tag:blogger.com,1999:blog-280783782024-03-13T18:56:55.882+00:00Bacon ButtyThis is the archived personal blog of Clive Bates: selfless civil servant, amateur chef, novice mountaineer, lawless cyclist, overweight runner and occasional optimist. No longer updated.Unknownnoreply@blogger.comBlogger131125tag:blogger.com,1999:blog-28078378.post-34623673070753803422007-12-20T18:10:00.001+00:002011-06-22T22:42:37.645+01:00Environment and conflict in Sudan<a href="http://4.bp.blogspot.com/_77g3DtXDJXE/R1rX-eC2tBI/AAAAAAAABNA/tFoa-XN_yt8/s1600-h/rain-elfasher.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5141659392813741074" src="http://4.bp.blogspot.com/_77g3DtXDJXE/R1rX-eC2tBI/AAAAAAAABNA/tFoa-XN_yt8/s400/rain-elfasher.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">I've moved to the Sudan... and I'm sitting under a fan in Khartoum writing this... I've now been here a couple of weeks and am no longer totally lost. I've a new job as the <a href="http://postconflict.unep.ch/index.php?prog=sudan">UN Environment Programme</a> (UNEP) Representative for Sudan. We hail from UNEP's <a href="http://postconflict.unep.ch/index.php">Post-Conflict and Disaster Management Branch</a>, which addresses the links between environment (or more specifically, 'natural resources') and conflict.<br />
<br />
The Sudan programme has had a fantastic start through a two-year project to create a <a href="http://www.unep.org/sudan/">Post-Conflict Environmental Assessment</a> for Sudan, which was published this year and is one of the best surveys of the challenges of a developing country environment you will find anywhere - a tribute to the energy and drive of Andrew Morton, who led the effort. The assessment develops some 85 recommendations, and our job here is to make as much of that happen as we can.</span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><br />
The 'post' in 'post-conflict' refers to the end of the long-running North-South civil war and the signing of a Comprehensive Peace Agreement in 2005. Darfur is another matter and is now moving towards banditry and lawlessness. I recommend Alex DeWaal's blog:<span style="font-style: italic;"> <a href="http://www.ssrc.org/blog">Making Sense of Darfur</a></span>, for insights into that tragedy and the intricate politics behind it.<br />
<br />
The environmental pressures are extraordinary - and nowhere more so than in Darfur. The chart above was compiled by my new colleague Brendan Bromwich as part of his work for the charity Tearfund. His work over three years in Sudan has spawned two excellent reports on the environmental pressures in Darfur: <a href="http://www.tearfund.org/darfurenvironment"><span style="font-style: italic;">Relief in in Vulnerable Environment</span></a> and <a href="http://www.tearfund.org/darfurwatervulnerability"><span style="font-style: italic;">Water Supply in a Vulnerable Environment</span></a> (<a href="http://www.tearfund.org/darfurwatersummary">summary</a>) and much wider understanding of the Darfur environmental challenge. As the chart shows, rainfall in Northern Darfur has decreased since the 1950s and most of the driest years on record are in the last 20 years - we don't know if that is climate change caused by greenhouse gases, local environmental changes (eg. due to deforestation), or some natural variability or a combination of each, but it is real nevertheless. Add to that 6-fold population growth since the 1950s and steady southwards creep of the Sahara desert and it is easy to see how the pressures would overwhelm relatively informal and traditional systems of tenure over natural resources. The key natural resources of trees, fertile land, and water are heavily contested. The UN Secretary General summarised as follows in a <a href="http://www.un.org/apps/sg/sgstats.asp?nid=2717">speech</a> in September:<br />
</span></span></span><br />
<blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-style: italic;">But when it comes to providing root solutions to the country's problems, it begins with a core issue facing so many people in Sudan and elsewhere in this region. You all know that the conflict in Darfur began, long ago, in part because of drought. When the rains failed, farmers and herders fell into competition for an increasingly scarce resource. The decisions of man to wage war over these precious natural resources further compounded other factors and challenges. But the fact remains. Lack of water, and a scarcity of resources in general, has contributed to a steady worsening of Sudan's troubles. As part of the solution, the Government with international assistance will have to ensure that the people of Darfur have access to vital natural resources – water being chief among them. The UN stands ready to assist in this effort.</span></span></span></span></blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-style: italic;"></span> The link between natural resources and conflict is probably felt most strongly through the pressures on and opportunities for viable <span style="font-style: italic;">livelihoods</span>. For the poorest in rural areas, their assets and 'wealth' are environmental (or in the case of livestock, dependent on the environment). One of the best expositions of this idea is the 2005 report of <a href="http://www.wri.org/">World Resources Institute</a>, <a href="http://multimedia.wri.org/wr2005/index.htm"><span style="font-style: italic;">The Wealth of the Poor</span></a>.<br />
<br />
For Sudan and Darfur, brilliant work on livelihoods has been done by researchers from Tufts University Feinstein International Center, see <a href="http://fic.tufts.edu/downloads/darfur_livelihoods_under_seige.pdf"><span style="font-style: italic;">Livelihoods Under Seige</span> (2005)</a>, <a href="http://fic.tufts.edu/downloads/DarfurLivelihoods.pdf"><span style="font-style: italic;">Sharpening the startegic focus of livelihoods programming in the Darfur region</span> (2007): report of workshops held in Darfur</a>, and <a href="http://fic.tufts.edu/downloads/BriefingNote_7_30_07.pdf"><span style="font-style: italic;">Strategies for economic recovery and peace in Darfur</span> (2007)</a>. These provide great insights into the ways out of the Darfur conflicts - to the extent that you can be optimistic at all about Darfur, it is through thinking about how livelihoods might develop or re-establish.<br />
<br />
The UNEP programme, in a only a modest way, will aim to move this mighty agenda forward, through a series of projects that are underway or under construction...<br />
<ul><li><span style="font-weight: bold;">Darfur Integrated Water Resources Management</span> - how much water can be abstracted and how should scarce water resources be managed and shared between competing uses and users - and what is the right model of governance? </li>
<li><span style="font-weight: bold;">Darfur Timber and Energy</span> - plant millions of trees in Darfur and find ways to reduce demand for wood, for example through fuel efficient stoves and use of stabilised soil blocks for construction instead of timber</li>
<li><span style="font-weight: bold;">Darfur aid and environment</span> - how can the massive international operation (the UN, donor nations and NGOs) in Darfur operate coherently within environmental and natural resource constraints?</li>
<li><span style="font-weight: bold;">Capacity building</span> - for the Government of National Unity and Government of Southern Sudan.<br />
</li>
<li><span style="font-weight: bold;">Mainstreaming </span>- how do we deliver on the recommendations of UNEP's environmental assessment? An almost unlimited opportunity to improve the lot of people all over Sudan.<br />
</li>
</ul>It will be very challenging but the one thing I've understood since being here is that most people involved 'get it' at a fundamental level, and mainly need to work out what needs to be done and how to do it. There certainly no shortage of commitment from high levels in the UN, willingness from donors and a lot of enthusiasm amongst the government officials and Sudanese people I have so far met.<br />
<br />
I'm not sure I'll have much opportunity for blogging - I'm in a diplomatic job, and that means being, er, diplomatic. But I hope to post occasionally on interesting policy issues in Sudan and to keep an eye on the international environmental agenda, mainly from a technocratic rather than political perspective. I won't be doing a travelogue, personal diary or expressing wonder at the new experiences I am bound to have - I'll spare you that!<br />
</span></span></span>Unknownnoreply@blogger.com6tag:blogger.com,1999:blog-28078378.post-87917368560443250412007-11-14T23:35:00.001+00:002011-06-22T22:44:34.171+01:00Asking the wrong question - biofuels<a href="http://1.bp.blogspot.com/_77g3DtXDJXE/RzsJA8uQisI/AAAAAAAABMY/v3gU1cLnhE8/s1600-h/biomass.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5132706112223611586" src="http://1.bp.blogspot.com/_77g3DtXDJXE/RzsJA8uQisI/AAAAAAAABMY/v3gU1cLnhE8/s400/biomass.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">I don't want to do a full scale critique of biofuels - not least because that would be to enter an already crowded field [see <a href="http://www.biofuelwatch.org.uk/index.php">Biofuelwatch</a> and <a href="http://www.globalsubsidies.org/article.php3?id_article=35&var_mode=calcul">Global Subsidies Initiative</a>, for example]. But it's worth looking at how narrowly-focussed, bottom-up policy-making now means we have somehow put the most financial support into the worst ideas...<br />
<br />
Instead of asking how to reduce transport emissions from road fuel substitution, we should be asking how to make use of land to tackle climate change in the most effective way possible. In coming up with the biofuels targets, policy-makers have asked, and answered, the wrong question. It's not hard to see why... transport policy-makers have to find <span style="font-style: italic;">transport </span>policies. The results: waste, damage and lost opportunities to do better... </span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><br />
There are two main problems with biofuels:<br />
(1) they are a very expensive way of saving carbon, compared to the alternatives (at least 10x the going rate in the EU ETS)- see chart and click to view in detail;<br />
(2) there are substantial negative 'sustainability' impacts, arising from changes in land use for biofuel production - for example deforestation, water impacts or land shortages. Beyond rhetoric, we appear almost indifferent to these.<br />
<br />
Despite these weaknesses, we now have extremely powerful and expensive policy instruments devoted to promoting biofuels. These are ambitious targets set at EU level (<a href="http://www.euractiv.com/en/transport/biofuels-transport/article-152282">EurActiv</a> and appendix below) and the Renewable Transport Fuel Obligation introduced in the UK to meet the EU targets (<a href="http://www.dft.gov.uk/pgr/roads/environment/rtfo/">DfT RTFO pages</a>).<br />
<br />
<span style="font-weight: bold;">Expensive emissions reductions</span>. I've drawn the chart above from data from the government's <span style="font-style: italic;">UK Biomass Strategy</span> [<a href="http://www.berr.gov.uk/files/file39040.pdf">Working Paper 1 - Economic analysis of biomass technologies, Table 30</a> /<a href="http://spreadsheets.google.com/pub?key=pf6IJHIcU_ArAaQ2bjwWwAQ">spreadsheet</a> /<a href="http://spreadsheets.google.com/pub?key=pf6IJHIcU_ArAaQ2bjwWwAQ&output=xls">XLS</a>]. It shows that the RTFO is focussed at the most expensive end of the range of biomass options. In fact, these are at the expensive end of all carbon abatement technologies - perhaps 10 times the going rate in the EU Emission Trading Scheme. But the RTFO is supposed to save 3.6 million tonnes of CO2 (1 MtC - see <a href="http://www.berr.gov.uk/files/file39571.pdf">Energy White Paper 7.31</a>) by displacing 5% of petrol and diesel sales... that's about 2.5 billion litres of fuel.<br />
<br />
<span style="font-weight: bold;">Huge subsidies.</span> Normally with these obligations, you would expect the consumer to pay any premium cost associated with meeting the obligation as the supplier just passes higher costs through. The subsidy system that underpins the RTFO will cost about 30p/litre in 2010-11... of which 20p is carried by the taxpayer (does the polluter pay? Er... no) through a discount of fuel duty and the rest will be passed on to consumers (see <a href="http://www.dft.gov.uk/pgr/roads/environment/rtfo/faq">Transport FAQ</a>]. 30p subsidy on 2.5 billion litres is a lot: £750 million per year - £500m from the taxpayer. No wonder the farmers like it.<br />
<br />
<span style="font-weight: bold;">Ludicrous carbon costs</span>. The implied carbon price in the RTFO is over £200/tonne CO2 (higher than the figure in the chart above). That same £750m/year spent through the EU ETS at a future price of £20/tonne CO2 would realise savings of about <span style="font-weight: bold;">10 times</span> as great as the RTFO. Also, as the chart shows, you would also get much better value for money from almost any other biomass investment. So our biggest instrument is pointing in the wrong direction - and it is extremely inefficient and wasteful.<br />
<br />
<span style="font-weight: bold;">How has this happened? </span>Why, you might well ask, is the government acting so irrationally? Forcing very large sums into inefficient policy instruments for little environmental gain. I think this illustrates an important failing of climate policy. Obviously this has its origins in the EU (in which the UK is an accessory to poor decisions taken by the Council), where the biofuel targets have been set at arbitrarily high levels. I suspect the idea of biofuels targets have come from policy-makers asking the question: “how do we reduce the emissions from transport?”. They conclude that fuel substitution is one of the best options they have then designed a mechanism to make that work - but by indiscriminately subsidising a change of land-use in Europe and beyond. Perhaps they feel an implicit sectoral burden sharing regime at work... that transport must somehow take its "fair share" of the reductions compared to power station, chemical plant and homes. Of course, the climate is indifferent to burden sharing... it doesn't care where the reductions come from. Reading the Energy White Paper [<a href="http://www.berr.gov.uk/files/file39571.pdf">Transport section</a>], you can feel the implicit burden sharing in the text:<br />
</span></span></span><br />
<blockquote style="font-style: italic;"><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">For transport to reduce its climate change impacts we need to enable smarter, more energy efficient use of transport and we need to reduce carbon emissions by bringing about changes in the types of vehicles and fuels we use.</span></span></span></blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">The biomass strategy goes further [<a href="http://www.berr.gov.uk/files/file39571.pdf">UK Biomass Strategy p7</a>]- it recognises that transport biofuels sit at the expensive end of a hierarchy of biomass options, but then concludes it would be simplistic to think about it like that...<span style="font-weight: bold;"><br />
</span><span style="font-style: italic;"><blockquote>... despite their higher cost of carbon, transport biofuels are essential to carbon savings in the transport sector for which there are few other options in the short to medium term.</blockquote></span>But <span style="font-style: italic;">this </span>is the simplistic thinking... we should get the emissions reductions where lowest cost and least damaging overall. The issue is that no-one has the policy brief to optimise these resources: but there is plenty of muscular transport policy-making going on - trying to do the wrong thing well, and establishing a meaningless policy priority. <span style="font-weight: bold;"><br />
<br />
Land grab</span>. The effect of this is that transport-related climate policy lays claim to a big expanse of agricultural land, in Europe and beyond, to grow the necessary crops supported by huge subsidies passed through to grateful/greedy farmers. This brings about land-use changes and the various forms of collateral damage that flow from that. But this is completely the wrong way to determine this sort of policy: the real question should be <span style="font-style: italic;">how do you get the best climate change result from the land use policy</span>? Because the current policy starts from the silo of meaningless transport priorities, it ends up doing the wrong thing with land. Start from land-use and you may do much better for the climate overall, even if that means lower emissions reductions from transport. But what is the aim...? It's the climate!<br />
<br />
Using land in a way that reduces carbon dioxide emissions more cost effectively would either reduce the land-take and agricultural impacts for a given result, or it would allow for a greater beneficial impact on the climate for the same land take. Not only is it an important economic objective to to get the economics of climate change right, it is important for the environment.<br />
<br />
<span style="font-weight: bold;">Grow forests instead...? </span>An excellent articulation of this idea appeared in August in the journal ‘<span style="font-style: italic;">Science</span>’ [<a href="http://www.sciencemag.org/cgi/content/full/317/5840/902">article</a>][<a href="http://verticalfarm.com/pdf/Carbon_mitigation.pdf">bootleg PDF</a>] discussing alternative uses for land and challenging biofuels subsidies. They argue that using land for forestry can be far more effective than growing biofuels in carbon terms over 30 years.<br />
<br />
It points out: “<i>As land is the limiting resource, the appropriate basis for comparison is a function of land area (Mg C ha<sup>-1</sup> year<sup>-1</sup>)</i>” and concludes that growing or protecting forests on the same land would give a much better climate change result over 30 years:<br />
<blockquote><span style="font-style: italic;">In all cases, forestation of an equivalent area of land would sequester two to nine times more carbon over a 30-year period than the emissions avoided by the use of the biofuel. Taking this opportunity cost into account, the emissions cost of liquid biofuels exceeds that of fossil fuels.</span> </blockquote><span style="font-weight: bold;">But could they get cheaper if we invest now...? </span> the stand-by excuse of technology-promoting scoundrels everywhere is that we need big subsidies now to prepare for the brave new dawn tomorrow. I agree you need an innovation system - but it's not obvious that you get to cheap second-generation biofuels via lavish subsidies for a very large uptake of expensive dead-end first generation biofuels. For now, the best transport responses are fuel efficiency and changes in driver behaviour. Longer term it's about mobility demand and the physical layout of our lives.<br />
<br />
<span style="font-weight: bold;">Conclusion</span><br />
It is probably better to grow or regrow forests and ensure that they aren't cut down than rush into biofuels. It is better to use land for almost any other biomass technology than biofuels. More generally, we should see land as one of the resources available to address climate change and build the optimum approach from <span style="font-style: italic;">land-use policy</span>, not let imaginary imperatives in transport policy cause arbitrary and inefficient land grabs. We do not have an adequate system for asking the right questions about biomass, biofuels and land-related carbon policy - and that needs to change.<br />
<br />
<span style="font-weight: bold;">Appendix ... Related posts...</span><br />
<a href="http://baconbutty.blogspot.com/2007/08/escaping-absurd-eu-renewables-target.html">Escaping the reckless RU renewables targets - Aug 2007</a><br />
<a href="http://baconbutty.blogspot.com/2007/02/renewable-energy-targets-why-is.html">Renewable energy targets - why is the EU involved? - Feb 2007</a><br />
<br />
Related <a href="http://www.blogger.com/post-edit.g?blogID=28078378&postID=8791736856044325041">graphic</a>...<span style="font-style: italic;"><a href="http://2.bp.blogspot.com/_77g3DtXDJXE/RzwRzIvbiYI/AAAAAAAABMg/slos8mF8tFw/s1600-h/biofueltargets.gif" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5132997245512944002" src="http://2.bp.blogspot.com/_77g3DtXDJXE/RzwRzIvbiYI/AAAAAAAABMg/slos8mF8tFw/s400/biofueltargets.gif" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><br />
<br />
</span><br />
</span></span></span>Unknownnoreply@blogger.com8tag:blogger.com,1999:blog-28078378.post-40853862403702935112007-11-04T11:55:00.001+00:002011-06-22T22:45:01.501+01:00Heads you win, tails I lose - the City explained<a href="http://4.bp.blogspot.com/_77g3DtXDJXE/RyzJX8xGAeI/AAAAAAAABJ4/J_ulGt7b5j4/s1600-h/merrilllynch.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5128695488954368482" src="http://4.bp.blogspot.com/_77g3DtXDJXE/RyzJX8xGAeI/AAAAAAAABJ4/J_ulGt7b5j4/s400/merrilllynch.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">Imagine your job is taking huge gambles with other people's savings and pensions. Imagine also that the bets are arranged so that you are paid a fortune when things turn out well, but you don't lose anything much when they go wrong. How would you behave...?<br />
<br />
I think you might rapidly develop a hog's appetite for wild risk taking. And that is, in essence, what is wrong about the financial markets - the incentives of individual traders and managers are not aligned with the interests of those whose money they manage. The pay system based on big bonuses creates a sharp asymmetry in rewards for success and penalties for loss. There are no <span style="font-style: italic;">negative bonuses</span> that penalise big losses. The worst that can happen is a few months gardening and a pay-off that would dwarf most people's regular pay. The institution, its shareholder or investors take the pain - not the trader or manager.</span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><br />
It is this view of <span style="font-style: italic; font-weight: bold;">individual incentives</span> that I think has been missing from the commentary on recent turmoil in the financial markets. People are asking why the companies took such risks... just look inside the companies at the personal risks taken by the people making the decisions and it is clear.<br />
<br />
The most egregious example of this in recent weeks has been the precipitous fall of Merrill Lynch, and the departure of its top gun, Stan O'Neal. What happened tells us something about how the industry works...<span class="fullpost"><br />
<br />
<span style="font-weight: bold;">O'Neal's payment for failure. </span><a href="http://www.forbes.com/lists/2006/12/B9NJ.html">Mr O'Neal was paid $22 million in 2006</a>, as the company's fortune soared - $14m of that was his bonus. In fact the company put on a nearly $20 billion in shareholder value in 2006 and you might argue that was a good return (see chart / <a href="http://uk.finance.yahoo.com/q/hp?s=MER">share price data</a>)Much of this value was illusory, as it was stacking up investments in securitised sub-prime mortgages, much of which went very sour indeed in October 2007 - causing an embarrassing $7.9 billion write down in the <a href="http://www.ml.com/index.asp?id=7695_7696_8149_74412_82725_84064">third quarter results</a>. The market value of the firm has fallen by over $30 billion since the beginning of the year, with who knows what misery still to come as all these dodgy positions unwind. O'Neal had to go, but he will walk with a $160m package. And in the name of a quiet life for all involved (except the shareholders) he has been allowed to retire rather than being given the boot, so his package is $90m more than it otherwise would be [<a href="http://www.ft.com/cms/s/0/4fb6d18c-86eb-11dc-a3ff-0000779fd2ac.html">FT report</a>]. So much for the down-side risks....<br />
<br />
<span style="font-weight: bold;">A negative bonus? </span></span></span></span><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">In a more reasonable world, there would be symmetry in his reward system - and you might expect him to have a negative bonus, or '<a href="http://search.ft.com/ftArticle?queryText=malus&y=0&aje=true&x=0&id=060209001005&ct=0">malus</a>'.</span></span></span><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"> O'Neal did well in 2006, but so did many at Merrill: from 2005 to 2006, the pay bill increased by $4.6 billion from $12.4 to $17.0 billion, a 37% increase. If we were to pretend this increase was a reward for creating shareholder value (which increased from $61bn to $80bn) we can derive a return to value-creation of 24 cents extra pay for every dollar of extra shareholder value created. But if Merrill Lynch staff had to pay back at the same rate when they have destroyed shareholder value in 2007 so far, there would be a $7.4 billion negative bonus (a 'malus') payable by now. I don't suppose they'll be paying back anything like that much, or anything. [</span></span></span><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><a href="http://www.ml.com/annualmeetingmaterials/2006/ar/default.asp">Merrill Lynch 2006 Annual Report</a>]<br />
<br />
<span style="font-weight: bold;">They're all at it.</span> I don't particularly want to pick on Merrill Lynch. It just illustrates the incentive structure that works in financial markets and it is far from alone: see <a href="http://www.thisismoney.co.uk/news/article.html?in_article_id=411903&in_page_id=2"><span style="font-style: italic;">Biggest City bonuses ever</span></a> [Evening Standard in 2006] and troubles at other investment banks like <a href="http://news.yahoo.com/s/nm/20071103/bs_nm/citigroup_boardmeeting_dc;_ylt=AiSoanCzVu1ism.FvNPWQZmb.HQA">Citigroup</a> and <a href="http://news.bbc.co.uk/1/hi/business/7074751.stm">Barclays</a>. The <a href="http://business.guardian.co.uk/flash/page/0,,2174388,00.html">Northern Rock crisis</a> was driven by a management determined to make aggressive use of a risky business model, placing all their investors at risk. In the end, they were bailed out with £30 billion of public sector loans [<a href="http://news.bbc.co.uk/1/hi/business/7073556.stm">BBC</a>]. It's the same basic model - profit from exuberant risk taking while times are good: let others take the pain when it all goes wrong. That's why it's no good asking Northern Rock why they didn't see the credit crunch coming - the <span style="font-style: italic;">individual managers</span> (as opposed to the institution) had no incentive to look or to act differently. Quite the opposite.<br />
<br />
<span style="font-weight: bold;">Could anything be done?</span><br />
