No, we really shouldn’t build the Swansea tidal lagoon

It’s possible that we really should think about tidal power. There’s a lot of it about and around our islands, so why not ponder whether we could capture some of it? The real point to ponder of course being whether it makes us all collectively richer. And there we find that there’s a slight problem:

Plans to build the world’s first ‘tidal lagoon’ in Swansea Bay have suffered a setback after influential consumer charity Citizens Advice said the project was “appalling value for money” and should not receive subsidies.

Ministers are preparing to begin formal bilateral negotiations with developers over the proposed green energy scheme – a £1bn, six-mile sea wall with turbines to harness the power of the tide, which has already been included in the National Infrastructure Plan.

Tidal Lagoon Swansea Bay is thought to be seeking a guaranteed subsidised price of about £168 for every megawatt-hour (MWh) of electricity it generates over a 35-year period – almost four times the current market price of power.

And there is the problem. All of us having to pay, through our electricity bills, four times the current price for electricity does not make us collectively richer. It makes us, significantly, collectively poorer. Further, sorry about this, no you cannot add in all sorts of greenery arguments and no CO2 emissions and future high gas prices and all that malarkey. This has been comprehensively studied in great detail:

What they’ve done in the report is look at all of the different variations of the proposal. A great big dam across the whole estuary, the various partial ones, lagoons with turbines and so on. And they’ve looked at all of the various different costs and benefits of them. Environmental costs, emissions, the cost of gas fired plants which would be the alternative, everything up to and including the kitchen sinks in which the workmen will wash their hands. And what we find is that the more we spend on it, the bigger we make the project, the more it makes us poorer.

For what we’re looking for is a positive net present value. That is, all the costs, properly discounted into the future, are a lower number than all of the benefits properly discounted into the future. When we get more benefits than there are costs, we become richer. For the Cardiff Weston Barrage, similar to what Hain is currently proposing, we have a net present value of -£27.1 billion. Yes, that is minus £27.1 billion. The costs of this plan are £27.1 billion, which even in government circles is something that can be described as real money, higher than the benefits that we all get from this scheme. Building it will make us all, collectively, £27.1 billion poorer.

That these plans (and all variations studied have exactly the same result) have a negative net present value is simply the flip side of their needing a high fixed price for the electricity they produce. One is simply the capitalisation of the other, the point that they are just not economically sane projects.

If this project does get off the ground, if some fool does issue a contract for differences at such prices, then we can take that as a marker that the inmates really have taken over the asylum. This is simply a terrible deal that should be immediately rejected.

This is really quite gobsmacking from Friends of the Earth

Friends of the Earth is running a series of little debates over what we should all be doing to make the world a better place. Obviously this is not a bad idea: how to make the world a better place is an entirely suitable subject for discussion even if we’d not expect all that many useful suggestions from that quarter. Imagine our surprise then, the quite gobsmacking surprise, that they’re actually recommending voluntary cooperation and free markets absent government regulation:

Isn’t Wikipedia a paradise for practical jokers?

If we run our global commons like that, we’ll be saving forests that don’t exist and hailing the creation of a super-sucking CO2 machine called Bee Jay.

Not true. It isn’t perfect – don’t use it to diagnose any health problems – but it’s perhaps more accurate than you think. A study favourably compared the reliability of Wikipedia to that of the Encyclopædia Britannica.

In any case, Wikipedia is a permeable mega-site. Anyone can edit it. So it’s pretty darn impressive that millions of people confidently use it every month.

And don’t forget, compared to the waves of anonymous Wikipedians, the group of people negotiating our global commons are visible and relatively minute. Indeed, their UN talks should be a doddle to manage in comparison.

Well, yes, your humble author was one of those who had a published conversation with the former Editor in Chief of Britannica at the time that research came out. And I was able to point out exactly why Wikipedia did work. In a different manner to a centrally edited encyclopedia, yes, but the end result was as good or better. Less checking and verification at the outset but that voluntary interaction led to a result, over time, as good or better.

