Wednesday, October 25, 2006

Jonathan Freedland on market-led Climate Change danger

In an article for the Guardian Jonathan Freedland argues that the market itself make climate change solutions impossible. I'm not going to argue his estimate of the benefits of tackling climate change as even if you do believe it is the crucial issue his argument is still useless.

"Whose job is it to stop climate change? For a while, it's seemed like it's up to us, as individuals, to change our personal behaviour. Witness the BBC news item this week, exposing Britons' slobby habit of leaving electronic appliances on stand-by, in contrast with the conscientious, energy-efficient Germans. David Cameron's wind turbine on the roof, even his cycling, have fed the notion that greenism is now all about personal conduct."

The reason this is the case is simple. Every time someone proposes a solution other than "cut consumption" the left-greens deride it as naive. A case in point is nuclear power. As democratic governments are pathologically unable to say "have less" to their people, the same problem which led to the growth of the state through the 20th century before the left start getting high and mighty on this, this phrases the problem of global warming in terms of personal conduct.

But we should be careful: climate change is too big a problem to be solved simply by virtuous individuals hopping on a bus instead of taking the car, or disconnecting the tumble dryer, valuable though those moves are. This is one responsibility that can't be saddled solely on activists and consumers. This is a job for government.

How convenient. Given the record of government I think that you have to ask the question, is this problem too big for government? How many really big problems has government faced up to?

The only obvious example was Thatcher but as the problem being faced up to was a surplus of government itself this is hardly a fair case.

Which means governments, no less than individuals, have to rethink their behaviour. Until now, administrations here and abroad have tended to dump climate change into the laps of their environment ministries. The odd speech from the president or prime minister, to raise the issue's profile, but otherwise filed under "e" for environment.

This actually works in favour of the environmentalist movement because it means that the agenda is set by a department with a financial interest in the environment being a big problem. Other departments have to work a lot harder to justify how climate change justifies spending more in their field.

That approach is no longer, how shall we put it, sustainable. It should be obvious that climate change is not a discrete policy problem but an across-the-board threat to every aspect of our lives, if not our very survival. Confronted with a planetary emergency, it takes a special kind of bureaucratic myopia to allocate it to a single government ministry.

Given that such minor items as "health" and "education" also get a single ministry that is hardly indicative that a matter is considered of little importance.

Yesterday there were two signs that this penny has at last dropped. The first, reported in the Guardian this morning, was word of a new climate change bill, which will create a new body dedicated to following the science on global warming and setting targets on carbon emissions decade by decade. The second sign was a useful speech by Margaret Beckett. She flew to Berlin to give it (thereby adding to a carbon dioxide cloud of nearly 1,000 tonnes in 2005-2006 alone, thanks to the 6.5m air miles racked up by travelling British cabinet ministers and their entourages), but we'll put that particular inconvenient truth to one side. Significantly, this was a speech about climate change delivered not by an environment minister but by the foreign secretary. "This is not just an environmental problem," she said. "It is a defence problem. It is a problem for those who deal with economics and development, conflict prevention, agriculture, finance, housing, transport, innovation, trade and health." She's right, with economics the obvious example.

Next Monday, Sir Nicholas Stern will deliver his report on the economics of climate change, and I'm told his message will be stark. He believes that climate change represents the biggest market failure ever, bigger than the two world wars and the Depression put together. To combat it will cost a huge amount. But Stern will say that it is affordable, if only because a refusal to act will end up costing a whole lot more.

Comparing the world wars with the depression and climate change as "market failures" suggests that Stern is engaging in an exercise of rhetoric rather than economics.

Still, if global warming is inseparable from economics, it casts a similar shadow over foreign policy. John Ashton, who sits as the UK's special representative for climate change within the Foreign Office, reckons that the fires that diplomats spend their lives putting out will only proliferate as the planet heats up. He cites Darfur, where a main cause of conflict has been a shift in rainfall, pitting nomadic herders against settled pastoralists. "And there will be more Darfurs," he says, the more the climate changes. As Beckett put it yesterday: "Wars fought over limited resources - land, fresh water, fuel - are as old as history itself." And climate change threatens to reduce the supply of each one of those resources in some of the most unstable places on Earth, with Africa and the Middle East first in line.

