No Free Ride on the Green Bandwagon
From the March 18, 2007, Sunday Times
March 19, 2007
by Irwin Stelzer
AS they struggle to cope with voters' new concerns about global warming, the world's politicians seem to be seeking one of those "cunning plans" that Baldrick was always ready to offer Blackadder. Tony Blair and Angela Merkel are competing for the anti-global warming leadership of Europe. David Cameron is erecting a wind turbine on his house and targeting air travel, with people who fly most often (wealth-generating businessmen) to be taxed at the highest rate. California governor Arnold Schwarzenegger has converted one of his Hummers to hydrogen and another to biofuel. And George Bush is lavishing billions of taxpayers' money on America's already-cossetted farmers to get them to grow more corn.
Only Gordon Brown seems to have kept his head. The chancellor has finally recognised that his climate-change levy is too blunt an instrument, and shaped some of his colleagues' loonier proposals into something that just might not disrupt the British economy or create an even bigger black hole in the Treasury's finances. Emphasise the "just might", as no one has yet seriously costed the "free insulation", changes in appliances, and new light bulbs that are parts of Labour's plan to cope with global warming and, more importantly, fend off Cameron and his green supporters.
All these plans have two features in common: rationing and new costs. Both Tory and Labour green campaigners favour issuing each of us a certain number of carbon credits, modelled on the ration books of the second world war. This rationing of carbon emissions means rationing energy, at least until new, unsubsidised technologies emerge, and will involve enforced used of fluorescent light bulbs, or switches on television sets, or an individual allocation of carbon credits to curtail travel. Such rationing apparently appeals to Old Labour types. "The current climate crisis gives the Labour party -never comfortable with the politics of post-war affluence -the opportunity to return to the politics of austerity," writes Professor Mark Roodhouse of the University of York in support of applying to climate change "the Blitz spirit ...this time to avert catastrophic climate change rather than Nazi invasion".
The second feature of all proposals is that they cost money -to be paid by consumers, taxpayers and businesses. Some green politicians want to tax energy use, or at least those uses they have decided are not as important as other uses - aeroplanes spring to politicians' minds as they jet around the world to conferences aimed at saving the planet. Others want to cap the carbon emissions of various industries, imposing costs that will be reflected either in higher prices or, if the rest of the world doesn't go along, in jobs lost to international rivals.
Consider the simple matter of incandescent light bulbs, which the EU wants switched off by 2009. The European Lamp Companies Federation is ecstatic. Its president hailed the move: "These (energy-efficient) bulbs have been on the market for 15 years. Price has been a factor. If the EU sets minimum energy efficiency standards, people will have to buy them." No surprise that the industry is delighted to have government force people to buy a product they don't want, at prices they consider too high.
All of these costs might be worth bearing if the threat is as immediate and overwhelming as the Al Gore-Sir Nicholas Stern faction believes. But it is neither: Gore guesses that sea levels will rise 20ft, and soon, while scientists estimate closer to 20in, and later. And the flaws in the Stern report have been pointed out by academics at Massachusetts Institute of Technology and elsewhere, including many who do not oppose emissions-reducing policies.
So sensible policymakers will have to ignore the direst forecasters. And the noisiest. Hollywood stars such as Pierce Brosnan and Martin Sheen, leaders in the fight against global warming, are also leading the campaign against an offshore terminal that would allow California to import clean liquefied natural gas from Australia. And powerful American promoters of the virtues of ethanol are fighting to retain the 54-cent-per-gallon tariff that keeps cheaper ethanol from entering US markets.
Fortunately, lurking in the flurry of political activity are some sensible ideas.
It does make sense to put a price on carbon, so that the users of energy bear the costs they are imposing on society. It does make sense to shift the tax burden from growth-stifling income taxes to pollution-creating activities. It does make sense to allow polluters to trade carbon credits internationally so that the cost of reducing emissions can be minimised. It does make sense to consider the costs of any emission-reducing plans. It does make sense to consider the impact of any programme on economic growth and jobs -some pollution is worth bearing if it is more than offset by the wealth it creates.
Finally, it does make sense to consider the unintended consequences of any legislation. American policymakers' infatuation with corn as a replacement for crude oil has driven corn prices so high that poor Mexicans can't afford tortillas, and created such inflated incentives to plant more corn that forests are being chopped down to make space for it, and other acreage is being shifted from barley to biofuels, driving up the cost of beer. The new light bulbs will make reading more difficult and drive up demand for specs, and the cosmetics industry is said to be reformulating foundation makeups so that feminine beauty will be undimmed by the strange hue emitted by the new bulbs.
There are more such consequences, but you get the idea: think hard before jumping on the green bandwagon. There is no free ride.
Irwin Stelzer is a Senior Fellow and Director of Economic Policy Studies for the Hudson Institute. He is also the U.S. economist and political columnist for The Sunday Times (London) and The Courier Mail (Australia), a columnist for The New York Post, and an honorary fellow of the Centre for Socio-Legal Studies for Wolfson College at Oxford University. He is the founder and former president of National Economic Research Associates and a consultant to several U.S. and United Kingdom industries on a variety of commercial and policy issues. He has a doctorate in economics from Cornell University and has taught at institutions such as Cornell, the University of Connecticut, New York University, and Nuffield College, Oxford.