CLIMATE CHANGE AND THE CONVENTIONAL WISDOM

A speech by Colin Robinson [colin@gunnersbury.freeserve.co.uk] given at the British Institute of Energy Economics conference on 9/24/2008

Earlier this year, I was composing a lecture about climate change policy and I looked at a book which I had not read for years (and is hardly one of my favourites). In chapter 2 of my fifty year old copy of John Kenneth Galbraith`s `The Affluent Society' I found his definition of `the conventional wisdom', a term which he coined. It reminded me what a powerful idea it is.

The conventional wisdom: Galbraith defined the conventional wisdom as `the name for the ideas which are esteemed at any time for their acceptability'. He went on to point out that since exposition of the conventional wisdom `has the approval of those to whom it is addressed' it is always in great demand, and `it follows that a very large part of our social comment -and nearly all that is well regarded - is devoted at any time to articulating the conventional wisdom' which, he said, is regarded as `more or less identical with sound scholarship.'

What present day idea most closely fits Galbraith`s notion of something that is constantly repeated, is what people want to hear, can generally be expounded without fear of contradiction and is regarded as `sound scholarship'? It is, of course, the damaging climate change hypothesis by which I mean the idea that the world faces damaging changes in climate, as a consequence of human activities, and that the only way to avoid the dire consequences is centralised action by governments and international institutions.

The idea has been firmly implanted and the media constantly reinforce it. Newspapers, radio, TV and blogs (Hayek`s second hand dealers in ideas) attribute many of the changes they see in the natural world to `climate change' and they urge responses which involve changes in lifestyles, for instance away from activities once thought liberating (such as air and motor travel) to a `simpler' way of life. They tend to use weather events to spread the message about climate change, pointing out that it is drier, wetter, warmer or colder than it was in the recent past. Since recent weather must always fall into one of those categories (unless it stays exactly the same), there is no weather-related event that can refute the hypothesis that the climate is changing. The more specific hypothesis - that the climate is warming -might seem easier to refute. But I note that even a soggy summer, which has left my drought-resistant plants looking distinctly worse for wear, is still being attributed in some way to global warming.

The damaging climate change hypothesis has acquired many of the trappings of a religion. It has priests who proclaim its main message - `the science is settled', a dismissive phrase intended to reinforce the position of the hypothesis as a principal element in the conventional wisdom of the day. And august bodies, such as the Royal Society, condemn heretics - that means anyone who raises any questions about the validity of the hypothesis. Its constant repetition makes its status appear, in Galbraith`s word, `virtually impregnable'.

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CHINA CALLS ON RICH NATIONS TO SLASH EMISSIONS BY 95%

Heh!

China, the world's most populous nation, called on wealthier countries to slash production of greenhouse gases as much as 95 percent by mid-century and leave developing economies with a lower pollution-cutting burden.

In a preliminary step to tackle global-warming emissions, the proposal seeks cuts of 25 percent to 40 percent by 2020 from 1990's level, the Chinese government said in a statement on the Web site of a United Nations agency that oversees climate treaties.

China, whose economy expanded 11.9 percent last year and is the fourth-largest in the world, wants slower-growing rich nations such as the U.S., Britain and Japan to set targets because their industries and vehicles have caused most of the historic build-up of polluting gases. Carbon dioxide, the main man-made greenhouse gas, lasts a century or more in the atmosphere, scientists say.

China's demand for 95 percent cuts is ambitious and has "zero" chance of acceptance by developed nations, said Dennis Mignon, an analyst with First Climate in Bad Vilbel, Germany. Industrialized governments "will be focused on maintaining economic growth" as the credit crisis bites, Mignon said.

About 180 nations are locked in a series of eight negotiations to form a climate-protection agreement under supervision by the UN climate agency. They have set a deadline of the end of 2009 to devise a successor to the Kyoto treaty, which is set to expire in 2012.

"Only with such a mid-term target being clearly determined is it meaningful to talk about any long-term goals for emission reductions," China said in its submission to the UN Framework Convention on Climate Change, based in Bonn.

China warned rich nations not to "twist" the mission to suit their own needs and left the door open for further agreements. Any accord reached at the eighth round of talks, planned for Copenhagen at the end of next year, "shall not be a final result," China said.

Europe, the U.S. and other industrialized countries should contribute 0.5 percent to 1 percent of their national economic output to help developing countries cope with global warming and reduce their emissions of greenhouse gases, China said, repeating a proposal presented at a UN-sponsored climate meeting in Accra, Ghana, in August.

