Saturday 15 April 2023

Climate crisis? What climate crisis? - Part Five: The case of the missing cost-benefit analysis

This is the last in a set of five essays about the issue generally known as “climate change” or “global warming.” Today I will address, specifically, the costs versus benefits of the “net zero” policies, which the government is forcing on to the people of the UK. It’s a sad story.

Several attempts have been made to do costs versus benefits analysis on measures proposed to reduce emissions of carbon dioxide (CO2) in the UK. Yet none of them have properly answered the question: What exactly are the costs which would result from a given level of CO2 emissions, now and in the future?

This matter is important. For, without an answer to this question, it is not possible to work out objectively whether or not “climate change” is, or ever has been, an issue that demands any policy action at all. Beyond this, in order to evaluate the costs versus benefits of a proposed policy that is expected to reduce (or increase) CO2 emissions, it is necessary to compare the direct costs imposed by the policy with the “benefits” which are expected to result from it. And the major part of, if not the whole of, those benefits is represented by the savings in costs from the CO2 emissions which, because of the policy, would not take place.

The story so far

Before I get into specifics, I’ll give a brief summary of what I found out while researching and writing the first four essays in this set.

Part One: The evidence

In Part One, which you can find at [[1]], I looked for objective evidence to support the claims of catastrophic climate change, caused by emissions of carbon dioxide gas (CO2) by human civilization, which are made so frequently and so stridently by green activists and alarmists.

I began by stating, as clearly as I could, the accusations which are being levied against us:

1.     It’s warming. And the warming is global, not just local or regional.

2.     This warming is unprecedented.

3.     All, or a significant part of, the global warming is the result of emissions of greenhouse gases (GHGs), primarily CO2, by human civilization.

4.     This warming will have significant negative effects on the planet and on human well-being and prosperity.

5.     The benefits from avoiding the negative consequences of this warming outweigh the costs of taking action to avoid them.

6.     It’s a crisis! There is a climate crisis, and we need to act NOW!

Here are the answers I found to those accusations:

1.     There is general agreement that global temperatures have been warming since the 17th century. And that they have warmed very close to 1 degree Celsius since 1880.

2.     That 20th-century warming is unprecedented is not proven.

3.     There is a plausible scientific theory which suggests that more CO2 in the atmosphere can cause warming. However, the direct effect of CO2 is quite small. For all or much of the warming to be caused by human emissions of CO2, it would be necessary for this small initial warming to be amplified by large, positive “feedbacks.” The evidence does not support the idea that these feedbacks are large and positive.

4.     Because of the lack of objective cost-benefit analysis, the only answer anyone can honestly give to “What would be effects of X amount of warming (or Y amount of CO2 emissions) on the planet and on human civilization?” is: “We simply don’t have a clue.”

5.     Cannot be answered without 4 above being answered first.

6.     We are bombarded with many scares today. Weather disasters, storms and hurricanes, floods, droughts, wildfires, heatwaves, climate refugees, sea ice and ice sheets melting, sea level rise accelerating, coral reefs dying, crop yields falling. Are these things getting worse? No. I looked at the objective facts, and found no cause for any great concern.

I concluded that, whatever alarmists may say, I for one don’t see any hard evidence that emissions of CO2 from human civilization have caused, or are causing, any climate problems at all. Still less is there any evidence for a “climate crisis.”

Part Two: Where we are in the UK today

In the second essay, I told the sorry story of how badly and dishonestly the UK government has behaved, in the last four years, over the matter of “climate change.”

It has fraternized with extremists like Extinction Rebellion, against the interests of the human beings it is supposed to serve. It has declared a “climate emergency,” without any hard evidence of such an emergency, and without the parliament even taking a vote. It has made bad policies that, if we had known their likely consequences, we would have rebelled against. It has erected a supposedly democratic “assembly,” and made it nothing more than a rubber stamp for a pre-determined agenda. It has laid out, and is implementing without our consent, plans to do things that seriously harm our interests. On the occasions where it has allowed us an apparent say in the matter, it has ignored our views. And in all these things, it has behaved with dishonesty and hypocrisy.

Part Three: The back-story up to 1992

In the third essay, I began to tell the back-story of the green agenda. There, I traced it up to and including the 1992 Rio “Earth Summit.”

I told how, in the late 1960s, the green leviathan was born. How it was nurtured in the 1970s and 1980s, most notably by means of the United Nations’ World Charter for Nature and Our Common Future. And how, at Rio in 1992, it broke out of its pupa, and became the monster we face today; although at that stage of its development, it was a lot smaller than it is now.

I find it impossible to believe that all this wasn’t carefully planned, not only by the UN, but by a significant number of politicians and government officials in many countries around the world. At Rio, our “representatives” signed up to a whole raft of long-term commitments, that they must surely have known were utterly opposed to the interests of those they were supposed to represent. We ordinary people were set, against our wills and without any chance to object, on a course that would inevitably lead to us losing our prosperity and freedoms. And they seem to have done it gladly! As I like to put it, they sold us all down the Rio.