Annoyingly, it is very hard to see how this could be fixed. It would require an incentive structure that was multi-year, transferable between employers, and stuck with traders and managers even if they left the industry. No manager would accept it, and given the pursuit of talent, no employer would offer it. Any market that required it through regulation would find its institutions moving offshore. It is easier for the fund manager and institution to let the ultimate investor take the pain - as long as all institutions do it together. Which they do. The only sensible approach is <a href="http://en.wikipedia.org/wiki/Caveat_emptor"><span style="font-style: italic;">caveat emptor</span></a> or 'buyer beware' and distrust of promised big returns.<br />
<br />
A <a href="http://www.ft.com/cms/s/1/ab7873d6-8808-11dc-9464-0000779fd2ac.html">Lex comment in the Financial Times</a> puts it rather well:<br />
<span style="font-style: italic;"></span></span></span></span><br />
<blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-style: italic;">Senior Wall Street executives can enjoy eye-watering pay packages by taking excessive risks during good times – something that only becomes clear when risk management is tested and is found wanting.[...] A radical shift on Wall Street is unlikely. But heads you win, tails I lose is no way to pay anyone. </span></span></span></span></blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-weight: bold;"></span> <span style="font-size: 78%;">Note: Market capitalisation is calculated here as share price at the end of year multiplied by shares outstanding at the end of year as listed in the annual report for 2005 and 2006.</span></span></span></span>Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-28078378.post-3816705886040444002007-11-01T17:30:00.001+00:002011-06-22T22:45:55.059+01:00Buddy can you spare a trillion? The EU budget review<a href="http://4.bp.blogspot.com/_77g3DtXDJXE/RyoMScxGAcI/AAAAAAAABJo/XP7F76rDClU/s1600-h/eubudget.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5127924636814016962" src="http://4.bp.blogspot.com/_77g3DtXDJXE/RyoMScxGAcI/AAAAAAAABJo/XP7F76rDClU/s320/eubudget.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">Way past bedtime on 17th December 2005, frazzled European leaders decided how to spend just under one trillion Euro. They set the EU's budget framework from 2007 to 2013 - and committed €947 billion or just over 1% of EU GDP over the period. The chart shows the breakdown of the 2007 budget by major theme - dominated as ever by agricultural subsidies and 'regional' policy or what is now known as 'cohesion' policy (spending in poorer regions of the EU, supposedly to bring them closer to the EU average).<br />
<br />
The full budget from 2007-13 is in this <a href="http://spreadsheets.google.com/pub?key=pf6IJHIcU_ApmCRHQxqL8QQ">spreadsheet</a> [<a href="http://spreadsheets.google.com/pub?key=pf6IJHIcU_ApmCRHQxqL8QQ&output=xls">XLS</a>] [<a href="http://ec.europa.eu/budget/prior_future/fin_framework_en.htm">source data</a>]. You can also look at the <a href="http://ec.europa.eu/budget/library/publications/budget_in_fig/dep_eu_budg_2007_en.pdf">2007 Budget at a glance</a> or <a href="http://ec.europa.eu/budget/budget_detail/policy_areas_en.htm#8">expenditure by programme</a> to see how the Commission describes it, and at an even more detailed material in the <a href="http://eur-lex.europa.eu/JOHtml.do?uri=OJ:L:2007:077:SOM:EN:HTML">EU Official Journal</a> if you want to risk insanity and blindness. Probably the best guide to how the budget is intended to be used is still the Commission's 2004 proposal, <a href="http://eur-lex.europa.eu/LexUriServ/site/en/com/2004/com2004_0101en02.pdf"><span style="font-style: italic;">Building our common future</span></a>.</span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><br />
<span style="font-weight: bold;">Review of the budget</span>. During that endless December night, the leaders also agreed to have a thorough review of the budget, in plenty of time before the grim physics of bureaucratic inertia and the momentum of the <span style="font-style: italic;">status quo</span> settle the budget for 2014-20, once again with only modest tinkering. The resulting <a href="http://ec.europa.eu/budget/reform/index_en.htm">2008-9 Budget Review</a> is now under way and we are invited to respond to a <a href="http://ec.europa.eu/budget/prior_future/fin_framework_en.htm">short consultation paper</a> by April 2008 and participate in a <a href="http://blogs.ec.europa.eu/grybauskaite/does-current-spending-match-priorities/#comments">discussion forum</a> [<a href="http://blogs.ec.europa.eu/grybauskaite/does-current-spending-match-priorities/#comment-55">see my comment</a>]. The Commission has declared there should be '<a href="http://www.euractiv.com/en/future-eu/barroso-opens-taboos-debate-eu-spending-priorities/article-166679">no taboos</a>'. My overall view is that very little of what is currently spent through the EU budget can be justified. But there is one big strategic change to make: <span style="font-style: italic;">shifting from inward-looking and unjustifiable spending within the EU to outward-looking strategic spending as the EU plays a bigger role globally</span>. This is the big challenge for the review.<br />
<br />
I thought it might be an idea to set out some facts and arguments to back this point of view and address the question: <span style="font-style: italic;">what should be done with the EU budget?</span> <span class="fullpost"><br />
<span style="font-size: 100%;"><span style="font-weight: bold;"><br />
<span style="font-size: 130%;">Reprioritisation in the new financial framework - tinkering</span></span></span><br />
<a href="http://1.bp.blogspot.com/_77g3DtXDJXE/RycJve-yF0I/AAAAAAAABFg/Bc7C_Ar9Xck/s1600-h/budget+reform+06-13.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5127077412159493954" src="http://1.bp.blogspot.com/_77g3DtXDJXE/RycJve-yF0I/AAAAAAAABFg/Bc7C_Ar9Xck/s400/budget+reform+06-13.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a>Let's start by looking at what has been done so far. The chart to the left shows how the new 7-year framework will shift priorities within the near €1 trillion 7-year budget - based on how the share of this budget allocated to each theme changes over the 7 years. There is a reduction in the share taken by agricultural subsidies and rural policy and a sharp increase in spending on 'competitiveness', which includes R&D, energy & transport, skills and innovation. This is supposed to support the <a href="http://en.wikipedia.org/wiki/Lisbon_Strategy">Lisbon Strategy</a> [<a href="http://europa.eu/scadplus/glossary/lisbon_strategy_en.htm">EU description</a>], which aims to make the EU the top knowledge-based economy in the world, though there is little hope of that. Disappointingly there is only a small increase in the funding for the EU's role as global player - and from a small base.<br />
<br />
The total reprioritisation (budget share shifted between themes) is just 8% over the seven years. I think that reflects the way the budget is settled at the last minute in a bureaucracy - incrementalism rather than a first principles approach is always likely to prevail. This is an improvement - but not enough of an improvement over seven years, and the focus on 'competitiveness' through government funded R&D is misplaced - as we will discuss later.<br />
<span style="font-size: 130%;"><br />
</span><span style="font-size: 130%; font-weight: bold;">A few cautionary things to bear in mind about spending at EU level</span><br />
<a href="http://1.bp.blogspot.com/_77g3DtXDJXE/Rx9-0_GIifI/AAAAAAAABFA/4lzo00XCb54/s1600-h/EUrevenue.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5124954349726370290" src="http://1.bp.blogspot.com/_77g3DtXDJXE/Rx9-0_GIifI/AAAAAAAABFA/4lzo00XCb54/s200/EUrevenue.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a>I think there are good reasons to start from a sceptical perspective on EU budget spending. Three reasons for caution:<br />
<br />
<span style="font-weight: bold;">1. The EU doesn't really have any money of its own</span> - most of its money comes from contributions by member states, plus some from VAT and some from import tariffs (see chart to the left). When money is spent by the EU, it isn't '<span style="font-style: italic;">additional'</span>, it is money no longer available to spend by member states. Obvious, but it means the question is not whether money should be spent, but at what level.<br />
<br />
<span style="font-weight: bold;">2. Accountability is poor</span>: when money is spent at EU level, the link between the original taxpayer / voter and the body through which the spending is done is weak and diffuse. To a citizen in a member state, money coming from the EU <span style="font-style: italic;">looks </span>additional - like a grant of extra money. There is a danger that member states will seek EU funds where they wouldn't spend the money themselves - for example in subsidising rich land-owners.<br />
<br />
<span style="font-weight: bold;">3. The EU is prone to a '</span><span style="font-style: italic; font-weight: bold;">juste retour</span><span style="font-weight: bold;">' (fair return) approach to spending</span>... you get out what you put in (this is especially true in R&D). Add to this the tendency for member states to fight hard to get the budget spent in their country no matter how compelling the case for it to be spent elsewhere. A layer of messy and inefficient 'political economy', or '<a href="http://encarta.msn.com/dictionary_/pork%20barrel.html">pork-barrelling</a>' must be factored in. Some say that this dynamic means the member states are less likely to tackle fraud in EU spending as the money is coming from somewhere else.<br />
<br />
These '<a href="http://en.wikipedia.org/wiki/Principal-agent_problem">principal-agent</a>' problems are intrinsic to the relationship between the EU and its member states. They are a reason to be cautious about pushing money through the EU budget unless there is a really strong case for it.<br />
<span style="font-size: 130%;"><br />
</span><span style="font-size: 130%; font-weight: bold;">Some principles for deciding what should be spent through the EU budget</span><br />
What are the things for which can we justify spending from an EU budget? There are three dimensions to this: (1) should government or the public sector be involved at all? (2) is <span style="font-style: italic;">spending </span>the right way to meet the objectives compared to other interventions? If there is a case for public spending, (3) is the European Union the right administrative level to do the spending, compared to say national or local government?<br />
<br />
<a href="http://3.bp.blogspot.com/_77g3DtXDJXE/Rx94afGIibI/AAAAAAAABEg/JCrsN3clRSE/s1600-h/eubudgetdecision.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5124947297390070194" src="http://3.bp.blogspot.com/_77g3DtXDJXE/Rx94afGIibI/AAAAAAAABEg/JCrsN3clRSE/s400/eubudgetdecision.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-weight: bold;">1. Public versus private? </span>Should government be involved at all? I think a reasonable rationale for government intervention is that used by the British government: government intervenes to address <a href="http://en.wikipedia.org/wiki/Market_failure"><span style="font-style: italic;">market failures</span></a> (eg. externalities, public goods, information asymmetries, collective action failures etc) and to meet <a href="http://en.wikipedia.org/wiki/Equity_%28economics%29"><span style="font-style: italic;">equity or distributional objectives</span></a> (eg. through providing universal schooling, health care). These ideas are discussed in the UK Treasury's <a href="http://greenbook.treasury.gov.uk/annex01.htm">Green Book section on rationale for government action</a>.<br />
<br />
<span style="font-weight: bold;">2. Spending versus other instruments?</span> The EU has several instruments available to promote its objectives: regulation, economic instruments, development loans, standard-setting, policy co-ordination (eg. the state aids regime) and softer options like establishing good practice or developing comparative indicators.<br />
<br />
<span style="font-weight: bold;">3. Spending through the EU versus spending through member states or more locally? </span> The guiding principles of the EU are that responsibility ('competence') should at the lowest administrative level, and only at EU level if there is no alternative or the benefits are substantially worthwhile and if the EU member states agree. The formal principles that codify this into the treaties are: <a href="http://europa.eu/scadplus/glossary/subsidiarity_en.htm">subsidiarity</a>; <a href="http://europa.eu/scadplus/glossary/proportionality_en.htm">proportionality</a> and <a href="http://en.wikipedia.org/wiki/Principle_of_conferral">conferral</a>.<br />
<br />
<span style="font-weight: bold;">A word about politics...</span> This is perhaps an ideal 'analytical' framework for considering what should and shouldn't be spent through the EU budget. But the EU is a <span style="font-style: italic;">political </span>settlement and political bargains, including spending commitments, will hold it together. So while I think we should strive to apply the criteria above, we should expect it to deviate where politics dictates otherwise. But political determination of the budget is likely to be a cause of waste or inefficiency and, given the poor accountability of EU spending, a reason to keep the budget down.<br />
<br />
<span style="font-size: 130%;"><span style="font-weight: bold;">Where might EU budget spending be justified?</span></span><br />
For spending to be justified through the EU, it should meet the three tests above: that there is a case for<span style="font-style: italic;"> government intervention</span>; that <span style="font-style: italic;">spending </span>is the right thing to do, and that the <span style="font-style: italic;">European Union</span> is the appropriate administrative level to do the spending. I think there are two main areas where these criteria could be met, and a third where regulation is preferable and a fourth where spending is justified, but only on a transition basis...<br />
<br />
<span style="font-weight: bold;">1. Funding genuinely Europe-scale activities or the provision of non-market goods at EU scale</span> - but there are surprisingly few of these. Perhaps border security, policing and anti-terrorism; some research or science projects (space, particle physics, transboundary pollution monitoring and research etc). There are very few nature reserves that could be considered 'pan-European' (perhaps Slovenia?). But by far the most important pan-European activity will be when the EU acts collectively as a global player - for example promoting a response to climate change in developing countries; responding to humanitarian crises; intervening in conflicts or genocide or acting on the '<a href="http://www.responsibilitytoprotect.org/">responsibility to protect</a>'; contributing to meeting the millennium development goals.<br />
<br />
<span style="font-weight: bold;">2. Transfers between from rich states to help poorer states improve welfare</span>? This is the 'cohesion' theme in the budget. However, for every case for a transfer <span style="font-style: italic;">within </span>the EU, I think there is always a more compelling case to transfer from the relatively affluent EU to much poorer developing countries or to countries on the periphery of the EU where the EU has wants peace and stability and future accession states. The members of the EU and potential accession states are middle income countries. I would expect their development to be funded through hard loans from development banks, rather than grants. The EU has the <a href="http://www.eib.org/">European Investment Bank</a> for exactly this purpose.<br />
<br />
<span style="font-weight: bold;">3. Where member states wish to co-ordinate their spending or act in concert</span>. The most charitable view of this is that member states wish to establish norms throughout Europe that go beyond what they would each be prepared to do unilaterally. The less charitable view is that member states like to hide difficult decisions or unpopular spending within the EU's opacity, and take advantage of its democratic deficit. In either case, I think the better approach is to agree standards or outcomes, or define common policies, and do the spending locally - so that it can be managed with local accountability and scrutiny. Almost all environmental spending works this way - EU directive impose high compliance costs on members states and their industries and consumers.<br />
<br />
<span style="font-weight: bold;">4. Legacy and transition</span>. The EU is not starting with a blank canvass - it intervenes heavily in agriculture markets and agricultural production systems and livelihoods are configured around this massive intervention. It should stop intervening, but not overnight. Other areas, such a regional 'cohesion' funding could be unwound more rapidly, but they may be part of the political deal underpinning enlargement and we will have to taper these expenditures more rapidly.<br />
<span style="font-size: 130%;"><br />
</span><span style="font-size: 130%; font-weight: bold;">What does this mean for particular budget lines...?</span><br />
<br />
<span style="font-size: 100%; font-weight: bold;">1. Cohesion ('regional') policy</span><br />
The case for providing grants for infrastructure or social spending for poor areas within the EU, especially through an EU mechanism, is very weak. If the investment creates economic growth (as the Commission argues it does in its '<a href="http://ec.europa.eu/regional_policy/sources/docoffic/official/reports/cohesion4/index_en.htm">Fourth Cohesion Report</a>') then the investments should be paid for from the proceeds of growth - this is how development finance works! If it doesn't create growth, then why have it? All the member states are at least middle income countries and would not qualify for grant finance from international financial institutions. For example, grant finance is available to the 80 poorest countries in the world through <a href="http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/IDA/0,,contentMDK:21206704%7EmenuPK:83991%7EpagePK:51236175%7EpiPK:437394%7EtheSitePK:73154,00.html#borrowers">International Development Association</a> of the World Bank, but everyone else develops through loans The European Investment Bank exists for this purpose in the EU and all EU member states can access the capital markets - and that is what they should do. There may be a case for public spending in poor areas of the EU - but I think think this should be a matter settled at the <span style="font-style: italic;">member state level</span>. In other words, governments should take direct responsibility for the extent of redistribution and inequality within their countries. If the EU has grant funding available for 'cohesion', in every case it would be better used outside the EU with poorer countries or where Europe has important political objectives.<br />
<br />
So I don't think transfers <span style="font-style: italic;">within the EU and between member states</span> are justified at all - there is always a stronger case to redistribute externally. But a further point is whether the cohesion funding actually serves its intended purpose - this short Oct 2007 article <a href="http://www.bruegel.org/5295" style="font-style: italic;">Back to Basics with the EU Budget</a> from the <a href="http://www.bruegel.org/Public/WebSite.php?ID=2">Bruegel</a> think tank, points out that there are no credible systems to assess effectiveness of cohesion policy and:<br />
</span></span></span><br />
<blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-style: italic;">At the end of the day, EU funds do not fall from the sky. The relevant question is whether cohesion funds are the most efficient redistribution instrument available. Nobody can really answer this question today</span></span></span></span></blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="color: #cc0000; font-weight: bold;">Verdict: renationalise regional 'cohesion' policy, use loans rather than grants for development within the EU and create a 'global cohesion fund' for grant spending outside the EU (or add to existing development instruments).</span><br />
<span style="font-weight: bold;"><br />
<span style="font-size: 100%;">2. Agricultural subsidies</span></span><br />
There is no real justification for these and they should be wound down at the fastest rate that does not cause serious dislocation - that would streamline EU farming, land policy and help us in trade talks. The EU still subsidises to the tune of one third of gross farm receipts, and about half of that comes through budget payments (<a href="http://www.oecd.org/document/0/0,3343,en_2649_33727_39508672_1_1_1_1,00.html">OECD</a>). A worthwhile aim would be to have direct payments through the EU (effectively subsidies to land) reduced to zero by the end of the next financial perspective in 2020. I don't have any evidence that this is the optimum speed of taper, but I think a seven year adjustment, signalled three years before it starts, is a long time for an activity that isn't highly capital intensive.<br />
<br />
There may be a case to allow member states to subsidise particular types of agriculture for social or cultural reasons: the EU role could be to set maximum allowable level of subsidies and to ensure these are minimally trade distorting (ie. the EU would be a co-ordinator of allowable state-aids, which would be welfare payments to farmers engaged in particular activities deemed culturally important). If France wanted to fund its <span style="font-style: italic;">foie gras</span> sector, fine by me - as long as its the French taxpayer and French politicians that are accountable. I can always go there on holiday or purchase it from <a href="http://www.lafromagerie.co.uk/#"><span style="font-style: italic;">La Fromagerie</span></a>.<br />
<br />
CAP reform deserves a longer treatment, but the UK's <a href="http://www.defra.gov.uk/farm/policy/capreform/pdf/vision-for-cap.pdf"><span style="font-style: italic;">Vision for the Common Agricultural Policy</span></a>, is a reasonable starting point - basically arguing that public money should be restricted to securing public goods. I think it ducks the question of what are the public goods for which provision can be justified at <span style="font-style: italic;">European level</span>. I also, think that in the interim before a full phase out, more of the CAP spending should be met from national budgets - reducing the unjustified transfers between member states engineered through agricultural support. The argument for localising the support of farming was eloquently made in the 2003 <a href="http://www.euractiv.com/ndbtext/innovation/sapirreport.pdf">Sapir report</a> (section 12.2.1 - p162) for the European Commission, which concludes there is a:<br />
<span style="font-style: italic;"><blockquote>...solid argument for decentralising to Member States the distributive function of the Common Agricultural Policy, as is already the case for all other individual distributive policies.</blockquote></span>I completely agree with this. To reach this conclusion Sapir and colleagues drew on the 1987 <a href="http://ec.europa.eu/economy_finance/emu_history/documentation/chapter12/19870410en149efficiencstabil_a.PDF">Padoa Schioppa report</a>, which made a pervasive case for decentralisation (so it's been around a while now) and argued that the EC:<br />
<blockquote><span style="font-style: italic;"> ... is not well suited to executing distributive policies at the level of individual persons or small enterprises. Efficient income distribution requires detailed administration at the level of the individual, and coherence with features of income tax and social security systems, and the Community cannot assure this. The Community has thus switched role with the Member States, counter to the basic principles of subsidiarity and comparative advantage. </span>(page 133)</blockquote>However, despite the Commission's 'no taboos' line on the budget review, the agriculture DG, led by Mariann Fisher-Boel, is having a CAP "Health Check" (which doesn't sound much like 'major surgery') and through a series of speeches Mrs Fisher is arguing that: <span style="font-style: italic;">The central purpose of the health check is not to change the essential direction of the CAP</span> [<a href="http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/06/622&format=HTML&aged=1&language=EN&guiLanguage=en">speech 20 Oct 2006</a>] and:<br />
<blockquote><span style="font-style: italic;">This "health check" was never and is not meant to be about further fundamental reform. The main objective will essentially be to ensure that the CAP is working as it should. It will be an opportunity to fine tune our tool box</span> [<a href="http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/06/589&format=HTML&aged=1&language=EN&guiLanguage=en">speech 12 Oct 2006</a>]</blockquote>This is annoying: who is Mrs Fischer Boel, an unelected official, to restrict reform to a 'health check'? If the health check is as feeble as it sounds, then the Budget Review should do the job properly. In fact there is a good argument that the CAP will never be reformed from within the agriculture parts of the Commission and national ministries - they are just in it too deep and are, in any case, not properly positioned to see potential benefits by redirecting the budget elsewhere. Has Mrs Fischer Boel somehow decided farmers have a better claim on the budget than the EU's global role? [For more: see excellent report, <a href="http://www.ieep.eu/whatsnew/newsitem.php?item=129"><span style="font-style: italic;">Towards the CAP health check and European budget review</span></a> by <a href="http://www.ieep.eu/index.php">IEEP</a>]<br />
<br />
<span style="color: #cc0000; font-weight: bold;">Verdict: abolish direct farm subsidies by tapering out by 2020 and in the interim have more of the cost of subsidising farmers carried at national rather than EU level, especially if it is going to take longer than 2020. Create some flexibilities for member states to subsidise particular groups for cultural reasons, but at national not EU level and subject to state aids rules. </span><br />
<br />
<span style="font-size: 100%; font-weight: bold;">3. Rural development</span><br />
A lot of this is just more imaginative (and to be fair, more worthwhile) schemes for funding farmers. But hardly any of it can be justified at EU level. There is something annoying about the UK reports to the Commission on the <a href="http://www.defra.gov.uk/erdp/default.htm">England Rural Development Programme</a> and now the <a href="http://www.defra.gov.uk/erdp/rdp07_13/index.htm">Rural Development Programme for England</a> - the prime vehicles for spending EU rural money. This is money paid by the UK taxpayer, sent to Brussels, then returned to the UK with strings and reporting requirements. What is needed here is more careful assessment of the case for European action.<br />
