Energy Return on Energy Invested: The Kleptogarchy part 21

Posted: September 1, 2022 | Author: | Filed under: Economics, Energy | Tags: , , | Leave a comment

Energy Return on Energy Invested

Fossil fuels still dominate global energy because they appear to have high positive returns on the energy invested in extracting and processing them. Uncomfortably, this is true only because we have not counted the millions of years of geological time that have passed since they were living carbon. These eons of time are among the ‘externalities’ that organisations leave out of their profitability calculations. With each passing decade, oil, gas and coal experience a fall in Energy Returned On Energy Invested (EROEI or EROI) because extractors have to mine deeper, in more problematic places, at escalating cost. Research at the University of Leeds warned in 2019 that the EROIs for fossil fuels have become much closer to those for renewable energy, around six units of output to one of input, down to three to one for electricity generation.[1] Back in the early 1990s estimates for the EROI for oil and gas traded on the world market were more like 30:1.  

“The EROI for petroleum production appears to be declining over time for every place we have data,” researchers wrote in 2014.[2] They listed several examples of EROI, showing that coal and natural gas had the highest figures from extraction to end of processing, up to 60:1 for coal and to 67:1 for natural gas since 2000. For oil, the most recent figures quoted, for 2010, were 10, 11 and 15 to one.

Fuel from biomass, in this table, was scarcely worthwhile, with EROI figures between 0.8 and 1.6 for ethanol and 1.3 for biodiesel. Nuclear was 15:1 to 5:1, similar to electricity from photovoltaic panels. Wind power had an EROI of about 18 to one, relatively high, and hydropower had the highest figure in the list, over 100:1, although that was a figure from the 1980s. Hydropower still has benefits for clean electricity, but droughts impact the quantities of water available.

For flexibility and usability, nothing competes with oil. It is the super ingredient of modern materials and the energy source for the bulk of the world’s mechanised transport. There is nothing as cost-effective that can replace it. The best answer, for the sake of lower emissions and a liveable planet, is to use LESS. The conditions for this to happen include:

  • Local economies that are self-sufficient in essential goods and in services such as health and education.
  • Pleasant living environments where people are content to spend their leisure time.
  • Energy and fuel rationing to avoid excessive capture by the wealthy.

If the law-and-economics philosophy holds sway (see Law and Economics in The Kleptogarchy part 7), rationing would contradict the rights of wealthy people to acquire as much as they want; people will only live in pleasant environments if they can buy them; and if current concepts of market efficiency are paramount, resilient local economies will struggle to develop. The spread of law-and-economics over legal systems, reinforcing the capacity of the presently powerful to resist change, has slowed meaningful action to limit global heating.

According to the Environmental Performance Index 2022 from the Yale Center for Environmental Law and Policy and Columbia University’s Center for International Earth Science Information Network,[3] the top countries for sustainability and environmental protection are Denmark, the United Kingdom and Finland. The leading sixteen are all in Europe. The high standing of the UK seemed surprising, until interpreted in the light of other nations’ lack of progress. The bottom six, as published in the Index, are all in Asia: Papua New Guinea, Pakistan, Bangladesh, Vietnam, Myanmar and, bringing up the rear, the giant, environmentally degraded former British colony of India. The six were all colonised by European powers, mainly the UK. The French colonised Vietnam (as well as Laos and Cambodia) and the Germans controlled part of Papua New Guinea. Colonisers exported capitalism as the organising principle, extracting resources for use ‘back home’, and they deployed aspects of their contemporary understandings of Christianity as legitimising concepts, such as work is virtuous, obedience is virtuous, reference to a higher authority is virtuous.

At the other end of the Index, the UK’s apparently praiseworthy position relative to others appears to grant leeway to ‘temporary’ strategies to extract more fossil fuels from the North Sea and elsewhere, but the climate does not appreciate relative positions in league tables, or national borders, all of which are human constructions.

[1] ‘Estimation of Global Final Stage Energy-Return-on-Investment for Fossil Fuels with Comparison to Renewable Energy Sources’, by Paul Brockway, Anna Owen, Lina Brand-Correa, and Lukas Hardt, Nature Energy July 2019, reported in Science Daily, July 11th 2019. https://www.sciencedaily.com/releases/2019/07/190711114846.htm, accessed April 24th 2022.

[2] ‘EROI of Different Fuels and the Implications for Society’ by Charles A S Hall, Jessica G Lambert and Stephen B Balogh, Energy Policy Vol.64, January 2014, pps.141-152. https://www.sciencedirect.com/science/article/pii/S0301421513003856, accessed April 25th 2022.

[3] https://epi.yale.edu/, accessed June 8th 2022.

No Happy Medium: The Kleptogarchy part 14

Posted: August 24, 2022 | Author: | Filed under: Economics, Energy | Tags: , | Leave a comment

Economic Growth and Energy Reductions?

Countries, those accidents of geography and history, differ massively in primary energy use. The average across all nations in 2020 was 71.4 gigajoules per capita, but eight of the countries listed by BP it its Statistical Review of World Energy[1] recorded more than 300 gigajoules per head. Qatar was highest with 594.2 gigajoules per person, and Singapore was close behind with 583.9 gigajoules. Six of the energy-intensive eight are major fossil fuel extractors – Kuwait, Saudi Arabia, United Arab Emirates, Norway and Canada, as well as Qatar. The other two are Trinidad and Tobago, with energy intensive heavy industry, and the highly industrialised city state of Singapore.

The UK used 101.6 gigajoules of primary energy per capita, below the European average of 113.6 and 0.5 of a gigajoule more than China. The fairly low figure for the UK probably reflects the offshoring of industry more than deliberate cutbacks.

If we all achieved the low level of primary energy consumption in Africa apart from Algeria, Egypt, Morocco and South Africa, namely 6.2 gigajoules per capita, we would be using only one-eleventh of current worldwide consumption. A relatively affluent country like the UK (despite its downward trajectory) would have to reduce to one-sixteenth of 2020’s consumption. Heavily urbanised economies could not function in such conditions of energy scarcity. Governments are still desperate to achieve economic growth, although mostly they also claim to have programmes to cut both energy use and damaging emissions.

Yet even in 2020, Covid Year 1, when economic activity slowed across the globe, carbon dioxide emissions declined only 6.0%, and were higher than in 2011. Emissions from mainland China, where Covid-19 was first identified, increased by nearly 1%, an alarming 88.8 million tonnes more. Hong Kong, recorded separately, had a fall of 28%, but even that, 26.5 million tonnes, was considerably less than China’s growth. Between 2010 and 2020 emissions from mainland China, the world’s leading polluter throughout the decade, soared 21.5%. And at the COP26 climate conference in Glasgow in 2021, China refused to commit to phasing out coal.

We cannot cut energy use by anything like the extent required, and continue to expect economic growth. We know that, China knows that, but on this conundrum, the most powerful voices are silent.

[1] https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2021-full-report.pdf, accessed February 1st 2022l; Primary energy consumption per capita, p.13.

Changing Investors’ Expectations: The Kleptogarchy part 9

Posted: August 19, 2022 | Author: | Filed under: Climate, Economics | Tags: , , , | Leave a comment

Changing Investors’ Expectations

The struggle for profits means that the bulk of workers are paid less than they should be, and the harmful impacts of extracting resources from land or sea are left for societies to pay, which often they cannot afford to do, one reason being inadequate remuneration for workers in those societies. Co-operative ownership of resources and production can create a fairer system, but the enemy now is time.