Part Four: The back-story since 1992

In the fourth essay, I continued the back-story to the present day. I told of the corruption and ever-increasing alarmism of the IPCC, the UN body tasked with assessing “the state of scientific, technical and socio-economic knowledge on climate change, its impacts and future risks.” I told how, at the yearly Conference of the Parties meetings, our “representatives” have again and again moved the emissions goalposts, always in the direction of increasing restrictions. And how they have tightened the screws on us all, giving themselves carte blanche to tax us out of existence to pay for what they see as our “sins of emission.”

I told of the corruption of science. I told of efforts to deny skeptics of the “climate change” narrative, including experts, the right to be heard. I told of the UK government’s anti-car policies, which have been gathering pace for 30 years.

I told of the sidelining of objectivity in the very important area of risk analysis. This has led to a culture of over-safety, that grossly favours those demanding government action over those who will be affected by that action, and encourages government over-reach. I told of the Wingspread Statement of 1998, which radically re-wrote and perverted the “precautionary principle.” In effect, it inverted the burden of proof in risk assessment, rejected the presumption of innocence, required the accused to prove a negative, and mandated precautionary action regardless of how much pain it would cause. And I told of the UK government’s further perversion of the principle into, in effect: “If in doubt about a risk, government must act to prevent it.” If in doubt, they want to make a pre-emptive strike!

I came to the conclusion that all this was done deliberately in order to foster tyrannical policies. And that the UK government has behaved, towards the people it is supposed to serve, with extreme arrogance, dishonesty and recklessness, over a period of decades.

Costs versus benefits

I’ve saved until this last essay what I personally consider to be the most egregious example, in the whole sorry saga, of dishonesty by the UK government towards the people. But before I discuss that, I’ll take a détour to the “social cost of carbon,” cost-benefit analysis in general, and the Integrated Assessment Models which are used as tools in doing such calculations.

I hope this section will help those of my readers, who are comfortable with “techie stuff,” to a fuller understanding of what has been going on here. If techie stuff makes your head spin, I suggest you skip to “Projections from different emissions scenarios” below.

Bjorn Lomborg’s paper

In doing this, I shall extensively reference a 2020 peer-reviewed paper by Bjorn Lomborg. It is here: [[2]]. The paper has 53 citations so far. I thoroughly recommend that you read this paper in its entirety. Despite its length, 35 pages of two-column small print! It is an absolute gem.

I referenced this paper from the first essay of this set, but there I only used data from its first two sections. Today, I will be looking at the rest of the paper, in which Lomborg does some economic analysis.

Emissions scenarios – SSPs

In the fourth essay, I mentioned the Representative Concentration Pathways (RCPs), a set of scenarios which incorporate different combinations of emissions and of adaptation and mitigation policies. But there is also another and more recent set of scenarios, called Shared Socioeconomic Pathways (SSPs), which Lomborg uses in his analysis.

The SSPs are described here: [[3]]. In brief, they are:

·       A world of sustainability-focused growth and equality (SSP1).

·       A “middle of the road” world where trends broadly follow their historical patterns (SSP2).

·       A fragmented world of “resurgent nationalism” (SSP3).

·       A world of ever-increasing inequality (SSP4).

·       A world of rapid and unconstrained growth in economic output and energy use (SSP5).

Today, Western élites, and those in the UK in particular, are trying to force us down the road of SSP1. I don’t know about you, but SSP1 is a no-no for me. It would bring lots of power and riches for the élite controllers; which would explain why globalists, the European Union, and national political élites support it so strongly. But for ordinary people, it offers only a bleak future of poverty, with our rights and freedoms cut to shreds. I simply don’t trust anyone that favours it, and I cannot see it being sustainable, in any sense of the word. The most likely consequence, I think, is a series of popular revolts, which in time would lead the world into SSP3.

SSP4 would likely bring about a world in which where you are born, and who you are, would determine your prospects in life, rather than how you develop your talents. As an individualist, I consider that to be morally wrong. I suspect that an SSP4 world would end up as an “élites versus plebs” world, just as bad as SSP1, if maybe a little more prosperous.

SSP2 or SSP3 would be preferable to either SSP1 or SSP4. But by far the best, I think, is SSP5: the scenario in which environmental policies are set entirely in terms of adaptation, and the whole idea of swingeing “mitigation” is dropped altogether. Lomborg predicts that this will produce better economic results by 2100 than any of the other scenarios, both globally and for people in Africa. And it restores our rights and freedoms, too. Win, win, win.

The “social cost of carbon”

The conventional – indeed, as far as I am aware, the only – way to do an objective cost-benefit analysis on what are called “externalities” or side effects, is to use a “social cost” approach. An externality occurs “when producing or consuming a good causes an impact on third parties not directly related to the transaction.” The impact might be negative (a cost), or more rarely positive (a benefit). The social cost of an externality is defined as the aggregate cost, to all those affected, of that externality.

What is loosely called the “social cost of carbon” (SCC) is actually the aggregate cost, to all those affected, of carbon dioxide emissions caused by human civilization. That’s assuming it is overall a cost, not a benefit! (In the latter case, the social cost would be negative). It is usually measured in $ or £ per tonne of CO2 emitted.

