The EU's method of dealing with climate change always was insane


There have always been multiple layers of insanity to the way that the European Union and various layers of bureaucracy have tried to deal with the problem of climate change. Assuming, for the sake of argument, that there is a problem that needs solving. It is still true that the actual system of attempting to deal with it is, well, doolally. As this little example from Drax shows:

Drax's hopes of securing lucrative subsidies for its biomass conservion have suffered a setback after the European Commission launched a full state aid investigation over concerns the payments may be too generous. The Yorkshire-based power plant is in the process of switching from burning coal to biomass, and was awarded a £1.7bn Government subsidy contract in April 2014 for the third of its six units - subject to state aid approval. The contract would see Drax paid a fixed price of £105 for every megawatt-hour (MWh) of biomass-fired power the unit generated until 2027 – well over double the current market price. Drax shares fell 5pc on Tuesday after the European Commission said it was concerned that the rate of return from the subsidies "could be higher than the parties estimate and could lead to overcompensation".

The first level of nonsense is that they've decided to pick and choose between different technologies. Some, those favoured, will gain subsidy. And that subsidy will be different for each technology. No, bureaucracies are not good at choosing between technologies. Further, if there is to be subsidy it should be one flat rate subsidy for all technologies. Those that can make that standard succeed: those that cannot do not. Without people being able to lobby for just a little bit more subsidy if they can catch the ear of the bureaucracy (as the absurd Swansea Barrage has).

The second level of loopiness is in the actual technologies that have been chosen. Outside those who consume or grant subsidies there's no one at all who thinks that shipping 2.4 million tonnes of low energy wood pellets across the Atlantic is going to do anything at all to reduce either emissions or climate change.

The third level of madness is that having designed such a system the bureaucracy is taking archaeological ages to manage to make any decisions. Market economies, heck, successful economies, do not allow 20 months for the papershufflers to even start hemming and hawing about what is going on. That it's an entirely ridiculous project is true: but that there's simple paperwork delays of this length will strangle any and every activity in the economy. It's better, by far, for there to be the wrong decision, the wrong investment or activity even, than the entire economy grind to a halt while waiting for permission.

This is why we here at the ASI have always been in favour of a carbon tax. We know very well that, whatever the reality of climate change, some fool somewhere is going to do something. So, let's make sure that what is done is minimally damaging and might even have some useful side effects. If emissions have externalities then tax the emissions and let the market sort out the rest of it.

As, actually, Lord Stern recommended. It's just that having taken the argument that something must be done from that Stern Review everyone has rushed off to do exactly the thing that the Stern Review said don't do. Do not use this as an excuse to plan the economy. Rather, use this as a reason to adjust market prices and then use that most efficient human discovery, that market, to make all subsequent changes.

Whether or not something must be done is an entirely different argument from what should be done if something must be. We should not, for the sake of our own future wealth, and that of our children, confuse the two. Yet we've ended up doing what the argument that says something must be done proves should not be what we're doing.

This is simply insane.