Freedland is trying to present as novel the argument that climate change has consequences for non-environmental policy but this is blatantly obvious and true for almost all ministries. If defence screws up and we get nuked it will effect health, if health screws up we'll lack the recruits for the army that makes defence possible, etc. etc. It does not imply that global warming is unique.

More straightforward still, if we remain dependent on fossil fuels, then we remain dependent on the countries that produce them. That leaves us held to ransom by Russia for its gas, and the Gulf states for oil. Even if global warming did not matter, that would be a hard-headed, realpolitik reason to wean ourselves off fossil fuels.

Still, more hearteningly, if climate change is a foreign policy problem, foreign policy can surely be part of the climate change solution. It's a truism that carbon dioxide does not recognise borders, and that any effort to tackle it will have to be supranational. Ideally, that would mean global treaties, accepted by everyone, which would see the entire human race come together to deal with a threat that is choking the planet we all share. But that's hardly likely, not when the world's biggest polluter, the US, is still led by an administration barely emerging from official denial that there is a problem at all.

That means interim action, starting with the EU. Heaven knows there are ample reasons to be sceptical about the EU, but when it comes to tackling climate change, we should fall to our knees and give thanks that such a body exists. It has more clout, over a larger area, than any single country could ever hope to wield. With its mighty €120bn budget, it can encourage the technological innovations, from alternative energies to more efficient gadgets, that might get us out of this mess. And it can regulate out of existence those that make our troubles worse.

It's budget is actually pretty measly; it is substantially smaller than the budget of the United Kingdom alone, less than a third the size, and mostly spent subsidising waste. This does not look like changing. Given that the EU doesn't contain China or the US, the two most important countries for climate change, even if it did implement an ambitious climate change policy it could not affect the most important countries.

Some diplomats are pushing for ever closer engagement with China, working urgently to perfect the technology that might capture the carbon generated by coal-fired power stations, sending it back into the earth rather than into the atmosphere. That's especially pressing in the case of China, which is building a new coal-fired station every four or five days.

The Chinese, on the other hand, don't really care. Climate change concern is a luxury of the rich world. Besides, if efficiency savings aren't good enough in the West how are they good enough in China where consumption is rising so much more quickly?

Why doesn't the EU go further, constructing a low-carbon free trade area with China, a single market for low-carbon technology? Europeans might design, say, an ultra-efficient fridge; China could build it and, with the resulting economies of scale, they could end up selling them all over the world.

We already do this. Fridges are becoming radically more efficient and are then being built in the developing world. It's called outsourcing or "economic imperialism" and anti-capitalists hate it.

All these ideas are fizzing away among those who have come to realise that no area of life is left untouched by this danger. Very smart people in government ministries across the globe are trying to think of the right blend of taxes, regulation, incentives and trading schemes that might stop the world emitting too much carbon. They acknowledge that most of the $17 trillion (£9 trillion) that will be spent in the energy sector between now and 2030 will be spent by private companies - and that, therefore, public servants are limited to prodding and pushing them, hoping they move in the right direction.

They do this because they've realised that working with the creative potential and dynamism of the market is far more effective than attempting to use the levers of government control. Take a look at the success of the sulfur dioxide regime in the US for an example of this at work.

But a heretical thought nags. Governments are limited in what they can do because they no longer control the key economic levers: if they did, they could act swiftly. Instead, they are left hoping that market mechanisms will work their magic and that the polluters' behaviour will change. But that can take time and time is the one commodity we don't have. As John Ashton says: "We don't set the deadlines, nature sets the deadlines." It's true that we cannot go back to the days of state ownership and the command economy. (True, too, that state-run industries polluted as badly as private ones, and were often achingly slow to change). Yet if ever there was a time when the sovereignty of the market posed a mortal danger, it is surely now.

Heretical? A call for more economic power going to the state in the Guardian? You're kidding?

As Freedland acknowledges then ignores he has spent this entire article giving an account of the costs of taking too long and has asserted that market solutions are not fast enough but has not grappled with the question of whether state run industries can move fast enough. State run industries are not an exogenous variable which we can change at will; they are slow moving, union dominated, costly and unproductive. They have enough trouble producing goods at remotely competitive rates without also modernising to increase emissions efficiency, primarily a capital investment operation, more rapidly than industrial capitalism, which is really good at capital investment.

1 comment:

Gracchi said...

Quite right. Good fisk.