How to do a cost-benefit analysis and make a decision

Doing an objective cost-benefit analysis on the externalities resulting from emissions of CO2 by human civilization is, in principle, quite a simple matter. First, calculate the costs of the externalities, now and in the future, using the social cost approach. Second, calculate the costs of pre-emptive action – “mitigation” – to avoid the externalities, both now and in the future. Third, calculate also the costs of the “adaptation” approach, that is, not mitigating the externality at source, but acting to fix the envisaged problems as and when they occur. Then compare the social cost of the externalities (which can also be seen as the benefits of removing them) against the costs of the mitigation and adaptation approaches. And pick whichever minimizes the total costs.

Of course, in practice, to do such a cost-benefit analysis is very complicated. There will be uncertainties in the emissions scenario for the base case, where no political action is taken at all over the matter. There will be a range of possible combinations of mitigation and adaptation, all of which must be taken into account. There will be considerable uncertainties in all three sets of costs. And, as any mathematician or businessman knows, if you subtract one uncertain number from another uncertain number, particularly if the two are close together, the uncertainty can easily become so large that no objective cost-benefit decision can be made. In that case, the true precautionary principle, “Look before you leap,” or even “First, do no harm,” ought to apply. You should simply let the externality run its course. While being prepared to fix any problems that may arise as they come up.

Now, I do not propose to look in detail at the second and third steps above. It is the first step, the calculation of the costs resulting from given amounts of CO2 emissions, independently of any climate policies, on which I have my focus. And my contention is that the UK government has not published any objective calculations of these costs for the UK. Indeed, it has gone out of its way to prevent any such calculations being made!

Integrated Assessment Models

The tools which are used in estimating the “social cost of carbon” are called Integrated Assessment Models (IAMs). The IAMs, in effect, take the outputs of a climate model, then estimate the economic consequences, and from those they calculate a value for the SCC.

An overview of IAMs is here: [[4]]. As it says, “an IAM is constrained by the quality and character of the assumptions and data that underlie the model.” So, IAMs suffer from all the problems of AOGCMs, and more. They also “consider demographic, political, and economic variables that affect greenhouse gas emission scenarios in addition to the physical climate system.” The field is acknowledged to be still in its infancy.

In early 2020, I wrote an essay looking at the economic calculations which – so we’re supposed to believe – justify the extreme measures proposed, all the way up to total de-carbonization of the UK economy, to avoid alleged catastrophic damage from global warming. You can find it at [[5]]. Here, I will repeat some of the points I made in that essay, and amplify on a few of them.

In many ways, IAMs are like climate models. They take dubious data, whirl it round and round through various mathematical equations, then spit out results that may or may not make sense. There are lots of parameters that can be adjusted, and the effects of adjustments can vary hugely.

At the core of an IAM, there is a “damage function” (or, perhaps, many damage functions, each of which covers a particular area of concern). The damage function calculates economic damage as a function of temperature change and perhaps other factors. The temperature change is usually expressed in terms of a “pre-industrial temperature” baseline. In the RCP scenarios, this baseline is given as the average of temperatures between 1850 and 1900.

In terms of studying economic effects of changes in the climate, the three IAMs which have been most used are DICE, PAGE and FUND. Here is a little about each of them.

DICE

Historically, DICE was the first of the three IAMs. Its genesis goes back at least to the 1980s, and its developer was 2018 Nobel Prize in Economics winner William Nordhaus. There’s a social cost calculation using DICE at [[6]]. You can see Nordhaus’s quadratic damage function at Equation 3. This study “estimates that the SCC is $31 per ton of CO2 in 2010 US$ for the current period (2015).” And “the real SCC grows at 3% per year over the period to 2050.” The discount rate used is roughly 4¼%.

One of the things I found odd at first was the way in which the social cost of a tonne of CO2 emitted always grows year-on-year. I eventually came to the conclusion that this is merely because the damage function is steeper than linear. So, the cost of a tonne emitted later, at a higher temperature, is greater than of a tonne emitted at the original temperature.

I wondered, also, why Nordhaus picked a quadratic damage function. Perhaps it was because the quadratic is a simple way to produce a curve, both of whose tails point in the same direction. Both tails must point the same way, because it is assumed that large amounts of either warming or cooling will lead to damage. It would not make sense to project that a large warming will cause damage, and yet a large cooling would bring benefits!

What is the optimum global temperature?

A problem with using a quadratic damage function, though, is that it implies a single global temperature, at which the damage reaches a minimum. Nordhaus’s approach places this optimum on the temperature at the point you pick as your reference date. This temperature, at least in the context of the RCPs and so presumably of the SSPs, is the average temperature between 1850 and 1900; the so called “pre-industrial” temperature. But to place this optimum in the 19th century looks arbitrary to me. Why not at the peak of the Mediaeval Warm Period, or even of the Holocene Optimum? Or, for those who dislike heat, why not the trough of the Little Ice Age in the 17th century?

It seems to me that DICE’s entire approach may be compromised by this need to make an essentially arbitrary choice of an optimum. Do we not need, therefore, before doing anything else at all, to have a debate about what we would like to see as the “perfect” global temperature? I don’t know about you, but I – with anyone who has chosen to move from northern North America or Europe to places like Florida – would prefer warmer to cooler.