The IPCC, to be fair, cannot order governments around. The mitigation measures in the April 2022 report are couched in bland language which detracts from the urgency of the situation. This is an example:

“Economy-wide packages that support mitigation and avoid negative environmental outcomes include: long-term public spending commitments, pricing reform; and investment in education and training, natural capital, R&D and infrastructure (high confidence). They can meet short-term economic goals while reducing emissions and shifting development pathways towards sustainability (medium confidence). Infrastructure investments can be designed to promote low-emissions futures that meet development needs (medium confidence).”[1]

This is a list of useful aims but not a recipe for change resulting in degrowth. The text has to be approved by governments, many of which are reluctant to introduce policies that require people to commit to huge changes in behaviour. The authors are walking on eggshells. Meeting short-term economic goals while reducing emissions? Does this mean combining economic growth with a fall in harmful emissions? In the UK this meant relying on poorer countries to manufacture emission-heavy goods for subsequent import, emissions uncounted in the UK’s emissions data. That is just shifting the problem around the globe. Powerful countries can do more shifting than weak ones. Countries trying en masse to look after their own short-term interests are a problem, because scarcely anyone in power is concentrating primarily on whole-Earth mitigation.

Shareholders are also a problem. Investors in companies look for capital growth as well as for rising income. In a company that is not growing, let alone shrinking, shareholders are likely to be disappointed and may try to sell their stock. Abandonment of growth as a guiding principle would demand change to the structure and funding of companies, and to shareholders’ expectations of dividends. Almost two generations ago, in 1973, Ernst Schumacher’s classic Small in Beautiful was published. Dr Schumacher (1911-1977) has much to say on the dangers of wholly private ownership. He pointed out that:

“Private enterprise claims that its profits are being earned by its own efforts, and that a substantial part of them is then taxed away by public authorities. This is not a correct reflection of the truth – generally speaking. The truth is that a large part of the costs of private enterprise has been borne by the public authorities – because they pay for the infrastructure – and that the profits of private enterprise therefore greatly overstate its achievement.”

Dr Schumacher did not call this kleptocracy, but that’s what it is – to take profits from resources paid for by others. It is just a small step from this assumption to believe that it is fine to use up the natural world in the service of private profit.

To start to correct this inequity, Ernst Schumacher proposed that the public should receive half of the distributed profits of large-scale enterprises, not by taxation but through owning half of the equity in these organisations. The public shares should be managed by ‘Social Councils’ with half the members drawn from the population at large, a quarter from professional associations and a quarter from trades unions. Social Councils did not make much headway, because opposition from company bosses/ investors was so regimented, and in 2022 the number of companies that are substantially employee-owned remained quite modest. The Employee Ownership Association in the UK listed 19 trustee members in June 2022, including the John Lewis Partnership, Mott MacDonald, and Scott Bader Company Ltd. In Small is Beautiful, Ernst Schumacher described the structure of Scott Bader, which was founded by Ernest Bader in 1921 and so is now over 100 years old. Mr Bader transferred the company, which makes adhesives, polymers and other chemical products, to the workers in 1951, and in 1973 Schumacher commented[2] that the company, and “a few others” were “small islands of sanity in a large society ruled by greed and envy”.

Opponents of growth as the default principle have diverged somewhat. Several influenced by Nicholas Georgescu-Roegen (1906-1994), have disagreed with supporters of a steady-state economy including Herman Daly (1938- ), emeritus professor at the University of Maryland, although both schools of thought accept that populations in rich countries should cut their use of non-renewable resources including fossil fuels. The steady-staters propose that an economy can persist in a state of dynamic equilibrium, while the de-growthers tend to accept the Georgescu-Roegen view that “even a declining state which does not converge toward annihilation, cannot exist forever in a finite environment”.[3] In theory, consumption should fall to the point at which new carbon emissions are zero, but the distribution of cuts could be anywhere on the continuum from equitable to wholly unequal. In a kleptocratic society, rising inequality is the norm – the exact opposite of a society which could be content with lower material living standards.

[1] Summary for Policymakers, paragraph E.4.5, IPCC AR6 WGIII.

[2] P.237 of the 1974 Abacus edition.

[3] Energy and Economic Myths: Institutional and Analytical Essays, p.23. Differences of opinion between de-growthers and steady-staters are explored in ‘Economic De-Growth Vs. Steady-State Economy’ by Christian Kerschner in Journal of Cleaner Production Vol.18 pps.544-551, 2010.

The Cold Philosophy of Law and Economics: The Kleptogarchy part 7

Posted: August 17, 2022 | Author: | Filed under: Economics, Law, Ethics | Tags: , , , , | 1 Comment

The Cold Philosophy of Law and Economics

The uncounted ‘externalities’ of production like toxic waste from oil drilling, and emissions of greenhouse gases, are not the only source of ‘profit’ but it is alarming to consider other profit sources and to realise how often they result in harm. To the old examples of tobacco, alcohol and other mind-altering drugs, we can add highly processed fat-rich, salt-rich and sugar-rich foods causing such conditions as obesity, diabetes and high blood pressure which, like lung damage from smoking and liver damage from alcohol, impose unnecessary costs on medical services all over the world. Addictive behaviours make money for those feeding the addictions, whether it is gambling, gaming, sex, social media or shopping. Encouragement of addiction can destroy the lives of purchasers but makes money for the sellers, who can count on new customers emerging from anxious, dispossessed populations. When the mantra is ‘Growth’, to maintain the fiction than continuous growth on a finite planet is possible, activities that used to be voluntary are commercialised. First you encourage all parents to get paid work, and then expand commercial childcare, cleaning, ready meals, delivery services, elder care and so on, to create the illusion of growth. Doubtless some people, but by no means all, would prefer to be at work rather than looking after their own children, or their own frail relatives, but even so, commercialisation cannot expand beyond the sum total of activity.

Growth has depended on fossil energy, which still dominates the world’s largest companies by revenue. Five of the top ten in the Fortune Global 500 for 2020 were oil companies: China’s Sinopec Group in second place, revenues of $407 billion; China National Petroleum, fourth, $379 billion; Royal Dutch Shell of the Netherlands and the UK, fifth, $352 billion; Saudi Arabia’s Saudi Aramco, sixth, $330 billion; and the UK’s BP, eighth, $283 billion. The largest company by revenue, Walmart of the USA with $524 billion, fulfils households’ daily and weekly needs but the logistics operations are energy-intense and the food products often travel hundreds, even thousands of miles. Two of the remaining four in the top ten are automobile companies: Germany’s Volkswagen at seventh, $283 billion and Japan’s Toyota, tenth, $275 billion. The auto industry owes its existence to fossil fuels.

The remaining two companies in the 2020 top ten were State Grid Corporation of China and Amazon of the USA. State Grid Corporation, third, had reported revenues of $384 billion. State Grid distributes electricity, more than 60% of which is generated using coal. Amazon.com Inc, ninth, recorded revenues of $281 billion revenues. Amazon, like Walmart, depends on highly complex, energy-hungry logistics networks.

Giant organisations are obstacles to the radical changes necessary for the future of life as we know it. Their spending buys, among much else, professorships and higher education courses that reinforce capitalist dogma.

Law and economics is one such field of academic endeavour, and a critical one for corporations. Law-and-economics has the premise that laws must be evaluated for their efficiency, meaning their economic impacts. In this mode of thought, justice is merely a financial calculation: a right in law should belong to the party willing to pay most for it. Theories of legal efficiency are quite abstruse but are based on an understanding of human activity as dependent on continuous cost-benefit calculations, with the law coming into play as arbiter between competing calculations. Efficiency and ethics might coincide, but need not do so, and if they clash, the cost-benefit calculations usually win out.

“In simple terms, a legal situation is said to be efficient if a right is given to the party who would be willing to pay the most for it”, wrote American economist Paul H Rubin.[1]

He explained: “Law and economics stresses that markets are more efficient than courts. When possible, the legal system …… will force a transaction into the market. When this is impossible, the legal system attempts to ‘mimic a market’ and guess at what the parties would have desired if markets had been feasible.”

