Adam Smith Institute

43. "The market cannot protect the environment."

The Stern Report described climate change as "the greatest case of market failure" the world has seen. In fact the market has not failed – there is no market at all. There is no market in war, either, which some think more devastating then climate change. Markets deal with transactions, not with human behaviour in general. Where there are no exchanges, there are no markets.

Markets can prompt and regulate human activity by signals they send about scarcity and prices. They allocate scarce resources in ways that encourage people to consume less of them and produce more of them. When some resources, such as air, water, and ocean fish stocks have no price on them, there are few restraints on their use. Sometimes production causes 'externalities,' such things as pollution and noise disturbance, and the depletion of resources.

The way to have markets protect the environment is to put markets into place. If some activities contribute to climate change, there should be a price to pay for doing them. The habit of environmental campaigners of picking out relatively trivial symbolic targets such as "food miles" or budget air travel obscures the fact that agriculture, industry, and power production are among the greatest emitters of "greenhouse gases."

Markets can be introduced by putting a price on previously unowned resources. Fish quotas can be set and then traded, giving the buyer ownership of the fish and an incentive to conserve them. Tradable emission permits can discourage emission by raising the price of doing it. They raise production costs to those who emit more, and reward efficient, cleaner producers.

Markets can be used to promote the development of clean technologies by giving them a price advantage, encouraging people to produce more cleanly by making it more attractive financially to do so. Markets can protect the environment if they're properly introduced.

Genetically modified (GM) plants are helping to adapt to climate change. This is mostly because of drastically minimizing water use compared to non-GM plants. Worldwide 1.4 billion acres are already cultivated with DNA-modified crop varieties in 22 countries. However the same agency that took the lead in climate change alarmism is now seriously considering a moratorium on all field-testing and commercialisation of GM tress. This comes on top of already extant heavy-handed over-regulation that stifles innovation in biotechnology. According to a new paper from the Hoover Institution the UN may actually be worsening the global environment with its policy:

Irrigation for agriculture accounts for approximately 70 per cent of the world’s fresh water consumption… so the introduction of plants that grow with less water would allow vast amounts to be freed up for other uses. Especially during drought conditions…even a small percentage reduction in the use of water for irrigation could result in huge benefits, both economic and humanitarian.

I was interviewed on Sky News yesterday morning, giving my take on the European Parliament's plan to prohibit the sale patio heaters. Unlike the other guest, Friends of the Earth's Tony Juniper, I thought this was a ridiculous idea.

First of all, the only reason so many people are using patio heaters is the smoking ban. Attempting to outlaw patio heaters is a classic example of one ill-conceived and illiberal piece of legislation having to follow another, with little thought for the unintended consequences. In this case, the pub industry thinks it could lose as much as £250 million pounds a year in lost trade if outdoor heaters were banned.

My second point was that no one actually believes banning patio heaters would make the slightest bit of difference to the global climate anyway. Yes, these heaters are inefficient, but their emissions are miniscule in the grand scheme of things. Tony Juniper said we should lead the world by example, but it didn't think our banning patio heaters would really make much difference to the Chinese. They're going to build a coal-fired power station every week for the next ten years anyway.

Patio heaters are just the latest symbolic thing for environmentalists to get worked up about, like food miles or budget airlines. It's not about being practical, or actually improving the environment, it is just another way to tell people that they should stop being so wicked and 'live more simply'.

I suggested that instead of banning outdoor heaters, the EU should focus on reforming its emissions trading scheme so that it actually works, encouraging the development of clean technologies. And since agriculture contributes 17 percent of global emissions, they might like to abolish the common agricultural policy too. The developing world would certainly thank them for it.

21. We are using up resources for the future; we should all learn to live more simply.

Although it might seem obvious that the supply of resources is limited, and that they grow more scarce as we use them up, this is not in fact true. It costs money to locate reserves of scarce resources, so we tend to search for more as the price rises. In other words, as they grow scarce, we can often establish more supplies.