Looking wider at the literature, I find that Nordhaus has come under fire from some angles for “neglecting tipping points.” Here is an example: [[7]]. It even talks of “tipping cascades!” This leads to the question, is there evidence that there have been tipping points in the past, and in particular, sudden large warmings? The answer is yes, but only when coming out of Ice Ages. No evidence I know of from the past suggests “runaway” warming at anything like the temperatures we have now. This suggests, to me at least, that the criticisms are founded less on science than on politics.

PAGE

PAGE is the model produced by Chris Hope of the Judge Business School in Cambridge. There is some documentation on it here: [[8]]. It says the following about its damage (impact) function: “Economic and non‐economic impacts before adaptation are a polynomial function of the difference between the regional temperature and the tolerable temperature level.”

Notice that Hope says “tolerable,” not “optimum.” That requires a value judgement as to what is a “tolerable” global temperature. But are not today’s temperatures tolerable? I think they are tolerable, given the evidence I presented in the first essay of this set. Though I wouldn’t mind another degree or two of warming on top.

The polynomial appears to be, potentially at least, a cubic; a bit odd, because that could come out with large benefits from a large cooling! But PAGE does make an explicit allowance for “saturation in the vulnerability of economic and non‐economic activities to climate change.”

PAGE attempts to account for “tipping points” or “discontinuities,” such as the Greenland ice sheet suddenly melting, by adding in a factor for catastrophic impacts after 3 degrees Celsius. (Why 3 degrees? That seems a bit arbitrary to me.) This, presumably, is why, at or above the middle of the IPCC’s ECS range, PAGE is the most pessimistic of the three.

FUND

The third model, FUND, comes from Richard Tol of the University of Sussex and his colleague David Anthoff. This looks to be the most complex of the three. The technically minded can find documentation here: [[9]].

FUND has no single damage function. Rather, it divides the possible sources of damage into a number of areas – such as agriculture, forestry, sea level rise, storms, effects on human health – and assesses each separately. Each of the equations used in FUND is based on the results of earlier published studies, mostly from the 1990s.

Unlike the other IAMs, FUND includes positive side-effects of CO2, such as on plant growth. This means that, for small temperature changes, FUND tends to give lower, more optimistic social costs than DICE. Bjorn Lomborg, however, in section 3.2 of his paper, has presented a graph showing that when temperature changes get large, beyond 8 degrees C, FUND becomes more pessimistic than DICE or even PAGE.

Other models

Bjorn Lomborg (in section 3.4 of the paper I referenced above) reviews a number of other models and approaches, which have been tried in recent years. And he finds them all lacking, in comparison to DICE, FUND and PAGE.

Projections from different emissions scenarios

In his paper at [2], section 3.5, Lomborg looks at likely projections from the five SSP scenarios, which I listed earlier. Of the global economy, he says: “This means that the negative climate impact in 2100 for SSP1 will be 2.5% of GDP, whereas SSP5 will see a negative 5.7% impact. It means that instead of per person GDP in 2100 being six times larger than its 2020 value, it will be 5.9 times its 2020 value after deducting the climate damage. The fossil fuel-driven scenario will see a larger reduction, from 10.4 times its 2020 value to 9.8 times.”

Which would you rather wish for the people of 2100? To be 9.8 times better off than we are now with SSP5, or only 5.9 times better off with SSP1? To judge how far Lomborg is right in these “projections” is above my pay grade – I am a mathematically trained generalist, not an environmental economist. Lomborg himself has qualifications in political science (not very reassuring) and statistics (far more reassuring). And the English edition of his book The Skeptical Environmentalist was published by Cambridge University Press: [[10]]. Even more reassuring.

Despite “climate damage,” under SSP5, the free-market solution, people in 2100 will still be 66% better off than under SSP1. SSP1 is the scenario in which: “consumption is oriented toward low material growth and lower resource and energy intensity.” And in which we, today, lose our private transport and lots of other good things, too.

If Lomborg is right on this, the decision is a no-brainer. Go for SSP5, focus on adaptation, drop the whole idea of “mitigation,” and ditch all the senseless climate policies we have suffered under for the last several decades. Of course, we will need to open up new sources of energy, such as fracking and small modular nuclear reactors. But those are within known bounds of possibility. Whereas energy sources proposed for SSP1, like hydrogen, are not.

And what’s in store for Africans under these two scenarios? Lomborg says: “While Africans will lose much less to climate change in SSP1, they will still be much better off in SSP5, being 30 times richer in 2100 than in 2020, even after accounting for climate damages, compared to ‘just’ 19 times better off in SSP1.” They will be 58% better off under SSP5 than SSP1. Now if that prediction works out, there surely won’t be any need for a “loss and damage” fund. Except, perhaps, to make African dictators and corrupt officials compensate the people they held back from industrializing for so many decades.

The costs versus benefits of the Paris agreement

Moreover, in section 4 of the same paper, Lomborg analyzes the costs versus benefits of the Paris agreement world-wide. He says: “for each of the three Paris cost estimates and each of the six SCC estimates for 2030 how the cost of cutting a ton of CO₂ is in the hundreds of dollars, and the benefits are in the tens of dollars. Not a single instance of the analysis has benefits higher than costs.” And concludes: “In short, under a wide range of optimistic or realistic cost estimates and under all the main estimates for benefits of cutting a ton of CO₂, the Paris Agreement is not worth its costs. It will likely deliver just 11 cents of climate benefits for each dollar spent.” And: “At any reasonable estimate of costs, benefits, and implementation, the Paris Agreement is unlikely to be a beneficial investment for the world.”