Wi-Fi, air traffic control radars, mobile phone networks… They all have their own frequency highways. But these highways need to be managed to stop multiple-wave pile-ups.

Did I mention that they run across national borders? Tricky. Yet a network of technical bods across Europe have been managing these frequencies without political interference – even throughout the Cold War.

Like Wikipedia, they huddled around shared interests – not wanting to live in a world resembling a detuned radio. Their interactions fostered a sense of community and a common cause. As did flexibility eg countries could use frequencies formally allocated to other countries, as long as they didn’t interfere with existing radio services. Cooperation gave birth to standards and regulatory powers.

Quite, the use of those common resources were managed, as the mentioned Elinor Ostrom pointed out, by people voluntarily cooperating for their own enlightened self interest.

We know that markets work, that world around us shows that markets work but as with Dr. Johnson, the surprise is not to hear such things said so well but to see them from this source.

So, we can expect FoE to be signing up to the neoliberal globalisation plan then can we? You know, the only one of the various plans on offer that is based upon this acknowledgment of the inclination to voluntary cooperation among human beings, the only one that allows that inclination to flourish?

Markets vs. Mandate: the American energy dilemma

New York State’s fracking ban has evoked strong polarising sentiment. Local anti-fracking supporters welcomed the ban as a necessary intervention against corporations pursuing profits at the expense of local safety. The fracking industry on the other hand, saw it as a political move; an example of political interference in the markets at the expense of jobs, energy security and the principles of enterprise and free markets that America stands for.

This dynamic is symptomatic of a bigger tension between markets and mandate within the US energy industry; one that that lies at the heart of hotly contested issues like the Keystone pipeline and the proposed TTIP EU-US free trade agreement.

And against the backdrop of a President carving out climate action as a top priority, historic US commitments to reducing emissions, a Republican House majority that views Obama’s Environmental Protection Agency as big-government interventionism, and America’s emergence as a global energy producer, how this tension is resolved affects not just the future of American energy, but has wider global ramifications.

Six years ago I wrote in the Financial Times about the need for less interference in European energy markets to enhance competitiveness; a perspective I still find myself inclined towards today, and for good reason.

Take energy security for example. Shifting responsibility for energy security from suppliers to government would reduce, not increase, security. A liberalised market provides strong incentives for producers to diversify supply and respond to consumer demand. OPEC’s current oil price war might even eventually strengthen a fracking industry forced to become more technically innovative and cost efficient to survive, despite the shorter-term challenges.

Then there is the danger of vested interests influencing a wide government mandate and effectively using government as a proxy for their own interests as illustrated by recent alleged links between energy company Devon Energy and Oklahoma Attorney General Scott Pruitt.

And of course there is the notion that climate change justifies state intervention to make cleaner renewables more competitive against oil and gas. But while this is a logical argument, its worth noting that government intervention is at least partly to blame for renewables having less market share in the first place. Federal research for US oil and gas as well as tax credits and subsidies totalling $10 billion between 1980 and 2002 dwarfed state support for renewables, ensuring there was never a level playing field to begin with. And modern-day fracking could not have developed without federal research and demonstration efforts in the 1960s and ’70s.

But as valid as all this is, it fails to tell the whole story.

What makes the energy industry unfortunately unique is the speed with which it could environmentally impact our planet; a factor so exceptional it justifies exceptional action in addressing it, including, if need be, some level of market intervention.

The real problem with the US energy debate is its deep ideological polarisation. Energy discourse is too often pulled towards dogmatic extremes; between those who believe strong government intervention is necessary to further centralise and regulate energy markets, sometimes to the point of protectionism, or conversely those who, as economist Paul Krugman put it when describing the GOP, “believe climate change is a hoax concocted by liberal scientists to justify Big Government, who refuse to acknowledge that government intervention to correct market failures can ever be justified”.