<br />
<span style="font-weight: bold;">Pillar 1 to pillar 2...? </span>We should be wary of the expedient arguments of the environmental lobby which has a "convert Pillar 1 to Pillar 2" approach. Pillar 1 is the vast majority of spending - pure wasteful subsidy. Pillar 2 is payments for rural development and environment. But I think much of Pillar 2, whilst important, fails the subsidiarity test, and should be funded at national level - with the EU setting standards and imposing fines for non-compliance where a co-ordinated approach is needed. This is the dominant model for EU environmental policy - co-ordination, regulation and enforcement, not spending. There may be some true European public goods - things we all value that would be under-protected if left to member states, or areas where there is a particularly high demand (eg. Slovenia has a very high proportion of its land area designated for nature protection). We should also note that payment from the EU rather than from national budgets creates an incentive to engage in nature protection, for example by designating conservation sites, simply to claw back money from the EU. I'm nervous about this motivation because of what it means for democracy and accountability. Perhaps it would be better if there were some way of civil society groups or other independent bodies determining what ecology should have conservation status.<br />
<br />
<span style="color: #cc0000; font-weight: bold;">Verdict: renationalise most of EU rural policy, except where pan-European legitimacy can be justified. Continue to base EU environmental policy on co-ordinated standard setting with member states responsible for ensuring compliance and spending as appropriate. </span><br />
<span style="font-size: 100%;"><br />
</span><span style="font-size: 100%; font-weight: bold;">4. Competitiveness (R&D)</span><br />
This theme has seen the largest increase and reflects the EU's focus on what it calls 'competitiveness' - or the Lisbon strategy.<br />
<br />
<a href="http://4.bp.blogspot.com/_77g3DtXDJXE/RydirO-yF2I/AAAAAAAABFw/kL_tw-d_h7M/s1600-h/EUscience.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5127175195679922018" src="http://4.bp.blogspot.com/_77g3DtXDJXE/RydirO-yF2I/AAAAAAAABFw/kL_tw-d_h7M/s400/EUscience.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a>The spending is spread over several headings (Education and training, Research, Innovation, Energy and transport networks, and Social policy). The lion's share is funding for the <a href="http://cordis.europa.eu/fp7/home_en.html">7th Framework Programme for Research and Technological Development</a> and you can view the <a href="http://ec.europa.eu/research/fp7/pdf/fp7-factsheets_en.pdf">budget allocation summary here</a> (see chart) This is the EU's main R&D spending and includes initiatives to support research, institutions and scientific careers.<br />
<br />
A beefing up of R&D spend is surely a good thing, isn't it? Well, there are many arguments over this... first, I don't think R&D spend (an input) translates easily to innovation, which is more about culture. Nor do I think competitiveness derives much from R&D, which is more about skills, labour market flexibility, competitive pressure etc. In the services economy, traditional R&D counts for little.<br />
<br />
If one accepts that science does a have an important role, do we think the EU is the right place to organise science spending? If it is about 'competitiveness' and much competition is within Europe, how would the EU justify supporting one company not another? How does publicly funded intellectual property become exclusively owned by a company that can then use it to compete? And what about the EU co-operative research model...? Researchers and their institutions are ferociously competitive to publish papers, secure patents and win Nobel prizes. Does Europe force its universities into unproductive bureaucratic collaborations just to get their hands on the money?<br />
<br />
In theory, widening the number of institutions and researchers that can bid for a pot of money should ensure that allocation goes to the best of a larger bunch - and so is spent better overall. That sounds okay, but a meritocracy in spending would tend to drive money towards Northern Europe's big players - UK, Germany, France and the Scandinavians - and their 'Ivy league' institutions. Essentially <span style="font-style: italic;">redistributing from poorer to richer</span>. Hmmm... that doesn't sound right. Alternatively, the money could be spent on a '<span style="font-style: italic;">juste retour</span>' basis (each getting back what they put in), but that loses the main advantage of pooling money.<br />
<br />
My own take is that we should carefully identify where the EU has a legitimate niche. These are:<br />
<ul><li><span style="font-style: italic;">Very large scale</span>: eg. space, particle physics, nuclear fusion<br />
</li>
<li><span style="font-style: italic;">European or global coverage</span>: eg. acid rain monitoring, studies about the EU, standard setting to inform EU legislation.<br />
</li>
<li><span style="font-style: italic;">Public purpose</span>: avoiding too much wheel re-invention through EU level co-ordination where the research doesn't necessarily lead to a product or is aimed at producing 'public goods' - security, some health research, major climate change technologies (carbon capture and storage).<br />
</li>
</ul>In addition, I think there is scope to strengthen institutions and provide open support for talented scientists or researchers - these are good ideas in the 'ideas' 'people' and 'capabilities' components of the framework programme.<br />
<br />
It's hard to see why there should be EU spending on information technology, nano-technology, biotechnology, or any technologies that can be commercialised.<br />
<br />
<span style="color: #cc0000; font-weight: bold;">Verdict: don't accept the that the EU's R&D spend has much to do with 'competitiveness' or the Lisbon strategy. However, there are legitimate reasons to organise some funding at the EU level where scale, coverage or co-ordination in developing public goods justifies EU action. Support for people and institutions will also strengthen Europe's overall system for innovation.</span><br />
<br />
<span style="font-size: 100%; font-weight: bold;">5. Security and citizenship</span><br />
"Freedom, security, justice and European citizenship" to give the full title, does a number of worthwhile things and doesn't cost much - managing migration, preparing accession states, some security, public health etc. But there are some areas where you would want to know something worthwhile was being achieved - for example 'media', and 'culture & diversity'. One fears that these might be budgets that support 'make-work' activity needed to justify having 27 Commissioners.<br />
<br />
<span style="color: #cc0000; font-weight: bold;">Verdict: scrutinise expenditure for value for money and check for overlap with other institutions. </span><br />
<br />
<span style="font-size: 100%; font-weight: bold;">6. EU as a Global Player</span><br />
This is the area where I think much more could be done. But this gets back to a deeper and prior question... what do we want the EU for? See my earlier posting, <a href="http://baconbutty.blogspot.com/2006/12/eurovision-vision-contest.html"><span style="font-style: italic;">The Eurovision Vision Contest</span></a>, on the E3G pamphlet, <a href="http://www.e3g.org/index.php/programmes/europe/"><span style="font-style: italic;">Europe in the World</span></a>]. So I don't think we can be clear on spending on EU as a global player until there is more political assent for the EU acting globally on the member states' behalf - and this must be considered in the Budget Review. The scope for EU budget spending is virtually unlimited:<br />
<ul><li><span style="font-weight: bold;">International development assistance</span>. Pooling member state resources to reduce the number of donors that host countries have to deal with and to improve coherence. Member states are supposed to spend 0.7% of GDP in development assistance, though we are currently well below that (see <a href="http://www.oecd.org/dataoecd/52/18/37790990.pdf">data</a>). In May 2005, EU ministers agreed to a new collective target of 0.56% for 2010, which would result in an additional €20 billion of aid by that time. They also set 2015 as the date for reaching 0.7%and could agree to spend part of this through the EU through the <a href="http://europa.eu/scadplus/leg/en/lvb/r12102.htm">European Development Fund</a>. Smaller states could ask the EU to manage their remaining bilateral resources to reduce overheads and programme costs. [<a href="http://europa.eu/pol/dev/index_en.htm">more on EU aid</a> / <a href="http://ec.europa.eu/europeaid/what/index_en.htm">more on EU external co-operation</a>]<br />
<br />
</li>
<li><span style="font-weight: bold;">Contribution to securing global public goods </span>(<a href="http://www.undp.org/globalpublicgoods/Q-A/q-a.html">Q&A</a>). Transfers to developing countries to underpin international environmental treaties (like UNFCC, Kyoto, biodiversity) - in particular adaptation to climate change and protection of forests for both carbon and biodiversity reasons. A relatively small budget is devoted to international environmental protection focussed onintegrating environmental concerns in development strategies; tackling climate change, biodiversity loss and desertification; promoting the sound management of chemicals and wastes; as well as providing access to affordable and sustainable energy services [<a href="http://ec.europa.eu/environment/international_issues/financing_en.htm">more</a>]<br />
<br />
</li>
<li><span style="font-weight: bold;">Common foreign and security policy</span> (<a href="http://en.wikipedia.org/wiki/Common_Foreign_and_Security_Policy">CFSP</a>) and its security dimension, the European Security and Defence Policy (<a href="http://en.wikipedia.org/wiki/European_Security_and_Defence_Policy">ESDP</a>). This function of the EU is potentially extremely important in the future, though currently still heavily constrained by political nervousness. The role could including acting on the UN's '<a href="http://www.responsibilitytoprotect.org/">responsibility to protect</a>' principle and the <a href="http://www.unhchr.ch/html/menu3/b/p_genoci.htm">UN genocide convention</a>. The EU is beginning to intervene collectively - in Bosnia (through EUFOR), policing in Afghanistan and missions to Southern Lebanon and DR Congo [<a href="http://europa.eu/pol/cfsp/overview_en.htm">more</a>].<br />
<br />
</li>
<li><span style="font-weight: bold;">Humanitarian assistance</span> for emergencies (earthquakes) or crises (Darfur, DRC) combined with standing response capacity. The EU spends about €600m annually through ECHO - the DG for Humanitarian Aid [<a href="http://europa.eu/pol/hum/index_en.htm">more</a>].<br />
<br />
</li>
<li><span style="font-weight: bold;">Promoting stability on the EU's periphery</span> - North Africa, Middle East, Eastern Europe and Central Asian Republics - for example, by investing in institutions, environmental protection, support for democracy, and creating an <span style="font-style: italic;">acquis-lite</span> to establish associate member status with access to the single market. The EU has the <a href="http://ec.europa.eu/world/enp/policy_en.htm">European Neighbourhood Policy</a>, which aims to strengthen links with Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, the Palestinian Authority, Syria, Tunisia and Ukraine. Relations with Russia are managed through an increasingly fraught '<a href="http://ec.europa.eu/external_relations/russia/intro/index.htm#eu">Strategic partnership</a>'.<br />
<br />
</li>
<li><span style="font-weight: bold;">Promotion of EU membership</span> to the East and South and getting candidate countries up to the requisite legislative and institutional standards - a good use of transfers. Croatia and Turkey are beginning the process, but <span style="font-size: 85%;"><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">Macedonia, </span></span></span></span>Bosnia, Serbia and Albania must be encouraged. [<a href="http://europa.eu/pol/enlarg/index_en.htm">more on enlargement</a>]<br />
<br />
</li>
<li><span style="font-weight: bold;">Promoting a European model of democracy and human rights. </span>The EU could do far more to champion the cause of human rights and a broader definition of democracy (ie. broader than the American view). The EU's external relations portfolio has strong rhetoric on human rights and it could become a major global role for the EU [see activities <a href="http://ec.europa.eu/external_relations/human_rights/intro/index.htm">here</a>]. The key funding stream is the European Initiative for Democracy and Human Rights [<a href="http://ec.europa.eu/europeaid/projects/eidhr/eidhr_en.htm">EIDHR</a>] and this will spend €1.1 billion 2007-13.<br />
</li>
</ul>The point is that these are all excellent things for the EU to be doing on behalf of the 27 member states. In none of these areas could anyone claim that the potential to do good has been exhausted. So I see this as an area where very substantial additional funding could and should be absorbed - though an increase should be phased at a rate that allows the administrative and political capacity to develop proportionately.<br />
<br />
<span style="color: #cc0000; font-weight: bold;">Verdict: this is where the EU should be doing <span style="font-style: italic;">much </span>more, and where more of the budget should be spent. The critical requirement is a strong political mandate.</span><br />
<br />
<span style="font-size: 100%; font-weight: bold;">7. Administration</span><br />
Like all bureaucracies the EU is guarded and apologetic about the amount it spends running itself. It shouldn't be. Nor should it be measured by what proportion of the budget it takes, with the presumption that the smaller proportion the better. The key understanding is that the European Commission and other institutions are not there to spend a budget but to administer the European Union jurisdiction - proposing directives, supervising the single market, negotiating at WTO meetings (ie. important things that have little to do with the budget). With a strong dose of subsidiarity, the EU budget could be cut by two-thirds. But the administration costs would fall by nothing like so much, and the percentage of the budget devoted to 'administration' would rise sharply. <span style="font-style: italic;">But that would be a good thing</span>. It's a slightly cheap comparison, but it is worth bearing in mind the EU has about 30,000 civil servants, compared to about 540,000 in the UK [<a href="http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=2899&Pos=&ColRank=1&Rank=422">stats</a>].<br />
<br />
I'm not for one moment suggesting that the EU institutions are free of waste and incompetence. Goodness no. Just arguing that lower administration spending is not a sensible objective in its own right.<br />
<br />
<span style="color: #cc0000; font-weight: bold;">Verdict: a well functioning administration has great leverage on the effective of the spend of the whole budget and the entire EU programme - improving <span style="font-style: italic;">allocative </span>efficiency. Spend generously on administrative resources, but push hard for improved <span style="font-style: italic;">managerial </span>efficiency - avoid waste, avoid over-paying, have a good performance framework, move the under-achievers out.<br />
<span style="font-size: 100%;"><br />
</span></span><span style="font-size: 100%; font-weight: bold;">EU budget expenditure - summary</span><br />
<span style="color: #3333ff; font-weight: bold;">Overall verdict: apply rigorous tests for rationale for government intervention, spending rather than other instruments and spending at the EU level. On that basis phase out agricultural subsidies and 'cohesion money', remain sceptical and discerning about spend on R&D but be far more bullish about funding the role of the EU as a global player. </span><br />
<br />
Tony Blair made a powerful case for reform in his <a href="http://www.number10.gov.uk/output/Page7714.asp">speech to the European Parliament</a> in June 2005, but by then it was to late to deliver meaningful reform through the European Council. The Budget Review was a commitment to have another go, but with enough time to create strategic reform for the next financial perspective. I hope the UK government still sees it that way.<br />
<br />
<span style="font-size: 100%;"><span style="font-weight: bold;">EU budget sources of revenue</span></span><br />
There's more to be said about where the EU raises it's revenue and the UK 'rebate' - but this posting has already gone on too long!<br />
</span></span></span>Unknownnoreply@blogger.com8tag:blogger.com,1999:blog-28078378.post-63923483466353127842007-10-25T17:12:00.001+01:002011-06-26T23:32:49.952+01:00Don't ditch the Kyoto Protocol<a href="http://4.bp.blogspot.com/_77g3DtXDJXE/RyBIA--yFyI/AAAAAAAABFQ/y7t2GlHPk2A/s1600-h/worldemissions.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5125175557691152162" src="http://4.bp.blogspot.com/_77g3DtXDJXE/RyBIA--yFyI/AAAAAAAABFQ/y7t2GlHPk2A/s320/worldemissions.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">My otherwise peaceful morning slumber was disturbed by a <a href="http://www.bbc.co.uk/radio4/today/listenagain/ram/today3_Kyoto_20071025.ram">radio interview</a> announcing that social scientists Steve Rayner and Gwin Prins want to 'ditch the Kyoto Protocol'. In a <span style="font-style: italic;">Nature </span>commentary, <a href="http://www.nature.com/nature/journal/v449/n7165/full/449973a.html"><span style="font-style: italic;"> Time to ditch the Kyoto Protocol</span></a>, they have a go at the Kyoto Protocol and claim that 'political correctness' is inhibiting proper criticism and unnamed Kyoto supporters insist that Kyoto must remain the only game in town, sternly admonishing any dissenters to this orthodoxy. Luckily for us these fearless academics are ready to speak out. The trouble is, they have nothing much to say!<br />
<br />
Yes, it is true that current efforts to control greenhouse gases are inadequate and that emissions are still rising and accelerating when they need to be slowing and falling - see chart [<a href="http://cait.wri.org/cait.php">data from CAIT</a>] - see also <a href="http://news.bbc.co.uk/1/hi/sci/tech/7058074.stm">BBC item</a>. So we do have <span style="font-style: italic;">prima facie</span> evidence of failure. Or more optimistically, it's too early to see success in a multi-decade effort. But any failure so far is a reflection of insufficient political will and its wicked uncle, human short-termism, rather than the design of the Kyoto Protocol.</span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><br />
<br />
The authors "<span style="font-style: italic;">believe that a radical rethink of climate policy should possess at least five central elements</span>":<br />
1. Focus mitigation efforts on the big emitters<br />
2. Allow genuine emissions markets to evolve from the bottom up<br />
3. Put public investment in energy R&D on a wartime footing<br />
4. Increase spending on adaptation<br />
5. Work the problem at appropriate scales<br />
<br />
</span></span><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">Their supposedly radical alternative proposals aren't radical or even alternative. But they would, if taken seriously, dissipate what political commitment already exists.</span></span><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"> Let's examine what they describe as this 'silver buckshot' approach in more detail...<span class="fullpost"><br />
<span style="font-weight: bold;"><br />
Overall... I think they just don't quite get what Kyoto does</span><br />
The authors say that Kyoto is based on the models used for tackling ozone, depletion, acid rain and nuclear arms, and that: <span style="font-style: italic;">in practice, Kyoto depends on the top-down creation of a global market in carbon dioxide by allowing countries to buy and sell their agreed allowances of emissions</span>.<br />
<br />
Overall, they have mis-characterised the Kyoto protocol (it isn't a single policy instrument designed to create a global trading system). Furthermore, they've not recognised the critical problem at the heart of climate change - it is an international, intergenerational <a href="http://en.wikipedia.org/wiki/Collective_action">collective action problem</a> to be faced in conditions of uncertainty, distrust and short-termism. The Kyoto Protocol attempts to create a framework for negotiating a solution given that conceptualisation of the problem. The authors' emphasis on local, bottom and piecemeal approaches overlooks the problems of free-riding and the difficulty of getting anything much done, when people fear that others are not doing anything (ie. the collective action issue). The authors appear to take swipes at the Kyoto Protocol without realising that its function is limited to establishing major commitments between parties and organising co-operation. It does not specify policies, but what must be achieved. the choice of policies and the appropriate jurisdictional scale for action is up to the parties.<br />
<br />
Let's look at the five specific proposals....<br />
<br />
<span style="font-weight: bold;">1. Focus on the big emitters</span><br />
The idea is that the top 20 emitters account for 80% of emissions. Do a deal between them and <span style="font-style: italic;">hey presto</span>!<br />
<br />
But a 'C-20' is effectively happening <i>in parallel</i> with Kyoto, through the G8 and other fora, and is actually what happens in negotiations anyway - through a 'contact group' or other such negotiating device. There is lots of scope to find consensus amongst big players outside the UN meetings, but to imagine this can replace a broader forum is wrong. Where this goes wrong is to ignore the value of a global agreement and how the agreement might change shape in the future: for example through global sectoral agreements (eg. for aluminium or aviation) or if the approach moves on to a 'policies and measures' agenda - eg. setting global product standards. It should also seek to involve all countries in cap and trade or harmonised carbon tax regimes. There is also the financing (CDM) and adaptation aspects of Kyoto. The other reason to have all countries involved is the moral pressure of those states that have most to lose (and gain). Note that the per capita emissions are very different. Note that<br />
<br />
<span style="font-weight: bold;">2. Allow genuine emissions markets to evolve from the bottom up</span><br />
They want emissions trading markets to begin with small coverage as local initiatives, like all 'genuine markets'.<br />
<br />
First of all, there isn't a global market - the emissions trading systems that do exist have been created to help particular parties, like the EU, meet their Kyoto commitments or by jurisdictions or groups of companies wishing to take action outside Kyoto (eg. in the US). So what does this supposedly radical proposal actually mean? A cap and trade system is only as good as its cap - the trading bit improves efficiency, not the environmental outcomes (unless you allow that trading facilitates agreement to tougher caps). Where do meaningful caps come? Certainly not from the free play of perceived corporate or national self-interest if the EU system is anything to go by. Does bottom up mean 'voluntary participation'? If so, who will join the system if they are a loser and have to buy emissions rights? If it not is not voluntary, some legislative body needs to compel the participants to join and to allocate or auction caps. Has anyone ever suggested that environmental taxes should evolve from the bottom up? Well emissions trading markets have much the same effect - they impose scarcity and force a price on carbon.<br />
<br />
<span style="font-weight: bold;">3. Put public investment in energy R&D on a wartime footing</span><br />
The authors think that massive public sector R&D will increase the stock of low carbon technologies and point out that government R&D spend has fallen by 40% since 1980.<br />
<br />
First, let me propose a thought experiment... if we only ever had the technology available today, 25 October 2007, could we address the climate change challenge? I think we could go a long way... I think the real deficit is in <i>policy innovation</i> and political will - ie. that which causes the available low carbon technologies to be widely applied. You only have to look at the state of the existing building stock to realise that new technology is the least of the problems. The sort of wartime effort we need is not a Manhattan Project or dambusters development ending in new gee-whiz technologies, but more like the distribution of gas masks or Morrison shelters - effective bomb retardants based on the old-tech plasticity of metal.<br />
<br />
Secondly, if the problem is cost, the answer is unlikely to be R&D but more likely to involve increasing scale through market support in some way (for example like the Renewable Obligation or feed-in tariffs). For technologies that are more distant, other mechanisms like prizes (as done for carbon capture and storage) might be the way ahead.<br />
<br />
Thirdly, where is their evidence that government R&D spend will have the effect they hope for? Military R&D during total war is very different to civil innovation in an energy market. Actually, private sector R&D with carefully designed incentives from government will do the job better than thousands of men in white coats in government labs. But where do governments get the motivation to act provide market support or other incentives... from meeting targets, or from seeking to induce first-mover advantages in low-carbon markets that will be created by policies originating in the Kyoto Protocol.<br />
<br />
<span style="font-weight: bold;">4. Increase spending on adaptation</span><br />
Yes, it is a good idea to spend more on adaptation. Mitigation at the very best will slow the warming trend and it won't start doing that noticeably until 2040. The interesting thing that has escaped many commentators is that adaptation is not a choice really - the impacts and risks will arise whether you expect and prepare for them or not. Mitigation is a choice, albeit an irresponsible one to duck. Governments will face the risks whatever they do, and so will have strong incentives to fund adaptation to deal with floods, sea level rise, droughts, super-storms, urban heat waves, exotic diseases etc. Most of this should be spending at national or local level - but there is scope for international co-operation.<br />
<br />
