Thursday, November 16, 2006

Nick Hurd responds to Lawson; Green Articles That Can't Rebut Lawson #3

This is the first in my series of articles about climate change articles that can't rebut Lawson in which the original piece deserves serious consideration. Hurd is better briefed than Franklin and less insane than Bunting. I'll ignore his little 'you're so superficial' quip at the beginning and jump straight into the main article.

"The modern policy maker, faced with an overwhelming scientific consensus about the scale of risk attached to carrying on as we are cannot afford to be quite so complacent. Lawson finds it convenient to ignore the fact that every molecule of carbon stays in the atmosphere for at least 100 years.

This inertia in the climate system means that if we wait for greater certainty onwhat the scientists are already telling us, then the bigger and more expensive the adaptation challenge is likely to get. The next twenty years will be critical because it is in this period that the big investment decisions will be taken on our energy infrastructure. Get this wrong and the scientists tell us that we will be locking ourselves into a serious problem."

That the challenge of adaptating to climate change is set to rise is rather obvious from the fact that it is currently pretty much zero. However, that does not necessarily mean that paying a different cost, that of curbing emissions, now is necessarily a better idea than paying the cost of adaptation in the future. What did Lawson say which could be construed as rejecting the idea the costs of adaptation would accrue over the long term?

One other thing to note: Every generation we roughly double in wealth. We also see technological advances which allow us to do new things. While the costs of responding to climate change may rise our ability to respond to it is likely to increase as well.

"At the extreme end of the risk spectrum, the focus on adaptation alone becomes ridiculous. How is India supposed to adapt to the melting of the Himalayan water source? How does China adapt to the potential loss of one third of her grain production? At that stage people will adapt by moving, which is why Climate Change is a security issue as much as anything."

"At the extreme end of the risk spectrum" is the classic environmentalist ruse to conflate something science expects to happen, the moderate changes Lawson discussed, with the ones that it has hypothesised possibly could happen. At the extreme end of the nuclear profileration risk spectrum a nuclear bomb goes off in London and millions die. At the extreme end of the asteroid risk spectrum the planet is hit by an asteroid and we all die. If we use this risk to justify a 1% doctrine approach we could quickly freeze human progress in a vain effort to frustrate the possibility of our society being destroyed.

"Lawson is understandably silent on both the short term and long term cost of his strategy but the message from the more rigorous Stern Review is that over time it is likely to be significantly higher than taking action now to try and stabilise our emissions and so mitigate the risk of dangerous climate instability."

How was Lawson silent on the long and short term costs? He spent some time discussing the costs of adapting and defending agriculture, combating infectious disease and making the point that combatting these is eminently possible. Putting numbers to these is the work for a new, genuinely rigorous, research effort. His point was that Stern had not given sufficient weight to the idea that humans might respond actively to many changes in climate.

"Lawson argues that there is no point because it will add too much to our energy bill. That position ignores the high probability that the cost of fossil fuel based energy is likely to go up over time anyway because the world is well on our way to exhausting reserves. It ignores the fact that for many importers of energy (including the UK) the issue of security of supply is now a major issue, so why not try and become more self-sufficient? In short reducing our dependence on fossil fuels makes sense irrespective of climate change risk."

This is logic that I have seen from Liam Fox and which is initially plausible, however, it has serious weaknesses. Essentially the problem of declining fossil fuel reserves is one we can expect the market to respond to very effectively as an increase in a factor price is pretty much a classic scarce resource problem. Problems with the security of supply are reflected pretty reasonably in the price of fossil fuels as the relationship between news from the Middle East and the price of oil attests so these are also problems the market can internalise. The idea that replacing steadily rising energy prices with a rapid rise is good policy is utterly absurd; it clearly makes the process more difficult for the economy to adapt to.

This implies that whereas the response to climate change has to involve government artificially raising the price of energy in order to attempt to account for externalities such as climate change the response to declining fossil fuel reserves is probably best left to the market.

In fact, the logic that falls in emissions will have to happen regardless of climate change policy helps those who are arguing against attempts to curb emissions as it establishes that fossil fuel emissions are essentially a short term problem as market incentives will create a solution to emissions in the medium to long term as part of its response to declining fossil fuel reserves. This is the Kuznets Curve in action and argues for the redundancy of attempts to use government power to curb climate change not their good sense.

"The technology is basically in place today to help us move to a low carbon economy. The problem is that it is relatively expensive now but Government has the power to make that technology cheaper by facilitating roll out at scale. They have the power to create new market opportunities by requiring higher energy efficiency standards of the products we use and incentivising us to make the low carbon choices."

This could be argued for almost any technology. We could all drive cars with satellite navigation more cheaply if government taxed cars without satellite navigation and so that the numbers using sat nav increased and economies of scale kicked in. The problem, as I set out in my response to Franklin, is that this suffers from the standard weakness of state planning in the economy; government is bad at picking winners in technology and is as likely to wind up subsidising a bad choice as increasing the pace at which a good one is deployed.

"Lawson says there is no point because the USA, China and India are not prepared to play ball. He ignores the significant economic opportunity in being at the vanguard of this new investment frontier. He has nothing to say about the benefits of greater energy efficiency to the UK Economy. He ignores what is actually happening below federal level in the USA where progressive Governors and Business leaders push the Superpower into a more engaged position. He ignores the real concerns that India and China have about pollution and access to water which are forcing them to revaluate the issue."

The pollution bit could have been lifted from Franklin. Here's what I said in response to it the first time:

"China's pollution problem is a matter of having industrial plant sited too near, or in, major cities and is a legacy of a planned economy and has nothing to do with CO2, which is not an element in the clean/dirty air equation."

As for access to water. The difficulties accessing water in China are largely a result of Maoist incompetence. Restoring the balance is being undertaken as an engineering challenge and there is no sign the Chinese see tackling global warming as a part of their response.

That's the end of the substantive matter of Hurd's article. He hasn't rebutted Lawson but has inadvertently highlighted many of the reasons why the market and business as usual might produce less carbon dioxide emissions than Stern, who builds his model on rising emissions intensity of economic growth, expects.

1 comment:

Anonymous said...

good post

note this
"progressive Governors and Business leaders " ie leftwing- and Hurd was supposed to be a solid tory , more so than his father....

and he igneos that unilateral climate change prevention is an impossiblity-and doubly so for the UK