Furthermore, as materials grow scarce, the price rises and it becomes more economic to mine marginal reserves. Not only that, it becomes cheaper in some cases to use or develop substitutes. As supplies appear to dwindle, so does the rate of use. Instead of the world suddenly waking up one morning to find the last ounce of aluminium gone, it turns gradually to glass filaments and to carbon fibre as substitutes. New methods of extraction and reclamation become economically viable. The question is whether our development of new sources and substitutes is faster than our use of resources.

There is one reliable indicator. No one knows what new sources will be developed, or how fast our use will be. We do know, however, that price is a guide to the ability of supply to meet demand. Over many years the real price of most commodities (excluding oil) has been going down. This means that they have been becoming progressively more available, and that our relative supply has been increasing rather than diminishing.

We do not have to live more simply. On the contrary, we have to keep on developing new technology to make better use of our resources and to extract from more difficult locations. In this way our relative supply of them will continue to increase. If we start to "live more simply" we may lose the ability to economize on them and replace them.

The EU Commission has decided to increase the use of biofuels as part of Wednesday's €60 billion (0.5 percent of Europe’s GDP) plan to 'save the world'. The goal is that biofuels will account for 10 percent of all European energy needs by the year 2020.

Given the extensive bad press that biofuels have recived, this decision makes little sense. The environmental damage of biofuels is fast becoming clear. It often takes more energy to create biofuels than they produce – which means they create more emissions than they replace. They are also inefficient: the crops needed to fill the tank of a 4x4 with biofuels could feed someone for a year. Perhaps most importantly, biofuel production drives up food prices, worsening the plight of the world's poor.

The intransigence of the Commission in continuing to support biofuels in the face of the criticism is testament to its continued attachment to the European farm lobby, and its failure of it to engage with the outside realities of the world. This "Fortress Europe" mentality is also refelcted in its protectionist decision to inhibit the likely response of industries wishing to move out of Europe to avoid excessive EU regulations.

In sum, the Commission’s plan consists of limiting the opportunities for people in poor countries to work their way out of poverty, whilst continuing to undermine the possibility of Europe benefiting from free trade with them. Just as they are demonstrably damaging the environment they claim they are seeking to protect, the EU's member states are decreasing Europe’s economic potential through excessive taxation (thus making technological advances less likely). Saving the world? No, quite the opposite...

What gives motorists a thrill gives archaeologists - well, some of them - distress. The busy A303 one of the main roads from London to the Southwest of England, goes right past ancient Stonehenge (see picture). It's a magnificent view as you drive past, and I'm sure that many tourists are moved to turn off and go to the visitor centre, which is right next to the stones, and have a look round.

I think that's wonderful, but the opposing point of view says that the stones lose much of their majesty when you have nose-to-tail traffic grinding past - for this is one of the few remaining sections of the A303 that has not been made dual carriageway. Stonehenge isn't just a pile of stones in the middle of nowhere - it lies in a landscape teeming with ancient earthworks, and folk worry that any road widening, or even a diversion, would irretrievably harm that landscape.

There have been dozens of proposals. Twelve years ago a conference proposed a 4km bored tunnel; but the government baulked at the cost, proposing a cut-and-cover alternative (right out because it would destroy a huge area of the ancient landscape). I was glad: a 4km tunnel would have meant denying motorists that magnificent view - not that the state-dependent heritage bodies and professional archaeologists worried about that. Driving by is how thousands of people see Stonehenge, and we should rejoice in that; but the quango-crats can't stand it. They're only interested in getting people immersed (apart from those who see the public as just a complete nuisance).

The government came back with a 2.1km bored tunnel suggestion, which would have preserved something for the motorist to look at, while still removing the traffic right next to the stones. Now it has shelved even that idea, on cost grounds.

This is a mixed blessing. It seems to put paid to English Heritage's plans for a new visitor centre, far away from the stones, which would require people to spend several hours just to visit them. A typical producer-driven solution. The present visitor centre and car park is right beside the stones, and all the archaeology round there is pretty shot anyway, so expanding that would seem a much cheaper and easier solution, which would allow people to go right up to the stones in just a short time.

