NESO discovers Bill Nordhaus

Given that they did actually award the Nobel to Bill Nordhaus specifically for his work on climate change it’s nice to see some fraction of our ruling class catch up with it all:

Ed Miliband’s plans to make Britain net zero by 2050 risk costing the country £350 billion more than a slower approach to reducing carbon emissions, the government body in charge of keeping the country’s lights on has warned.

In a stark analysis the National Energy System Operator found that the UK could save an average of £14 billion a year if the country were to forgo its legally binding target to reach net zero. The figure is the equivalent of about £500 for every household in Britain per year or 0.4 per cent of UK GDP.

The additional costs of net zero would be highest over the coming decade, with a premium of more than £40 billion in some years, its analysis shows.

There are varied differences between Nordhaus and Stern - discount rates for example - and both are wildly different from the idiocies MiliEd is trying to enforce.

But the big one to note here is that Nordhaus insists we should work with the capital cycle, not try to accelerate it. That is, we do want to influence decisions, sure we do, but what we want to influence is future decisions, ones that we were going to take anyway. Not, as Stern does to an extent and Ed tries to insist upon, stampede people into changing right now.

The societal infrastructure we’ve got is something that cost a lot of money to create. We gain a lot of value from the current use of it. It would all take vast amounts to recreate, replace or redesign.

Yes, investment is a cost, not a benefit, therefore recreation, replacement, redesign, is a cost, not a benefit. It is the output of the recreation, replacement, redesign, which is the benefit, not the process itself.

It is also true that all such societal infrastructure wears out over time. Therefore, at some point, it will be necessary to replace it. Which is the point at which we redesign, the time when we’ve got to recreate it anyway.

That is, run whatever we’ve got until it starts to fall apart and then do it the new green, non-emittive and lovely way. Do not tear down the things that work perfectly well today which we can still get a decade or three’s use out of.

Now, it is indeed possible to shriek that we’ve got to do it all now because climate change and civilisational collapse - Ed’s Way. But as NESO is pointing out here that’s the expensive way. The cheaper way is to replace with the good and lovely when we’ve got to replace anyway.

At which point we can also borrow a point from Stern. As he points out humans have a little quirk, we’ll all do more of cheaper things and less of more expensive. So, if we attack climate change the cheap way then we’ll do more attacking of climate change. So, attack climate change the cheap way to save the planet etc, QED.

There is a reason they gave Bill Nordhaus the Nobel. Pity so few bother to either work out what it was or pay attention to it.

Tim Worstall