The terrible error of Naomi Klein

Naomi Klein tells us that the polluter must pay. Something that is both logical and true. Then she tells us that the fossil fuel companies must be made to pay for the damage that they do. Also logical and true:

Up until the early 1980s, that was still a guiding principle of environmental law-making in North America. And the principle hasn’t totally disappeared – it’s the reason why Exxon and BP were forced to pick up large portions of the bills after the Valdez and Deepwater Horizon disasters.

We might quibble about whether the damage was quite what was described or paid for but the basic principle is entirely fair. However, here comes the error:

The astronomical profits these companies and their cohorts continue to earn from digging up and burning fossil fuels cannot continue to haemorrhage into private coffers. They must, instead, be harnessed to help roll out the clean technologies and infrastructure that will allow us to move beyond these dangerous energy sources, as well as to help us adapt to the heavy weather we have already locked in. A minimal carbon tax whose price tag can be passed on to consumers is no substitute for a real polluter-pays framework – not after decades of inaction has made the problem immeasurably worse (inaction secured, in part, by a climate denial movement funded by some of these same corporations).

Assume, for a moment, that CO2 emissions are indeed causing damage. So, who is responsible for those emissions? Who is the polluter here who must pay?

When I drive to the shops it is me making the decision to do so, me making the decision to emit CO2 in gaining my supply of comestibles. I am therefore the polluter. That’s why, if there is to be a tax on polluters it should be upon me, the polluter. Which is the entire point of a carbon tax that can be passed on to the consumers. It is we consumers who are the polluters which is why we should have that tax which falls upon the polluters.

This is the most appalling and most basic error by Klein. We do not consume fossil fuels because Teh Eeevil Corporations force them upon us. We consume them because they provide us with things that we desire, transport, heat, light and so on. The fault, as it were, is not in our suppliers but in ourselves.

Of course, as many do around here, it’s entirely possible to reject the entire thesis. But working within the logical structure of the IPCC we still end up with the result that a tax which falls upon consumers is the correct action: as every single economic report about the problem, from Stern through Nordhaus and the IPCC itself, has pointed out. Because it’s the consumers who are the polluters and yes, the polluters should pay.

Amazingly, fossil fuel reserves are different from fossil fuel resources

Bloomberg has shocking news for us. When fossil fuel companies report their reserves they give us different numbers from when they report their resources. They why seems to have escaped the news organisation:

Lee Tillman, chief executive officer of Marathon Oil Corp., told investors last month that the company was potentially sitting on the equivalent of 4.3 billion barrels in its U.S. shale acreage.

That number was 5.5 times higher than the proved reserves Marathon reported to federal regulators.

Such discrepancies are rife in the U.S. shale industry. Drillers use bigger forecasts to sell the hydraulic fracturing boom to investors and to persuade lawmakers to lift the 39-year-old ban on crude exports. Sixty-two of 73 U.S. shale drillers reported one estimate in mandatory filings with the Securities and Exchange Commission while citing higher potential figures to the public, according to data compiled by Bloomberg. Pioneer Natural Resources (PXD) Co.’s estimate was 13 times higher. Goodrich Petroleum Corp.’s was 19 times. For Rice Energy Inc., it was almost 27-fold.

That why being that reserves and resources are different things. This being the way that language tends to work: when we want to describe something that is different we use a different word to do so. Thus helps us distinguish between those different things we’re talking about.

In general for minerals and fossil fuels a reserve is something that we’ve proven is there, we’ve proven that we can extract it, in the volume we say we can, using current technology and also we can make a profit doing so at current prices. Resource is a looser concept: we’ve good evidence that there’s what we say is there there, that we can extract it, using current technology, at current prices, and make that profit. But there’s only good to reasonable evidence, we’ve not spent the money to prove this as yet.

There’s also a gradation: proven reserves, probable reserves, inferred resources and so on but that’s the general structure.

So why do companies talk about the different numbers? Because different people are interested in different things. The SEC (and other regulators, the LSE is pretty similar) wants investors to have access to the best hard numbers there are. Great, so, report reserves according to the rules they insist upon.

But investors are also interested in what might happen, what could happen and what’s likely to happen. After all, if we’ve two companies, one with 1 billion barrels of reserves and no resources and one with one billion of reserves and 2 billion of resources then that second is logically worth more than that first.

So, that’s why the use of the different numbers. Because they’re referring to different concepts, each useful in a different manner. And that, of course, is why we use different words to describe them, so that we can distinguish between those different concepts.

Seriously, it’s not that difficult to understand, this is only geology, it’s not rocket science or anything.