In the law-and-economics world view, private property is sacrosanct. Rubin expounded: “The characteristics of efficient property rights are universality (everything is owned), exclusivity (everything is owned by one agent), and transferability. Law and economics can also explain the results of inefficient property definitions. For example, because no one owns wild fish, the only way to own a fish is to catch it. The result is overfishing.”[2]

The claim that everything should be owned, ideally by a single agent, because this is ‘efficient’, ignores the past – how were property rights obtained? – and future – what happens if owners of wealth decide to use it for malevolent ends, for example? Nothing, it appears, because in law-and-economics issues of ethics are subordinate to money-power. Rights to ownership are determined by capacity to pay for those rights. The argument implies that if one individual or corporation claimed rights to all the fish in the sea, over-fishing would stop because that person/corporation would appreciate the need to conserve stocks for the long term. The owner-as-conservator argument does not stand up in reality because ‘owners’ in substantial numbers have depleted oil wells, coal mines, soil, forests and other resources they ‘own’, and continue to do so. The Steven Donziger story (part 6 above) shows the extreme determination with which a corporation can employ lawyers to disclaim responsibility for harmful consequences of its activities. Law-and-economics arguments can be and are applied to limit compensation payments.

The law-and-economics concept was marketed to judges in the USA, in the expectation that they would think twice about enforcing environmental regulations if lawyers convinced them that it was not ‘efficient’ to do so. Jane Mayer, in her gripping book Dark Money,[3] reported that about 40% of federal judges took part in law-and-economics seminars sponsored by the John M Olin Foundation before it dissolved in 2005, a dissolution specified by John Olin himself before he died. The Olin Corporation and its subsidiaries manufacture chemicals and ammunition, and they have committed many environmental and safety offences – 80 since 2000, incurring penalties of almost $5 million, according to the website Violation Tracker[4] — and so setting out to influence judges was a logical move for them. The John M Olin Foundation gave $5.5 million, Jane Mayer wrote, to the Federalist Society for Law and Public Policy Studies, founded in 1982 by conservative-minded students from the law schools at Harvard, Yale and Chicago. By 2021, six of the nine justices on the Supreme Court had ties to the Federalist Society, said Professor Noah Feldman in the Harvard Gazette of March 4th 2021. Professor Feldman’s list included all three nominated by President Trump: Neil Gorsuch, Brett Kavanaugh, and Amy Coney Barrett, as well as Samuel Alito, Clarence Thomas and Chief Justice John Roberts.

The big money conservative and libertarian donors have, contrary to a free-market free-for-all outlook, organised tightly, expertly, and in a highly disciplined way, to protect their short-term interests. Long-term interests are a different matter, because if the Earth becomes uninhabitable it will not make exceptions for billionaires. The fascinating blog hosted by ABC Finance Ltd of Cannock, Staffordshire, has investigated how billionaires are seeking immortality, or something close, even if an apocalypse is on the way.[5] Their possible methods include blood transfusions from younger people; or cryonics (as in the film Don’t Look Up, in which newly unfrozen bigwigs dismount from their spaceship into a verdant landscape grazed by large long-beaked birds, one of which bites off the head of the former President of the USA); or optimistically stockpiling survival gear to ride out the apocalypse; or in future uploading their brain digitally into the Cloud (if it still exists); or even setting up colonies on another celestial body (if they can work out how to get there, and how to stay alive once they have landed).

These ‘options’ are variously exploitative, far-fetched, self-centred, or unachievable. Set within the reality of a fragile planet, billionaires’ asset mountains are crazy exhibitions of hubris. The super-wealthy continue to fund programs to convince the public that capitalism is common sense and the only possible way of organising the life of human communities. Jane Mayer wrote[6] that in 2015 the Charles Koch Foundation[7] was subsidising programs in 307 higher education institutions in the USA and had plans to extend to 18 more. The institutions included the Providence, Rhode Island-based Brown University where in 2009 the foundation gave $147,154 to the Political Theory Project, teaching students about free market economics. At West Virginia University the foundation provided $965,000 to set up the Center for Free Enterprise. The foundation had a role in staff appointments; one of the professors was Russell Sobel, who argued in his 2007 book Unleashing Capitalism that mine safety and clean water regulation hurt workers because the costs of regulation came from their (theoretical) earnings.[8] 

Everyone has their price, so the saying goes. Academics who refuse to play the game, who stay outside the libertarian tent, deny themselves access to plentiful funding. The billionaires’ institutes, dressed in academic neutrality and housed at prestigious universities, deliver powerful public relations.

As for lawyers, they enable hard, cold law-and-economics arguments to percolate through the world’s courts, arguments that appeal to litigants of many kinds who seek to enforce rights obtained in both honest and dishonest ways (not that law-and-economics eschews dishonesty). The extent to which theft and fraud can be legitimised in the courts is dramatically illustrated by the Financial Times journalist Tom Burgis in his 2020 book Kleptopia,[9] focusing on tentacles stretching out from post-Soviet Kazakhstan. Despite his careful research for the book, Tom Burgis faced a libel claim in London brought by ENRC (Eurasian Natural Resources Corporation), an entity owned by Luxembourg-registered company Eurasian Resources Group, in which the Kazakhstan Government has a 40% holding. High Court judge Mr Justice Nicklin found the claim against Tom Burgis to be wholly flawed, and he stopped the case, awarded £50,000 costs against ENRC, and refused the corporation permission to appeal.[10]

The alarming global sway of theft and fraud networks indicates that profits made in conventional commercial ways may now be increasingly hard to obtain. As for externalities like global heating and ruined environments, in a world of law-and-economics, the enabling philosophy for a kleptogarchy, social responsibility falls off the bottom of the agenda.

[1] ‘Law and Economics’ by Paul H Rubin, in the Library of Economics and Liiberty, https://www.econlib.org/library/Enc/LawandEconomics.html, accessed May 16th 2022.

[2] Ibid.

[3] Dark Money was published by Scribe Publications in 2016.

[4] https://violationtracker.goodjobsfirst.org/

[5] https://abcfinance.co.uk/blog/how-billionaires-plan-to-live-forever/, accessed January 28th 2022.

[6] Dark Money, p.155.

[7] See The Kleptogarchy part 5, Unholy Alliances, for more on the Koch family.

[8] Quoted by Jane Mayer in Dark Money.

[9] Kleptopia: How Dirty Money is Conquering the World, by Tom Burgis, published by William Collins in London and HarperCollins Publishers in Dublin, 2020 and 2021.

[10] ‘Journalist Wins ‘Kleptocrat’ Book High Court Libel Case’, by Dominic Casciani, BBC News, March 2md 2022. https://www.bbc.co.uk/news/uk-60595266, accessed May 16th 2022.

False Accuracy of Discount Rates: The Kleptogarchy part 4

Posted: August 14, 2022 | Author: | Filed under: Climate, Economics, Education | Tags: , , | Leave a comment

The False Accuracy of Discount Rates

A major difference between the Stern Report and the Nordhaus data in the DICE model is the discount rate applied. The discount rate determines the difference between present and future returns on investment. A zero rate means there is no difference. A negative rate means that the future value of an investment is lower than at the present time, in which case the investment is not worth making in financial terms. A positive rate increases the future value compared to the present, and it indicates that investment should yield a profit. The Stern Report used a low discount rate of 1.4% a year, making investment in climate measures less and less attractive over time and indicating that investment should be made now and in the very near future. Nordhaus, in contrast, used a rate of 4.1% a year, which he argued accorded with market rates at the time (2005-06). While the Stern value gave a carbon price of $85 a ton, Nordhaus’s figure was about $7.40 for 2005, fluctuating a little depending on the precise figures fed into the DICE model. Thus choice of a different discount rate has a huge impact on the price polluters should be asked to pay for their CO2 emission, or on any other parameter to which it is applied.