A healthy balance is probably somewhere in-between with sound market based interventions that do not plan energy markets or pick winners through polices like the ethanol blending mandate, but instead couple responsibility for environmental damage and carbon emissions with individual companies and consumers. A carbon tax could help achieve this by using market incentives to strengthen cleaner energies and encourage efficient consumption. After all, why should the burden of carbon emissions, which have a cost, not be factored into a transaction?

And just as timely market adjustments within the financial sector could have averted the worst of the 2008 financial crash and subsequent government bailouts, a carbon tax today would prevent a more drastic future government response to disasters that rising CO2 emissions would undoubtedly cause if left unchecked.

Yet with the looming 2016 Presidential elections, the potential for politicised narratives and populist slogans to take priority over any meaningful measured balance in the US energy discourse is all too real and present.

Somewhere between climate deniers, including prominent GOP members, refusing to acknowledge the need for any climate action, and those attempting to address the problem in a vacuum without considering how sweeping interventionist solutions undermine economic competitiveness (an approach that creates an inevitable political, business and electoral backlash), lie more sustainable, effective solutions. It is vital moderates across the political aisle work together to reach them.

Vicente Lopez Ibor Mayor is currently Chairman of one of Europe’s largest solar energy companies – Lightsource Ltd. He is former General Secretary of Spain’s National Energy Commission between 1995-1999 and was previously a member of the Organizing Committee of the World Solar Summit and Special Advisor of the Energy Program of UNESCO (1989-1994).

Why emissions tests are so exhausting

One problem I have with carbon tax is that due to lots of asymmetry of information the setting of a carbon tax rate is almost entirely arbitrary. Still, despite this, carbon tax does some good for the following reason. People change their bad consumption behaviour to accord with differing incentives like price changes. So for example, a tax on carbon dioxide emissions of £50 or £60 a tonne would affect our consumption habits in relation to products and services associated with carbon dioxide emissions, whether it be driving, flying or whatever. If this tax enabled the government to reduce taxes in other areas, then the carbon tax would help us change our habits and at the same time bring about selection pressure in the market for us to be more mindful of the environment.This is part of a general law of economics – when prices go up or down, people change their buying habits. If the price of red grapes goes up by 40% and green grapes stay the same, people will buy more green grapes and fewer red grapes. Similarly, if the price of emitting carbon goes up, people will lower their CO2 emissions, which will place selection pressure on consumers and on eco-unfriendly businesses. This means that as carbon/pollution taxes endure, people will look for more ways to be greener, making us as humans more mindful of our environment.

Alas, the government isn’t happy with mere carbon taxes – it places superfluous and hence unnecessary additional burdens on us. It does this because politicians usually do not know the correct rate in a cost-benefit analysis between the externalities we emit and the freedoms we enjoy. Let me give you a personal example of this – the MOT emissions test. I drive a high-emission Subaru, and in order to enjoy this I am penalised with a higher rate of car tax. I also have a higher fuel bill than most. But both of these measures are fine by me in a free market where free-choice rules: I enjoy my Subaru and its fast-driving capacity so I soak up the additional cost. In a free society you may prefer something similar, or something very different, like, say, a more efficient Nissan Micra. You’ll pay less than me in tax and fuel (per mile) but I’ll beat you off the lights every time and probably get to my destination quicker than you. As long as we’re both happy with that arrangement (and our choices indicate we are) then all is fine.

The trouble is, emissions testing at the MOT centre means that it doesn’t stop there. Drivers cannot get an MOT certificate if their vehicle’s exhaust emissions are too high. This has come at a considerable extra cost to me (and other drivers like me). I had to pay £650 to replace a perfectly good sports-cat because it couldn’t lower the emission levels to below the legal limit, and I will have to do this every few years for the same reason. Add to that the fuel costs and wear and tear each year getting the sports-cat hot enough to pass the test, and the fact that many other parts (oil, filter, lambda sensor, valves, etc) need changing more regularly to keep my emissions low enough, and this amounts to an unnecessary set of costs that I have to incur on top of the carbon tax I already pay to run a Subaru.

