Apparently we’re to have less Net Zero. Or later. Or something at least:
Rishi Sunak is facing a growing Tory backlash over plans to water down his key net zero policies, with MPs saying it would be “the greatest mistake of his premiership”.
Bans on petrol cars and oil boilers in the next decade are among the green pledges that could be loosened under the Prime Minister’s plan to meet the 2050 net zero target in a “better, more proportionate way”.
Ahead of a major speech this week, he admitted that the Government has “not been honest about costs and trade-offs” of net zero.
As the actual economic report - that Stern Review - says we shouldn’t have an emissions target anyway. As the Nobel Laureate on the subject points out, Bill Nordhaus, we shouldn’t have an emissions target. Because that’s the wrong way to incentivise the innovation necessary to gain less climate change. We need to use prices and the market, not bureaucratic dictat.
But OK, everyone’s decided, wrongly, to use a target instead. As we’ve pointed out before, they’re still getting it wrong even if we allow them that pass.
For the economics here is terribly simple. There are costs of allowing climate change to happen. There are costs of stopping climate change happening. The costs we don’t have to carry by not stopping it are therefore benefits of allowing climate change to happen. Equally, a benefit of stopping climate change is not having to bear the costs of climate change happening.
This is obvious. So is it also obvious that there’s a fairly delicate dance between those two sets of costs and benefits. We wish to optimise the outcome, maximise human utility over time. That means bearing the least cost we possibly can while gaining the largest benefits possible. Again, all entirely obvious.
That delicate dance then changes when the costs of action change relative to the costs of inaction. We’re just finding out that offshore wind power is three to five times more expensive than we were told. So, as we’ve noted, we desire less wind power in our mix.
But we’re also now being told the true costs of everything planned in emissions reduction. Those costs are higher than we had been led to expect. Therefore - and entirely rationally - we should be agreeing to have more climate change.
Prices have changed to the correct answer is different. Anyone not arguing for less climate mitigation in the face of rising prices is therefore wrong.