World carbon dioxide emissions from energy use rose 2.8 percent last year as coal consumption outpaced crude oil and clean-burning natural gas, BP Plc data show.

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EMISSIONS IMPOSSIBLE: NORWAY TAXES CARBON, EMISSIONS RISE

The big debate over how to tackle climate change generally boils down to what kind of pain a climate plan will do to the economy; environmental benefits are generally assumed.

But what if the economic pain doesn't even translate into environmental gain? That's what happened in Norway, a pioneer in putting a pricetag on carbon emissions almost twenty years ago. Net result? Carbon emissions have increased 15% since then. Leila Abboud writes today in the WSJ:

It wasn't supposed to be this way. By making it more expensive to pollute, carbon taxes should spur companies and individuals to clean up. Norway's sobering experience shows how difficult it is to cut emissions in the real world, where elegant theoretical solutions are complicated by economic changes, entrenched behaviors and political realities.

For economic changes, read "growth." Norway's growth in emissions has been a lot less than its economic growth over the same period, so the economy is clearly getting cleaner. But not enough to offset the simple math of more economic activity spewing more emissions into the atmosphere. Norway's oil industry became one of the world's cleanest since it started paying to pollute; but it's grown so much in the meantime, oil and gas emissions have quadrupled, the WSJ notes.

People also learn to roll with punches. While $4 gasoline has changed some driving habits in the U.S., $10 gasoline hasn't in Norway-car sales surged in the last decade and people still choose expensive commutes. Does that mean expectations that pricey gasoline will end America's car addiction are overblown?

Then there's politics. Norway isn't alone in giving some economic sectors, like fishing, preferential treatment. China and India don't even want to talk about emissions curbs. Germany and Poland are rapidly backpedaling on environmental commitments to save key industries at a time of economic strife. Australia has tied itself in knots trying to figure out how to clean up a coal-fired export economy without killing it.

Which brings us back to one of the bigger questions. If Norway can't slash emissions almost two decades after slapping a hefty pricetag on carbon, what does that say about the belief that "making polluters pay" will automatically transform America's economy?

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CARBON CAPS ARE CREATING A EUROPEAN ENERGY CRISIS

Having for years put other peoples' money where the alarmists' rhetoric was, there is serious momentum on the Continent to curb the Kyoto policies by which they have defined themselves for so long - and a growing reluctance to deepen the (failed) efforts to reduce GHGs in the face of mounting energy and other economic costs. Oh, and they want to drill in the Arctic, recognizing at the highest level that "any realistic energy strategy in the future will have to rely on oil and gas".

Official Europe has reached the point of acknowledging that they created a looming crisis, and are getting their wits about them. This comes just as our own leaders race to replicate their mistakes.

Yes, the latter are the same people who brought us the lovely housing and financial crises by succumbing to noisy pressure-group demands, and whose very similar ostrich routine on energy supply while succumbing to other pressure groups has us on track for a very similar energy crisis - with utility executives increasingly warning that the Lights. Will. Go. Out.

The odd thing about that one is: As the reactive Congress, which loves creating risk for others while avoiding political risk to themselves at all cost (well, at a cost of about $1 trillion just this year), will find - no doubt to great shock and finger-pointing - the productive sector of the economy can't just build energy capacity as fast as government can bail out the lenders they twisted into a pretzel in the first place.

And until Washington reforms the laws they have written delegating ultimate energy-supply authority to agencies and the courts, there's nothing Congress or the productive sector could do about it even within about a decade, anyway.

What Europe is experiencing explains the open calls on their shores that the climate-change issue is too important to be left to democracy. I tremble when I reflect how we may find ourselves agreeing with that in the fairly near future, if not for quite the same reason.

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FINANCIAL STORM DIMS HOPE OF TOUGH U.N. CLIMATE PACT

Global financial mayhem is dimming prospects for a strong new U.N. pact to fight climate change, but it might aid cheap green schemes such as insulating buildings to save energy, analysts said. The turmoil, straining government coffers with bank bailouts, may sap interest in more costly projects such as burying heat-trapping carbon dioxide from coal-fired power plants, refining biodiesel or some renewable energies. "There will be a shift in investments" toward energy efficiency, said Nick Mabey, director of E3G think-tank in London. Saving energy, such as by insulating buildings, gives quick returns and can help create jobs.

A year ago, many governments were billing the fight against warming as humanity's top long-term challenge after the U.N. Climate Panel said human use of fossil fuels would bring more floods, heatwaves, droughts and rising seas.

Now, with the United States caught in a financial storm that may cost $700 billion of taxpayers' money to fix, a plan to agree a new U.N. treaty to fight global warming in Copenhagen in December 2009 is looking ever more ambitious.