Surprise! If you set a target then people will game that target

This shouldn’t come as the greatest surprise to anyone ever but sadly it does to those who would plan our lives. If you set people a target for something then they will game that target. This is true whether it’s of bankers vying for bonuses and pushing losses outside the bonus period, people making tractors where if you measure them by the tonnage they’ll make heavy tractors and, in today’s example, if you set car manufacturers mpg targets for their vehicles then they’ll game the measurement of mpg:

Motorists are usually advised that smaller cars can travel more miles per gallon (mpg) than those with larger engines, making them cheaper and more environmentally friendly to run.

But manufacturers’ estimates of fuel economy, based on official laboratory tests, may not reflect the reality when the vehicles are driven on the road.

Tests on 500 vehicles, half petrol, half diesel, each driven for three hours on roads in Britain, found that the cars travelled on average 18 per cent fewer miles per gallon than stated in manufacturers’ specifications.

Emissions Analytics, a data company which measured the cars’ fuel consumption and emissions, explained that this was due to cars accelerating more and travelling at higher speeds on the road than in official testing regimes.

The test drivers are of course all practicing perfect economical driving while, and this problem is worse for very small engines, we real drivers give it a bit of welly to compensate for those very small engines. And of course this is a general fault with any and every target of this type. Showing, once again, that if you want to ration something (here the desire is to ration fuel consumption) the best way to do your rationing is by price. For price is the one thing that doesn’t lie in these circumstances.

It’s such a simple concept that it really is amazing that those who would plan our lives still don’t get it.

Well of course the 2 degrees climate change target should be ditched

The reason that 2 degree climate change target should be ditched being that it was always an entirely economically illiterate target to set in the first place. Sadly, that’s not the point being made in Nature on it. As The Guardian reports:

But two academics in the prestigious journal Nature now argue that the 2C target has outlived its usefulness. They say it should be abandoned and replaced with a series of measures – “vital signs” of the planet’s health.

Under the headline, “Ditch the 2C warming goal”, they argue the 2C limit is “politically and scientifically … wrong-headed”, it is “effectively unachievable” and it has let politicians off the hook, allowing them to “pretend that they are organising for action when, in fact, most have done little.”

The reason it should be ditched is that it should never have been a target in the first place. For we should not be trying to target a particular change in temperature: we should be trying to target a certain cost of action.

Think back to what every economic report on this issue has said. That there will be costs associated with allowing climate change to happen. Also that there will be costs with preventing climate change from happening. And in such circumstances the correct answer is that we should spend up to the price of those costs on trying to prevent it happening. But we should not spend more than those costs: nor, obviously, should we spend less.

Thus whatever climate change target is set (for those who want to set one at all) it always has to be set in terms of the costs of the actions we are going to take. And this does have very important effects. For example, if we attack the problem in the most efficient manner possible (say, a carbon tax) then we can avert more climate change by doing so than if we try to avert it in less efficient manners (say, regulation or legislation). And that’s why we really do want to always keep the costs in mind. Because if we set a temperature target, as we have, then people will say that we should do anything at all to meet that temperature target. But that’s the very thing that we’ve already proven is not true: we should not do anything at all to avert warming. We should only do however much is economically rational: which brings us back to the costs of action as against the benefits of it.

So ditch the two degrees by all means. Then concentrate on what actually matters: the costs of whatever actions are taken.

Greenpeace really is getting desperate here

Desperate in the sense that they’re now claiming that if the people whose lives get disrupted by fracking get a share of the money from fracking then this would be bribery. Rather than what we might normally call it, compensation:

Jim Ratcliffe, the 61-year-old industrialist who founded the chemical giant Ineos, is promising to hand more than 6% of future shale gas revenues to those sitting on the reserves or affected by their extraction, in an effort to replicate efforts in the US where shale gas has created scores of new millionaires. The situation in America contrasts starkly with that of the UK, where efforts to develop the controversial new energy source have been delayed by landowners, environmental groups and the planning system.

Simon Clydesdale, UK energy campaigner at Greenpeace, said: “This is just more of the same bribes and bulldozers approach that has already proved a failure. With one hand the fracking industry goads the government into steamrolling people’s right to oppose fracking under their homes, with the other it offers cash incentives.

“The industry forgets people have legitimate concerns about fracking that won’t be easily assuaged by cash sweeteners.”

It’s all very Dave Spart isn’t it?

Leaving the Trotskyist Hippies aside the interesting part of this is that we seem to have reversed, to some extent, the nationalisation of fossil fuel reserves that happened many decades ago. It’s a standard of landowning law that the landowner owns the minerals underneath it. Except for gold and solver and then later we added fossil fuels to the list nationalised. Given that there would therefore be no benefit to landowners of fracking under their land there’s been a certain resistance to allowing it.

However, the government has lowered the tax rate on gas and oil brought up through fracking: allowing that Coasean bargain to be struck again between the drillers and the landowners. There’s now room in the sums for compensation to be offered: and thus compensation is being offered.