This whole saga is testimony to what happens when governments and quangos are in charge of things. No doubt we'll still be talking about it a dozen years from now. Why can't we just have a people-driven solution?

A comprehensive new scientific study comparing 22 climate change models with recent actual measurements of the troposphere highlight the clear failure of their predictive accuracy. The group of climate scientists, among them IPCC member John Christy, found new evidence that the computer models are failing because they do not reflect actual causes of climate change.

This is only the latest in a series of studies that have cast systematic doubts on the efficacy of climate modelling. These models form the basis for future global warming predictions and have projected significantly more warming in recent years than has actually occurred. Their main weakness seems to be that they are unable to deal with confounding factors such as cloud cover and water vapour, which is the dominant green house gas.

Satellite data and independent balloon data agree that atmospheric warming trends do not exceed those of the surface. Greenhouse models, on the other hand demand that atmospheric trend values be 2-3 times greater. Satellite observations suggest the greenhouse models ignore negative feedbacks, produced by clouds and by water vapour, that diminish the warming effects of carbon dioxide.

This is a devastating message given that the whole global warming alarmism is almost entirely based on computer climate models. And put simply, the models are completely unable to account for the facts on the ground – like the observed cooling periods in recorded temperatures between 1940 and 1975. The models falsely project fast warming in the middle atmosphere compared to the earth surface - whereas in fact the opposite is happening. And they cannot explain the present cooling of the Antarctic, which forces me to put an extra pullover on when sitting on the balcony of my 30th floor Melbourne apartment with south westerly winds.

Ministers confirmed this week that battery hen cages will be banned in Britain by 2012. UK Environment secretary Hilary Benn described the move as "long overdue".

Maybe. But I certainly thought that battery cages for chickens had been banned some time ago. When my own father, Antony Fisher, raised chickens back in the 1960s, they were not kept in cages even then. They were kept in what is called deep litter. They were on shavings bedding, loose in huge buildings so they could move around and scratch in their bedding as they do naturally. True, their space was limited, but it was infinitely better than a life in battery cages (which are only used for egg-laying chickens anyway).

None of us, including farmers, want to see animals kept in cruel conditions. In richer countries like ours, we can afford better conditions for our animals, but then our farmers find themselves undercut by foreign producers who keep their animals in conditions that have been banned here years ago. So overall, sadly, the number of animals kept in bad conditions has not changed.

It's possible that technology will change this. We now can - and do - track the entire life history of cattle and other animals, so we know the conditions they were raised in. The same might be true of chickens. Of course, it costs money to be sure of the source of any agricultural product, and many families are more concerned with the price of their food, than how it was produced. There are human needs in this equation too. One thing is for certain, though - government regulation is rather less likely to promote animal welfare than is a market driven by concerned human beings.

Should we be worried that the price of oil is over $100? Of course, dollars aren't worth very much these days, so the price is illusory. But it's still high. In the 1970s, when the oil price quadrupled overnight (but that's government cartels for you), the shock to the developed economies was enormous. The current price rise is more down to markets - like strong demand from China - but still alarms many people.

However, high oil prices make it worthwhile to invest in other sources of energy such as solar, wave, and wind power. (So why, you may rightly ask, do government feel they have to subsidize such alternatives?) Higher oil prices induce consumers to cut back - to install more efficient domestic boilers and move to lighter, more fuel-efficient cars, to turn down the thermostat a notch, or to car-pool to work.

And high prices make it worth looking for more oil - which exists in sands and shale all over the place. And even the Middle East, which has 70 percent of known oil reserves, it relatively unexplored. Only 3 percent of the world's oil exploration has occurred there, according to Pete Geddes of the Foundation for Research on Economics & the Environment. Fewer than 100 new wells were drilled in the Persian Gulf between 1995 and 2004, compared with 15,700 in the United States (which has very much leaner reserves). And apart from the North Sea and a few other places, hardly any of the world's ocean floor is explored at all.