German Foreign Minister Frank-Walter Steinmeier said on Tuesday the market difficulties would make it harder to agree a climate deal, while U.S. Democratic presidential candidate Barack Obama said last week he may be forced to scale back his planned investments in energy. "It's starting to weigh on peoples' minds that the whole process could go completely wrong," said Mabey. In the worst case, the negotiations could collapse, like U.N. trade talks. "The problem of climate change is going to stick with us. But the pace and the scale of ambition may be less in the near term," said Elliot Diringer, a director at the Pew Center on Global Climate Change in Washington.

"Hopefully the crisis will make us smarter in spending our money," said Bjorn Lomborg, Danish author of "The Skeptical Environmentalist," who says many governments like Britain focus too much on costly projects such as offshore windmills. More mundane carbon-saving projects may benefit.

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Congress is no green house

The view from Australia

There are two great myths perpetuated by Kevin Rudd and Climate Change Minister Penny Wong as a foundation for Australia introducing an emissions trading scheme. Both are deceitful and misleading the public about the cost of anETS. The first myth appears in Wong's green paper, which argues Australia is "acting with the rest of the world" because other countries are supporting an ETS, in particular the US, where "both presidential candidates are committed to introducing schemes".

Wong is correct that Republican presidential candidate John McCain and his Democratic rival, Barack Obama, support the introduction of a cap-and-trade system. But their support doesn't guarantee anything and the $US700 billion ($895 billion) financial bailout package demonstrates why. The bailout is one of the grandest bipartisan political measures taken in US history. It was supported by Republicans President George W. Bush, Treasury Secretary Henry Paulson and McCain, and the Democrats' house Speaker Nancy Pelosi, Senate majority leader Harry Reid and Obama. Yet the bill failed in the House ofRepresentatives.

A bill may yet pass, but it has nothing to do with bipartisan support. There isn't similar party discipline as in Australia and therefore bipartisan support doesn't mean success. Members of the House of Representatives are elected every two years and are highly accountable to their electorates. Their allegiance is to their electorate first and their party second. And US voters are very sensitive to thegovernment voting for legislation that will simply take money from their back pockets. The present 110th Democrat-controlled Congress provides ample evidence. To date there have been eight bills introduced to establish a cap-and-trade system. None have passed. Bush didn't even need to pull out his veto pen.

These failed bills are merely following in the footsteps of the Kyoto Protocol, which was voted down in the Senate 95-0. Similarly, in 2003 McCain and then Democratic senator Joseph Lieberman proposed the Climate Stewardship Act. The bill was defeated 55-43. Both senators then proposed an amended version in 2005 that was defeated by an even wider margin. Ultimately, the reason for each bill's demise has been the cost it would impose on American consumers and industry without corresponding costs on competitor nations. The fallout from the financial crisis is just going to make negotiating an ETS harder.

And that leads to the second myth: Australia needs to develop an ETS to participate in the forthcoming international trading scheme. But there will not be a comprehensive international trading scheme. Establishing one requires every major emitting country to participate. At the G-8 meeting in Japan earlier this year Chinese President Hu Jintao reiterated what has long been the mantra of the Chinese Government: "China's central task now is to develop the economy and make life better for the people." The attitude of the Chinese Government is that "developed countries should make explicit commitments to continue to take the lead in emissions reduction".

China is not alone. Indian Prime Minister Manmohan Singh said to the 63rd session of the UN General Assembly: "The outcome must be fair and equitable ... we are committed to our per-capita emissions of greenhouse gases not exceeding those of the developed countries." In short, India may only slow the growth of its emissions to correspond with developed country levels.

For the US to participate requires developing countries to take proportionate emissions cuts. For developing countries to participate, developed countries need to shoulder most of the burden. In this scenario the developed and developing world are caught in a game of climate chicken. But outside Australia and the European Union no one appears interested in playing.

The final Garnaut report points out: "The only realistic chance of achieving the depth, speed and breadth of action now required from all major emitters is allocation of internationally tradeable emissions rights across countries." But it is simply not going to happen. The likeliest outcome will be a voluntary international trading scheme. Countries that participate will be guinea pigs. Their role will be to iron out problems, such as developing an accounting system for an industry's carbon footprint, the equivalence of permits and how to respond to the nightmarish impacts on trade.

If we keep heading down this path, the myths will become clear, and it won't take long before Australians start to ask why we are harming our economy while achieving virtually no reduction in emissions. It is an answer Rudd and Wong should think long and hard about.

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