Decarbonization and protectionism


Adam Buckley, Ben Caldecott and Gavin Dick from The Conservative Environment Network (CEN) have written a short piece on ConservativeHome on the benefits of decarbonization.

CEN’s argument is entirely objectionable:

CEN believes that we should consider climate change a significant risk and decarbonise accordingly. But even without the very real and obvious risks associated with climate change, decarbonisation has other profound benefits. In a world without climate change it would still make sense, if done in a cost-effective way, for Britain to save energy, use less foreign fossil fuels, and develop indigenous sources of low carbon energy.

Ignoring the well-trodden territory of their position on climate change, much of the argument from CEN is based upon the failed economics of protectionist policies and state dirrection and control of industries.

In arguing that we should use less energy, CEN suggest that we need to tackle “market failures that prevent people and organisations from improving their energy efficiency". These failures are they believe down to access to capital and the “hassle" factor. However, in the real world individuals and organisations do not improve energy efficiency when it will not save them money and given the failure of the climate change predictions to come to fruition, people see no practical and moral reason to waste their money. How is that a market failure?

If – and it is a very big ‘if’ – CEN are right about the bleak future for hydrocarbon fuels, then the market mechanism will ensure that alternative energy production will be put into effect. And with an unmolested market, some entrepreneurs will take risks at the right moment and cash in on this shift. For the government to do so now is bad economic policy.

The last and most surprising argument that CEN put forward in favour of decarbonization is as follows:

Additionally, we can send less money abroad.  The issue of balance of trade has become unfashionable, but is another important reason why decarbonisation should be desirable regardless of the risks associated with climate change.

CEN tie this in with arguments to invest (read tax and spend) and protect UK energy production. As an antidote to all this nonsense, I suggest the authors start by reading this from Milton and Rose D. Friedman:

"Protection" really means exploiting the consumer. A "favorable balance of trade" really means exporting more than we import, sending abroad goods of greater total value than the goods we get from abroad. In your private household, you would surely prefer to pay less for more rather than the other way around, yet that would be termed an "unfavorable balance of payments" in foreign trade.