The trouble with oil is that 90 percent of it is controlled by non-democratic governments. It's not a market at all. And the existing producers have every incentive to keep the price up, and no incentive for new exploration. The only answer to the world's energy needs is to create an oil market - which can't happen until democracy and private enterprise is spread much more widely around the planet.

Today the UK government is expected to announce that it will resume the building of nuclear power stations. This is good news for the environment. Nuclear power plants are very clean. They produce very little of the carbon dioxide that fossil fuels produce. In emissions terms, one nuclear power station replacing a conventional one is the equivalent of taking thousands of cars off the road. Almost all the waste is recycled. A well-designed nuclear plant actually releases less radioactivity into the atmosphere than a coal-fired plant.

The bad news is it will take several years to get them up and running, and in the meantime Britain is increasingly dependent on foreign gas supplies. There could well be an energy crunch before the new plant is ready to take the strain.

So the question is: why has the government allowed this to happen. And the answer is: a bit of political ideology and a lot of political cowardice. Nuclear plants produce over a fifth of the UK's electricity, but many are getting old and inefficient. So they are being shut down, and by 2023 - under the policy up until now - only 4% of the UK's electricity would come from nuclear energy. Any sensible approach would have had new building programmes in place so that the power would be there long before the lights start going out.

But this is politics. Energy ministers like Michael Meacher were delighted to consign nuclear energy to oblivion: they hate it just as they hate nuclear weapons, and they loved the thought of wind and wave power doing the job instead. Which it can't. The political cowardice stems mostly from planning. Politicians fear that local people would object to new nuclear stations being built on their nice coastlines. Maybe they would. But the fact is that nuclear stations have a great deal of support from places that already have them, where they provide much-needed jobs. So rebuild and refurbishment on the same sites would not have been unpopular.

Now, however, the damage has been done. If the global warming scaremongers are right, maybe by 2015 we'll all be sweltering on a Cambridge beach rather than turning up the heating, so there won't be an energy crisis. But I'm not so sure.

6. "Nuclear power is uniquely dangerous and should be banned."

Most forms of energy production are dangerous. The number of deaths or serious injuries caused by the generation of nuclear power is very limited, even including those caused in the Soviet state-sector Chernobyl disaster. The numbers which result from other power sources are documented.

Coal mining, for example, kills several hundred each year throughout the world in mining accidents. It kills thousands of miners from lung diseases. It kills hundreds of thousands from its acidic and polluted smoke. Oil and gas kill their numbers in fires and explosions, and from suffocation. Hydro-electric power claims its victims as dams burst upon villages. The generation of electricity kills by the air-pollution which power stations cause, however they are fired. If solar power, wind power or wave power ever could be developed to supply a sizable fraction of the needs of an advanced economy, no doubt they, too, would claim their victims in various ways. Remember: wind power is not pollution free. It takes energy and materials to make and install those windmills.

Nuclear power may not be 100 percent safe. It is not, however, uniquely dangerous, and is safer than many of its rivals. It offers a relatively clean, cheap, and safe source of power. It is, in the form now being used, a renewable source. The new reactors use fuel more efficiently and are safer, and new and more secure methods of waste disposal and storage are continually being developed.

It would take many, many mishaps for nuclear power even to approach the coal industry in terms of damage to life and health. And nuclear power could never have the environmental impact caused by the burning of coal, especially of the dirty coal which is easier for developing countries to afford. Fusion power is probably the best future possibility, if it can be done, but until then nuclear power is a relatively clean and safe option.

In the New York Times, John Tierney's first column of the year gets off on the right foot, rebuffing some of the abject lunacy surrounding the subject of climate change. Hopefully this is the first sign of a changing of the tide, with the celebrity of the moment, Al Gore, cast adrift in his ship of fools, preaching his ego-driven environmental evangelicalism into the gentle breeze.

Last year, it was distressing to read and listen to the constant rhetorical allusions by Gore and others of their climate agenda to the horrors of the Holocaust. This blinkered dogmatism of the environmentalist herd can be charted back to 1989, and yes, to Al Gore when he wrote an article for the New York Times entitled "An Ecological Kristallnacht", in which he used Holocaust tragedy to defend his contentious scaremongering.

