George Monbiot does rather misunderstand things

The latest bright idea from George Monbiot is that we must, in order to beat climate change, force people to leave fossil fuels in the ground. On the basis that it is necessary to attack supply as well as demand:

Imagine trying to bring slavery to an end not by stopping the transatlantic trade, but by seeking only to discourage people from buying slaves once they had arrived in the Americas.

It’s an interesting example of his faulty logic. Because of course the transatlantic trade was at first banned in 1803 and then gradually extended to non-British ships and so on. But slavery lasted in the US until 1865 and into the late 1880s in Brazil, long after that supply was both legally and effectively banned. The solutions were variously more and less bloody but they were actually that people were dissuaded from purchasing slaves rather than that people were dissuaded from supplying them anew from Africa.

So it is, we’re sorry to have to say, with fossil fuels and their associated emissions. We are not all victims of the evil capitalists (and, given that governments actually own the vast majority of fossil fuel reserves and resources, it’s definitely not the capitalists to blame) who are forcing us to use such fuels. Rather, we the people rather like what we can do with such fuels: travel, heat our homes, heat our food and so on. It is the demand that needs to be changed (assuming that you want to consider climate change to be a problem), not the supply.

After all, banning the production of psychedelic drugs has proved so successful hasn’t it? So too the supply of prostitution services where such is illegal. It really is worth recalling that while Say’s Law (that supply creates its own demand) might not be entirely true the opposite, that demand calls forth supply is.

The answer to climate change, as above assuming that you think it is a problem and one that needs a solution (we do, even if not as immediate and cataclysmic as Monbiot does), is as it always has been. Either cap and trade or a carbon tax, plus research into non-CO2 emitting forms of energy production, in order to curb demand. Just as Bjorn Lomborg, the Stern Review, William Nordhaus, Richard Tol and everyone else who has actually looked at the economics of the problem has concluded.

Two interesting little points about climate change

Two little snippets that caught our eye. The first:

Percentage of annual net electricity generation by renewables in 1948: 32

Percentage of annual net electricity generation by renewables in 2005: 11

The main difference of course is the fall in the relative import of hydroelectric power.

The second:

Two months after the floods, while delivering the final order on a long-running case against the 330 megawatt Srinagar hydropower project on the Alaknanda, the supreme court issued a moratorium on dam construction in the state. It wanted an expert committee to investigate if dams in the state caused environmental degradation and exacerbated flooding and review 24 hydel projects on the Alaknanda and Bhagirati rivers that the wildlife institute of India had vetoed for causing irreparable ecological damage. These dams, with a combined capacity of 2,900 megawatts, need nearly 10,000 hectares (24,710 acres) of land and will submerge 3,600 hectares of forests.

Renewable energy is good we are told these days. But we are also told that renewable energy is not good. There’s a certain desire that these people make up their dam minds.

Either climate change is the most severe threat to us all, in which case build the dams, or it isn’t, in which case we can worry about a few thousand acres of forest. But one of other of these concerns really does need to have primacy.

Anything else would simply be a conversation of the dammed.

Questions in The Telegraph to which the answer is no

Sometime we are asked question to which the answer is obvious:

Is the answer to Britain’s problem of how to revitalise the North Sea creating a new national oil company?

No.

The justification offered for this bizarre idea is as follows:

Given the harsh new realities of attracting the right kind of investment into the North Sea now could be the right time to revive the idea of a new British National Oil Company. This would help to fill the void that is left as companies like Royal Dutch Shell, Chevron, BP and Total gradually start to moderate their investment in the region.

Well run, technologically superb, profit seeking companies are leaving the North Sea. Thus we should substitute a state managed (for which read “not well run”), technologically naive because it is new, and not necessarily profit seeking company to try to exploit the same assets.

It’s not going to work, is it? Throwing the state and bureaucracy at something not deemed profitable does not suddenly make the state’s activities profitable. And we really do want our tax money, if it is to be invested in industry at all, to be invested in things that make a profit. To do otherwise is to make us all poorer.

The correct action in the North Sea is to, as we have been all along, capture the resource rents through taxation and ten leave well alone. If the best people in the world think it’s worth exploring or extracting oil under such circumstances then great. If they think it’s not worth it then so be it. Having investment decisions made by the Treasury is not going to improve matters here.

If it’s difficult to attract the “right sort of investment” then perhaps the right sort of investment is none?

The amazingly stupid way the government subsidises renewables

We’ve been complaining about this for a number of years now. In fact, we’ve been complaining about it ever since Ed Miliband lit upon this policy. The manner in which the government subsidises renewable energy projects is, quite frankly, insane:

Two offshore and 15 onshore wind farms have won subsidy contracts in the Government’s first competitive green energy auction, significantly undercutting the prices that have been handed to other projects.

The results of the auction suggest consumers may be paying hundreds of millions of pounds a year too much on their energy bills because ministers previously allocated subsidies without competition, providing much higher returns to investors, critics said.

More generous subsidy schemes should now be reined in and excess subsidies clawed back, they added.

In total on Thursday ministers gave the go-ahead to 27 green energy projects, with estimated lifetime subsidy costs totalling £4bn.

Energy companies were forced to bid against each other in “reverse auctions” with the cheapest proposed projects in each category being awarded subsidies.

There’s part of the insanity. For a decade and more they have not been insisting upon competitive bids. Instead, they’ve drawn up standards for certain technologies and then agreed a level of subsidy. That’s madness.

But sadly, it gets worse. They are offering different levels of subsidy for different technologies. As we’ve long said that’s where it tips over into insanity.

Start from where the government actually is: climate change is happening, we’re causing it and we’ve got to do something about it. That something obviously being reducing emissions by having renewable power supplies. So, what’s the best way of doing this? A series of committees deciding who gets to be the lucky recipient of a cheque? Different amounts of subsidy for different ways of achieving the same aim, reducing emissions by x tonnes?

No, of course not. The correct way to do it is to set just the one price (perhaps a subsidy, perhaps a carbon tax) and then see which technology can best achieve that goal, that reduction in emissions. If, for example, solar can meet the target better than wind then wind should have no subsidy and solar all of it. If onshore wind is better than offshore then no subsidy to offshore, all to onshore.

For we don’t in fact want to have just competition among providers of one technology. We want to have competition among all providers of all potential technologies so as to find out which one solves the problem best.

Whatever one thinks about climate change itself the way that the government has been splashing around our money is simply mad. Yes, under both Labour and the Coalition.

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.