So although more focus on adaptation is worthwhile, and in my view will inevitably be driven by impacts, why does this justify 'ditching Kyoto'? Adaptation and mitigation are not mutually exclusive - they are just different risk management strategies which work over different time horizons. In fact, both the UNFCCC and Kyoto Protocol have adaptation provisions within them (see <a href="http://unfccc.int/adaptation/items/2973.php">UNFCCC</a> & <a href="http://unfccc.int/essential_background/kyoto_protocol/items/1678.php">Kyoto Art 10 and 12.8</a>). Other than the fact that they are under-used, I don't see what is wrong with these. And they are an important part of the 'bargain' that encourgaes developing countries to participate in mitigation.<br />
<br />
<span style="font-weight: bold;">5. Work the problem at appropriate scales</span><br />
The authors point out that policy innovation happens at more local levels.<br />
<br />
Another misunderstanding... Kyoto provides the elements that are needed at the global and national levels - namely targets and commitments to co-operate between nations. Which localities are going to set demanding targets if they believe others will not? The whole point of the protocol is that targets are agreed and the parties work out how to meet the targets themselves - and they may devolve responsibility to a lower administrative level, for example to local government or cities. The authors' recommendation as framed is, of course, a banality - of course things should be done appropriate scales! But some things do need to be agreed at the top level - mainly targets and a system for co-operation and transfers between states. And that is exactly what is done in the Kyoto Protocol. There would be a problem if the Kyoto Protocol was all there is.... but it does only the job that is needed at global level.<br />
<br />
And what is truly local, bearing in mind the industry lobbyists' dislike of local differences or, as they would have it, 'distortions'? Could you imagine the cap-setting trouble we would have if each EU member state set its own cap or carbon tax? What if each US state set different vehicle emissions standards etc. I think things like renewables policy, building rehabilitation, local transportation, spatial planning might be a good local thing. But its less obvious with economic instruments, large scale energy supply, product standards etc.<br />
<br />
<span style="font-weight: bold;">The silver buckshot approach - media-savvy academics rename something ordinary to gain extra publicity </span><br />
This seems to mean having lots of different policy approaches and doing what works. I agree. It's how most countries are trying to meet their Kyoto commitments. I don't think they've added anything new or interesting with this commentary, but they will have made some American climate sceptics and Kyoto detractors very happy.<br />
<br />
<span style="font-weight: bold;">Could the response to climate change be improved?</span><br />
Most definitely.... but not by ditching Kyoto. Here's six ideas for starters...<br />
</span></span></span><br />
<ol><li><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">Global sectoral agreements (steel, aluminium, cement, oil, aviation, shipping) aiming to limit emissions worldwide<br />
</span></span></span></li>
<span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">
<li>Global product minimum standards built into WTO rules - this would be like globalising the approach taken in the EU single market, or for food safety<br />
</li>
<li>Focus commitments on realising 'no-regrets' measures, especially in developing countries. This aims to get over the idea that commitments are always harmful - who can object to committing only to do those things that are otherwise beneficial?</li>
<li>Very large North-South transfers to buy-out carbon intensive development - these should be big enough to completely offset developed country emissions.<br />
</li>
<li>Demand-side measures aimed at tackling deforestation and promoting reforestation by reducing unsustainable dependence on forest products. We can't tackle deforestation simply by protecting particular areas... it just means other areas are cut<br />
</li>
<li>The strategic use of time - policies that build up gradually to give a large effect - eg. a $200 /tCO2 globally co-ordinated tax introduced over 40 years. I think we could do really huge things if we give them time and act with credibility and consistency. Trying to do big things quickly usually fails and a series of small piecemeal initiatives rarely achieves much.</li>
</span></span></span></ol><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><br />
Note - some of this first published on Caspar Henderson's <a href="http://jebin08.blogspot.com/">Grains of Sand blog</a> in response to a <a href="http://jebin08.blogspot.com/2007/10/radically-rethinking-climate-policy.html">posting</a> by him.<br />
</span></span></span>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-28078378.post-36839427228906479442007-10-19T19:30:00.000+01:002008-12-09T17:24:43.458+00:00Have a referendum... on EU membership, not the treaty<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/_77g3DtXDJXE/RxnQPfGIiRI/AAAAAAAABCA/73AR6hp2dkI/s1600-h/eurosceptic.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://1.bp.blogspot.com/_77g3DtXDJXE/RxnQPfGIiRI/AAAAAAAABCA/73AR6hp2dkI/s400/eurosceptic.jpg" alt="" id="BLOGGER_PHOTO_ID_5123355015574489362" border="0" /></a><span style="font-size:85%;"><span style="font-family:trebuchet ms;">Am I alone in finding the phoney war over the EU treaty unbelievably annoying? I feel as though I'm caught in the midst of an Olympic synchronised lying event, where just about everyone is saying the opposite of what they think for reasons different to those they give. The government doesn't want a referendum because it will probably lose, so it is saying the treaty is very different to the constitution and therefore its earlier promise of a referendum no longer applies. The opponents say the treaty is the same as the constitution so the promise of a referendum must apply. But they want that because they think people will over-react to any vote on Europe and this will help to sink the EU or, amongst the most deranged, lead to our withdrawal. They are hoping to make political capital (or plain mischief) from Britain's deep Euroscepticism - see chart [<a href="http://www.yougov.com/archives/archivesMain.asp?jID=2&sID=5&rID=5&wID=0&uID=">YouGov polling data</a>]. No side is bothering to make a thoughtful case for the treaty, or against it.<br /><br />The real situation, at least as I see it, is as follows: <span class="fullpost"><br /><br />1. <span style="font-weight: bold;">Main purpose</span>: the treaty provides some much needed administrative streamlining and better 'machinery of government'. This should improve the quality of EU decision-making and accountability (a bit).It also does a few things that will help Europe in a globalising world. [see <a href="http://www.consilium.europa.eu/igcpdf/en/07/cg00/cg00001.en07.pdf">text</a> / <a href="http://www.consilium.europa.eu/cms3_applications/Applications/igc2007/doc_register.asp?lang=EN&cmsid=1300">documentation</a> / <a href="http://newsvote.bbc.co.uk/1/hi/world/europe/6901353.stm">BBC guide</a> / <a href="http://politics.guardian.co.uk/eu/story/0,,2194794,00.html">Guardian Q&A</a>]<br /><br /><span style="font-weight: bold;">2. Transfer of power to EU</span>; the treaty does pool some sovereignty (or transfer power) in some issues (many trivial, some important)... this happens because we give up some vetoes (unanimous voting) for majority voting. But the sceptics always think of loss of vetoes as a loss of power, and vetoes as 'surrendered'. This is wrong - often a move to majority voting means other countries can't block what we want to achieve through the EU. People think the power goes to 'Brussels', but it largely remains with the Council of Ministers. When we need to express power collectively (eg. in international relations or development) the removal of vetoes can give us more power.<br /><br /><span style="font-weight: bold;">3. It's the same.</span> The amending treaty is little different to the constitution in its effect, though its form is completely different. The amending treaty is tediously defined as a series of textual amendments to the existing treaties (Rome, Maastricht, Nice etc), whereas one of the great benefits of the constitution was a consolidation into a single text, albeit a long and complicated text. In claiming it is different, the government is focussing on its form, not its function, and is being very disingenuous. The main difference is the dropping of a few symbols like the anthem etc. See <a href="http://www.publications.parliament.uk/pa/cm200607/cmselect/cmeuleg/1014/101402.htm">European scrutiny committee report</a>, especially <a href="http://www.publications.parliament.uk/pa/cm200607/cmselect/cmeuleg/1014/1014.pdf">Annex 1 (p.25)</a> and <a href="http://news.bbc.co.uk/1/hi/uk_politics/7034052.stm">BBC reporting</a> of this for comparison.<br /><br /><span style="font-weight: bold;">4. Some of it is stupid and unnecessary.</span> The <a href="http://www.europarl.europa.eu/charter/pdf/text_en.pdf">Charter of Fundamental Rights</a> is ridiculous and counter-productive (and UK has an opt-out of dubious resilience). The danger of defining too many rights that are not profound or deeply supported in society, is that the currency of rights becomes devalued. There is something troubling about a document that includes the rights to 'access to free placement services', 'right to social security' and 'family protection' in the same charter than protects the right to life and freedom from torture. It even seems to ban school kids having a Saturday job. We should stick with the <a href="http://en.wikipedia.org/wiki/European_Convention_on_Human_Rights">European Convention on Human Rights</a>, which deals with the rights that really matter, and make sure that really works.<br /><br /><span style="font-weight: bold;">5. There is no case for a referendum</span> on the treaty (and there wasn't on the constitution). We are, rightly, sparing in what we ask people to vote on - we leave scrutiny of difficult legislation to elected representatives, and only bother people when the changes are fundamental - ie. in/out of EU, devolution, regional assemblies etc. The issues at stake here are no more significant than those considered in domestic bills and trusted to parliament. And many domestic bills shift more powers around than this treaty - eg. the recent terrorism legislation. We know people are hugely confused or wilfully ignorant about the EU and this treaty - see for example <a href="http://www.yougov.com/archives/pdf/OMI040101040.pdf">polling for the Sunday Times</a>, from 2004 - which shows people believe that the EU has more power than it has and would take more than it will, and so it is unclear on what understanding people would base their answers to the simple question about whether you support the treaty. One might argue that a referendum will force politicians to explain the treaty properly. I strongly believe that any referendum should present people with strong clear choices that they can understand. The difference between 'yes' and 'no' for this treaty is very obtuse - to the point where few involved can actually explain it.<br /><br /><span style="font-weight: bold;">6. EU is an elite programme that needs a new mandate</span>. The development of the European Union has long been a programme of the political and business elites - and current treaty is no exception. Ordinary folk have usually misread it from one extreme or another - either as a happy-clappy fellowship of nations with liberal values or as a sinister plot by power-crazed bureaucrats. It is neither. the EU provides cover for politicians to do what they know or believe to be right, but often find hard to sell to their electorates. That cannot continue for two reasons: firstly the EU institutions don't really like or understand the basic principles of '<a href="http://en.wikipedia.org/wiki/Subsidiarity">subsidiarity</a>', '<a href="http://europa.eu/scadplus/glossary/proportionality_en.htm">proportionality</a>' and '<a href="http://en.wikipedia.org/wiki/Principle_of_conferral">conferral</a>' that supposedly underpin the balance of powers between member states and the EU. As a result it does too much, does it badly and does it with poor democratic accountability. It is right to be Euro-sceptic about this. Secondly, we need the EU to do more outward-looking things - be a global player on behalf of the member states... and that will require more pooling of sovereignty. This is where the EU needs more support and less scepticism. So big changes are needed, and the public will have to understand them and want them. In other words, the EU needs a renewed popular mandate based on what it now is and should become. The <a href="http://en.wikipedia.org/wiki/United_Kingdom_European_Communities_membership_referendum,_1975">mandate secured in 1975 for continued membership of the 'Common Market'</a> has run out.<br /><br /><span style="font-weight: bold;">7. Have a meaningful referendum in the next parliament.</span> I think at some point the EU will have to stop being an elite programme and be respected and accepted by the wider public - a point we are far away from now - or we leave it. To do this, we need a proper vision and debate about the future of the EU, both in the UK and in the EU itself. The real future of the EU is obscured in the treaty and there is virtually no debate about what it will be doing in even 10 years (though the budget review might help with that). But this is what we should be discussing - not the cycle of Commission appointments or voting system for comitology or other arcane details. A referendum would present people with a stark in/out choice and force us all to examine what we want the EU for and where it is going.<br /><br /><span style="font-weight: bold;">To summarise:</span> the treaty has virtually the same effect as the constitution and is a useful improvement to the EU. But it is not of such consequence that it justifies a referendum (and it never did). However, the popular mandate for EU programme from the British people has expired and needs to be regained. Legitimate scepticism and a bold outward-looking vision need to face down Euro-phobia and the globalisation-denial of the Little Englanders. <span style="font-style: italic; font-weight: bold;">I think the best strategy for the government would be for parliament to decide on the treaty in 2008, but for the government to promise a referendum on EU membership for the next parliament - and then present a vision and make the case</span>.<br /><br />Other political parties could declare for a referendum or even for leaving the EU in their election manifesto. Europe would be a central issue at the next election. It's about time it was taken seriously - the last time it was an election issue, it was <a href="http://www.conservatives.com/tile.do?def=news.story.page&obj_id=11274&speeches=1">William Hague pledging to 'save the pound'</a>.<br /><br />And that was quite enough of <span style="font-style: italic;">that </span>sort of thing.<br /></span></span></span>Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-28078378.post-2279272446450383502007-10-09T09:05:00.001+01:002011-06-26T23:33:22.857+01:00Severn barrage - flawed economics<a href="http://4.bp.blogspot.com/_77g3DtXDJXE/RwfE2WJhjwI/AAAAAAAAA18/7r792uGq97w/s1600-h/Severncosts.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5118275939467366146" src="http://4.bp.blogspot.com/_77g3DtXDJXE/RwfE2WJhjwI/AAAAAAAAA18/7r792uGq97w/s400/Severncosts.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span style="font-size: 78%;">Note: this follows an <a href="http://baconbutty.blogspot.com/2007/09/severn-barrage-brilliant-or-bonkers.html">earlier posting on: The case for the Severn barrage - does it hold water?</a>...</span><br />
<br />
Sometimes you can be wading through a report and hit something that abruptly tells you it isn't really worth reading on: the report is mad and you are wasting your time. And so it happened when reading through the SDC report <a href="http://www.sd-commission.org.uk/publications.php?id=607"><span style="font-style: italic;">Tidal Power in the UK</span></a>, and coming across Table 33 on page 119 - see left.<br />
<br />
This shows the cost of the Cardiff-Weston Severn barrage for different discount rates (the horizontal lines), compared to other low carbon technologies (the bars). The report declares:<br />
<br />
<span style="font-style: italic;">...at an 8% discount rate, [the barrage options] lie at the higher end in comparison to other low carbon technologies; at 15%, they are well above the costs of all other technologies except wave power; but using low discount rates of 2 or 3.5% a barrage becomes highly cost-competitive</span>.<br />
<br />
Oh <span style="font-style: italic;">dear</span>...! If you were also to assume a very low cost of capital (discount rate) for the other technologies, they get much cheaper too! So the costs given for offshore wind or nuclear, both highly capital intensive, would be much lower if they had 2-3% discount rates and the bars would shrink below the lines. The chart is distorting and meaningless, but it does rather betray the tendency to appraisal bias that pervades the report. About this there is more to say.... </span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><br />
<br />
The economics in the SDC report is too much about '<span style="font-style: italic;">how</span>?' and not enough about '<span style="font-style: italic;">why</span>?'. The first job of economics is to help with deciding where and where not to invest resources. When things come out hugely more expensive than the alternatives, that should be cause for a searching examination of why we would want to do it. In the SDC report, it instead sets off a concerted effort to justify exceptional treatment. A 16 Km dam with over 200 turbines producing only the output of two Sizewell B power stations for £15 billion (and counting) should set off alarm bells for anyone with the slightest feel for power project costs. It's just a very very expensive way to reduce carbon - about £200/tCO2 on the same sort of assumptions used elsewhere in the energy / carbon market, which is more than 10 times the going rate. Why should society want to tie up its resources in this unproductive way? Could not £15 billion be put to better use?<br />
<span style="font-size: 100%;"><br />
<span style="font-weight: bold;">Severn barrage in context - the alternatives are cheaper and better</span></span><a href="http://3.bp.blogspot.com/_77g3DtXDJXE/RwfZ1GJhjyI/AAAAAAAAA2M/6XWRYzJ54us/s1600-h/macwithsevern.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5118299007736712994" src="http://3.bp.blogspot.com/_77g3DtXDJXE/RwfZ1GJhjyI/AAAAAAAAA2M/6XWRYzJ54us/s400/macwithsevern.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><br />
The Severn barrage should in the first instance be considered along side other options for reducing carbon emissions. In fact, consideration of available options is a requirement of the <a href="http://ec.europa.eu/environment/nature/legislation/habitatsdirective/index_en.htm">Habitats directive</a>, <a href="http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31992L0043:EN:HTML">Art 6.4</a>. A common way to do this is to set out the available carbon abatement options from in order of cost and showing potential as the width of the bar, in what is known as a marginal abatement cost (MAC) curve. The chart to the left is an attempt at the MAC curve for the UK from the recent <a href="http://www.dti.gov.uk/energy/whitepaper/page39534.html">Energy White Paper</a> (see <a href="http://www.berr.gov.uk/files/file39574.pdf">fig 10.2 p286</a>). I've added an estimate for the Severn barrage (£767/tC and 2mtC/year - note the chart uses carbon not CO2), based on SDC figures and the 10% discount rate, which would be typical in this industry (see my last posting: <a href="http://baconbutty.blogspot.com/2007/09/severn-barrage-brilliant-or-bonkers.html"><span style="font-style: italic;">Case for the Severn Barrage - does it hold water</span></a>). You can see that the barrage is way off to the wrong side of the chart. Note this chart is specific to 2020, so some of the technical potential estimates for other technologies will be constrained by how much can be delivered by 2020 - and it is far from clear a Severn Barrage would be producing anything by 2020, it is far from clear that the positions wouldn't be even worse than this. The main point is that on a like for like basis with other technologies, this is a very expensive way to cut carbon - amongst the most expensive, and not particularly huge potential compared to say wind power.<br />
<span style="font-size: 100%; font-weight: bold;"><br />
The case for exceptional treatment... not made</span><br />
The report tries to escape from this conclusion by making a case for doing something different. In a world in which private sector companies deliver power and, through policy-created markets, deliver carbon reductions, the SDC calls for a some form of taxpayer-funded public sector enterprise which, it argues, would expect or tolerate a very low rate of return on its investment. A scheme that provides low cost of capital is the only way the numbers can be made remotely respectable - so that is what has been attempted. The report moves quickly from 'if' to 'how?' with the only slightest pause for 'why?' in about one and a half pages (<a href="http://www.sd-commission.org.uk/publications/downloads/Tidal_Power_in_the_UK_Oct07.pdf">p.120-1</a>). The following three sections are subheadings from section 4.8.3:<br />
<span style="font-weight: bold;"><br />
"Long term public benefits"</span>. Irrelevant. If a barrage produces power for 120 years and a nuclear power station for 60 years but with lower average ('levelised') cost, you just have two nuclear power stations in sequence. Same applies for other shorter lived and modular technologies like offshore wind etc. In fact, shorter project lives have some advantages: technology moves on, you know more about the problem, society may be richer and better at taking decisions. We are instinctively wary of placing high values on promised benefits far into the future because we feel they may not actually materialise.<br />
<br />
<span style="font-weight: bold;">"Mismatch between risk and reward"</span>. This seems to be based on the misconception that government always ultimately bears a range of project risks. In fact, the right people to bear risks are those best able to manage them - meaning construction risks should be borne by constructors, operating risks (ie. low output) by the operators etc. Government has got better at not standing behind big projects - with the Channel Tunnel it was 200 banks that took a bath. Offering low cost capital to a high risk project is just another type of subsidy - only less explicit and transparent than paying for valuable outputs (like carbon reductions) that are beset by market failures.<br />
<br />
<span style="font-weight: bold;">"Ensuring the public interest"</span>. The report argues for public sector involvement to secure public benefits - but why wouldn't the government just specify what it wants and pay a private sector body to deliver those benefits, if they were valuable? That's the standard practice and something like the barrage would probably need its own legislation. The public interest is strangely defined in the report - apparently with no regard for how much of the public's money is spent badly, and how much risk the taxpayer is asked to take on. I think it is also quite naive - and certainly poorly baked with evidence - to believe that public ownership is somehow in the benign public interest. Political and spending pressures to cut corners and make false economies are legion - witness the gross under-investment in water infrastructure by publicly-owned water companies prior to privatisation. Public ownership and direct involvement too easily sets up 'principal-agent' problems, making the Leninist mistake of conflating the interests of the state with the public interest.<br />
<br />
<span style="font-weight: bold;">Is there an innovation case? </span><br />
One argument for paying over the odds and subsidising technologies that are way off market is that they will improve in cost-effectiveness and may be replicable and scalable. No such argument plays here. As the SDC puts it:<br />
</span></span></span><br />
<blockquote style="font-style: italic;"><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">it would be difficult for the Government to justify treating a tidal barrage as a new renewable technology that requires innovation support (the justification behind the establishment of the RO), as the technology itself is certainly ‘mature’, and there is only limited potential for learning and further replication.</span></span></span></blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">However, there <span style="font-style: italic;">are </span>technologies that do justify innovation support as they are key climate technologies - eg. <a href="http://www.co2capture.org.uk/">carbon capture and storage</a>, which might have the all-important result of containing Chinese and Indian coal-related carbon emissions.<br />
<br />
I don't see a compelling case for exceptional treatment on any of these grounds at all... but let us just go with the flow and imagine that it was going to be done by the government. Even here, the position is not as the report suggests...<br />
<br />
<span style="font-size: 100%; font-weight: bold;">Public procurement - about managing risk and appropriate returns</span><br />
The crux of the Severn barrage case is that its carbon economics are awful if a commercial rate of return is required for the project. The SDC point to lower rates of return implicit in 'social discount rates' and attempts to justify a 'public sector project'. But if the government wants to buy a construction project, there is guidance on how that should be done. And it isn't by setting up a government building company with cheap capital.<br />
<br />
The SDC acknowledges that it it would have to upend current energy policy to make the barrage work, but it would also require rewriting other principles too. One reason is that higher costs of capital or discount rates capture 'risk'. The government's policy is to transfer risk, and it does this through contracting and procurement.<br />
<br />
The Treasury Green Book discusses transfer of risk as follows <a href="http://greenbook.treasury.gov.uk/annex04.htm">Treasury Green Book Annex 4</a>:<br />
<span style="font-style: italic;"></span><blockquote><span style="font-style: italic;">When faced with significant risks, a public body should consider transferring part or all of it to the private sector. The governing principle is that risk should be allocated to whichever party from the public or private sector is best placed to manage it.</span><br />