Last year's award to Gore of the Nobel Peace Prize was especially grating because one of the many deserving candidates was Irena Sendler, a 97-year-old Polish woman who personally saved around 2500 Jewish children from certain death in the Warsaw concentration camps. Having stood up against the fascist state, she continued to suffer suspicion under the communist one, devoting herself to looking after children, a life truly deserving of the Prize.

To put Gore's position in context one only needs to look at his argument. The 1989 article mentioned above rests upon his assurance to us that temperatures would rise by five degrees within our lifetimes. This doomsday prediction was as preposterous then as the current apocalyptic revelations are now. To compare such unsubstantiated nonsense with the devastating events of the holocaust is nothing short of inhumane.

The US has sustained a series of energy bills with the intention to foster energy efficiency. But they have caused lots of headaches for consumers and are likely to cost a lot of money. Rent seeking special interests from the burgeoning eco business are rolling their pork barrels all over the place. Just look at the 1992 US Energy Policy Act.

Implemented in 1994 it forced millions of Americans to install water-saving toilets. But they performed so badly that people mostly had to flush twice, actually increasing water usage. Or the 2005 energy law that prescribed that agricultural-based ethanol must be mixed into the gasoline supply. Since then we learned that the energy and water needed to produce ethanol is huge, and also that biofuel production has driven up food prices. On top of that, ethanol generates less energy during combustion because unlike fossil petrol it is already partly oxygenated.

Despite these well documented shortcomings the latest US energy bill, which just passed Congress, includes a fivefold increase of ethanol in the gasoline mix. Other provisions likely to backfire are for new, supposedly energy efficient devices such as new light bulbs, boilers, refrigerators, dishwashers, cloth washers and air conditioners. Ben Lieberman, a senior policy analyst at the Heritage Foundation, got it right when he said the following:

There shouldn’t be any mystery why these laws fail. They all involve Congress trying to force the public into using something the market place has rejected. If newfangled toilets or increased ethanol usage actually made sense, they would catch on without heavy-handed government mandates. Ditto the required modifications to appliances. More often than not, this kind of government interference with the free market works to the detriment of consumers. Washington may think it is passing energy bills, but all it’s really doing is proving the law of unintended consequences.

Not everyone agrees with Jeremy Clarkson, but the man does have a way with words. He doesn't seem to have thought much of the Archbishop of Canterbury's Christmas Day sermon.

Hmm. I'm not sure that I can take a lecture on greed from a man who heads one of the western world's richest institutions. As we huddle under a patio heater to stay warm while having a cigarette in the rain, his bishops are living in palatial splendour with banqueting halls, wondering where to invest the next billion.

Some pundits guess America, long known for her unique exceptionalism, is roughly 50 years behind the French in realizing that Western security is jeopardized by the reliance on imported energy. Abandoned by her last ally in resistance to Kyoto carbon emission cuts - with Australia signing probably the most overrated and greatly dysfunctional treaty in human history - the US is expected to revive its nuclear industry after 30 years of stagnation.

Now, given that most of the Anglosphere looks set to be dominated by the secular left in years to come there is no guarantee that the nuclear renaissance will succeed. So let’s look at France, which as a country with no own energy resources to speak of, can serve as a role model for achieving energy independence.

It is the only country where the political left has not opposed civil nuclear energy. Over the last fifty years, that has enabled France to excel as a beacon of nuclear electricity generation worldwide – producing 80 percent of its electricity supply that way. Secondly, France has an exceptionally strong cultural appreciation of scientific progress - expressed in popular high-speed trains and the supersonic Concorde. Thirdly, the trust in French public service officials, who tend to be trained engineers - rather than lawyers as typical in the US – helped to maintain public confidence in the nuclear program. And finally, the excellent security record of the French nuclear industry - usually attributed to synergies from central management, reactor standardization, a better learning curve and better homogenous training facilities for personnel.

These are the lessons to learn for the US, which will need 35 new reactors to meet surging energy demand by 2050. It’s time to forget about Freedom Fries and just say ‘oui’.