Earth systems including climates do not respond to discount rates, but they do respond to changes within their own primary system and in other systems with which the primary system interacts. An investment in nuclear power generation on a low-lying coast, for example, would be pointless if it fell victim to sea-level rise, and would incur additional damage-limitation costs if radioactive waste polluted the waters.

The initial discount rate calculation would not count for anything at all.

Follow the Money

Stanford University in California is super-selective, admitting only four or five qualified applicants in every hundred. It features in league tables as one of the top half dozen universities in the world. The Hoover Institution is housed at Stanford University. John H Cochrane is the Rose-Marie and Jack Anderson Senior Fellow at the Hoover Institution. John H Cochrane argues against radical policies to try and mitigate climate change.

Rose-Marie and Jack R Anderson’s foundation promotes free markets and small government. Via the Donors Trust, it has links to a network of funding sources including a number distributing funds from Koch family foundations. Koch Industries, big in oil, natural gas, coal, fertilisers, plastics, chemicals, minerals and much more, is the USA’s largest privately owned company, with revenues of $115 billion in 2019. Action to limit climate change is a red flag to Koch Industries, given the importance of carbon-emitting technologies in its portfolio.

The Hoover Institution, the current director of which is the former Secretary of State Condoleezza Rice, has an extensive list of Distinguished Visiting Fellows including the near-centenarian Henry Kissinger; former US Defence Secretary James Mattis (and fellow Defence Secretary Donald Rumsfeld until his death in 2021); and the UK’s former Chancellor of the Exchequer George Osborne.

John H Cochrane says that “Climate policy is ultimately an economic question”.[1] Yet it is an economic question only through the lens of privilege and entitlement, for people with assets they are desperate to preserve. For most people, and indeed for all life forms, climate is a matter of survival.

John Cochrane: “Even our sclerotic post-2000 real GDP grows at a 2% annual rate. At that rate, in 2100, the US will have real GDP 400% greater than now, as even the IPCC readily admits. At 3% compound growth, the US will produce, and people will earn, 1,000% more GDP than now. Yes that can happen. From 1940 to 2000, US GDP grew from $1,331 billion to $13,138 billion in 2012 dollars, a factor of ten in just 60 years, and a 3.8% compound annual growth rate.”[2]

But how did the USA achieve these numbers?

  1. OIL! And coal and gas. Burning fossil fuels to fire economic growth at supersonic speeds, growth that would have been impossible if only renewable resources had been used. The first commercial oil well in the USA was drilled by Edwin Drake in Venango County, Pennsylvania, in 1859. Oil displaced the labour of slaves; if oil had not been ‘liberated’ in huge quantities, the USA could not have become an industrial titan. 
  2. Advertising, creating demand for goods no one knew they needed. Advertising agencies, starting with N W Ayer & Son in Philadelphia, Pennsylvania, developed in the second half of the 19th century.
  3. Consumer debt. It really took off in 1856 in the USA, when the Singer Sewing Machine Company began to offer instalment plans to customers. In 1899 the Retail Credit Company, later to become Equifax, was founded in Atlanta, Georgia. This gave lenders data on who (in the opinion of Equifax) was creditworthy and who was not. By 1914, a new industry was emerging – financial services companies, offering loans for customers to buy cars like Henry Ford’s Model T. Henry Ford did not embrace hire purchase directly, but competitor General Motors had no such qualms and in 1924 launched General Motors Acceptance Corporation to offer finance for new cars, the risks split between the manufacturer and the dealer.
  4. What enabled the automobile industry to exist, grow, and dominate transport? OIL!
  5. The ‘military industrial complex’ that President Dwight D Eisenhower warned of (albeit late in the day) has a primary aim of securing access to resources, oil among them, from around the world. The operations of the military industrial complex feed GDP, which is an amoral measure of revenue-earning operations of every type (including drug-dealing and prostitution). If roads, buildings and other structures are badly damaged after flood, or fire, or hurricane, and are rebuilt, damaged again, rebuilt, all the costs are added to GDP, creating a mirage of a buoyant economy, but actually masking alarming disasters. 

So, to go all out for GDP growth is hardly a laudable objective, and to persist in the endeavour when the risks of climate disaster are multiplying is symptomatic of irrational belief rather than logic.

Returning to John Cochrane, he comments in the National Review: “Growth risk is an order of magnitude larger than climate risk.” It is an opinion, but not a provable fact. He continued: “If the question is, ‘What steps can we take, perhaps costly today, to improve GDP in the year 2100?’ hurried decarbonization is not the answer. If the question is, ‘What steps can we take to improve the well-being of the world’s poor?’ climate policy is not the answer……. Sturdy pro-growth policies, however unpopular to so many in today’s political class and incumbent businesses and labor organizations, are the answer.” Oh dear.

“Looking under the hood of big models, it is not even obvious that climate change hurts the economy at all,” Cochrane wrote. “People and companies are moving in droves from the cold Rust Belt and cool, coastal California to Texas, even though Texas is a lot hotter than anything climate change will bring to the former……The central uncomfortable fact is that the output of an advanced industrial economy like the US, moving headlong into services, is just not that sensitive to climate or weather. The worse heat waves, floods, and storms just do not move national GDP”. To be fair to John Cochrane, he admits that the environment is in trouble – “We are in the middle of a mass extinction” – but he blames human activities like encroaching on habitats and poaching, not climate change. If he had been writing in 1750, he could have been correct, but he is now mistaken. WWF, the World Wildlife Fund, fears that “Up to half of plant and animal species in the world’s most naturally rich areas, such as the Amazon and the Galapagos, could face local extinction by the turn of the century due to climate change if carbon emissions continue to rise unchecked”.[3]

Perhaps John Cochrane felt he had to stick to the script and write as a climate change sceptic. Doubts may be starting to creep in, perhaps in the same way that they did for the late Martin Weitzman. Cochrane admits that “total warming is robustly related to total carbon”, so he accepts a fundamental cause of climate change, he just does not yet believe that it will have severe repercussions for humans. This stance means he can champion the business-as-usual pursuit of profits. 

Vast wealth controls the narrative, able to buy politicians, professors and journalists, and able to fund overt and covert promotion campaigns. The covert operations are particularly insidious, including as they do social media messages tailored to each individual’s profile, and not sent to people who might disagree, thereby seeking to minimise contact with those likely to hold opposing views. Wealth buys power, and power therefore works to protect wealth.

The ‘Climategate’ furore just before COP (Conference of the Parties) 15 in Copenhagen in 2009 could not have happened without intent, organisation and technical skill.  Climategate was so labelled by climate change deniers after a hack of emails and other documents from the servers of the Climate Research Unit at the University of East Anglia. The hack released over 1,000 emails and 3,000 other documents, which appeared to have been selected to highlight certain terms and words chosen to convey ambiguity, notably ‘trick’. 

The Trick was the title of a BBC drama shown in October 2021, focusing on Professor Phil Jones, the Director of the Climate Research Unit at the time, and the personal trauma he suffered after the hack. The word ‘trick’ was seized upon by sceptics, who accused Professor Jones of misrepresenting temperature data to exaggerate the global rise. The ‘trick’ was in fact a statistical way of integrating evidence from tree rings – dendrochronology – and temperature data. Warm temperatures help trees to grow, creating larger rings than in cold climates, but temperature is not the only factor affecting tree rings. Rainfall, pollution, pests and diseases can all affect tree growth and thus tree rings, therefore evidence from tree rings and temperature readings can diverge.

The sceptics seized upon decontextualised words to sow doubt and confusion about climate change in the public’s mind. The journalist James Delingpole, who publicised the term ‘Climategate’, wrote this in the Conservative-leaning magazine The Spectator, on December 12th 2009:

“Some of us have been saying for years that the IPCC’s (Intergovernmental Panel on Climate Change’s) process is corrupt; that dissenting voices have been shut out of the debate; that raw data has been subverted, suppressed, corrupted and destroyed; that AGW (anthropogenic global warming) theory owes more to political activism than disinterested science; that the measures currently being proposed to deal with AGW are a global economic disaster waiting to happen.”