These costs are unnecessary for two reasons: firstly because they are going to have no significant bearing on future environmental changes at all. And secondly, a carbon tax (on my car tax and my fuel buying) already does the trick without imposing all the additional MOT emissions costs on me. If I find I want to lower my tax and insurance and reduce my fuel bill I can choose to sell the Subaru to a buyer who wants a fast car. Through that transaction we both win. If I can’t sell it due to no one wanting such expensive car bills then it’s a signal that my next car should be a more environmentally friendly car. In each case, autonomous decision-making rules. With the MOT emissions problem I have to fork out hundreds of pounds just to keep my car on the road. The government is already getting its pound of flesh through my increased road tax and fuel bills, it’s unnecessary and hugely damaging to my bank balance to add MOT emissions expenditure to the mix.

There’s also the unpredictability factor which gives us inopportune bills for which it is hard to save – and this affects not just high-emission drivers – all drivers have the same issue here. When your car tax and fuel bill is consistent with the kind of car you drive you can plan your year around it, knowing roughly what your expenditure is likely to be. If you end up with a part fault you can replace it knowing that the part needed replacing. But with these emission laws, bills can come in not through non-functionality of parts but through cars not being able to get through the MOT emissions test without having them replaced. As I and no doubt many drivers have found, this frequently brings about unexpected bills of hundreds of pounds that we need to pay, not to make the car roadworthy but to make it MOT emissions-worthy (a very different thing).

If we think it’s reasonable to pay a bit more to run gas guzzlers, then it’s true we need some mechanism to know whether people are running high-polluting vehicles or not. But we already have this mechanism in the form of higher fuel bills for gas guzzlers and higher car tax to account for those emissions, which, to me, renders the additional (and superfluous for reasons I indicated) MOT emissions test unnecessary. I’m not saying we don’t need an MOT test at all – we just don’t need the emissions part.

They’re spouting rubbish about rubbish again

We’re really got to get ourselves a new group of people running our public services you know. The current lot seem to have missed the point of the whole exercise. For, at root, the entire exercise of politics and state power is really a method of deciding who empties the bins.

There are certain things that simply need to be done. There’s also a group of things that can be done individually, one of those that can be done by simple voluntary cooperation and another group of things that can only be done by some fairly strong compulsion. And those that are properly the province of that state, this government idea, as those that must both be done and can only be done with that compulsion. And taking out the rubbish is one of those things that is both. Yes, a free market would indeed deal with most of it but the public health benefits of not having those remaining piles of stinking ordure mean that there’s always going to be some state compulsion necessary.

At which point we get:

A town has been left overflowing with rubbish bags after binmen have refused to pick them up – because the sacks are the wrong colour.

Mountains of household waste is lining streets in Weymouth, Dorset, after residents were given blue bin bags as part of a new waste collection scheme rolled out in the town.

But some claim they did not receive the new blue sacks, and have continued to use the standard black ones – only for them to be left by the side of the road by binmen under strict orders not to take away the ‘unauthorised bags’.

Piles of rubbish bags have been mounting up in streets around the town for the past two weeks, to the anger of residents.

What?

The council-run Dorset Waste Partnership said it is ‘applying its policy’ to limit residents to one household rubbish bag a week in the hope they will recycle more.

The loons have taken over the asylum. We need to fire these people and get a new set.

Please note this is not about party politics and it’s also not about the “shortage of landfill”. We don’t have such a shortage. The country produces about the same amount of waste each year as the number of holes we dig each year for other reasons. The only shortage is in the licences to be allowed to put the rubbish into the holes we already have available.

What this is about is that we’ve simply got the wrong group of people ruling us and that needs to change. On the basis that government really is about deciding who take out the rubbish and if they can’t even manage that then….well, why don’t we try finding some people who can manage that minimal task?