Unless Bjorn Lomborg has made a very big error, when that gets into the consciousness of the general public world-wide, it will be game, set and match to the skeptics.

The case of the missing cost-benefit analysis

Now, I shall return to the back-story, and fill in some of the details I omitted from the fourth essay.

The Stern Review of 2006

In 2006, economist Nicholas Stern and his team published the Stern Review. This was an (apparent) attempt to provide a cost versus benefits analysis for policy action or inaction on reducing CO2 emissions. But of the three integrated assessment models Stern had available to him, he chose the one, PAGE, which gave by far the most pessimistic estimate of the social cost of CO2. This model is well known to produce “fat tailed” distributions with higher estimated likelihoods of extreme scenarios, and higher social costs, than the other two. Presumably, because it includes, in its design, allowance for unforeseen “tipping points.”

On top of this, Stern made other assumptions that resulted in a grossly exaggerated estimate of the cost of not taking any action. One economist commented: “The Review's radical policy recommendations depend upon controversial extreme assumptions and unconventional discount rates that most mainstream economists would consider much too low.”

At the time, 2006, the only specific commitments which had officially been made on climate change were the relatively light ones of the Kyoto Protocol. That Stern had to fiddle the figures in order to create anything like a cost-benefit case for action, ought to have been a big red flag for all involved. But it was ignored. You wonder whether commitments might have already been made, that went far beyond that, without ordinary people knowing about them.

Peter Lilley’s criticisms

In a pamphlet written some years later [[11]], Peter Lilley MP criticized Stern’s report. He concluded that the review “was an exercise not in evidence-based policy making but in policy-based evidence making.” Meaning, that policies already set had driven what was in the Stern report, not the other way round.

This was a strong claim, particularly coming from an MP. And yet, the only reactions I could find to it were two dismissive responses from Bob Ward, policy and communications director of the Grantham Institute, who is well known as an extreme alarmist about the issue. The second of these responses speaks for itself: [[12]].

I will also point out that when at Cambridge, Peter Lilley studied first Natural Sciences, then Economics. That combination made him better qualified than most to comment on the cost-benefit analysis of an environmental issue! Surely, better qualified than Bob Ward, who according to his LSE profile [[13]] has “a first degree in geology and an unfinished PhD thesis on palaeopiezometry.”

The Climate Change Act 2008

Next, to the 2008 UK climate change bill. They did make a token attempt at a cost benefit analysis. The numbers were based on the Stern review. Not only were these numbers dubious for the reasons outlined above, but they had a huge range of uncertainty too.

I actually downloaded and read the 200 or so pages of supporting data and calculations. If I recall right, there was a factor of 7 uncertainty in the costs, and a factor of 12 uncertainty in the “benefits,” of taking action to reduce CO2 emissions in order to mitigate climate change. If we could believe the figures in the first place!

Such numbers are useless for making any kind of objective decisions. These estimates were not fit for purpose. Yet, the politicians went ahead regardless. It seemed that their perverted version of the precautionary principle was so far enshrined in their world-view, that they were unable to consider either of the two sensible options. Either to send the cost-benefit calculations back to those responsible for them, with instructions to reduce the uncertainties to a level at which an objective, rational decision could be made over the matter. Or, if that was not possible, to “abandon ship” and ditch the policy commitments altogether. That neither of these happened, reinforces Peter Lilley’s criticism that policy drove “evidence,” rather than the evidence driving policy.

I should also note that in July 2008 I wrote to “my” MP, Jeremy Hunt, giving him a synopsis of the facts on the matter, and inviting him to inform himself fully, then when he understood the facts, to vote against the bill. He failed even to acknowledge my letter, let alone to respond to it! And, of course, he voted for the bill. How can anyone that behaves with such contempt towards their “constituents” possibly “represent” someone like me, who seeks always to focus on facts and hard evidence for and against any policy decision?

To their huge credit, five brave members of parliament – including Peter Lilley – had the gumption to stand up for the people they were supposed to represent, and oppose the bill. The rest of them, more than 450, voted to subject us to Soviet-style “five-year carbon budgets,” as well as all manner of taxes, and caps on emissions of other greenhouse gases too. They acted shamefully and recklessly, in making costly commitments, on behalf of the people they were supposed to represent, without rigorous justification.

And so, we were embarked on a never-ending round of green taxes and more green taxes. Of energy policies that favour solar and wind, both of which supply power that is far too intermittent ever to be able to generate base load for a Western industrial country. Of idiocies like converting Drax power station to burn wood chips imported from the USA. Of green lies, fabrications, scares and hype. Of continual moving of the emissions goalposts, always in the direction of greater restriction. And of more and more crazy and totalitarian proposals, culminating in the “net zero” nonsense.