<br />
<span style="font-style: italic;">Appropriate transfer of risk generates incentives for the private sector to supply timely cost effective and more innovative solutions. As a general rule, PFI schemes should transfer risks to the private sector when the supplier is better able to influence the outcome than the procuring authority.</span></blockquote><span style="font-style: italic;"></span><br />
<span style="font-weight: bold;">OGC guidance on procurement require private sector contracting<br />
</span><a href="http://3.bp.blogspot.com/_77g3DtXDJXE/Rwqu-WJhj1I/AAAAAAAAA2k/R3xPj8J4LB8/s1600-h/Contract.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5119096312580640594" src="http://3.bp.blogspot.com/_77g3DtXDJXE/Rwqu-WJhj1I/AAAAAAAAA2k/R3xPj8J4LB8/s320/Contract.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-family: trebuchet ms;">The Office of Government Commerce publishes guidance through the <a href="http://www.ogc.gov.uk/ppm_documents_construction.asp"><span style="font-style: italic;">Achieving excellence</span> guides</a> for government construction procurement, and guide 06 deals with <a href="http://www.ogc.gov.uk/documents/CP0066AEGuide6.pdf"><span style="font-style: italic;">Procurement and contract strategies</span></a>. This says:<br />
<blockquote>“<span style="font-style: italic;">Since April 2000, government policy has been that projects should be procured by one of the three recommended procurement routes (PFI, Prime Contracting or Design & Build)</span>”. (click left to expand definitions)</blockquote>This means that if the government wanted to buy a Severn barrage it would use a form of procurement that transfers risk to the developer and operator, who would expect a rate of return commensurate with the risk.<br />
<br />
<span style="font-size: 100%; font-weight: bold;">What about a central government project?</span><br />
But what if some sort of Ministry of Works project was authorised? Would it command a low cost of capital simply because it is government. No, actually it wouldn't.<br />
<br />
But before we get in further, let's examine another '<span style="font-style: italic;">stop reading</span>' moment in the report. One of the more extraordinary comments is this:<br />
<span style="font-style: italic;"><blockquote>"the Government can obtain debt finance at very low interest rates, and there would be no need to justify a high rate of return from the project due to the absence of any incentive to maximise short-term profits. For example, HM Treasury recently released index linked bonds at a nominal interest rate of 1.75%."</blockquote></span>Er... ever noticed how your bank gives you a lower interest rate on your savings than it charges on your overdraft? The Bank of England's 'base rate' is currently 5.75% and this is the cheapest money available. The 1.75% is paid on 'gilt-edged' bonds that the government issues to finance the public debt - its is government borrowing not lending. The government has the highest <a href="http://en.wikipedia.org/wiki/Bond_credit_rating">credit rating</a> and negligible default risk for the purchaser of the bond. None of these things applies to government lending for a risky capital project in an otherwise private market place.<br />
<br />
<span style="font-weight: bold;">Apply a social discount rate?</span> One might wish to point to the discount rate used in government policy appraisal as set out in '<a href="http://www.hm-treasury.gov.uk/economic_data_and_tools/greenbook/data_greenbook_index.cfm">Green Book</a>' guidance on policy appraisal... 3.5% and declining over time [<a href="http://greenbook.treasury.gov.uk/annex06.htm#long">here</a>]. But where the output is sold in a competitive market (for example in markets for electricity, renewables certificates, carbon) the government's priority is to avoid excessive distortion. The Treasury Green Book is clear that where the government acts in otherwise private market. The Green Book and related guidance is set out in sequence of quotes below below.<br />
<br />
<a href="http://greenbook.treasury.gov.uk/chapter05.htm#discounting">1. Treasury Green Book</a>.<br />
<span style="font-style: italic;">5.54. Some central government bodies sell goods or services commercially, including to the government itself. These activities may be controlled by requiring prices to be set to provide a required rate of return (RRR) on the capital employed by the activity as a whole. Government policy is generally to set charges for goods and services sold commercially at market prices, and normally to recover full costs for monopoly services, (including the cost of capital as defined in the Treasury </span><span style="font-style: italic; font-weight: bold;">Fees and Charges Guide </span>[see below].<br />
<br />
That means the government should use an appropriate cost of capital, not just the social discount rate.<br />
<br />
<a href="http://hm-treasury.gov.uk/media/1/D/pes_2003_16.pdf">2. PES (2003) 16 Fees and charges policy</a><span style="font-style: italic;"><br />
5 (second bullet) for commercial services where there is or may be private sector competition, and a profit may<br />
be appropriate, to replace the required rate of return of at least 8 per cent with an illustrative range starting with 5.5 per cent - we want departments to make their own assessment of the appropriate rate of return for commercial services, but we would expect the rate to fall in a range 5.5 per cent to 15 per cent depending on factors such as the level of risk.<br />
<br />
14.b) For commercial services where there is or may be private sector competition departments should make their own assessment of the appropriate rate of return, taking account of the illustrative range in paragraph five above, and the further advice in <span style="font-weight: bold;">Annex 3 </span></span>[see below]<span style="font-style: italic;">. For some this may mean a significant change in the rate of return and level of prices. For some it may be that that the level of charges is already be consistent with the revised guidance and will need no change.</span><br />
<br />
That means that rates of return (discount rate) should be between 5.5% and 15%.<br />
<br />
<a href="http://hm-treasury.gov.uk/media/3/3/pes_2003_16_annex3.pdf">3. PES (2003) 16 annex 3</a><br />
<span style="font-style: italic;">The assessment of the rate of return may also be assisted by an overview of the weighted average cost of capital (WACC) of competitors in the relevant market. Existing overviews of WACC in the relevant market (or a comparable market – see paragraph 9 above) may be available from relevant organisations such as a competition regulator, or other reputable organisations (but would need to be of reasonably recent date). Alternatively, the public sector body could consider whether there would be value in seeking a new assessment of this type of information</span>.<br />
<br />
That means the rate of return (discount rate) should be set with reference to the costs of capital of participants in the related market. In my previous post, I suggested 10% would be a sensible comparator (see <a href="http://2.bp.blogspot.com/_77g3DtXDJXE/RvJD-0YufeI/AAAAAAAAA0s/629Knm9H9Ug/s1600-h/ROR.gif">table</a>). The SDC suggested 9% in its report on nuclear.<br />
<br />
<span style="font-size: 100%;"><span style="font-weight: bold;">Is this mindlessly following guidance...? What if the guidance is wrong?</span></span><br />
Though I've set out what the government says about appraising and funding projects like this in general (not just in the energy sector), there is the possibility that the guidance is inappropriate and an exception justified for the Severn Barrage. If there is a case for an exception, the SDC hasn't made it, and although it draws on 'social discount rates' it doesn't mention the guidance above. The guidance isn't arbitrary and it is designed to implement some sound economic ideas - about distortion of markets, about risk, and about the opportunity cost and scarcity of capital - and a reluctance to transfer resources to the public sector from the private sector so that it can be used in ways that have a lower rate of return. I don't see why these ideas wouldn't apply to carbon policy.<br />
<span style="font-size: 100%; font-weight: bold;"><span style="font-size: 85%;"><br />
</span>Is there any justification?</span><br />
The only case I can think of rests on meeting the extreme EU renewables target of meeting 20% of primary energy from renewables by 2020. In this case, a new instrument like the Renewables Obligation, only better designed would be the way to go. If the justification for the barrage flows from this, it simply reflects the poor design and over prescriptive nature of the '<a href="http://baconbutty.blogspot.com/2007/08/escaping-absurd-eu-renewables-target.html">reckless EU renewable target</a>', as I called it in an earlier posting. It's precisely because the target would drive really expensive carbon-reducing projects that I think it is a bad policy.<br />
<span style="font-size: 100%;"><br />
<span style="font-weight: bold;">What should be done?</span></span><br />
<span style="font-weight: bold;">Long-term low-carbon framework</span>. The SDC do suggest some good ideas for addressing the true market failure - the weakness of the long term price signals for carbon and framework for developing low-carbon technologies (<a href="http://www.sd-commission.org.uk/publications/downloads/Tidal_Power_in_the_UK_Oct07.pdf">p.123</a>) and I discussed these in my <a href="http://baconbutty.blogspot.com/2007/09/severn-barrage-brilliant-or-bonkers.html">earlier Severn barrage posting</a>. However, there is no case for tying these to the Barrage. I think it would be very good for the government to recognise the immaturity of the carbon market, the fact that it is laden with 'policy risk' (ie. no-one can guess what the policy framework will be in 2025), and the fact that long-term investments are necessary but are inhibited in the current framework. That says to me that a more credible less risky long term carbon framework is needed - perhaps with the government underwriting a long term future carbon price.<br />
<br />
<span style="font-weight: bold;">Innovation strategy - carbon capture and storage</span>. There is a good case for investing at over the market rate in technologies that will play a role in the future or that would allow for some diversity in the response. Things like the <a href="http://www.regensw.co.uk/press/news-read.asp?id=29">wave hub</a> and <a href="http://www.londonarray.com/">London array</a> looking promising. I'm particularly keen on seeing a kick-start for carbon capture and storage. We have 8GW of new coal plant awaiting licensing in the UK (far more output and carbon than the barrage). Devoting resources (£15 billion!) to CCS would be a far better approach - a lower cost of carbon, and a scalable critical technology.<br />
<br />
<span style="font-weight: bold;">Long-term abatement cost curve / surface - the 'why now?' question.</span> We should be paying much more attention to the 'marginal abatement cost curve' as this should guide the focus of policy - telling us where the most cost-effective carbon savings are. However, this 2D curve (as shown <a href="http://3.bp.blogspot.com/_77g3DtXDJXE/RwfZ1GJhjyI/AAAAAAAAA2M/6XWRYzJ54us/s400/macwithsevern.jpg">above</a>) should really be visualised as a 3D surface, with an axis for time... costs and technical potential will change over time for each technology, and so will the depth of cuts required in emissions and the 'strike price' for carbon (ie the cost of the marginal tonne saved). It is possible that a barrage will become a cost-effective at some point in the future as better options are exhausted. Equally possible is that new options will appear or costs and potentials of existing options will continue to improve. Another question not addressed (or asked) in the SDC report is 'why now?'. We have an option on the barrage and it might be that the right to do it will be in 60 years time in a more carbon constrained world. <br />
<br />
<span style="font-size: 100%;"><span style="font-weight: bold;">Summary</span></span><br />
I could go on, but let me draw this together.<br />
<ul><li>The Severn barrage costs too much for too little. On a like for like basis with other low carbon technologies, it creates extremely expensive carbon savings - more than 10 times the going rate.<br />
</li>
<li>The case for some sort of exceptional treatment is very weak - with a poorly defined case for the public interest, market failure or innovation<br />
</li>
<li>Even if it was built as an exceptional public sector project, the procurement would need to transfer risk to the private sector and use something like a PFI, which would reintroduce financing costs commensurate with risk<br />
</li>
<li>Even if an exception was made to this and the government somehow builds the project itself, guidance on policy appraisal requires a commercial rate of return to be used where the government is intervening in a market where there are private sector actors delivering the same things (energy, carbon savings)</li>
<li>The Habitats Directive (<a href="http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31992L0043:EN:HTML">92/43/EEC Article 6.4</a>) has three levels of test before a designated area can be disrupted:</li>
</ul><blockquote>1. consideration of alternatives...<br />
2. assessment of 'over-riding public interest'...<br />
3. specification of acceptable compensating measures...</blockquote><ul><li>The barrage fails the first two of these, and so the third should not arise. There are clear alternative low carbon technologies that are cheaper and more widely applicable. There is no over-riding public interest in upending energy policy in order to develop an extremely expensive renewables project. These tests are supposed to be sequential, so discussion of compensating measures should not arise.</li>
<li>A better strategy would be to establish a long-term framework for rewarding carbon savings, promote innovation in technologies that will matter for the future and keep the option of the barrage open until we have exhausted better approaches - if that ever happens.<br />
</li>
</ul><br />
</span></span></span></span>Unknownnoreply@blogger.com14tag:blogger.com,1999:blog-28078378.post-75019802553333204512007-09-30T11:36:00.001+01:002011-06-26T23:32:18.549+01:00The Merton Rule - an investigation<a href="http://www.themertonrule.org/map" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5115947312898023794" src="http://1.bp.blogspot.com/_77g3DtXDJXE/Rv9--cLmoXI/AAAAAAAAA1E/RPtAix3igDE/s320/mertonmap.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">Once it was famous only for the '70s Mod-revival band, <a href="http://punkmodpop.free.fr/mertonparkas_pic.htm"><span style="font-style: italic;">The Merton Parkas</span></a>. And, frankly, it wasn't <span style="font-style: italic;">that </span>famous even for them. But now the London Borough of Merton is famous for the eponymous 'Merton Rule'. As the map left shows, local government across the nation [<a href="http://www.themertonrule.org/list-of-boroughs">list</a>] is at various stages of implementing the Rule. The Merton Rule is a planning condition requiring on-site generation of renewable energy:<br />
<br />
<span style="font-style: italic;">All new non residential developments above a threshold of 1,000sqm will be expected to incorporate renewable energy production equipment to provide at least 10% of predicted energy requirements </span>[<a href="http://www.merton.gov.uk/living/planning/plansandprojects/10percentpolicy.htm">Merton council site</a>][<a href="http://www.themertonrule.org/the-merton-rule">Merton Rule site</a>]<br />
<br />
The intention is to develop this to residential development over 10 units and possibly to increase the percentage to 20%. But a storm has erupted: the champions of the Merton Rule believe the government is about to put a stop to it in a craven capitulation to the building industry, which doesn't like the high costs of complying and has the government over a barrel on delivering targets for housing growth [see recent Guardian articles: <a href="http://www.guardian.co.uk/environment/2007/aug/24/energy.renewableenergy"><span style="font-style: italic;">Don't scrap green housing rule, urge campaigners</span></a> and <a href="http://business.guardian.co.uk/story/0,,2164127,00.html"><span style="font-style: italic;">Green groups warn energy minister against U-turn</span></a>]. The <a href="http://www.themertonrule.org/news/2007/09/05/defending-the-merton-rule">case for the defence</a> has been developed and a <a href="http://petitions.pm.gov.uk/LOWcarbonfuture/">petition</a> opened on the No 10 web site. Let battle be joined!</span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><br />
<br />
<span style="font-weight: bold;">But is the Merton Rule actually a good idea? </span>At first reckoning, I'd say: 'no it obviously isn't'. But with a second glance, there's a real surprise in the way it is actually working: so perhaps I'd say 'yes maybe, sort of...'. On final reckoning, I'd say: 'it's up to them'.<span class="fullpost"><br />
<br />
<span style="font-size: 100%; font-weight: bold;">First sight: it's a bad idea...</span><br />
The argument against it is quite straightforward - why make builders use cumbersome expensive renewable energy when the same outcome in terms of reduced energy emissions can be achieved on other and often better ways? (see my blog on <a href="http://baconbutty.blogspot.com/2006/08/completely-dreadful-economics-of-solar.html">solar PV</a> and <a href="http://baconbutty.blogspot.com/2007/01/blowing-your-money-on-wind-turbine.html">domestic wind-power</a> for reason to be a small-scale renewables sceptic). The real objectives could be better met by on-site energy efficiency investments or CHP, or by off-site renewables generation where economies of scale and location may be chosen more carefully. Surely, the aim should be to specify the energy / carbon performance of the building and let the developers meet the requirement in the most cost effective way - a process that should drive innovation by rewarding ingenuity in meeting the target better. The new voluntary <a href="http://www.planningportal.gov.uk/england/professionals/en/1115314116927.html">Code for Sustainable Homes</a> could be used to impose binding energy-related conditions beyond the requirements of the building regulations through planning conditions imposed locally. In fact, the government appears to want to do this anyway; it is aiming to have all new homes as 'zero carbon' by 2016 by progressively making the more ambitious levels of the Code mandatory, with level 6 (zero carbon) the standard beyond 2016 (see <a href="http://www.communities.gov.uk/archived/publications/planningandbuilding/buildinggreener"><span style="font-style: italic;">Building a greener future: towards zero carbon development</span></a> <a href="http://www.communities.gov.uk/documents/planningandbuilding/pdf/153125">p.13-15</a>). Surely it would be wrong to be overly prescriptive about how that very ambitious target should be met? I don't actually know what the government is planning, but as you can probably tell, I have some sympathy for this view.<br />
<br />
Pro-Merton Rule campaigners fear that the government might use an argument like this in the forthcoming Planning Policy Statement (PPS) on Climate Change [see <a href="http://www.communities.gov.uk/archived/publications/planningandbuilding/consultationplanningpolicy">Consultation</a> / <a href="http://www.communities.gov.uk/publications/planningandbuilding/climate-report">Responses</a>] and that it is backing away from Housing Minister Yvette Cooper's apparent support for the Merton Rule in a <a href="http://www.communities.gov.uk/speeches/corporate/planning-renewable">June 2006 speech</a>, or that it is decommitting from statutory obligations to deliver a strategy for promotion of microgeneration in the <a href="http://www.opsi.gov.uk/acts/acts2004/ukpga_20040020_en_9#pt2-ch1-l1g82">Energy Act 2004 s84</a>. But none of this answers the question of whether is a good thing, and a strategy for promoting microgeneration might be no more than publicity and enabling measures where people want to use it.<br />
<br />
<span style="font-size: 100%;"><span style="font-weight: bold;">Second glance: Merton Rule - good idea for an unintended reason? </span></span><br />
Why might one think it is a 'maybe, sort of' good idea/ It turns out the Merton Rule in practice drives energy efficiency precisely because the renewable are so expensive and cumbersome. If the target is 10% of energy from renewables, the developer can reduce the amount of renewables needed by improving the energy efficiency - for example halving the energy consumption of the building would reduce the renewable spend by half, but reduce emissions crudely as follows:<br />
100 = base case emissions from building with no Merton Rule<br />
90 = emissions if Merton Rule taken literally with no compensating changes<br />
45 = emissions if developer halves energy use to reduce spending on renewables<br />
5 = emissions saved by renewables<br />
50 = emissions saved by energy efficiency<br />
<br />
Thus in a 50:5 ratio, the compensating and avoiding measures give the dominant effect over the headline policy! The managing Director of a major green buildings director told me last week that this is basically what is happening in the real world where the Merton Rule is applied. How true and to what extent, I can't verify - but the argument is plausible. An economist would expect the 'rational developer' (er...?) would introduce energy saving measures to the point where the marginal cost of energy efficiency investment per avoided KWh = 1/10th avoided marginal cost of renewables (you can imagine one of those crossing lines graphs would show this) + a factor for any benefit that would increase value of the property from having lower energy consumption.<br />
<br />
<span style="font-weight: bold;">Rule overcomes the 'split incentives' problem... </span>The really interesting thing about this is not the renewable component at all, but that the developer bears a high cost in proportion to the energy use of the building. In fact, if renewables were even more expensive, the energy efficiency measures justified would be even more. It could even be a requirement to erect a bronze obelisk with height in proportion to the energy consumption of the building and it would have almost the same effect. This 'internalisation' of future energy costs to the developer overcomes one of the perennial barriers to energy efficiency - 'split incentives': namely that the developer pays for the energy using/wasting building fabric, glazing, lighting, <a href="http://en.wikipedia.org/wiki/HVAC">HVAC</a> etc but doesn't bear the energy running costs, which fall to the occupier. This tends to mean, all other things being equal, that buildings are built with less than the optimum level of energy efficiency if the full life costs are considered.<br />
<br />
<span style="font-size: 100%;"><span style="font-weight: bold;">Finally - leave it to local government... </span> </span><br />
Could those following the Merton lead do better? They probably could.<br />
<br />
First we must understand who pays for the renewables on a new development. When planners impose conditions on a development (environmental improvements, affordable housing, support for public services, road building etc) it is basically paid for from 'planning gain'. That is the huge lift in the underlying land price that happens when planning permission for property development is granted. One of the great arts in local government is to extract as much of that planning gain as possible without killing off the development. So-called '<a href="http://www.idea.gov.uk/idk/core/page.do?pageId=71631">section 106 agreements</a>' are the current approach and there has been lengthy discussion of a '<a href="http://www.planningportal.gov.uk/england/professionals/en/1115313579044.html">planning gain supplement</a>', which would be a tax on the uplift on land value. As long as the developer is making enough money on the property they will be able to surrender most of the windfall planning gain - which is then available for worthy public purposes. Developers of course want to limit the mining of planning gain as far as possible or restrict it to those things that add to the value of the property - landscaping, flood defences, local services etc. So developers push back on any new calls on planning gain. The renewables probably add very little to the value of the property, so the money will come from the developer. However, if the planning gain is there and it is available for renewables, it could also be captured and used for something else - including reducing emissions in more cost effective ways. In this way, it represents an <a href="http://en.wikipedia.org/wiki/Opportunity_cost">opportunity cost</a> to the council. This means there is a <a href="http://en.wikipedia.org/wiki/Zero-sum">zero-sum game</a> at work, and the key challenge for the council is to get the best social return on investment from the captured planning gain. To me, the money spent on on-site renewables, even after the developers have reduced energy consumption, is still poor spending. The question could be reframed by a council thinking about its carbon mitigation policy: <span style="font-style: italic;">for that part of the planning gain that we are able to capture and wish to devote to reducing carbon, what is the maximum carbon we can reduce? </span>I doubt it would be to demand 10% renewables. Some other approaches...<br />
<br />
<span style="font-weight: bold;">An energy-related planning tariff?</span> So suppose that, instead of a requiring a bronze obelisk to be erected as I proposed above, the council simply levied a tariff on the developer in proportion to the energy consumption of the building or level of the Code for Sustainable Homes? The idea of tariffs instead of planning obligations is in any case gaining ground, so it might be workable. In that way, the incentives to reduce energy would be the same for the developer, but the council would have the money to spend on cost effective energy. It could for example, purchase off-site renewable energy for its own estate, renovate social housing, auction the money back to developers to make further savings, invest in energy efficiency in the existing building stock, address fuel poverty, even fund emissions reduction in developing countries or retire EU Emissions Allowances.<br />
<br />
<span style="font-weight: bold;">Insisting on higher Code levels?</span> Alternatively, they could just insist on developers reaching ever higher levels of the Code for Sustainable Homes - a more rounded form of planning obligation than the 10% target.<br />