The stolen emails and documents did not give journalists like Mr Delingpole ammunition for long, because the data was not misrepresented, but the hack released acrid, blinding smoke that slowed progress towards international action on climate change.

As to who was responsible for the hack, their identity was never discovered. Norfolk Police closed their investigation in July 2012, because they could see no realistic prospect of identifying the offender or offenders or of launching criminal proceedings within the legal time limit.

[1] ‘Climate policy should pay more attention to climate economics’ by John H Cochrane, www.nationalreview.com, September 3rd 2021.

[2] Ibid.

[3] https://www.worldwildlife.org/press-releases/half-of-plant-and-animal-species-at-risk-from-climate-change-in-world-s-most-important-natural-places, accessed September 12th 2021.

Economists’ Denial: The Kleptogarchy part 3

Posted: August 13, 2022 | Author: | Filed under: Climate, Economics | Tags: , , , | Leave a comment

Opposition to climate change action remains widespread, and has been bolstered by a small number of vociferous economists including Richard Tol, Martin Weitzman and William Nordhaus.

Richard Tol, Professor of Economics and the University of Sussex and also Professor of the Economics of Climate Change at Vrije Universiteit, Amsterdam, wrote in 2008:[1] “I do not adopt a more risk averse, or prudent, or precautionary standpoint to the unquantified impacts of climate change, because there is a long history of worrying that proved unfounded on closer inspection”. He gained a reputation as a climate change sceptic, and does not appear to have altered his stance. In 2015 he commented[2] “Climate change will have many, diverse impacts and it will affect different people in different ways. Some of these impacts are negative, some may be negative or positive, and some are positive. The three key positive impacts are a reduction in the costs of winter heating – a particular boon to the poor in temperate and cold climates – a reduction in cold-related mortality and morbidity – a particular boon to the old and frail in temperate and cold climate change [sic] – and an increase of carbon dioxide fertilization – a particular boon to those dependent on water-stressed agriculture.” This does appear to highlight possible short-term benefits to humans in northern and far southern climes, but life would be substantially less pleasant for inhabitants of scorched tropical regions.

Martin Weitzman. Photo by Daniel V
Kevorkian, European University Institute,
Italy. Creative Commons Licence.

Martin Weitzman, Professor of Environmental Economics at Harvard University, was complimentary about aspects of the Stern Review at the time of publication, such as the exposure given to the climate change issue, and support for future carbon taxes, but commented[3] in 2007 that “in my opinion, Stern deserves a measure of discredit for giving readers an authoritative-looking impression that seemingly objective best available-practice professional economic analysis robustly supports its conclusions instead of more openly disclosing the full extent to which the Review’s radical policy recommendations depend upon controversial extreme assumptions and unconventional discount rates that most mainstream economists would consider much too low.” Phew! As time marched on, Professor Weitzman focused on how to account for the risks of potentially catastrophic climate events. There may have been an incompatible tension in his mind between theoretical calculations of how much to invest in emissions reductions and mitigation measures now and how much to leave into the future, and the awareness that regardless of theory, catastrophic events could render economics irrelevant. The complexities of uncertainty loomed large in Martin Weitzman’s thinking in later years, until he killed himself by hanging in 2019, at the age of 77. The year before, he had been passed over for a Nobel Prize. It went to William Nordhaus instead.

NORDHAUS AND THE NORMALISATION OF GLOBAL WARMING

William Nordhaus. Photo by Bengt Nyman,
 Vaxholm, Sweden. Creative Commons licence.

Global warming is an externality because the agents of change are not paying for the damage. One influential economist who has removed any feelings of guilt from proponents of warming activities is William Dawbney Nordhaus, the Yale economist awarded the 2018 Nobel Memorial Prize in Economic Sciences, shared with Paul Romer, former chief economist at the World Bank. Professor Nordhaus (1941- ) created the DICE model to calculate costs and returns of climate mitigation measures. It looks very clever and uses complex equations, but is based on dodgy, even dicey, assumptions. DICE stands for Dynamic Integrated model of Climate and the Economy, and has had various recalibrations since its launch in 1992. One of the most basic assumptions is that today’s real interest rates and savings rates can persist for centuries into the future. Another is that climate change impacts will be linear and minor, because in the Nordhaus view, the impact will be largely confined to people who work out of doors, for whom a hotter world would result in damage to their health. Professor Nordhaus has argued that warming of 3 degrees C would cut global GDP by only 2.1%, and that a frightening rise of 6 deg C would trigger a GDP fall of 8.5%.[4] 

Global warming is not even all over the globe, because weather systems and ocean circulations are dynamic. Heat expands oceans and melts glaciers, adding to rising sea levels. Between 1880 and 2020 the average global temperature increased by 1.02 deg C:[5] this may sound almost insignificant, but the impacts are felt in the intensity and unpredictability of weather events – floods, droughts, hurricanes, heatwaves – which have their own repercussions. In a severe drought, nothing grows. Irrigation can lower water tables, and in coastal areas result in sea water ingress. More frequent hurricanes destroy infrastructure, repeatedly. Heatwaves kill people on their own: at 100% humidity, the maximum survivable temperature is 35 deg C. Heat and drought spark forest fires and also permafrost melt, which releases the powerful greenhouse gas methane, which per tonne is more than 80 times as damaging as carbon dioxide, but fortunately persists for only nine to 12 years or so. Ruminant farm animals are powerful emitters of methane. Their diets can be altered to reduce their methane output, but it is even better to slash meat-eating in favour of plants. 

While economists may expect the world to obey the financial and behavioural rules they create, the world has other ideas. Earth systems can suddenly shift from one state to another, and in addition create wholly new features that nobody foresaw – or indeed was able to foresee, other than by guesswork.

Prizes often convey celebrity and gravitas on their winners, who find themselves on pedestals. The Nobel Memorial Prize is no exception, and so a critique of a winner’s work is not to be undertaken lightly. Nobel laureate Professor Nordhaus himself wrote a critical response to the Stern Review on the Economics of Climate Change.[6] He argued that “The Review’s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today’s marketplace real interest rates and savings rates”.

This opinion reveals that in Professor Nordhaus’s mind, immediate financial measures such as real interest rates and savings rates have greater validity than the living systems to which those rates apply. Yet finance does not exist on a dead planet. The living systems are the horse drawing the financial cart along. The cart, uncoupled from the horse, cannot influence the horse’s movement except by becoming a roadblock. Economists tend to persist in regarding their subject as akin to physics with universal laws, but any set of theories that would not exist without human agents are dependent on the behaviour of those agents, and on the living world which sustains them.

For Nordhaus, the Stern Review tended to “emphasize studies and findings that support its policy recommendations, while reports with opposing views of the dangers of global warming are ignored” and this was not “standard academic analysis”. So what is ‘standard academic analysis’? Before a paper appears in a prestigious journal, it is normally reviewed by a panel of experts and accepted or rejected according to their verdict. While this sounds sensible, reviewers can share groupthink which helps outdated interpretations to persist. Nordhaus commented that “fatal flaws in evidence and reasoning, which might have been caught in the early stages under normal ground rules, may emerge after the report has been published”.  This weakness, in his eyes, affects the Stern Review, which he accuses of taking “the lofty vantage point of the world social planner, perhaps stoking the dying embers of the British Empire, in determining the way the world should combat the dangers of global warming”. The Brit-bashing comment suggests that maybe Professor Nordhaus was not as neutral as he might have thought. 

In his universe, from which living systems have been ejected, “under the optimal policies, the investments in climate capital must raise future output by more than enough to repay the debt”. ‘The debt’ is the cost of measures to try and reduce the impacts of climate change. Professor Nordhaus uses the financial metrics of the time (2006-07) to estimate that average per capita consumption globally would rise from $10,000 to $130,000 in 200 years, if the growth rate were 1.3% a year. “Using these numbers,” he wrote, “how persuasive is the ethical stance that we have a duty to reduce current consumption by a substantial amount to improve the welfare of the rich future generations?”