The Stern Review did, indeed, try to use the social cost approach. But it is concerning that Stern used the most pessimistic of the three integrated assessment models available to him, and made some other pessimistic assumptions, including a very low discount rate. It’s hard not to suspect that Stern, like Ben Santer back in 1996, was ordered to produce what he did. He who pays the piper, says the proverb, calls the tune.

It is even more concerning that, instead of throwing the climate change bill in the waste paper bin where it belonged, the entire parliament, apart from the “Famous Five” who stood up against the bill, fell into line behind it. That I see as having been a serious dereliction by MPs of their duty to the people they are supposed to represent. And most of all, by Jeremy Hunt, who ignored the good advice I gave him.

The Green Book

Now, how committed is the UK government to doing cost-benefit analysis on proposed public projects? As a matter of principle, they ought to do such an analysis on all significant projects. Any democratic government should always check, before it spends taxpayers’ money on a project, that the people who have paid and will pay the taxes will get a positive benefit from that project, at least commensurate with what they pay. In particular, objective, unbiased cost-benefit analysis ought to have been done on “net zero” and related policies before any action at all was planned or implemented.

There is, indeed, a set of procedures which are meant to guide cost versus benefit analyses carried out by the UK government. They are collectively called “the Green Book.” Here is an overview: [[14]]. The Green Book was first issued in 2003, and radically updated in 2013. This means that Stern would have been using the 2003 version for his Review.

It says on the overview page: “Green Book guidance applies to all proposals that concern public spending, taxation, changes to regulations, and changes to the use of existing public assets and resources.” It says also that the content and boundary of all Green Book guidance is determined by HM Treasury (the department headed by the Chancellor of the Exchequer).

There is also a specific page on valuing energy use and greenhouse gas emissions: [[15]]. Behind this, again, there is a page on what they call “carbon valuations”: [[16]]. This page will have much significance in what follows. Indeed, the next few subsections will consist largely of direct quotes from it.

The social cost of carbon

In the beginning, the UK did use the social cost of carbon approach for valuing the effects of CO2 emissions (increases or decreases) when considering policies. The carbon valuations page says: “In January 2002, a Government Economic Service working paper Estimating the social cost of carbon emissions suggested £19/tCO2 within a range of £10 to £38/tCO2. This cost was set to rise at a rate of £0.27/tCO2 per year to reflect the increasing marginal cost of emissions.”

And: “The SCC matters because it signals what society should, in theory, be willing to pay now to avoid the future damage caused by incremental carbon emissions.” Yes, indeed.

In my terms, the SCC is the aggregate of what all individuals ought to be willing to pay, each according to his or her own share, to compensate the people who are harmed by their own emissions of CO2. And no proposed measure of damage costs, which is significantly different from the social cost, can provide any basis for objective and fair assessment of the costs of damage against the costs of taking steps to avoid that damage.

The shadow price of carbon

The carbon valuations page also says: “Following the publication of the ‘Stern review on the economics of climate change’, and work commissioned by the Inter-departmental Group on the Social Cost of Carbon, the methodological approach was changed to incorporate use of the shadow price of carbon.”

“In December 2007, the approach to carbon valuation adopted the use of the shadow price of carbon (SPC) as the basis for incorporating carbon emissions in cost-benefit analysis and impact assessments. However, it takes more account of uncertainty, and is based on a stabilisation trajectory. The SPC is based on estimates of the lifetime damage costs associated with greenhouse gas emissions, known as the social cost of carbon (SCC).” (My understanding is that the SPC was actually based on the approach of, and the numbers in, the Stern Review).

Reviews by economists

This page [[17]] links to the documentation on the change to using the shadow price of carbon. It also links to reviews on that change by a number of economists. Some of these are dated 2007, but others are dated 2009, indicating that they refer to the further change in that year.

Paul Ekins’ 2007 review [[18]] said: “The issue is how to arrive at such a price in a way that is both defensible and supports the Government’s climate change policy.” So, the climate change policy required a pricing mechanism that wasn’t easily defensible? That’s a bit of a revelation. And an extremely worrying one. Who set that policy, how, and why?

Ekins goes on to outline his plan “to seek to estimate the MAC [marginal abasement costs] required to reduce carbon emissions to achieve the desired UK contribution to a global goal of stabilising carbon concentrations in the atmosphere at a level thought to avoid unacceptably dangerous climate change. The Stern Review suggested that such a concentration should be in the range of 450-550ppm.” Does this mean that some “global goal” was seen as more important than the interests of the people of the UK? That would be a very serious breach of a democratic government’s duty towards its people.

The 2009 review by Paul Watkiss [[19]] says: “We now have defined policy targets for the short- and long-term, which were not set on the basis of the social cost of carbon (SCC), and thus there is a high risk of under- or over-delivery of these targets if Government continues to use a SCC value.” I read this as an admission that policy targets had been set without considering their cost-effectiveness from the point of view of the people who would pay the costs. Again, that was a very serious dereliction of government’s duty towards the people.

Watkiss also approved of a move from the SCC to marginal abatement costs. A marginal abatement cost is the cost of taking action to avoid one unit of emissions. This is completely different from what the SCC is trying to estimate, the damage which would be caused by not avoiding emitting that unit!