<br />
<span style="font-weight: bold;">Require life-time costing?</span> They could require the developer to invest a proportion of the life time energy cost in energy in reducing energy use to an optimum level. The council would play a proxy role to reflect the interests of the future occupiers.<br />
<br />
<span style="font-weight: bold;">Innovation in local government policy-making</span><br />
Others will have many and better ideas than these - so how do we get to the ones that work? Not by forcing everyone to take the same approach - and I'd definitely be against any attempt to make the Merton Rule mandatory. My overall take is that local government needs to be free to experiment and take different approaches, then we can all learn from what happens, do more of what works and less of what doesn't. If government is setting objectives at all, then they should be for broad outcomes, with local government having space for policy innovation. Local government is ideally placed to attempt diverse approaches and as long as some sort of evolutionary selection mechanism (the voter perhaps, but if not, the Audit Commission) can ensure the best ideas are spread more widely, then we will have a good system.<br />
<span style="font-size: 100%;"><br />
</span><span style="font-weight: bold;"><span style="font-size: 100%;">So to summarise:</span> </span></span></span></span><br />
<ul><li><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">The Merton Rule is too <a href="http://en.wikipedia.org/wiki/Dirigisme"><span style="font-style: italic;">dirigiste</span></a> and isn't good policy because it is focussed on inputs not outcomes, limiting developer innovation and costing more than necessary - with opportunity costs for councils as there is less planning gain available for other things.</span></span></span></li>
<span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">
<li>However, it has unintended beneficial side effects that are likely to be more important than the intended impact by overcoming the split-incentive barrier to energy efficiency through implicitly exposing developers to future energy costs. Developers are investing in cutting energy consumption to get to 10% renewables on the base of a smaller energy footprint.<br />
</li>
<li>If we are serious about local government, we should encourage local policy innovation and make sure all involved learn from it - amplifying the good and stopping the unsuccessful. When the Merton Rule was introduced, there was no Code for Sustainable Homes or government zero-carbon commitment. Merton was innovative and we should learn from its boldness, but the boldest thing Merton could do now would be drop the Merton Rule and focus on the Code for Sustainable Homes, though without being made to do it Central government.</li>
</span></span></span></ul>Unknownnoreply@blogger.com5tag:blogger.com,1999:blog-28078378.post-54665378285541324672007-09-29T13:10:00.000+01:002008-12-09T17:24:44.256+00:00Useless scientific advice<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/_77g3DtXDJXE/Rv4masLmoWI/AAAAAAAAA08/luBE6tljviY/s1600-h/wsjsnussummary.gif"><img id="BLOGGER_PHOTO_ID_5115568466717745506" style="FLOAT: left; MARGIN: 0pt 10px 10px 0pt; CURSOR: pointer" alt="" src="http://1.bp.blogspot.com/_77g3DtXDJXE/Rv4masLmoWI/AAAAAAAAA08/luBE6tljviY/s400/wsjsnussummary.gif" border="0" /></a><span style="font-size:85%;"><span style="font-family:trebuchet ms;">I lifted the box to the left from the <a href="http://online.wsj.com/article/SB115837375005265306.html?mod=hpp_us_pageone">Wall Street Journal</a>, a newspaper that has to be clear, concise and to the point in its communications or its busy and clever readers buy the Financial Times instead. If only the European Commission could choose where it gets its scientific advice, and the scientists involved felt some pressure to be clear, concise and to the point. Alas, I came to read the <a href="http://ec.europa.eu/health/ph_risk/committees/04_scenihr/scenihr_cons_06_en.htm">preliminary report</a> of the European <a href="http://ec.europa.eu/health/ph_risk/committees/04_scenihr/04_scenihr_en.htm">Scientific Committee on Emerging and Newly Identified Health Risks</a> on the subject of smokeless tobacco <a href="http://ec.europa.eu/health/ph_risk/committees/04_scenihr/docs/scenihr_o_009.pdf">[PDF</a>]. This will inform European public health policy, and if it was barely competent, it would lead to the lifting of the absurd policy of banning 'oral tobacco' (smokeless tobacco) in the EU outside Sweden. However, despite hundreds of citations and pages of data, the report doggedly conceals, obfuscates and evades the most obvious and important conclusions. </span></span><br /><span style="font-size:85%;"><span style="font-family:trebuchet ms;"></span></span><br /><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><strong>My response to the Committee:</strong> Suffice to say, I have been driven to pen a response. This required two components: an </span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;">on-line response to </span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;">constrained </span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;">questions set by the Committee (see <a href="http://docs.google.com/Doc?id=ddczg5p4_42f39sqr"><strong>here</strong></a>), and a fuller response (see <a href="http://docs.google.com/Doc?id=ddczg5p4_383hk6fp"><strong>here</strong></a>) covering the broader failings of the work. <span class="fullpost"><br /><br /><strong>Not stating the obvious, focussing on the obscure</strong>. Because smokeless tobacco is many times less hazardous than smoking and can substitute for smoking, there are potential large public health gains to be had (or more likely lost, if the stuff continues to be banned). Sweden has the highest rates of smokeless tobacco use and lowest rates of tobacco-related cancer, respiratory and cardiovascular disease. Instead we ban the product and prevent other countries benefiting in this way. You would have expected these insights to form the core of the assessment. </span></span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost">I really don't know why they are avoiding this: I can only assume someone involved thinks they are duty-bound to ensure these tobacco products stay banned on the ultra-naive basis that banning something harmful must be progress. But how does distortion and evasion help protect anyone? Apparently, several of the external experts are fed up, perhaps to the point of a walk-out, with the clear bias and manipulation in the drafting of the report's conclusions. The most important part of any scientific assessment is the framing of the issues - my <a href="http://docs.google.com/Doc?id=ddczg5p4_43d5sv9p">initial memo</a></span></span></span><a href="http://docs.google.com/Doc?id=ddczg5p4_43d5sv9p"><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost"> to the Committee</span></span></span></a><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost"><a href="http://docs.google.com/Doc?id=ddczg5p4_43d5sv9p"> in January 2006</a> addressed this. As I had expected, it was roundly ignored but I think this now accounts for the problems.<br /><br />The report actually does quite a good job of surveying the literature, but it is marred by misinterpretation and inappropriate conclusions drawn from the evidence. Glaring and important truths are ignored or sidelined (er, the very low levels of disease in Sweden hardly features) and great effort is expended on trivial detail - others more expert than me will no doubt tear its flawed inferences apart. But I'll highlight three major failings here that I think transcend the tobacco / public health issues:<br /><br /><span style="FONT-WEIGHT: bold">1. Communicating risk</span>. The report discusses at great length whether the use of smokeless tobacco is hazardous and addictive. It is. Everyone knows it is. But risk is only interesting if quantified in some way and set in context. Bacon is hazardous to health and coffee addictive. What is missing in this report is some sort of spectrum of risk - with common consumer risks at one end (eating meat), medicinal nicotine, smokeless tobacco - in all its various forms, smoking, drinking hemlock etc. That way, we would know how much to worry about a few extra people using smokeless tobacco that would otherwise have remained tobacco-free, compared to how much we might hope to gain if other people used smokeless tobacco instead of smoking. In fact, the risks of smokeless tobacco use vary markedly between products - but this range is compressed into one end of the spectrum that has combustible tobacco products clustered at the other end.<br /><br /><span style="FONT-WEIGHT: bold">2. Communicating knowledge in conditions of uncertainty</span>. Whether lazy or manipulative, scientists are often very poor at dealing with uncertainty - saying what is known, even if it is not known <span style="FONT-STYLE: italic">beyond reasonable doubt</span>. There is a tendency to say 'no evidence' when what they really mean is that there are no randomised controlled trials showing significant results at greater than 95% confidence. But this is just an arbitrary, if widely used, convention in medical literature. In policy work, insights based on t<span style="FONT-STYLE: italic">he balance of probabilities</span> are often more important and a good scientific assessment will help policy makers through the difficulties of understanding knowledge where there is not high certainty. In trying to find a way of putting this to the Committee I came across the Intergovernmental Panel on Climate Change (<a href="http://www.ipcc.ch/">IPCC</a>) <a href="http://ipcc-wg1.ucar.edu/wg1/Report/AR4_UncertaintyGuidanceNote.pdf"><span style="FONT-STYLE: italic">Guidance notes to lead authors on addressing uncertainties</span></a>, which I think is an excellent guide and should be required reading for anyone working at the science-policy interface.<br /><br /><span style="FONT-WEIGHT: bold">3. Burden of proof</span>. Who should be doing the proving and what are the hypotheses? I think there is an in-built bias in so-called evidence-based policy making that favours the <span style="FONT-STYLE: italic">status quo</span>. The problem is that high evidential hurdles are set as a pre-condition to justifying doing something new, but the case for carrying on with the current approach may not even be scrutinised and most probably questions never asked. The right way is to assess all the options including staying with the <span style="FONT-STYLE: italic">status quo</span> taking a balance of probabilities approach. The ban on smokeless tobacco is an extreme case, but amazingly no-one seems to think it is important to justify the partial ban on smokeless tobacco in the EU - a bizarre intervention, and utterly without precedent, to ban a much less hazardous product variant than the market leader, in this case cigarettes.<br /><br />One more small reason to despair at the European Union - to me, a completely vital institution in a globalising world. But it does too much of the wrong things, does too many things incompetently that it should do well, and does not do enough of what it really needs to do. A subject I'll be returning to....! </span></span></span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-28078378.post-52448614241323493502007-09-21T09:45:00.001+01:002011-06-26T23:30:17.612+01:00Case for the Severn Barrage - does it hold water?<a href="http://4.bp.blogspot.com/_77g3DtXDJXE/RvNhJMLmoVI/AAAAAAAAA00/vhkg1U4DLQ4/s1600-h/stpgBarrage.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5112536812512256338" src="http://4.bp.blogspot.com/_77g3DtXDJXE/RvNhJMLmoVI/AAAAAAAAA00/vhkg1U4DLQ4/s320/stpgBarrage.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">There's speculation in the papers [last weekend's <a href="http://politics.guardian.co.uk/labour/story/0,,2169818,00.html">Guardian</a>, earlier in the <a href="http://www.independent.co.uk/environment/article2562753.ece">Independent</a>] that the government is to back the <a href="http://en.wikipedia.org/wiki/Severn_Barrage">Severn Barrage</a>. This huge project would capture renewable energy in the tidal movement of water in the Bristol Channel - the tidal range is one of the highest in the world: up to 15 metres. There have been various designs and locations proposed, but the leading one is promoted by the Severn Tidal Power Group of major construction companies (see picture left and this <a href="http://www.iop.org/activity/groups/professional/emg/Group_Events/file_6882.pdf">2006 presentation</a> by the group making their case). The Sustainable Development Commission is shortly expected to produce its <a href="http://www.sd-commission.org.uk/pages/tidal.html">report on tidal power</a>, and we should have much more data and analysis to consider at that point. But I thought I'd get my own thoughts on this straightened out in advance.<br />
<br />
The inevitable question must be: "is this scheme bonkers?"<span class="fullpost"> In my view, bonkers would be too strong - but I can't see the case for the Barrage now.</span></span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><br />
<span style="font-size: 130%; font-weight: bold;"><br />
Arguments for</span><br />
<br />
<a href="http://3.bp.blogspot.com/_77g3DtXDJXE/RvDmHkYufaI/AAAAAAAAA0M/wp2RE2dqyDQ/s1600-h/Brunel.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5111838594766372258" src="http://3.bp.blogspot.com/_77g3DtXDJXE/RvDmHkYufaI/AAAAAAAAA0M/wp2RE2dqyDQ/s320/Brunel.jpg" style="cursor: pointer; float: left; height: 224px; margin: 0pt 10px 10px 0pt; width: 144px;" /></a>The argument in favour is a simple one: climate change is a massive problem demanding action far in excess of what we have mustered so far, and we can't afford to ignore any feasible options for reducing emissions. It doesn't cost <span style="font-style: italic;">that </span>much if built with public money. It will last for 100 years and is critical 21st century infrastructure in a climate changing world, and will provide other benefits too, like energy security, flood defence etc. No project is a perfectly free of impacts, but the medium term disruption to habitats in the Severn is worth the longer term contribution to stability of the climate, which will protect all ecosystems. </span></span></span><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">Now please just get on with it.<br />
<br />
And there is something pleasingly Victorian about that argument... (and I mean that sincerely and with great respect for the Victorian can-do approach to civil engineering). One might even wish for <a href="http://en.wikipedia.org/wiki/Isambard_Kingdom_Brunel">Isambard Kingdom Brunel</a> to supervise the project.<br />
<span style="font-weight: bold;"><br />
<span style="font-size: 130%;"><br />
Arguments against</span></span><br />
The arguments against come down to: (1) local environmental issues: is the impact on birds and other wildlife in the Severn estuary unacceptable;(2) climate change economics: is this the best way to save carbon? Of these, I think the economics is the more compelling in pure environmental terms. It provides the justification for not compromising on habitats and conservation because the trade off is very poor. But the legal constraints arising from habitats legislation are fundamentally difficult to overcome.<br />
<span style="font-size: 100%;"><br />
</span><span style="font-weight: bold;">1. Local environment - the Severn habitats...</span><br />
The Severn Estuary is important as a habitat for migrating birds and other species that thrive in mudflats [<a href="http://docs.google.com/Doc?id=ddczg5p4_36ff59tn">brief description of ecology</a>]. The concerns about impacts on habitats are summarised in this <a href="http://www.environment-agency.gov.uk/commondata/acrobat/severnpositionmay2006_1508223.pd">joint letter from environmental regulators May 2006</a>. The Severn estuary does have recognised biodiversity value and this will be subject to protection under EU law. The EU Birds Directive (<a href="http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31979L0409:EN:HTML">79/409/EEC</a> - see Art 4.4) and, with greater force, the Habitats Directive (<a href="http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31992L0043:EN:HTML">92/43/EEC</a> see Art 6) place stringent constraints on development that disrupts listed habitats. The Severn esuary is listed as a <a href="http://www.jncc.gov.uk/page-1400">Special Protection Area</a> and a candidate for <a href="http://www.jncc.gov.uk/page-1458">Special Area of Conservation</a> - these are collectively referred to as Natura 2000 sites. The basic requirement is that alternatives to the damaging development should be considered and compared. Where there is an 'over-riding public interest, development might be permitted provided the Commission is satisfied that "<i>any necessary compensatory measures are taken to ensure that the overall coherence of Natura 2000 is protected</i>". See <a href="http://www.opsi.gov.uk/si/si1994/uksi_19942716_en_1.htm">Habitats regulations 47-59</a><br />
<br />
Though this sounds tough at first glance, it is open to definitional fudging around 'overall coherence' and Defra has stressed that the listing of these sites does not foreclose development of the barrage. I think that if it was the <i>right thing to do taking everything into account</i>, a way could and should be found through these regulations. It is in essence a conflict between different environmental imperatives, and that may justify weighing the benefits and making a trade off. In listing the Severn estuary, Defra points to the heart of the issue:<br />
<br />
<i>We have also pointed out that these proposals could significantly alter the ecological characteristics of the Estuary and raise issues regarding the balance between habitat protection and tackling the wider problems caused by global warming. We are discussing this balance with the EU Commission</i>. (<a href="http://www.defra.gov.uk/news/2007/070831b.htm">Defra statement</a>).<br />
<br />
<span style="font-weight: bold;">Environmental trade-offs - but only if it is worth it</span>. Arguments can be made that the habitats in the Severn estuary will be modified by the barrage not destroyed or even necessarily worsened. It might also be added that climate change will modify the estuary anyway. We might be able to find some compensatory measures that would help maintain migration routes for birds (though it seems implausible that large ecosystems might be moved around for our convenience). Finally, we might as a society consider that the loss of a specific habitat is less important than a general attempt to reduce the threat to all habitats - by reducing greenhouse gas emissions. I think the key thing here is not to rely on legal arguments from legislation drawn up when these trade-offs were not so evident - but to weigh the right thing to do compared to the alternatives. I think this is the wrong thing to do - but mainly because the economics do not justify the environmental trade-off. If it was a good energy and carbon project, then the trade-offs <i>might</i> be worth it. But it isn't and they aren't.<br />
<span style="font-size: 100%;"><br />
</span><span style="font-weight: bold;">2. Economics and cost-effectiveness...</span><br />
The main trouble with the barrage is that it is a fantastically expensive way to make carbon savings, at least using conventional financing assumptions.<br />
<br />
<a href="http://3.bp.blogspot.com/_77g3DtXDJXE/RvGvOUYufcI/AAAAAAAAA0c/gMYCIoiGuHo/s1600-h/barragecarbon.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5112059712567672258" src="http://3.bp.blogspot.com/_77g3DtXDJXE/RvGvOUYufcI/AAAAAAAAA0c/gMYCIoiGuHo/s320/barragecarbon.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><br />
<span style="font-weight: bold;">Basic shape of the project</span>. In round numbers, it will take 7 years to build (once the planning stage is over), cost £14 billion and produce 17 billion KWh (TWh) per year, saving about 7.3 mtCO2 annually. Though it is a huge project, its electricity output is about the same as two nuclear power stations like <a href="http://www.british-energy.co.uk/pagetemplate.php?pid=96">Sizewell B, which had output of 8.9 TWh</a>. No doubt consultants will have produced a complicated model, but these numbers can be used to produce a crude estimate of the cost of power and saved carbon. My <a href="http://spreadsheets.google.com/pub?key=pf6IJHIcU_AqqGX_gtyhaZw">Google spreadsheet</a> [<a href="http://spreadsheets.google.com/pub?key=pf6IJHIcU_AqqGX_gtyhaZw&output=xls">XLS</a>] sets out a basic model for 'reality testing' figures for the Severn Barrage - allowing key assumptions to be varied and their importance to the cost case to be assessed.<br />
<br />
<b>Importance of cost of capital</b>. The chart (click to enlarge) shows the most important relationship in any cost-effectiveness estimate for the Barrage: the variation of cost carbon saved with the return on capital required. At very low cost of capital the project is probably cost effective, but at commercial rates of return - it is an extremely expensive way to save carbon.<br />
<br />
<a href="http://2.bp.blogspot.com/_77g3DtXDJXE/RvJD-0YufeI/AAAAAAAAA0s/629Knm9H9Ug/s1600-h/ROR.gif"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5112223273512238562" src="http://2.bp.blogspot.com/_77g3DtXDJXE/RvJD-0YufeI/AAAAAAAAA0s/629Knm9H9Ug/s320/ROR.gif" style="float: left; margin: 0px 10px 10px 0px;" /></a><span style="font-weight: bold;">Cost of carbon savings</span>. Estimates of commercial rates of return for large-scale power projects suggest a range of 8-15% (see table left adapted from <a href="http://www.berr.gov.uk/files/file38972.pdf">p.17 of: <i>Dynamics of GB electricity generation investment</i></a> for <a href="http://www.berr.gov.uk/">BERR</a>). The exact rate would depend on the investors' views of risk and what arrangements are in place to sell the electricity or carbon savings. We could for comparison purposes use the rate of return for new nuclear projects built by vertically integrated companies -10%. In this case a crude saved-carbon cost estimate comes to £190/tCO2. That compares with the EU ETS at about £15/tCO2, energy efficiency at negative cost and a large supply of Clean Development Mechanism projects at less than £20/tCO2. New nuclear might be expected to save carbon at less than £40/tCO2. It's true that the Renewable Obligation has a high cost (£65-140/tCO2 - so not as high as the barrage) - but that arises from the design of the mechanism, which makes the carbon savings especially expensive and justifies changing, and certainly not repeating - see <a href="http://www.ofgem.gov.uk/Sustainability/Environmnt/Policy/Documents1/Ofgem%20response%20to%20Renewables%20Obligation%20consultation%5B1%5D.pdf">OFGEM critique</a>).<br />
<br />
<b>Is there a case for building it with cheap capital?</b> The short answer is 'no' - in fact this is about the worst way to subsidise a project. The price of capital will properly reflect construction and other risks and the overall scarcity of capital. This is valuable information about risk and should not be lost. In my view the private sector should finance and build major projects, dealing with the risk, and the government (or consumer) should pay for the valuable outputs (renewable electricity, carbon savings). This is the basic idea underpinning PFI and the general move to have commercial risks (eg. construction overruns) managed in the private sector. In a market (electricity generation) that is already almost entirely private sector, it seems obvious to me that it would be highly distorting to introduce a competitor with access to capital at Treasury bond rates. The problem for the Barrage is that when it is built with money at commercial rates of return it will produce carbon savings that are many times the cost of alternatives and will require the government and its regulators to ensure that contracts are in place to buy very expensive carbon savings for several decades - or no-one will put up the cash. But that should be telling us something about this project - in terms of its carbon economics, it's a turkey. Doing this would upend the market basis of the government's energy policy:<br />
<br />
<span style="font-style: italic;">Our strategy continues to be based on the principle that independently regulated, competitive energy markets, are the most cost-effective and efficient way of delivering our objectives</span>.(see <a href="http://www.berr.gov.uk/files/file39387.pdf">2007 Energy White Paper p.8</a>)<br />
<br />
It would also violate climate change policy principles set out the Better Regulation Commission report: <a href="http://www.brc.gov.uk/climate_change.aspx"><span style="font-style: italic;">Regulating to mitigate climate change - a response to the Stern Review</span></a>.<br />
<br />
</span></span></span><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"></span></span></span><br />
<ul><li style="font-style: italic;"><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">Ensure climate policy is consistent with a healthy UK economy </span></span></span></li>
<span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">
<li style="font-style: italic;">Government must develop and act consistently with a climate change strategy; avoiding piecemeal announcements </li>
<li style="font-style: italic;">Test policy against a carbon price benchmark </li>
<li style="font-style: italic;">Carbon policy choices must be efficient; don't do things twice </li>
<li style="font-style: italic;">Keep administrative costs to a minimum </li>
<li style="font-style: italic;">Do not use climate change as a justification for other policy goals </li>
<li><span style="font-style: italic;">If it isn't working, change it</span> </li>
</span></span></span></ul><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">Interestingly, the Sustainable Development Commission took quite an arid market perspective in its report on the role of nuclear in climate change policy: <a href="http://www.sd-commission.org.uk/pages/060306.html"><span style="font-style: italic;">Is nuclear the answer? </span></a><br />
<br />
<span style="font-style: italic;">"...the economics of nuclear new-build are highly uncertain. There is little, if any, justification for public subsidy, but if estimated costs escalate, there's a clear risk that the taxpayer will be have to pick up the tab.</span><br />
<br />
We don't yet know how the SDC will regard the uncertainties and the case for public subsidy for a Severn Barrage, but one can only hope there will be some consistency. If subsidised capital or other support was given to the barrage, then I'd expect the nuclear industry and several other to come in arguing 'what about us?' and possibly taking legal action to secure non-discriminatory treatment. <span style="color: #339999;">[Post script 2 Oct: completely different approach taken with the Barrage!]</span><br />