One of the assumptions behind the equations developed by Nordhaus, and other economists who prioritise ‘laws’, is a linear continuation of current measurements into the future. Regarding climate, the assumption is that the climate would deteriorate slowly and evenly, and that damage-limiting interventions would best be made after economic growth has created the financial resources to pay for them. Nordhaus wrote: “by my calculation, the [Stern] Review’s strategy would leave the future absolutely worse off… The reason why the Review’s approach is inefficient is that it invests too much in low-yield abatement strategies too early. After 50 years, conventional capital is much reduced, while ‘climate capital’ is only slightly increased. The efficient strategy has more investment in conventional capital at the beginning and can use those additional resources to invest heavily in climate capital later on.”

This approach means kicking meaningful climate action into the long grass, an outcome that has attractions for ‘business as usual’ enthusiasts, all the more so when it is espoused by a Nobel-prize winning economist! There can be nothing to worry about, surely?

[1] Environmental Values Vol. 17, 2008, pps. 437–470.

[2] https://www.lse.ac.uk/granthaminstitute/news/the-economic-impacts-of-climate-change-richard-tol/, accessed September 3rd 2021. Commentary for the Grantham Research Institute on Climate Change and the Environment.

[3] ‘A Review of “The Stern Review on the Economics of Climate Change” ‘ by Martin L. Weitzman, Journal of Economic Literature, Vol. 45 No.3 September 2007 p. 724.

[4] ‘Nobel prize-winning economics of climate change is misleading and dangerous – here’s why’, by Steve Keen, UCL News, September 9th 2020.

[5] https://climate.nasa.gov/vital-signs/global-temperature/ accessed August 31st 2021.

[6] ‘A review of the Stern Review on the Economics of Climate Change’ by William D Nordhaus, Journal of Economic Literature Vol. 45 No.3 September 2007 pps. 686-702.

Revive a town without revitalising its rural hinterland? No way

Posted: May 4, 2021 | Author: | Filed under: Low-impact living, Planning, Rural Economy | Tags: , , , , , | Leave a comment

Llandovery in Carmarthenshire is a victim of centralisation. Since the start of the millennium all the bank branches have closed, the Royal Mail sorting office shut, the county council decided to build a new comprehensive school 13 miles away and to transport the pupils there and back by bus. The Chamber of Commerce folded.

“How can we revive the town?” the county council wondered (after ignoring strong local opposition to its decision to close the senior school). Reports were commissioned. Recent ones include a ‘Llandovery Economic Growth Plan’ prepared by The Means, Llanelli, which appeared in draft in March 2021, and Severn Wye’s ‘Community Wealth Building in Llandovery’, which was finished the same month.

Reports must follow the brief drawn up by their commissioners, and so it is no surprise at all that they do not question the objective of economic growth. ‘Growth is good’ is conventional wisdom, after all.  

Severn Wye’s report includes interesting original research, including the finding that in the Llandovery area – defined as Llandovery, Llangadog, Cilycwm and Cynwyl Gaeo, covering the rural north-east of the county and with a combined population just over 7,450 — almost 40% of businesses are not looking to expand. This goes against the view that businesses are generally run by ambitious entrepreneurs who want to grow, grow, grow. Some do, but there are multiple reasons for setting up a business in a rural area, such as a means of earning enough money to live, or to augment a pension, or to provide more flexibility than a clock-on, clock-off job for those who have to combine work with caring.

Llandovery in its rural setting. The river Tywi flows north to south, and the Heart of Wales railway clips the western side of town. Photo from Google Earth

Over 90% of Carmarthenshire businesses have fewer than 10 employees, Severn Wye found. Their average turnover in the most recent reporting year was a little over £81,000 a year. In the Llandovery area, most businesses turned over less than £50,000. Not that there are a great many businesses within this area of 230 square miles: Severn Wye found 249, one for every 30 people.

Yet if you want to start a new rural business, unless it’s a tiny one run from your kitchen table, you have to grapple with planning regulations that preclude rural repopulation, or buildings for new rural enterprises, except for tightly defined exceptions in Wales such as One Planet Developments (OPDs) or Rural Enterprise Dwellings. The OPD policy, dating from 2010, allows a new dwelling in the countryside if it is the applicants’ only home, if their land can meet their minimum food, energy, income and waste treatment needs within five years, if there is a binding management plan, if all development is ultra-low carbon, and so on. Over the whole of Wales, only some four dozen individual smallholdings have received permission under the OPD regulations during the 10+ years of their existence.

Rural Enterprise Dwellings are also strictly controlled. The guidance document says:

“ Four specific circumstances are identified in TAN (Technical Advice Note) 6 relating to the provision of new rural enterprise dwellings:

· to meet the needs of established rural enterprises (including farms) where there is a functional need and a requirement for a full-time worker together with a prospect of long-term business financial sustainability;

 · to enable the transfer of control of farm enterprises to the next generation (second or further dwelling on a farm only);

· to meet the needs of additional workers on established farms where there is a functional need, and a requirement for an additional 0.5 or more of a full-time worker earning at least 50% of a farmworker’s salary (second or further dwelling on a farm only); and

· to meet the needs of new rural enterprises where there is a functional need and a requirement for a full-time worker.

(Welsh Government, Technical Advice Note 6, December 2011, section 2.13)

The final grounds for approval, referring to new rural enterprises, is difficult to meet because applicants cannot prove that their venture will be profitable. They must provide a full business plan, and even if the plan suggests a rosy outcome, any permission would normally be for a temporary dwelling, for three years only.

So it’s tough to persuade planners and planning committees to depart from the view that the countryside is a landscape to be protected from change, even if changes are desirable in the interests of soil improvement, habitat enrichment, crop diversification and enough people living in rural areas to support essential public services. Usually they cannot be persuaded, because they must follow the published Development Plan, which outside existing towns and villages mainly means No Development (unless a big developer comes along with promises to create dozens or hundreds of new jobs for the region).

The report from The Means is focused on Llandovery town, and suggests sustainable outdoor recreation, innovative events, a makers quarter for craft-persons, the re-establishment of Llandovery and District Chamber of Commerce (and/or the setting up of an Economic Growth Plan team), a cycling hub, digital hoardings and more, including a number of feasibility studies. The report’s authors see the surrounding countryside mainly as a tourism venue and possibly a source of renewable energy. They do not question the policy of ‘no rural development unless it’s BIG’ (they suggest £60,000 for a feasibility study into an outdoor adventure park). But then, they were justifiably sticking to the approved policies, and working within those.

Reviving a town, though, also means revitalising its hinterland, in the urgent contexts of reversing environmental damage amid an unstable climate, and of living simply and more harmoniously with the nature that is still around us. More opportunities for newcomers to live on the land should be part of our journey to a survivable future.

The Llandovery Economic Growth Plan, draft update March 2021, is from The Means and was commissioned by Carmarthenshire County Council. https://static1.squarespace.com/static/5dfb7aeaf844f40ff2c70391/t/6057eb81a79fe46cb99f64a0/1616374663453/CRTEGP_Llandovery_Draft+Economic+Growth+Plan+rev+9.pdf.

The Severn Wye report on Llandovery’s Community Wealth Building project took place from September 2020 to the end of March 2021. Severn Wye’s was one of 52 projects awarded funding by the Welsh Government’s Foundational Economy Challenge Fund and the organisation worked with partners: The Centre for Local Economic Strategies (CLES), The Bro Partnership and Liz Bickerton Consultancy. It aimed to explore a replicable community economic development model for small rural market towns and their hinterlands, recognising the contribution of and building on the foundational economy, with the potential to retain and recirculate that wealth in the community. https://severnwye.org.uk/wp-content/uploads/2021/04/Foundational-Economy-Llandovery-Final-Report-updated-chart.pdf.