The 2009 review

The valuation page now says: “A major review of government’s approach to carbon valuation was conducted in 2009, and provides our current basis for valuing carbon in policy appraisal. The review was updated in 2021 to reflect the latest evidence, targets and wider context.”

Today, there seems to be no longer a link to the detail on the 2009 change. However, the original page is still available, here: [[20]]. The punch-line is as follows: “The old approach based on estimates of the social cost of carbon should be replaced with a target-consistent approach, based on estimates of the abatement costs that will need to be incurred to meet specific emissions reduction targets. The change will have the effect of helping to ensure that the policies the government develops are consistent with the emissions reductions targets that the UK has adopted through carbon budgets, and also at an EU and UN level.”

If I read that right, it means that the UK government had abandoned any attempt or pretence at trying to work out how big the CO2 problem really was. Cynically paraphrased, their argument seems to have been: “We know we can’t do a credible cost-benefit analysis that justifies any political action on this. But we’re already committed to political action. So, we’ll make up numbers to match the commitments, and hope that no-one notices.” That was extreme bad faith towards the people, was it not?

It also opens up the question, why did they set the targets and “carbon budgets” in the first place, without first checking that they were feasible and cost-effective? To do that was, very obviously, against the interests of the people. We want our money, and our affordable cars, back.

On that page, there is also a link to a review by Paul Johnson [[21]]. The following comment is most revealing: “The problem is, of course, that the natural response of the economist to some of the arguments put forward here – that the SCC may be inconsistent with targets and international agreements – is that this just reveals the incoherence of the targets and agreements. I am not in that camp, but the paper needs more explicitly to rebut that view.” And, a little further down: “given a target, the consistent approach is to value carbon in such a way as to ensure we hit the target.”

It looks as though the three Pauls, Ekins, Watkiss and Johnson, won out. The government scrapped the use of SCC, and adopted the MAC approach. This made it, in effect, impossible to do any kind of objective cost-benefit analysis on anything involving CO2 emissions. Abandoning the social cost approach was, in my view, an act of atrociously bad faith towards the people by Gordon Brown’s Labour government.

The 2019 CCC report and “cost-benefit analysis”

I’ll return to the 2019 report [[22]], which, as I said in the second essay, was used to “justify” introducing “net zero.” There are mugshots and bios of eight CCC members at the beginning of the report. When you put these together, and supplement them with a few morsels from Wikipedia, they tell a story. I’ll let you, dear readers, fill in the details for yourselves; but I will point out that one of the eight is an economist called Paul Johnson.

There’s more back-story here, too. In reply to a Freedom of Information request from the Global Warming Policy Foundation, the CCC admitted that they didn’t have any accurate estimates of the costs of “net zero” for 2020 to 2049. Amazing – and, again, bad faith.

Somebody in the government must have decided that going ahead with “net zero,” without having published any kind of cost-benefit analysis at all, was going to be a little risky. So, this report was produced: [[23]]. The date seems to have been April 2019, though I didn’t find it until 2021. It purported to be a cost-benefit analysis for “net zero” CO2 emission policies.

You can note that the chairman of the group that produced this report, Paul Ekins, was the same economist who drove the 2009 decision to move away from the use of the social cost of carbon. You can see in action the MAC approach which replaced it, and you can marvel at how obscure and counter-intuitive it seems.

You can also marvel at the lack of monetary numbers in the report for the costs of climate change! The report quotes a number from an IPCC special report, as follows: “The IPCC 1.5oC report made clear that going beyond a temperature increase of 1.5oC would significantly increase the risks of substantial damage from climate change – the report actually cites estimates of the extra damage caused in 2100 by 2oC as opposed to 1.5oC as USD 15-38.5 trillion (2.3-3.5% of Gross World Product).” And that’s it.

You can also see that the question of what would be the costs of taking no policy actions at all from here on in is never even addressed. The nearest they get is to say: “Given the potentially large damages from unabated climate change, and the perhaps small (but not negligible) existential risk of such change, we conclude that strong mitigation action is far preferable to not acting.” Which sounds to me much like “We have to take action, because a pixie might fart, and that would be catastrophic.”

You may well conclude, as I have done, that whatever this report was, it was not an unbiased, quantitative cost-benefit analysis.

2020 update to the Green Book

In 2020, there was an update to the Green Book, described here: [[24]]. This is a most interesting and, to me, rather damning document. It says: “In March 2020, the Government announced a review of the approach, to improve how the Green Book supports strategic priorities such as its ‘levelling up’ agenda and the transition to net zero greenhouse gas emissions.”

Further down, it says: “The 2020 review of the Green Book concluded that it failed to support the Government’s objectives in areas such as ‘levelling up’ the regions and reaching net zero. The review said this was because the process relied too heavily on cost-benefit analysis, also known as the benefit-cost ratio (BCR).” And there was “insufficient weight given to whether the proposed project addressed strategic policy priorities.” Further, under the new Green Book, “a project with a low BCR could go ahead if it were the best option to achieve a particular objective.”

This seems to imply that policies the politicians deem to be “strategic,” including “net zero,” are to be exempt from cost-benefit analysis! No matter how damaging the effects of those policies will be on the people the government is supposed to be serving. Let that sink in.