<br />
<b>So, leave it to the market?</b> The market fundamentalist would argue that the incentives already in place for an effective market for carbon should be sufficient: eg. the EU Emissions Trading System, Climate Change Levy etc. They might also argue that we have a Renewables Obligation and that will persist until 2027, with major EU commitements to 20% of primary energy from renewables by 2020. In fact, this is in effect what the government argues when it says: <i><a href="http://www.number-10.gov.uk/output/page13025.asp">'There won't be any taxpayers subsidy for new nuclear'</a></i>. Nuclear has to 'wash its face' aided only by the cost penalties arising from the ETS and other mechanisms that apply a cost to its more carbon-intensive competitors - but the long lead times means the effect of these mechanisms is very hard to call in, say, 2025. If nuclear suffers from this, then a massive barrage would suffer even more.<br />
<br />
I think the market fundamentalist approach is wrong, or rather that the market is not yet sufficiently mature to rely on it. The long-term market for renewables and carbon are not at all clear and laden with 'political risk' (ie. the consequences of policy changes and decisions not yet made). So I think there is a case for having some means of supporting investments that provide long term carbon savings.<br />
<br />
<b>What should be done? An auction for future carbon savings...</b><br />
There is a case for making a more robust market for long-term carbon savings. the case for this is market failure based on the inadequacy of the current mechanisms for signalling future carbon prices and concerns about 'credibility' in carbon policy (for example the absence of any sort of compliance mechanism in the Climate Change Bill, uncertainty about the future of the EU ETS, doubt about the next stage of the Kyoto Protocol and so on). There are also problems in contracting for benefits in carbon savings and electricity output that might arise several decades from now, but would need to be captured with some confidence today.<br />
<br />
There have been several proposals for creating a long term credible market in carbon - for example through auctioning contracts for carbon reductions to be delivered far into the future (see <a href="http://www.dieterhelm.co.uk/publications/CarbonContractsOct05.pdf">Carbon contracts and energy policy: an outline proposal</a> by <a href="http://www.dieterhelm.co.uk/">Dieter Helm</a>). Other ideas include a fixed future price for low carbon energy, a 'put' option to underwrite future carbon prices, a guaranteed future carbon tax that would set a floor price for carbon (see <a href="http://docs.google.com/Doc?id=ddczg5p4_37cth2kv">sources</a>). In all the proposals, the government effectively underwrites a future carbon price (even if the cost is eventually paid for by energy consumers).<br />
<br />
A barrage might compete in such a market - however defined. However, there are many other low carbon alternatives that might compete: nuclear power stations; carbon capture and storage; wind power on and offshore; biomass in all its forms; CHP; and large energy efficiency programmes (for example an overhaul of social housing) - and potentially schemes to reduce carbon overseas (though that raises other questions). It's far from obvious that a barrage project would do well in such an auction and it might require an immense future purchase before the costs of carbon saved by the barrage was competitive. But if it did, then one could not object on economic grounds.<br />
<br />
<b>What about a feasibility study?</b><br />
One argument might be just to continue to study the Barrage. The trouble is that continuing to study something that really doesn't make sense just sows confusion about the government's market based-approach to energy policy and the future markets for carbon and renewables. At some point, we must be capable of reaching a conclusion and stop spending money on unpromising ideas. What I would like to see instead is a review of the market framework for long-term low carbon investment (see <a href="http://docs.google.com/Doc?id=ddczg5p4_37cth2kv&pli=1">suggestions</a>). I think that would point up some important policy opportunities - but I doubt it would lead to the construction of the Severn Barrage.<br />
<br />
***** End of original post ******<br />
<br />
<span style="font-weight: bold;">Post-script 1...25th September - government announces feasibility study</span><br />
The government announces a feasibility study through <a href="http://www.labour.org.uk/conference/hutton_speech">John Hutton's speech to the Labour conference</a>:<br />
<br />
<span style="font-style: italic;">And the Government Gordon Brown leads will drive forward with delivering a step change in our use of renewable energy. We must lead at home as well as abroad. A country of change must be prepared to embrace tomorrow's energy sources. So today I can announce that the Government will now start work on the feasibility of a Severn Barrage.A truly visionary project, unparalleled in scale, potentially generating 5 per cent of the UK's electricity from renewable sources. As we undertake this work, we must understand the true environmental, social and economic impacts of such a project. They are potentially considerable. But so too is the challenge of climate change. And we must all have open not closed minds about how we meet the energy needs of tomorrow.</span><br />
<br />
This was backed up with government press release: <a href="http://www.gnn.gov.uk/Content/Detail.asp?ReleaseID=317256&NewsAreaID=2"><span style="font-style: italic;">Hutton Calls For Open Minds on the Future of the Severn Barrage</span></a> (who can he be referring to?) and an updated <a href="http://www.berr.gov.uk/energy/sources/renewables/renewables-explained/wave-and-tidal/tidal/severnbarage/page41473.html">Severn Barrage page on the BERR web site</a>.<br />
<br />
<span style="font-weight: bold;">Post-script 2... 1st October - SDC launches tidal report</span><br />
The SDC report is now available: <a href="http://www.sd-commission.org.uk/pages/tidal.html"><span style="font-style: italic;">Tidal Power in the UK</span></a>.<br />
<br />
The crux of the report is section 4.8 on the economics and financing of the Severn barrage. If the project doesn't make sense as a climate change project - ie. a good way of reducing carbon emissions, then all the fretting about nature conservation, compensatory habitat creation and changes to the environmental, social and economic life of the Severn estuary shouldn't arise. Trade-offs and hard choices only make sense if the barrage is justified on carbon reduction terms - if it isn't even that, then why bother harassing the worms, fish and birds? And there is no credible justification, except pleading for exceptional treatment in the (poorly articulated) public interest and distorted presentation of costs (see fig 33 on page 119 - a classic!). Section 4.8 moves effortlessly from 'if' to 'how' without dwelling too much on 'why?'. I will return to this: see <a href="http://baconbutty.blogspot.com/2007/10/severn-barrage-economic-failure.html"><span style="font-style: italic;">Severn Barrage - flawed economics</span></a> posting published after the SDC report came out.<br />
<br />
A sober assessment of the economics is presented in the SDC consultants' report: <a href="http://www.sd-commission.org.uk/publications/downloads/TidalPowerUK3-Severn_barrage_proposals.pdf"><span style="font-style: italic;">Research report 3 - Review of Severn Barrage Proposal, Black and Veatch</span></a> p.105-115.<br />
</span></span></span>Unknownnoreply@blogger.com7tag:blogger.com,1999:blog-28078378.post-3433731704276212672007-09-15T14:21:00.001+01:002011-06-26T23:31:23.457+01:00It could be worse - winter fuel payments<a href="http://3.bp.blogspot.com/_77g3DtXDJXE/RuvgQ6d2AgI/AAAAAAAAAmg/Dscq_a0q-fM/s1600-h/winter.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_" src="http://3.bp.blogspot.com/_77g3DtXDJXE/RuvgQ6d2AgI/AAAAAAAAAmg/Dscq_a0q-fM/s320/winter.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">In my <a href="http://baconbutty.blogspot.com/2007/09/is-this-worst-policy-announcement-ever.html">last post</a> I asked for nominations for a worse policy than the proposed 'Health in Pregnancy Grant'. An anonymous contributor proposes the <a href="http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Inretirement/DG_">Winter Fuel Payment</a>, which is designed to help pensioners fight off the cold over winter. I think 'anonymous' may be on to something...<br />
<br />
As the chart shows, this unconditional payment has now reached about £2 billion per year, and over £12 billion has been spent on this since 1997 [data from <a href="http://www.theyworkforyou.com/wrans/?id=-29b..h">PQ, 27 Jan 2007</a>]. Payments of £200 are made to over-60s and £300 to over-80s [<a href="http://www.thepensionservice.gov.uk/winterfuel/">guide</a>] ostensibly to see older people through higher winter fuel bills. So this shares with the pregnancy grant two characteristics: very poor targeting of the needy group and very poor link to the stated objective. But it is much larger, and therefore is a bad policy on a larger scale. Could this be done better? It could hardly be done worse...<span class="fullpost"><br />
</span></span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><br />
<span style="font-weight: bold;">Bad targeting wasting money</span><br />
Even fuel poverty campaigners don't think much of it - see <a href="http://www.nea.org.uk/Policy_&_Research/Policy_position_papers/Winter_Fuel_Payments">NEA views</a>. It would have been so much better to target this to work as an investment in the energy efficiency of homes - it would equate to about £500 for each of the <a href="http://www.statistics.gov.uk/CCI/nugget.asp?ID=1162">24.7m</a> homes in the UK since 1997. Otherwise, it could have been done as a boost to the pension for the festive season - with the aim of getting poor pensioners through a difficult time of year. It could have been targeted at investment in homes of the 'fuel poor', which include younger people (2 million households - see <a href="http://www.berr.gov.uk/energy/fuel-poverty/index.html">BERR data</a>), or it could have been targeted at poor pensioners as a Christmas uplift for them (about 2 million with incomes below 60% of median - about 22% of pensioners - see <a href="http://www.ifs.org.uk/comms/comm93.pdf">IFS report</a>). In either case, the target group would be much smaller than the general pensioner population.<br />
<br />
<span style="font-weight: bold;">Good targeting doing something useful</span><br />
The government's <a href="http://www.warmfront.co.uk/">Warm Front programme</a> is small by comparison - only around £300m/year for England - but gives grants of up to £4,000 to elderly and benefits claimants to overhaul the energy efficiency of their home. If the winter fuel payment actually did what it says on the tin, it would be funding wasteful repeat purchases of Russian gas and sponsoring an especially inefficient use of electricity. Luckily these indiscriminate grants are probably spent on more general consumption. In contrast, Warm Front payments are an <span style="font-style: italic;">investment</span>, and they come with a payback. They fund investment in more efficient energy using capital in the home (better boilers, insulation etc), and create a stream of energy savings. This saves the householder money, increasing their spending power by more than the grant over five years, and reduces dependency on Russian gas and impacts on the climate. The <a href="http://www.eaga.com/downloads/pdf/warm_front_annual_report06_07.pdf">2006-7 Annual Report for Warm Front</a> says:<br />
</span></span></span><br />
<ul><li style="font-style: italic;"><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">On average in 2006/7, each household receiving Warm Front assistance has the potential to save £193.78 in energy running costs every year. This broadly equates to a 7 year payback on the 2006/7 average grant investment of £1,436.</span></span></span></li>
<span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">
<li style="font-style: italic;">A reduction in CO2 emissions in the average household from 6.97 tonnes per year to 6.16 tonnes per year, equalling total annual savings of 0.81 tonnes of CO2 per year for those homes improved, each and every year for the next 20 years.</li>
</span></span></span></ul><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-weight: bold;">Any arguments for it?</span><br />
The argument for the Winter Fuel Payment and the Health in Pregnancy grant is that they are really just extensions to more unconditional benefits (pension credit and child benefit respectively) dressed up to give them an apparent sense of purpose, and in the case of the latter even some mild conditionality. There are probably three arguments against targeting:<br />
<ol><li>some in the target group may be ashamed or otherwise reluctant to be defined as deprived and will not take up the benefit;</li>
<li>targeting can reduce the incentive to save and be self-reliant. This is the argument used persuasively against pension credit... (which tops up whatever income and saving you have to give a standard income per week - but in doing so effectively devalues your income and savings);</li>
<li>administrative costs administrative costs, complexity and potential for fraud may be higher.</li>
</ol>I don't buy these for the Winter Fuel Payment because this is not sufficient to justify not saving for retirement, the opportunities for targeting are so good and the outcomes that can be attained by investment rather than consumption are so much better and longer-lasting.<br />
<br />
A final thought: maybe <a href="http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/On_a_low_income/DG_">pension credit</a> and <a href="http://www.direct.gov.uk/en/Parents/YourMoney/DG_">child benefit</a> deserve a crack at the title of worst policy?<br />
</span></span></span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-28078378.post-27744255768227920392007-09-12T22:38:00.001+01:002008-12-09T17:24:45.029+00:00Is this the worst policy announcement ever?<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://4.bp.blogspot.com/_77g3DtXDJXE/Ruhcx6d2AfI/AAAAAAAAAmY/5dvREBkGUFo/s1600-h/tubbytots.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://4.bp.blogspot.com/_77g3DtXDJXE/Ruhcx6d2AfI/AAAAAAAAAmY/5dvREBkGUFo/s320/tubbytots.jpg" alt="" id="BLOGGER_PHOTO_ID_5109435789829603826" border="0" /></a><span style="font-size:85%;"><span style="font-family:trebuchet ms;">There seems to be a plan to give pregnant women £200 and training in nutrition - it will be a 'Health in Pregnancy Grant' [<a href="http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/09/09/npreg109.xml">Pregnant women to get healthy food grant - Telegraph</a>] [<a href="http://news.bbc.co.uk/1/hi/health/6984122.stm">BBC</a>]. Despite the recently announced end of spin, this was spun in the media several days before its real announcement, <a href="http://www.dh.gov.uk/en/News/Speeches/DH_078397">in a speech by the Health Secretary</a><span style="text-decoration: underline;"></span>. By the time of the speech, the payment was less precise - it would be "<span style="font-style: italic;">substantial</span>" and "<span style="font-style: italic;">sufficient to help every mother eat healthily during her pregnancy</span>". Perhaps some sums have been done...<br /><br />I don't doubt that it would be good to improve diet and nutrition - and we should be worried about the rise of the tubby tots see chart [<a href="http://www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsStatistics/DH_4109245">data from Dept Health</a>]. There are also marked social class differences in child nutrition and prevalence of low-birthweight babies - see <a href="http://www.statistics.gov.uk/children/">ONS <span style="font-style: italic;">The Health of Children and Young People</span> Survey</a> - <a href="http://www.statistics.gov.uk/children/downloads/DNDE.pdf">chapter 3 on nutrition</a>.<br /><br />But it is one thing to recognise a problem but quite another to find a policy that will actually address it. And I think this announcement is just about the worst policy I can think of.<br /><br />Let's set out some of the doubts one might have...<span class="fullpost"><br /><br />1. <span style="font-weight: bold;">Untargeted</span> - there is a huge 'dead-weight loss' as payments are made to all women, including many that don't need the advice or don't need the money. Who are the target group? Why aren't they targeted? If there is less than 100% uptake, will those not taking it be disproportionately part of the target group?<br /><br />2. <span style="font-weight: bold;">Wasteful </span>- a high likelihood the £200 will be spent on anything but the intended outcome thus wasting money - there is no evidence that apples, broccoli and oat bran are the marginal purchase for poor families. Frankly, if I was a pregnant women I'd be taking a well-earned lunch at <a href="http://www.quirinale.co.uk/">Quirinale</a>. Why do they think the money will have the desired effect?<br /><br />3. <span style="font-weight: bold;">Expensive </span>- I'll guess about £130m assuming England and Wales (based on about 640,000 births per year) for the payments and provision of 'nutritional advice'. God knows how much for administrating it, preventing fraud etc. Even for the NHS, that's a substantial sum. About half the additional funding the government is making available for new flood protection by 2010-11 (£200m).<br /><br />4. <span style="font-weight: bold;">No evidence</span> - I couldn't see anything links the intervention with the hoped-for outcome ... and to be honest it seems unlikely and hangs on the value of the nutritional advice. What's the evidence that nutritional advice interventions change diets? How intensive does the intervention need to be? Does it make a difference if the person opts in voluntarily or attends under semi-coercive conditions to receive a payment?<br /><br />5. <span style="font-weight: bold;">Untried </span>- there's no sign that a pilot has been run - if there had it would have been part of the announcement. I've the evidence of my own eyes in seeing '<a href="http://www.healthystart.nhs.uk/">Healthy Start</a>' vouchers exchanged for sweets and Coke in my local shop. </span></span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost">Welcome to the graveyard of good intentions.</span></span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost"> Why can't they just try it and learn some lesson before they waste taxpayers' money?<br /><br />6. <span style="font-weight: bold;">Uncontested </span>- There's no obvious consideration of opportunity costs or alternatives - what about strengthening supply side by improving the services available? Is pregnancy the best time for the intervention? Would a community-based intervention work better - eg. running an aerobics class with a wider focus on healthy living etc etc...<br /><br />7. <span style="font-weight: bold;">Unfocussed </span>- What about bigger interventions aimed at fewer people? There's no recognition of the benefits of concentration - if, say, one-third are in the target group(the chav mums?), wouldn't a targeted £600 intervention work better that a £200 general intervention?<br /><br />8. <span style="font-weight: bold;">Implausible </span>- I've yet to see what the training would amount to, but I'll be surprised if a lecture works - I suspect the problem is a skills deficit and confidence in cooking fresh food - linked with time poverty. Also, assuming one person can run 300 training session per year and there is a single training session per woman, that would require a workforce of about 2,000. Where are they?<br /><br />9. <span style="font-weight: bold;">Prudence </span>- the old girl has had a quite torrid experience with this one. Where is the control and checks an balances on such poor policy-making? What is this government in a 'tight fiscal situation' doing? I hope the NAO and select committees are all over this.<br /><br />Apart from that, it's a great idea. Nominations please, for a worse policy? Poll tax excepted.<br /></span></span></span>Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-28078378.post-87974451891071674382007-09-12T08:15:00.000+01:002008-12-09T17:24:45.516+00:00Land use and food security<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/_77g3DtXDJXE/RuLHQp5YReI/AAAAAAAAAl4/ymiUQDcrSJU/s1600-h/foodsecurity.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://3.bp.blogspot.com/_77g3DtXDJXE/RuLHQp5YReI/AAAAAAAAAl4/ymiUQDcrSJU/s400/foodsecurity.jpg" alt="" id="BLOGGER_PHOTO_ID_5107864016329917922" border="0" /></a><span style="font-size:85%;"><span style="font-family:trebuchet ms;">One of the big questions for me is whether we devote too much land to farming and not enough to land use for wildlife, wilderness, woodland, places to walk and places to live etc. that is land for its 'amenity' value or for development. About 70% of England is given over to farming and only about 10% to development (<a href="http://baconbutty.blogspot.com/2007/03/land-use-strategy-discuss.html">see my earlier posting</a>), yet surveys show most people think that much more land (>50%) is developed than really is (<a href="http://www.hm-treasury.gov.uk/media/D/D/barker_supplementary.pdf">see Q1 in this survey for the Barker Review</a>). The survey also shows that people have strong preferences for land for its wildlife and landscape value (<a href="http://www.hm-treasury.gov.uk/media/D/D/barker_supplementary.pdf">Q3</a>).<br /><br />So, why don't we have more national parks, reforest large areas of rural England, get most of the sheep off the uplands, switch to extensive low impact agriculture producing high-quality and high-value foods, open up access to land, fill the countryside with helpful signposts and paths and let people enjoy living in England? I was out walking in the Thames Valley this weekend - very nice, but I did wonder why there was so much sheep farming going on what must be some of the most highly prized real estate in the land. An occasional sortie out of the city reveals just how much space there is given over to low value agriculture, even in crowded South East England.<br /><br />The argument that usually comes back is some variation on '<span style="font-style: italic;">we need domestic farming for food security</span>' or worries about the loss of self-sufficiency in food production. We might become more dependent on food imports, and that would be <span style="font-style: italic;">A Bad Thing</span>. So how credible is the food security argument? Indeed, what exactly is the argument? I think it takes us to the heart of the great debate about land use that there ought to be. In summary, I think the food security argument is entirely bogus, but a key question for land use policy becomes 'how much should we consider the international impacts of what we do domestically?' ... <span class="fullpost"><br /><br /><span style="font-weight: bold;">What is food security?</span><br />Most definitions [<a href="http://www.google.co.uk/search?hl=en&rlz=1B3GGGL_enGB225GB225&pwst=1&defl=en&q=define:Food+Security&sa=X&oi=glossary_definition&ct=title">here</a>][<a href="http://en.wikipedia.org/wiki/Food_security">Wikipedia</a>] are based on people having access an adequately nutritious diet. But the concept spans a range from having sufficient calories to remain alive to maintaining affordable choice in the diet - <a href="http://en.wikipedia.org/wiki/Kumquat">kumquats</a> in January and affordable <a href="http://en.wikipedia.org/wiki/Tuber_%28genus%29#White_truffle">Piedmont white truffles</a> at all times. Although often expressed in terms of access, food security is really an economic concept - about having the means to buy food, and about being near enough people with the means to create a market. Even the worst famines rarely arise from absolute food shortages, but loss of purchasing power and market failures (See <a href="http://www.economist.com/displaystory.cfm?story_id=4293198">Economist on Niger famine</a>, <a href="http://www.questia.com/library/book/poverty-and-famines-an-essay-on-entitlement-and-deprivation-by-amartya-sen.jsp">Amartya Sen, <span style="font-style: italic;">Poverty & Famines</span></a>) and few people actually starve in a famine - rather they die through infectious diseases. The symptoms of food insecurity are high or volatile prices. We should be clear, food security is first and foremost a problem for the poorest developing countries and for poor people everywhere.<br /><br /><span style="font-weight: bold;">Promoting self sufficiency - but why? </span><br />Much is made of self-sufficiency in food production - for some the declining 'self-sufficiency ratio' (see chart above [<a href="http://statistics.defra.gov.uk/esg/publications/auk/2006/excel.asp">Defra data</a> <a href="http://statistics.defra.gov.uk/esg/publications/auk/2006/chart7-4.xls">Table 7.4]</a>) is a crisis. The National Farmers Union (unsurprisingly) sees it as vital.<br /><br /><span style="font-style: italic;">In 1996 we produced more of our own food, and for a higher population, than at any time since the mid-nineteenth century. But that level of self-sufficiency has been falling. In the last 10 years, overall self-sufficiency has fallen by 18% and self-sufficiency in indigenous foods by 15%, as a result of lower UK production, reduced exports and increased imports. The figures look stark... </span>[From first page of the NFU's case for farming: <a href="http://www.nfuonline.com/nfuwfmlive/documents/Why%20Farming%20Matters%20FINAL%2030%20Nov.pdf">Why farming matters</a> - December 2006].<br /><br />Actually, our self sufficiency depends on how you look at it. The lower chart is derived from the <a href="http://faostat.fao.org/">FAO</a> Food Balances' (<a href="http://faostat.fao.org/site/557/DesktopDefault.aspx?PageID=557">see here</a>), but presented as calories per head per day rather than in prices. The food balance looks at production, exports, imports and consumption of food and as inputs, such as feed and seed. The self sufficiency ratio is domestic production divided by production + net imports. On this basis, we are 83% self-sufficient in calories. See my <a href="http://spreadsheets.google.com/pub?key=pf6IJHIcU_AoIYwXjZ5F6JQ">Google spreadsheet</a> [<a href="http://spreadsheets.google.com/pub?key=pf6IJHIcU_AoIYwXjZ5F6JQ&output=xls">XLS</a>], which sets out the food balances for the UK and a few other countries extracted from FAO. The lower chart above summarises the spreadsheet for the UK - it breaks down self-sufficiency into different food groups.