See also A Small Farm Future by Chris Smaje, published by Chelsea Green, 2020.

PDR

Dasgupta Biodiversity Review’s Impossible Task

Posted: February 11, 2021 | Author: | Filed under: Ecology, Economics | Tags: , | Leave a comment

Terms of Reference were Contradictory

“Here we go again”, I thought on first glancing at the Dasgupta Review on The Economics of Biodiversity, “still placing humanity above the natural world, instead of being part of it”. Phrases like ‘natural capital accounting’, ‘standardisation of data and modelling approaches’ and ‘supra-national institutional arrangements’ did not augur well for the new philosophical approaches that I believe need to be taken.

The review, led by Professor Sir Partha Dasgupta, Frank Ramsey Professor Emeritus of Economics at the University of Cambridge, was published on February 2nd. It has elicited many responses, including an 18-page document of ‘Reactions’ that the Westminster government released on the same day. ‘Reactions’ has comments from business and third-sector leaders. This is one, from Professor Gretchen C. Daily, Bing Professor of Environmental Science, Stanford University and Co-Founder and Faculty Director, The Natural Capital Project:

“All people – living in ancient or modern times, in luxury or destitution, in mega-cities or vast hinterlands – depend intimately and utterly on nature. Through the microbiome inhabiting our body, the nature in local parks and farms, and exotic forests and underwater realms across the world, we are all deeply embedded within the web of life. This extremely subtle and extensive net of relationships sustains and fulfils us, providing the material basics of nutrition, health, and security to ethereal senses of attachment, beauty, and spirit. The Dasgupta Review comes at a historical precipice, with human activity driving the collapse of nature and the future course of all known life. Through brilliant synthesis of knowledge, the Review lays bare the urgent situation today, its underlying causes, the risks and costs of failing to address them, and the pathways to a future world in which people and nature thrive.”

True. We know what the problems are. We are much less sure about solutions that could be both effective and acceptable to the world’s richer inhabitants, who stand to lose most from a more equitable distribution of the fewer resources available to us if biodiversity and ecosystem collapse is to be slowed.

Reading the terms of reference set for the review, I understood the dominance of the language of conventional economics and accountancy within it. This was what the Westminster government wanted.

The terms of reference include setting the review purpose to “assess the economic benefits of biodiversity globally, assess the economic costs and risks of biodiversity loss, and identify a range of actions that can simultaneously enhance biodiversity and deliver economic prosperity”. There appears no doubt that prevention of ecological breakdown and delivery of economic prosperity are compatible, a perspective amplified in three key questions for the review to consider:

  • How biodiversity supports sustainable economic growth;
  • The implications of further biodiversity loss for the prospects of economic growth over the coming decades, taking into account the interaction with  other aspects of environmental degradation, including climate change; and
  • The impact, effectiveness and efficiency of existing national and international actions and arrangements to limit and reverse the loss of biodiversity and their impact on economic growth [my emphases]

The “simultaneous goals” of the review are to advise on “enhancing biodiversity” and “delivering sustainable economic growth”. No question here whether both are possible.

Given these constraining terms of reference, the review goes as far as it can. The final chapter, ‘Options for Change’, says this:

“The extent to which we have collectively degraded the biosphere has created extreme risks and uncertainties, endangered our economies and livelihoods, and given rise to existential risks for humanity.” (p.485)

Our inadequate response is “a sign of the failure of contemporary conceptions of economic possibilities to acknowledge that we are embedded in Nature, we are not external to it”. (p.485) So, clearly, the review acknowledges that humanity is just a part of the natural world.

The “options for change” are “geared towards three broad, interconnected transitions, requiring humanity to (i) ensure that our demands on Nature do not exceed its supply, and that we increase Nature’s supply relative to its current level; (ii) change our measures of economic success to help to guide us on a more sustainable path and (iii) transform our institutions and systems – in particular our finance and education systems – to enable these changes and sustain them for future generations”. (p.486)

Indeed so. But how?

The review proposes (p.487) “…quantity restrictions, informed by science and supported by legislation, will help to correct the externalities pervasive in our engagements with Nature”. (‘Externalities’ are damaging but uncounted repercussions of economic transactions, such as ocean pollution, rain forest felling, removal of finite resources, and man-made climate change.)  

Can we both reverse a catastrophic loss of biodiversity and continue to grow economies?

‘Quantity restrictions’ can also mean ‘lower consumption’, but maybe sounds rather less harsh.

Other measures proposed include “[t]echnological innovations” which can “contribute enormously to reducing our footprint”. Genetically modified crops, vertical farming, and meat analogues are among the examples given. Plant-based diets are advocated because “it would be possible to feed the world’s present population with as little as 50% of current agricultural land”. (p.489)

Environmental taxes, accounting for the use of ‘natural capital’, and more controversially ‘family planning’ (contraception) are all suggested.

But how to organise these measures globally? Even if all world leaders signed up, would their populations accept ‘quantity restrictions’ rapidly enough to slow the rate of biodiversity and ecosystem collapse, let alone reverse them?

The review argues that the financial system would “shift its lending and credit activities towards the protection of Nature if consumers signal their distaste for investments that are rapacious in the use of Nature’s goods and services”. (p.494)

Given the acquisitive history of humanity, can this happen quickly enough to make a real difference? The consumerist mindset is entrenched and the global economy is built on resource extraction. The Dasgupta Review, which in its terms of reference was asked to reconcile ecosystem protection with continuing economic growth, cannot show conclusively that both are possible, because in the circumstances of today’s economic and governance structures, they are not.  

The Dasgupta Review is online at The Economics of Biodiversity: The Dasgupta Review (publishing.service.gov.uk)

PDR

Henry George and the Campaign to Tax Land

Posted: January 29, 2021 | Author: | Filed under: Economics, Land ownership | Tags: , | Leave a comment

Modern ideas about taxing land are not so modern after all, but old ideas resurfacing.

Take Land Value Tax. Now, many people will know this, but I did not. There is a movement called Georgism, after the 19th century American economist Henry George. Born in Philadelphia in September 1839, his works include the blockbuster multi-million seller Progress and Poverty, published in 1879. In Republican red US states today he could well be labelled abusively as a communist, so far towards individualism has much popular opinion swung, or been persuaded to swing.

Henry George, 1839-1897. Photo from Wikipedia

The 19th century saw massive wealth disparities on both sides of the Atlantic. In the States, Henry George argued that rents for land should be socialized by taxing it. He wrote in Progress and Poverty that “I do not propose either to purchase or to confiscate private property in land. The first would be unjust; the second, needless. Let the individuals who now hold it still retain, if they want to, possession of what they are pleased to call their land. Let them buy and sell, and bequeath and devise it. We may safely leave them the shell, if we take the kernel. It is not necessary to confiscate land; it is only necessary to confiscate rent.”  *

He also proposed that utilities should be publicly owned and not operated for profit. A debate between Henry George and Margaret Thatcher, had they lived at the same time, would have been explosive. It was Mrs Thatcher who ushered in the Great Privatisation of the United Kingdom, encouraging the public to buy small shareholdings in the hope of making them mini-capitalists. Here is Wikipedia’s extensive list of UK privatisations in the 1980s:

It was too much for former Conservative prime minister Harold Macmillan to stomach. In a speech on November 8th 1985 Macmillan, resident in 10 Downing Street from 1957 to 1963, castigated the policy as “selling off the family silver”, i.e. a step on the descent to Carey Steet. The ‘nation of shareholders’ never happened, as many who took part eagerly in the privatisations sold their shares soon afterwards. It was an intermediated transfer from the public to private institutions. (At least, there were intermediaries, unlike later incipient scandals of direct transfers from government funds to businesses with Party connections, as with certain pandemic contracts for personal protective equipment.)