I’ll also point out that, while it was Gordon Brown and Labour that abandoned the use of the social cost of carbon, this amazingly dishonest turn-about was the work of Boris Johnson and the Tories. Both the main political parties have been caught fiddling the books on this one.

Even the Wingspread Statement said that, when their perverted form of the precautionary principle (PPP) is to be used, the process “must be open, informed and democratic and must include potentially affected parties. It must also involve an examination of the full range of alternatives, including no action.” But to exempt “net zero” from objective consideration of costs versus benefits is not open, informed or democratic. And it prevents examination of the full range of alternatives, including no action. It beggars belief that they have specifically excluded from financial audit the costliest and most freedom-destroying set of policies the UK government has ever initiated in peace-time. I call foul on all that.

And the timing is very, very interesting. In mid-February 2020, Chancellor Sajid Javid resigned, because he refused to bow to pressure from prime minister Boris Johnson to change his advisors: [[25]]. Rishi Sunak – now prime minister! – took over as chancellor. It is probably no coincidence that the review of the Green Book began in March.

The missing cost-benefit analysis has not been found. We’re still waiting for it.

What is the UK’s shadow price of carbon now?

The Cebr report I referenced in the second essay of this set, accessible via [[26]], revealed that the number the UK government now uses to calculate the benefits of reducing CO2 emissions by a tonne (£255.40) is more than five times the sterling equivalent of the US government’s published value of the “social cost of carbon” per tonne (£48.54).

Comparing this with the 2002 social cost estimate of £19 per tonne, rising by £0.27 per year, extrapolating that to 2022 gives £24.40. Allowing for roughly a doubling of prices due to inflation in the mean time gives almost exactly the US government’s number. This means that the UK estimate of the price of CO2 emissions per tonne has gone up by a factor of more than 5, entirely due to the abandonment of the social cost of carbon approach. So now, presumably, it is more than 5 times the number used in the USA. I call foul on that.

A way forward?

Myself, I can see only one way forward out of this mess. That is, to suspend immediately the UK’s “net zero” program, and all policies and projects associated with it, pending an objective, unbiased audit of the whole matter.

The only way I can see that such an audit could be set up within the current UK system is through a Royal Commission. The audit would have to be carried out by an international team with the appropriate skills, including climate scientists from both sides of the debate. It would have to produce an objective, unbiased costs versus benefits analysis on all aspects of the green agenda in the UK. It would have to review the history I have related here (and a lot more), and to judge whether the actions of the parties involved were up to the standards that people are entitled to expect from a democratic government. It would need powers to remove from office, and to bar from UK government projects in the future, all those that have been dishonest over this matter towards, or have acted against the interests of, the people they are supposed to serve. We might even need a “loss and damage” fund after all; but for the purpose of making those responsible for the bad green policies pay reparations to all the ordinary people who have been damaged by them!

The auditors would also need powers to determine the future course of policy over this matter. Which should, at the least, require a referendum before “net zero” or any other green projects would be allowed to re-start. And which could go as far as withdrawing from all environmental commitments made to the UN and other international parties, and ditching the green and “climate change” agenda entirely.

I’m dreaming, of course. There are simply too many vested interests, that could not afford to let this happen. But the only alternative I can see is to continue along the same path that the politicians have been forcing us along for more than 30 years. And that path can only lead to the destruction of human industrial civilization in its original heartland of the UK.

To sum up

What happened with the Stern Review was bad enough. Economists and others took it apart, yet it was still used to “justify” the Climate Change Bill 2008.

The numbers submitted for the Climate Change Bill 2008 were far worse than merely bad. Yet almost all MPs waved it through, against the interests of the people they “represented.”

It is even more troubling that in 2009, the UK government chose to make it, in effect, impossible to do proper cost-benefit analysis on anything involving CO2 emissions. Stern had failed to convince people that the problem was big enough for draconian action. So, they made sure no-one could try to replicate Stern’s work, or show he was wrong.

Then in 2019, they issued a report about costs and benefits of “net zero,” which was not a cost-benefit analysis. And in 2020, they decided to exempt “strategic” projects such as “net zero” from any requirement to analyze costs and benefits at all. Go figure why.

UK governments of all parties have, in my view, committed very serious fraud over the “climate change” issue against the people they are supposed to serve. And they have behaved, for decades, with extreme bad faith towards us. We do, indeed, have a crisis on our hands; but it is not a “climate crisis,” or anything like it. This is a crisis of legitimacy of government.

Post-script

I will close this set of five essays with three messages from sages of the past.

John Locke (1632-1704): “But if a long train of abuses, prevarications and artifices, all tending the same way, make the design visible to the people, and they cannot but feel what they lie under, and see whither they are going, it is not to be wondered that they should then rouse themselves, and endeavour to put the rule into such hands which may secure to them the ends for which government was at first erected.” (Second Treatise of Government, §225).

Frederick Douglass (1818-1895): “Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is in an organized conspiracy to oppress, rob, and degrade them, neither persons nor property will be safe.” [[27]].

Thomas Jefferson (1743-1826): “I hold it that a little rebellion now and then is a good thing, and as necessary in the political world as storms in the physical.” [[28]].

I rest my case, my friends.

Posted by No comments:
Subscribe to: Posts (Atom)