Sadly, Ed Davey still doesn’t understand carbon cap and trade systems

This is something of a pity of course, for not only is he the politician in charge of this area he’s also been in charge of it for some years now. You’d rather hope that someone would have clued him into how cap and trade systems work by now but apparently not. Perhaps people have tried and he’s not able to grasp it?

The problem is that Davey seems to think that a low price for a pollution permit is a bad thing: that because pollution is bad therefore a high price for the right to pollute would be better. This is, of course, the reverse of what is actually true:

The EU cap-and-trade system is the world’s largest. By putting a price on every metric ton of carbon emitted and allowing companies to trade allowances, the system enables carbon-reduction targets to be met at the least cost.

But the market currently has a surplus of about 2 billion emission allowances, equivalent to a year’s supply. As a result, carbon prices are at an unhealthy low. So what has gone wrong, and what can we do about it?

Some believe that a weak carbon price benefits business and the economy, but it does not. It undermines the low-carbon investment we need now to meet long-term targets. Ambitious emissions-reduction targets are here to stay, so delaying low-carbon investments just pushes the cost of achieving them later down the line and risks increasing it. It also means losing out on the potential growth and jobs that come with such investments.


There is no surplus of permits: there’s exactly the same number of permits that there were when the politicians set up the system. That many of them are going unused does not mean that pollution is not being reduced: it means that reducing pollution was easier than the politicians thought it was going to be when they set the number of permits. And a low permit price does not mean that people are not working to reduce emissions: it means that it’s far cheaper to reduce emissions than we all thought it was going to be.

Davey’s simply got the wrong end of the stick here about what prices are telling us. If we were to have a carbon tax then yes, it would be the price which would be what limits emissions. The higher the tax the more emissions would be limited. But prices work the other way around in a cap and trade system. The limit on emissions is the number of permits. Price tells us not how many emissions will be limited but how easy or difficult it is to meet the permit cap. We would all very much prefer emissions permits to cost €0.01 per thousand tonnes CO2 than any thing higher. For it would indicate that reducing emissions is a great deal cheaper than anyone thought it would be.

Aren’t we lucky that people attempting to plan our lives can’t grasp even the most basic points about how to plan said lives?

What excellent news, risottos are becoming cheaper

There are always those who will complain about delicious food becoming cheaper of course:

Half a century on, the Italian rice industry is suffering badly from foreign competition.

While Italian farmers sell a tonne of home-grown risotto rice for 322 euros, producers in south-east Asia grow it for less than 200 euros a tonne.

Rice producers in the Po and Ticino valleys will organise a week of protests and strikes against the cheap imports, starting on Monday.

“In the first six months of this year, rice coming from Cambodia has been subject to at least one fine every week because of the presence of unauthorised pesticides or the absence of the proper food safety certificates,” said Roberto Moncalvo, the president of Coldiretti, a national farmers’ organisation.

The absence of the proper certificates is, of course, in this modern world, a heinous sin. And that presence of pesticides. Hmm, perhaps that’s something to worry about?

Gianmaria Melotti, a rice producer from near Verona, said rice arriving from countries like Cambodia and Burma was devoid of the weevils and grubs that afflicted Italy’s output.

“What are they putting in their rice fields, that they are able to eliminate all these insects? Saving Italian rice means also safeguarding people’s health,” he said.

That’s an interesting one to think about really, isn’t it? Safeguarding peoples’ health these days means ensuring that their rice is not vegetarian.

The answer here is obvious: as Bastiat told us we should always be looking at any and every economic question from he point of view of consumption, the consumer. And here the answer is blindingly obvious. Simply label the two, the imports with may contain pesticides and the Italian with does contain weevils. Let the customer make the choice.

Excellent, so that’s climate change entirely sorted then

I take this to be exceedingly good news. Our struggles to contain climate change are entirely over and we can all go back to sleep:

Solar has won. Even if coal were free to burn, power stations couldn’t compete

As early as 2018, solar could be economically viable to power big cities. By 2040 over half of all electricity may be generated in the same place it’s used. Centralised, coal-fired power is over.

It’s true that we don’t normally believe The Guardian on matters environmental. But let us just take them seriously here.

As we all know the predictions of future climate change are based upon economic predictions of the future. How many people will there be, how rich will they be and what technologies will they be using to generate the power to create that wealth for that many people. And of the models that are used the one that tells us that we’ve a serious problem with climate change insists that we’ll still be using coal for 50% of our power needs in 2080 or so.

We don’t actually have to believe that in order to be able to observe that that is the central point of the alarmist case.

Excellent, so, if no one is going to be using coal in the future then we’ve not got a problem with climate change, do we?

Do note that this is not to take as being true, nor even seriously, any of the predictions that are being made by anyone. It is, rather, just to point out an important piece of logic. If solar is now, or will be imminently, cheaper than coal so that we all start to use it purely on economic grounds then the problems with climate change are over. For all of the models and predictions insist that we only get major problems if we don’t stop using coal.

It cannot be true that solar is wholly (and unsubsidised) competitive, or cheaper, than coal and we still have a problem. Alternatively, it cannot be true that we still have a problem in hte future if we believe what we are being told about the imminent cost competitiveness of solar.

It’s an either or thing.

Looking at the true numbers, rather than those provided by the boosters of solar power, it’s probably a little early, 2018, to be saying that solar will be truly competitive. But by 2025 (as Bjorn Lomborg has long been saying) it almost certainly will be. Meaning that we don’t actually have a problem and that we can indeed all go back to sleep.