Henry George’s ideas have been out of popular fashion in his native USA more or less since he died in 1897, reflecting hostility to taxation and the view that socialism is unfair to hard-working rugged individualists. Could he be coming back into fashion? There is an active Henry George Foundation, based in London, https://www.henrygeorgefoundation.org/. The foundation publishes the journal Land and Liberty, which aims to “explore how our common wealth should be used – and to demonstrate that this is the key to building the bridge of sustainability between private life, the public sector and our resources – between the individual, the community and the environment. It aims to put the laws of nature and people at the heart of economics.” Land and Liberty can be viewed on the foundation’s website – do take a look. The foundation is on Twitter as well, @henrygeorgeuk.

* George, Henry (1879). Progress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth. VIII. New York: Robert Schalkenbach Foundation. ISBN 0-914016-60-1

PDR

Green Industrial Revolution is Maxi Puff for Mini Outcome

Posted: November 20, 2020 | Author: | Filed under: Climate, Economics, Politics | Tags: | 1 Comment

Policies are Full of Holes

The UK’s Job Retention Scheme cost £41.4 billion from its start on March 1st 2020 until October 18th, according to statistica.com. The scheme was to have ended on October 31st, but the November lockdown in England prompted the Westminster government to extend it until the end of March 2021 – a 13-month stretch, with a cost considerably more than the interim £41.4 billion figure.

Keep the £41.4 billion figure in mind, though.

On November 18th, Prime Minister Boris Johnson announced his Grand Plan for a Green Industrial Revolution, for which the Government’s budget is – £12 billion for the next ten years.

So Government wants us to think it can achieve the decarbonisation of the whole UK economy with a £12 billion investment over a decade, when to help prevent sudden Covid-caused economic collapse cost almost three-and-a half-times more, in just one scheme, over a mere seven-and-a-half months.

Naturally the Government hopes that much more investment, around £36 billion, will come from the private sector, but even that will not be enough to meet the Johnson wish list. The sums do not add up.

Take nuclear energy, one of the intended growth areas. “Advancing nuclear as a clean energy source, across large scale nuclear and developing the next generation of small and advanced reactors, which could support 10,000 jobs,” the Westminster Government announced. Nuclear is just one of the ten strands of the Grand Plan, and Government intends to invest peanuts in nuclear terms, £525 million, to support the development of nuclear plants small and large. 

Compare this with the current £22.5 billion estimated cost of the new Hinkley Point C nuclear power station in Somerset, being constructed by EDF (in which the French state has an 84.5% stake) and due for completion in 2023. £22.5 billion is almost 43 times the Government’s total planned input of £525 million. For one power station.

Currently the UK has 15 active nuclear power stations. They provide about one-fifth of the nation’s electricity. But by 2030, all but one of them should have closed. Eight new ones should be in construction, but the only one yet being built is Hinkley Point C.

£525 million will not go far. It’s the cost of less than 1.3 miles of the environmentally destructive HS2 railway.

Nuclear power stations use huge quantities of construction materials. By mid-2019, Hinkley Point C had absorbed 51,000 cubic metres of concrete, 2.5 million tonnes of aggregates, 65,000 tonnes of cement, 125,000 tonnes of asphalt, 210,000 tonnes of marine sand and 105,000 tonnes of ground granulated blast furnace slag. This for an estimated power station life of 20 to 40 years, the average range quoted by the International Atomic Energy Agency. Then there is the issue of radioactive nuclear waste, needing to be efficiently managed in perpetuity.

Hardly a Green revolution.

The Johnsonian ‘Green Industrial Revolution’ has ten strands:

  • Nuclear power
  • Offshore wind power
  • Hydrogen power
  • Carbon capture and storage
  • Electric vehicles
  • Cycling, walking and zero-emission public transport
  • Decarbonising aviation and shipping
  • Retrofitting buildings for energy efficiency
  • Promoting the City of London as ‘the’ global centre of ‘green finance’
  • Nature: planting 30,000 hectares (about 74,000 acres) of trees annually. (That’s about 42,000 football pitches.)

Electricity is a black hole at the heart of this wish list.  If the petrol and diesel vehicle fleet is replaced with electric vehicles, how much power demand would that create?  The Financial Times, in July 2017, reckoned 70% more generating capacity than the total installed at that time. There are other estimates in the range 30% to 40% more. Is this all to come from wind, water and solar power? Not by 2030, anything like. In the next decade, government will need to decide whether to keep end-of-life nuclear power stations operating, in the absence of sufficient alternative means of generation. Given the shortage of modern generating capacity, what chance is there of increasing the electricity supply by 30% to 70%?

Then we have the contentious matter of batteries. Batteries are not green. Intermittent renewables need batteries to store their output. Electric vehicles need batteries. Three components in particular pose geopolitical challenges: lithium, cobalt and nickel. There are too few known reserves of lithium for the manufacture of batteries to power a global fleet of electric vehicles. Supplies could be running out after 17 years if lithium continued to be used for pharmaceutical and other industrial purposes, about 50 years if all lithium went into car batteries, wrote Tam Hunt in ‘Are We Nearing Peak Lithium?’ (greentechmedia.com, June 2nd 2015).

The UK has no lithium supplies to speak of. The world’s reserves are concentrated in South America, in Chile, Bolivia and Argentina. If those governments appear to threaten corporate control of lithium mining, they can expect a coup (as happened in Bolivia in 2019, shortly after then-president Evo Morales cancelled a lithium extraction deal with a corporation, ACISA).

The main suppliers of nickel have been Indonesia and Australia, with the Philippines rising rapidly, a country that shows scant concern for human rights. Cobalt comes chiefly from the poor African country Democratic Republic of Congo, providing 60% of world supply. The mainly unregulated industry employs children in hazardous conditions where accidents are common.

The UK has to import nickel and cobalt, as well as lithium.

The advance of electric vehicles depends on dangerous and often unethical mining practices that are the opposite of ‘green’. The Westminster Government plans to spend ‘nearly’ £500 million over four years “for the development and mass-scale production of electric vehicle batteries, as part of our commitment to provide up to £1 billion, boosting international investment into our strong manufacturing bases including the Midlands and North East.”

Wind, batteries, electricity…. but Government’s £12 billion investment in a greener future won’t be enough to decarbonise the UK’s economy.

Offshore wind? The expected lifespan of offshore turbines is 20 to 30 years. Then the giant equipment has to be removed, dismantled, and disposed of, whether by recycling or destruction.

Carbon capture and storage? Hydrogen power? Building retrofits? Zero-carbon planes and ships? Cleaner public transport, including reopened railway lines? Government investment over all these is forecast to be around £7.5 billion. In total, that’s just 30 times the £250,00 fee income Boris Johnson received from the Daily Telegraph over a decade ago, an amount that in 2009 he dismissed as ‘chickenfeed’.

And how much has ‘disappeared’ into non-competitive contracts for personal protective equipment in 2020?

The National Audit Office said this on November 18th: “By 31 July, over 8,600 contracts, worth £18.0 billion, related to government’s response to the pandemic had been awarded.” 

The NAO also “reports a lack of transparency and adequate documentation of some key decisions, such as why particular suppliers were chosen or how government identified and managed potential conflicts of interest, in the awarding of some contracts while government was procuring large volumes of goods and services at high speed to respond to the COVID-19 pandemic. Some contracts were also awarded after work had already begun, and many were not published in the timeframe they should have been.”

£16.5 billion EXTRA for defence over the next four years, announced on November 19th, also illuminates the puny investment in keeping the planet habitable for us and our companion life forms. In 2020-21 the UK is spending about £41.5 billion on defence, so a quarter of £16.5 billion is a hefty 10% increase.

In an uninhabitable world, what will there be for anyone to defend? Or attack?

PDR

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