds you of the rise of another app more than a decade ago, that’s for good reason. With its 732 million monthly active users, TikTok is the app of the moment, and likely the app of the future. It’s the new Facebook.
So now we have that new Facebook. Which is pretty good evidence that the old one doesn’t have any form of monopoly. Or, to be more precise, that it’s an entirely contestable monopoly and therefore one that we don’t have to worry about.
Which leaves us just with those political calls for more political power over Facebook. There’s no antitrust justification - as there never is in contestable markets - so therefore it’s just that usual power grab from those who desire more political power.
All of which tells us what to do about those calls for more regulation. The Anglo Saxon Wave seems a useful reaction and for those who wish to remain strictly polite a simple rejection would be sufficient.
Competitive markets don’t require regulation because the competition within the market is the regulation required.
So, let's not do it that way then
Lord Sainsbury’s little think tank tells us that it’ll cost lots and lots of money to level up the UK if we follow the same plan and method as Germany did with the Eastern Lander after 1989. The useful conclusion from which is let’s not do it that way, let’s not try to level up the way Germany did with the Eastern Lander after 1989.
‘Levelling up’ cost will be close to £2tn price of German reunification, says think tank
Centre for Cities says schemes proposed by the Government for Boris Johnson’s flagship plan so far are a ‘drop in the ocean’
£2 trillion is around and about UK GDP. That is, everything produced and or consumed by everyone in the country in a year.
Centre for Cities said the schemes outlined so far by the government were a “drop in the ocean” and that closing the north-south divide would cost hundreds of billions of pounds over decades if done properly.
In a stark analysis shared with the Guardian, the non-partisan research group said England’s biggest cities, including Birmingham, Manchester and Leeds, have the lowest productivity and life expectancy in western Europe.
The first and most obvious question is whether the people of Britain are interested enough in this problem to willingly give up an entire years’ worth of their economic life in order to solve this problem. We’d venture that the answer is probably no.
“So, Sir, or Madam as the case may be, would you like to live on nothing for a year to help Birmingham?”
“No” would only be the shortest of likely answers to that question even if the meaning wouldn’t change much, only the emphasis.
It might even be true that we should all do something to aid Birmingham all the same. Clearly though it’s not this. Not simply unloading those sheds of cash - as Germany did - in the hope that something nice will happen.
Our own view is that the necessary changes are already underway. This combination of working from home and the internet is making economic geography disconnect from physical geography anyway. Being on the network matters - and will only grow in importance - far more than precisely where one is. At which point economic activity will spread out across that physical geography entirely naturally.
We can see this happening already in prices. London rents and house prices are falling, those in the regional cities are rising. As is so often true we’re getting the political demand to spend fortunes just as the market unadorned solves the problem anyway.
We're about to see the Sunk Cost Fallacy in glorious action again
There are Nudge Units and pronouncements upon human economic fallibility all around us. Us folks don;t, in fact, approach the universe in the supremely calculating manner than certain economic models insist we do.
Except of course the models don’t insist, they just explore what would happen if we did. All of interesting economics is in explaining what happens when behaviour deviates from the model which is why we use such models. So that we can explore the deviations from them.
However, despite all this attention paid to such fallibilities we’re about to see the most monstrous display of the Sunk Cost Fallacy:
Conservative MPs are lining up to denounce HS2 in the Commons after more than 100,000 members of the public secured a debate on scrapping the high-speed rail line.
Senior Tories are preparing to urge ministers to put the project "out of its misery" as they point to spiralling costs and a shift to working from home as evidence that it should be cancelled and the £98 billion budget distributed elsewhere.
We know what’s going to happen next. There will be an outburst of shouting. But, we’ve already spent £1, £1 billion, £10 billion. If we don’t go on then all that will be wasted!
Sunk costs are sunk costs. This is money, those are resources, that have already been applied to this scheme, whatever it is. Whether we proceed with the scheme or not we will never get those resources, that money back. So, that we’ve already spent the cash is an irrelevance to the decision about whether we should proceed.
Our decision should be based upon whether the benefits from proceeding - from our current starting point - are greater than the costs of doing so. The past is indeed past and our decisions are about our path into the future that is.
We really are going to have multitudes shouting that we must not waste what is already spent. The problem with that shout being that what is already spent is already wasted. No decision can bring it back.
Now, whether HS2 should be cancelled or not is another matter. We have, often enough, pointed out that it should never have been started and recent changes just make that more true. But the welcome cancellation isn’t the point here. Rather, that the decision must be taken using the right metrics.
Sunk costs are sunk costs. What has already been spent is irrelevant. The decision must rest upon what is to be gained from spending how much given our current starting point?
This is politics so it won’t be but then bully for politics as a method of spending money then.
This seems entirely sensible, even desirable, to us
A complaint that the Treasury is not greeting each and every green - or climate change related - demand for spending with an open chequebook:
The Treasury is blocking green policies essential to put the UK on track to net zero emissions, imperilling the UK’s own targets and the success of vital UN climate talks, experts have told the Guardian.
A string of policies, from home insulation to new infrastructure spending, have been scrapped, watered down or delayed. Rows about short term costs have dominated over longer term warnings that putting off green spending now will lead to much higher costs in future.
This seems entirely sensible, even desirable, to us. Someone, somewhere, does need to be asking whether any particular piece of expenditure is worth it. Yes, even about climate change. Even if we accept that something must be done it’s still necessary to examine each thing for value:
Boris Johnson is planning to launch a £400 million boiler scrappage scheme offering people £7,000 grants to encourage homeowners to buy low carbon alternatives.
Well, is that worth it?
Energy Catapult Analysis shows that in 2017, the average household generated 2,745 kg of CO2 emissions from heating,
OK, 3 tonnes at the Stern Review’s $80 per tonne is $240 per year. A 2.8% return (note the £7k is sterling) before we even think about the full cost, this is just for the subsidy? No, that might well not be worth it.
Our point though being that someone, somewhere, has to be asking this question. For it is not true that agreement on there being a problem which requires a solution means fiscal incontinence. Quite the opposite - resources are scarce in this universe therefore the larger the problem the more efficient we have to be with our use of said scarce resources.
Even with agreement that climate change must be dealt with it is still true that each bit of dealing with it needs to pass the cost benefit test. If it’s not going to be the Treasury which does this then all wallets are at risk, no?
If only Oxfam would think for a little bit
This is alarmingly ill-thought out:
Oxfam’s version is particularly ill-thought out: “a one-off 99pc levy on billionaires’ wealth gains during the pandemic”.
As is normal - as a result of the creation of a political statistic - these days the measurement of gains is done from March 18 2020. Which was the lowest point for the S&P 500 following a 29% fall as the arrival of the pandemic became obvious. That’s being more than usually aggressive in loading the number by careful choice.
But think a little larger. Taxing - as we do with capital gains taxes - when people crystallize a gain seems reasonable enough. At which point we also allow, as we must, people to count their losses as well. The demand here is to tax uncrystallized gains. At which point we’ve also got to untax uncrystallized losses.
Which produces an interesting example. Bill Hwang just lost $20 billion as Archegos imploded. What’s his tax refund under this new idea then?
That is, it’s entirely true that some billionaires made money over the past 15 months or so. Some other billionaires lost money over that same past 15 months. Just the basic idea of the rule of law insists that profits and losses on the same issue get treated equally.
It’s not actually obvious that taxing changes in wealth over the course of the pandemic would raise any money at all. Which is a pretty bad advertisement for a new tax really, isn’t it?