The only way that this cannot be true is if solar doesn’t become so competitive. In which case we shouldn’t be working so hard to install it either, should we?


On the idea of the three day weekend

The idea of reducing the working week raises its head again. This time it’s the idea that we should have a three day weekend:

Professor John Ashton, president of the UK Faculty of Public Health, caused a stir this week by advocating a four-day working week. This would improve our mental and physical health, reduce stress and we would all “enjoy ourselves more”.

One reason to bring in a four-day week is that we work the longest hours in Europe.

Sadly this is not true, we do not work the longest hours in Europe. We might work quite long hours at paid, market, work this is true. But in return we do rather less unpaid, household, labour. The net effect of this is that we have more leisure hours than much of Europe does.

And there’s a good reason why this is so too: the division and specialisation of labour.By doing market work we are able to do that dividing and specialisation which, as Adam Smith pointed out, allows there to be greater productivity. Household labour can generally only be divided between the two adults in a household: obviously less efficient than being able to divide and specialise with the 7 billion in the global economy.

By organising ourselves so that we do more market work and then purchase in more of that household labour (in the form of drip dry shirts, washing machines, vacuum cleaners, microwaves, prepared food and so on) we are thus able to have a higher standard of living while also enjoying more leisure.

We have also been doing more of this as the decades pass. Leisure hours continue to rise as household labour hours drop away.

But let’s imagine that we really do want to increase the days spent in leisure as a matter of public policy rather than as a matter of personal choice. The obvious solution is to nationalise the power industry again, put the unions in charge of it and then get Heath back into No 10. We all had four day weekends back then and that worked out really well, didn’t it?

How not to read a report, brought to you by Geoffrey Lean

A lovely example of how to propagandise rather than actually report from our Geoffrey Lean over at the Telegraph. Things are terrible and only going to get worse, of course:

Ours is the first generation than can largely take plentiful, cheap food for granted. Now, report after report is suggesting it may also be the last.

Two days ago, a Ministry of Defence study of “global strategic trends” raised the spectre of global demand outstripping supply over the next 30 years. And two days earlier, a Commons committee warned that Britain’s own food security is imperilled.

Prices have been rising twice as fast as general inflation and appear to be accelerating. The MoD report suggests that they could eventually settle at twice their present level.

That’s not, quite, what the report actually says. What it does say is this:

By 2045, food production is predicted to have increased by nearly 70%, to feed a larger and more demanding population13 – and it is possible that demand could outstrip supply. Some types of consumption are likely to grow particularly strongly. As affluence grows in the developing world, the demand for more protein-rich diets is also likely to increase. China, for example, has seen meat consumption increase by 63% between 1985 and 2009, and this trend seems likely to continue.14 Pollution and soil erosion are likely to adversely affect agricultural land – some estimates assess that, globally, as much as 25% of agricultural land is already degraded.15 Climate change will almost certainly have adverse effects on some agriculture, but may open up new areas for cultivation, with positive impacts on particular crops in certain regions. On balance, even though the quality of some areas is likely to have been degraded by 2045, the global arable land area is projected to remain relatively constant (estimates range from a 10% decrease to a 25% increase),16 with some potential increases in crop productivity in the high latitudes, and decreases across the tropical regions.17 Furthermore, warming, acidification and overfishing also threaten to reduce the amount of food that can be harvested from the oceans. Estimates of future food prices are highly varied and may be more volatile, although most projections indicate a general increase.18 Analysis by the International Food Policy Research Institute suggests that average prices of many staple grains could rise by 30% even in the most optimistic scenario.19 Disruption, and possibly congestion, of global trade routes may lead to sharp increases in food prices – particularly in those countries dependent on food imports. When the effects of climate change are taken into account, the price increase above present levels could be as much as 100%.

And when we go and look at that source report we find something very interesting.

If climate change is bad and population growth is high then the price of maize “might” rise by 100% in real terms (ie, after the effects of general inflation). Note, not “food” but “maize”. The price, even in this worst scenario, of wheat might move by 30%.

However, note also one of the drivers of that food price rise: that people are getting richer and thus are able to have (ie, there is effective demand for) a richer and more varied diet. And whether food is “cheap” or not rather depends upon both the price of food and also the incomes of those trying to purchase said food. And even in that worst case scenario the incomes of the poor of the world (obviously, the people we’re actually concerned about here, the change in the price of maize is going to make near no difference at all to rich world people like ourselves. Tuppence on a pack of cornflakes is too trivial to worry about for us.) rise faster than the price even of maize over the 2000 to 2050 time period being studied.

That is, yes, food rises in price but it also becomes cheaper, more affordable.

It makes sense that the MoD found this, that the original report found this, for it is also the same result Oxfam has found. Precisely because it is not a “shortage” of food, nor climate change, that is the major driver of future food price increases. Rather, it’s that the poor will be getting rich and be gaining access to that petit bourgeois pleasure of three squares a day, some of them even with a little meat in them.

This is a problem, if you want to describe it as a problem, of the great success of the neoliberal, globalised, world economic order. Finally, for the first time since the invention of agriculture, the poor are able to eat well. This pushes up food prices, sure, but only and exactly because food is becoming more affordable for all.

We find it very difficult indeed to describe this as something we ought to worry about. More an occasion to get out the bunting and the flags really, time perhaps for Breughel-like scenes of the yeomanry feasting and drinking as we celebrate the good fortune of billions of our fellows.