<br /><br />We are self-sufficient in the most important food group in energy terms, cereals. Where we are a net importer, it is primarily for meat (New Zealand lamb, Danish bacon etc) where others have advantages in production, or for things we like but don't grow here (fruit, olive oil). We tend to import higher value foods - but these are to some extent the excitement and choice in our diet, not the raw energy content.<br /><br /><span style="font-weight: bold;">But so what if we do import food? </span><br />What would higher self-sufficiency actually do for us? Not much actually. Domestically produced food still gets more expensive when world prices go up - so it doesn't somehow protect our people. In fact we end up at greater risk that pest, drought or some other rural plague will strike down domestic supply. It would matter for the economy if we were a huge importer or exporter and the agricultural sector was a substantial part of the economy - in which case we might worry about terms of trade shocks or other bad things that world markets might do to us. But we aren't, it isn't and we don't need to.<br /><br />Agriculture accounts for only 0.9% of UK GVA, about £9.6 billion, and it is the small player in the £80 billion UK food industry - food manufacturing accounts for £21 billion and distribution and services, such as restaurants, £49 billion. The agriculture net negative trade balance is £4.9 billion (ie more imports), but this is less than the £6.1 billion net imports of office machinery and computers. We are 22.5% important dependent in agriculture, but 52% import dependent in computers and office equipment. [Source: <a href="http://www.statistics.gov.uk/downloads/theme_economy/Input_Output_Analyses_2006_edition.pdf">ONS Input-Output Analysis, 2006</a>]<br /><br />So should we be more worried about importing food or computers? Answer: <span style="font-weight: bold;">neither</span>.<br /><br /><span style="font-weight: bold;">Trade is the basis of food security</span><br />Trade enables us to buy more food, more cheaply and with greater choice. A very good report by a team in Defra makes this case extremely well [<a href="http://statistics.defra.gov.uk/esg/reports/foodsecurity/foodsecurity.pdf"><span style="font-style: italic;">Food Security in the UK: an evidence and analysis paper</span></a>]. Strangely this seems to have popped out just before Xmas 2006 - usually a sign that something is to be buried! Maybe it was that it came a few days after the NFU report on <span style="font-style: italic;">Why farming matters</span>.<br /><br />As the authors say: <span style="font-style: italic;">The conscious or unconscious identification of food security with self-sufficiency has often obscured the real issues</span>... and ... <span style="font-style: italic;">a discourse centred on ‘UK self-sufficiency’ is fundamentally misplaced and unbalanced</span>.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/_77g3DtXDJXE/Ruaspp5YRgI/AAAAAAAAAmI/WIb-JzxDdEU/s1600-h/vegsecurity.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://3.bp.blogspot.com/_77g3DtXDJXE/Ruaspp5YRgI/AAAAAAAAAmI/WIb-JzxDdEU/s400/vegsecurity.jpg" alt="" id="BLOGGER_PHOTO_ID_5108960658919540226" border="0" /></a>The importance of markets in securing food supplies is well illustrated in charts included in the report (left). For vegetables, countries within the EU have varying self-sufficiency. But the EU is overall almost self sufficient. For fruit, some countries barely grow it all, but the EU meets most needs (but can't grow much tropical fruit). Over time, the EU has become more dependent - but that probably reflects an increasing taste for fruit, lowering tariffs that allow access to lower cost producers, taste for more exotic fruits not grown in the EU.<br /><br />The point is that markets and trade deliver food security, diversity and resilience in the supply system. The report concludes:<br /><br /><span style="font-style: italic;">International trade has long been a central feature of UK food supply, and has remained critical even during times of emergency. There is no reason to suggest this will be less in future. At the very least, UK food security is tied up with the EU single market and, ultimately, the efficiency of the world trading system.</span><br /><br />I think the big question about land use in England is how much we care about the international impacts of decisions we make about UK self-interest... there are two in particular: the international environmental footprint and the impact of our land choices on the food security <span style="font-style: italic;">of others</span>.<br /><br /><span style="font-weight: bold;">Exporting environmental footprint...</span><br />I hope you might be convinced that 'self-sufficiency' in food isn't a worthwhile objective in its own right, and may even be harmful - it certainly has little to do with food security. But what about the argument that we are simply exporting the environmental footprint associated with food production? We could turn England into a pristine green and pleasant national park with all industrial farming removed. But food production, fertilisers, water pollution, biodiversity impacts and all the rest would go abroad.<br /><br />The first thing to note is that this is absolutely the norm - we do this for manufacturing, mining and other high impact activities. Much of our polluting is done elsewhere. At the heart of this is the theory of <a href="http://en.wikipedia.org/wiki/Comparative_advantage">comparative advantage</a> and our preferences. Rich English people have a high and increasing preference for good environments (articulated collectively through numerous laws, codes, the planning system). Other countries may relatively favour more aggressive and polluting activities and prefer money raised through production of goods to sell to us. We have traditionally respected this as a matter of 'national sovereignty' and resisted what some would call '<a href="http://en.wikipedia.org/wiki/Eco-imperialism">environmental imperialism</a>'.<br /><br />I think this reluctance to impose extra-territorial standards will and should continue, with an expectation that food standards and costs will rise globally and that more countries will emulate the EU and set high environmental standards as they become more prosperous. But I think there should be one exception to pure national sovereignty - where the impact is on a '<a href="http://www.undp.org/globalpublicgoods/globalization/toc.html">global public good</a>' ie. something we should all bear responsibility for protecting because it's value is global and it has characteristics of a <a href="http://www.econlib.org/LIBRARY/Enc/PublicGoodsandExternalities.html">public good</a>. If the system behaved in such a way that for every hectare of land taken out of agriculture in England a hectare was felled in the Amazon or Borneo, I'd be troubled. I'm not sure it would behave in that way, but the challenge there is to develop global collective action to provide global public goods.<br /><br />PS. we should be very sceptical about 'food miles' arguments (see my earlier posting: <a href="http://baconbutty.blogspot.com/2007/02/food-miles-wrong-idea-stop-using-it.html">Food miles... wrong idea, stop using it!</a>)<br /><br /><span style="font-weight: bold;">Impact on the poorest...</span><br />If we use UK land for producing 'non-marketed' goods that we have high demand for (like leisure, views, woodland walks and biodiversity), then we are adding to the pressure on available productive land to meet food and energy needs globally. That doesn't hurt us too much, as we simply buy access to the necessary land through international trade. But does it hit those who are the poorest? To be honest, I don't know...<br /><br /><span style="font-style: italic;">How it could make things worse...</span><br />Pressures on land may grow - fuelled by population growth, economic growth, a tendency to consume more protein with increasing wealth, demand for biofuels and climate change and other pressures degrading the available land. This would be globally serious if agricultural productivity growth (increasing yields per hectare) did not keep pace with these pressures. Land prices and agricultural commodity prices would increase and the poor may be unable to afford sufficient food. In fact, the productive capacity of the land may be globally insufficient to support the world population. The poor would be the inevitable losers.<br /><br /><span style="font-style: italic;">Why it might easy to overstate the problem...</span><br />If land and food became scarce, we might expect those poor countries with agricultural economies to benefit from rising prices - just as oil producers (in theory at least) benefit from rising oil prices. A new green revolution might boost productivity and food production might shift, with perhaps Ukraine and Russia becoming bread-baskets of Europe, for example. As prices rise, there may be reconfiguration of the diet - perhaps with less resource-hungry protein consumption. Famine is rarely caused by absolute food shortages - and there is unlikely to be a global food shortage in absolute terms. Richer poor countries would have a better grip on their food security.<br /><br /><span style="font-weight: bold;">The international consequence are a critical question for land-use strategy</span><br />As I suspect is apparent, I'm not really sure how the international consequences of domestic land use choices would or should really play out. But what I am sure about is that these are critical questions for a future land use strategy. At the moment we generally do not act on these consequential impacts (in fact we usually wilfully ignore obvious damage caused by key farming policies like the CAP). But is this hard-headed and basically right, or does it belong to a pre-globalisation era of narrowly defined national interest?<br /></span></span></span>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-28078378.post-65532200849172155322007-09-01T11:36:00.000+01:002008-12-09T17:24:45.738+00:00Saying stupid things with fake sophistication<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/_77g3DtXDJXE/Rtkq3p5YRbI/AAAAAAAAAlg/QEPXwyhshF4/s1600-h/cancer+prevalence.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://2.bp.blogspot.com/_77g3DtXDJXE/Rtkq3p5YRbI/AAAAAAAAAlg/QEPXwyhshF4/s400/cancer+prevalence.jpg" alt="" id="BLOGGER_PHOTO_ID_5105158788228859314" border="0" /></a><span style="font-size:85%;"><span style="font-family:trebuchet ms;">If you want to say something absolutely jaw-dropping in its idiocy, then you need to cloak it in lots of fake sophistication. And this is what <a href="http://www.ashscotland.org.uk/ash/CCC_FirstPage.jsp">ASH Scotland</a> has done with its new <a href="http://www.ashscotland.org.uk/ash/files/SnuspositionpaperJuly%202007.doc">position paper on smokeless tobacco</a>.<br /><br />No less than 266 references are used to support the truly stupid idea that smokeless tobacco, which can substitute for cigarettes and is far less hazardous, should be banned. Smokeless tobacco is far less dangerous because there is no, er, smoke to draw into the lungs. The red hot particles, volatile gases and thousands or organic products of combustion ingested deep into the body do the harm. <br /><br />If you put that idea to any normal person they look at you as if you've lost your mind. Only in the insular world of 'tobacco control' do these ideas survive for longer than it takes to express them. In fact, there is a wealth of evidence that it is, as you would expect, a truly stupid thing to do - not least because the place where it is most widely used (Sweden - see chart) has much lower rates of smoking related deaths.... <span class="fullpost"><br /><br />The chart shows male lung cancer mortality rates in some major countries [Source: <a href="http://www-dep.iarc.fr/">IARC / WHO Cancer Mortality Database CANCER<i>Mondial</i></a>]. One country stands out: Sweden. And Sweden also has lower rates of oral cancer and other smoking-related diseases. The difference between Sweden and the others is that a high proportion of its tobacco use in Sweden is in smokeless form [<a href="http://www.swedishsnus.com/SMNA_US/main_static/img/figure4.gif">view</a>]. One of Europe's especially ludicrous policies is to ban most forms of 'oral tobacco' [<a href="http://europa.eu.int/eur-lex/pri/en/oj/dat/2001/l_194/l_19420010718en00260034.pdf">Directive 2001/37/EC Art 8</a>], though not in Sweden.<br /><br />So the main ASH Scotland policy idea is that other countries should be <span style="font-style: italic;">prevented by law </span>from reaching a position where more of the tobacco use is through far less harmful forms of tobacco consumption and that addicted individuals should be <span style="font-style: italic;">prevented by law</span> from having access to lower risk products. What next? A ban on anti-lock brakes? Cycle helmets? Ropes while rock climbing? Any risk reduction measures at all while engaging in inherently risky behaviour? There's the warped logic of the overweening health planner behind all this... if you make a risky activity much safer, then people might not stop doing it altogether.<br /><br /><span style="font-weight: bold;">Confused about burden of proof</span><br />Apart from the unsettling coerciveness of such positions, there are simplistic errors in the analysis - concerned with the handling of scientific uncertainty when making policy. Science can (and should) reserve judgement indefinitely or use 'beyond reasonable doubt' tests of evidence. But policy making requires decisions whatever the available evidence - and a decision includes "maintaining the status quo". This requires the policy-maker not to demand perfect knowledge but a 'balance of probabilities' assessment of available evidence. Throughout the document, the authors draw conclusions of the form: "<span style="font-style: italic;">there is not enough evidence [for doing something sensible]</span>" and so decide to stick with doing something stupid, as if there is conclusive evidence to support the stupid ban. Which there isn't and they don't pretend there is, or even seem to recognise that there ought to be. All they've done is set a high or impossible evidential hurdle for the thing they don't like and not applied any evidential challenge whatsoever to maintaining the ban, which they do like. But what if the ban, by denying people less hazardous alternatives, is actually killing more people? It's at least plausible. And given the position in Sweden, where it isn't banned and many fewer people die, you might think that was a good starting point and expect some evidence to show that bans aren't just making everything worse. For me, the burden of proof is on those supporting the utterly insane idea of banning much less hazardous substitutes for very deadly products. Look through the ASH Scotland paper and you'll find no evidence to support a ban or give any confidence that it isn't doing more harm than good.<br /><br /><span style="font-weight: bold;">Confused about individual rights</span><br />But I think the thing I find most troubling about this sort of posturing is what it means at an individual level. In effect, these remote health planners are saying to a person who smokes cigarettes that they should not have access to a much less risky alternative. Where did the acquire the authority and the bare-faced arrogance to do that? How did they become so sure of themselves that they feel qualified to restrict the harm reduction options available to someone struggling with addiction? So on those estates in Glasgow, where smoking prevalence can be as high as 70%, ASH Scotland says 'no' to lower risk alternatives. You must quit. And if you don't quit - well, you might as well die.<br /><br /><span style="font-weight: bold;">Wrong questions</span><br />ASH Scotland solemnly poses questions like should smokeless tobacco be given a "legal designation as a harm reduction product in the UK? Eh? There's no such thing. It's a tobacco product - just much less dangerous than the norm. Or they state a preference for use of <a href="http://en.wikipedia.org/wiki/Nicotine_replacement_therapy">NRT</a> for harm reduction or stopping smoking - but what if others find smokeless tobacco more effective or don't want or wont use a medicalised approach? What is the case for reducing the available options for quitting or reducing smoking? They prefer other interventions such as smoke-free places legislation and bans on advertising. All good ideas, but they don't explain explain why these are mutually exclusive with policies that reduce the harmfulness of the tobacco that is sold or why removing smoke would have a beneficial supportive 'denormalising' effect. Or why there wouldn't be additional benefits from reducing passive smoking exposure, role modelling and fire risk.<br /><br />With <a href="http://www.ctsu.ox.ac.uk/pressreleases/2000-08-02/the-future-worldwide-health-effects-of-current-smoking-patterns">top epidemiologists predicting 1 billion premature deaths from tobacco in the 21st Century</a>, one might think that all options would be in play- especially as the smokeless products have done so much to keep the carnage down in the one place where they are widely used.<br /><br />So for the next edition of this position statement:<br /><br />1. please provide evidence that the ban you favour maintaining isn't doing more harm than good at population level by denying smokers access to much less hazardous products and opportunities to manage nicotine addiction, in the way it appears to work in Sweden. We know that even if a few extra people used it that were never going to be tobacco users or would have quit anyway, the extra harm would be small.<br /><br />2. please outline your ethical basis for denying a person access to an alternative product that is much less dangerous than the one they may be addicted to. You might think it will save the lives of others (I don't, and you can't show it will), but what about that person's individual rights? Do they count for nothing in the face of your bossy prescription?<br /><br />3. please explain why it would be good policy to provide legal protection to the cigarette makers in the market for tobacco and a barrier to entry to potential competitors offering much lower risk products. This is an especially stupid idea now being aggressively pioneered by health campaigners in the United States through their seedy and desperate deal with tobacco giant Philip Morris to support a <a href="http://tobaccofreekids.org/reports/fda/">Bill to pass regulation of tobacco to the FDA</a>. Expect many dead.<br /><br /><span style="font-weight: bold;">Read this instead...</span><br />For a decent review of the evidence, don't spend too long watching ASH Scotland struggle with basic epistemology. See Brad Rodu and Bill Godshall in <a href="http://www.harmreductionjournal.com/content/pdf/1477-7517-3-37.pdf"><span style="font-style: italic;">Harm Reduction Journal 2006, 3:37</span></a>; and the collection of 50 best papers on the <a href="http://www.ihra.net/TobaccoHarmReduction">International Harm Reduction Association tobacco section</a>. Even tobacco companies provide better and more balanced analysis than this effort by ASH Scotland: see this account of <a href="http://www.swedishsnus.com/SMNA_US/main_static/bestpractice.html">Experience from Sweden</a> by Swedish Match - or this <a href="http://www.ussmokeless.com/regulatory/22.pdf">literature review by United States Smokeless Tobacco</a>.<br /></span></span></span>Unknownnoreply@blogger.com8tag:blogger.com,1999:blog-28078378.post-44031289599299098932007-08-22T12:42:00.002+01:002011-06-26T23:34:11.538+01:00When rich countries make emissions cuts in poor countries<a href="http://4.bp.blogspot.com/_77g3DtXDJXE/Rswk9Z5YRUI/AAAAAAAAAkU/BKDhlKjwDg4/s1600-h/emissionsdistribution.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5101493115246101826" src="http://4.bp.blogspot.com/_77g3DtXDJXE/Rswk9Z5YRUI/AAAAAAAAAkU/BKDhlKjwDg4/s400/emissionsdistribution.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><a href="http://www.unep.org/Documents.Multilingual/Default.asp?DocumentID=484&ArticleID=5332&l=en">Yvo de Boer</a>, head of the UN Framework Convention on Climate Change (<a href="http://unfccc.int/">UNFCCC</a>) argues that richer countries should be able to buy as much as <span style="font-style: italic;">all </span>their emissions reductions through investments in emission reductions in developing countries [see <a href="http://news.bbc.co.uk/1/hi/sci/tech/6957328.stm">BBC</a> / <a href="http://www.bbc.co.uk/radio4/today/listenagain/ram/today2_emissions_20070822.ram">interview</a>]. Given the global atmosphere is indifferent to where on the surface the reductions take place, there is an argument that countries with obligations to cut should make the emissions cuts where it's most cost effective. As long as the rich countries do the paying, then they would not be shirking their responsibilities. Or so the argument goes. And this argument is more plausible than its critics admit - the polluter is still paying, but in theory paying where the cuts are most efficient and thus squaring equity and efficiency objectives. However, the argument is also wrong. The main problem is long-term structural change... </span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><br />
<br />
<span style="font-weight: bold;">Underpinning data </span><br />
As the chart shows, a large number of people in the world have relatively low emissions - for example, 1 tCO2/capita for India and around 3 tCO2/ capita for China compared to about 9 in the UK and about 20 in the United States - with a world average of 4. [Data from the excellent <a href="http://cait.wri.org/login-main.php?log=1">Climate Analysis Indicators Tool</a>]. The trouble is that if the world average crept up to where Europeans are now (EU-25 = about 8 tCO2/capita), then we would have a doubling of emission, whereas we need to cut global emissions by at least 50% to have a hope of averting dangerous climate change and keeping temperature rise close to 2 degrees C -probably more like 70-80%. The problem is that the European carbon intensive lifestyle is not sustainable if replicated even partly around the world - yet for many countries European prosperity and living standards would be a highly desirable outcome for economic growth. <span style="font-style: italic;">This is where they would like to head</span> - but if they succeeded we'd all be under water.<br />
<br />
<span style="font-weight: bold;">So where do we need to go...?</span><br />
Both developed and developing countries need to converge to a model of prosperity/subsistence dependent on emitting <span style="font-weight: bold;">much less</span> carbon per head than current rich countries - and for the developed countries that means major structural change, and for everyone a different model of development. If we need at least a global 50% emissions cut to stabilise the climate at 550ppm [see <a href="http://www.hm-treasury.gov.uk/media/9/1/Chapter_8_The_Challenge_of_Stabilisation.pdf">Stern Review table 8.2</a> on the Challenge of Stabilisation - and this may not be enough], and we expect a 50% increase in population, and the current world average emissions are about 4tCO2/capita, simple maths suggests we need to move to a global average of about 1.3 tCO2/capita by the end of the century ie. about where India is now. And within that, we'd have to accommodate the economic aspirations of the 6-7 billion who will be living developing countries. Even allowing for trading, that model is will fail if it the current developed countries have 10tCO2/capita in 2050 and beyond - let alone the American 20 tonnes/capita.<br />
<br />
<span style="font-weight: bold;">Main objectives - how do we decide the right amount reduce domestically and through trading mechanisms?</span><br />
There are three main objectives to consider when thinking about offsetting or trading emissions between rich and poor countries:<br />
</span></span></span><br />
<ol><li><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">Finding the globally most cost-effective reductions for those with obligations to reduce emissions</span></span></span></li>
<span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">
<li>Supporting developing countries' participation in the Kyoto Protocol by transferring investment funds from rich to poor</li>
<li>Creating structural change in the domestic economies of rich countries towards a low carbon future</li>
</span></span></span></ol><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">These objectives are in tension - as 1&2 will tend to mean more trading and meeting more of our commitments in poor countries, and 3 will mean less. economics turns on short-run and long-run efficiency. In the short run, the first two above dominate and lead to the conclusions drawn by Mr. de Boer. Take a longer view however, and it is apparent for the really deep cuts to be made later in the century, changes to major systems are required. So, change to the housing stock, transport system, product design and manufacturing, social geography, consumer preferences, commercial energy use, energy production etc. These are slow-changing systems, but large changes can be made over decades (and of course we are wishing we had introduced tougher building regs back in the 70s and we'd be doing a lot better now). The long-run efficient approach will start to change these systems now, even if in the short run there are more efficient alternatives available, because we recognise that changing them suddenly in the future will be more costly and disruptive, and - frankly - less likely to happen. It is important to look at efficiency over the whole period over which emissions reductions are required.<br />
<br />
<span style="font-weight: bold;">Supplementarity - an important word, even if made up</span><br />
The Kyoto negotiators have tried to reconcile this by defining something with the unspeakable title of the '<a href="http://en.wikipedia.org/wiki/Supplementarity">supplementarity principle</a>'. Its origin is in <a href="http://unfccc.int/resource/docs/cop7/13a02.pdf#page=2">Decision 15/CP.7</a> (part of the Marrakesh Accords of the Kyoto Protocol agreed in 2001) which set out guidelines for use of mechanisms like the <a href="http://en.wikipedia.org/wiki/Clean_Development_Mechanism">Clean Development Mechanism</a>.<br />
<blockquote><span style="font-style: italic;">... the use of the mechanisms shall be supplemental to domestic action and that domestic action shall thus constitute a significant element of the effort made by each Party included in Annex I to meet its quantified emission limitation and reduction commitments </span></blockquote>What exactly this word 'supplemental' means is far from clear... it was originally thought to mean 'at least half' of the emissions reductions must be done domestically (an EU position that was not formalised), but there is no settled definition. Mr de Boer is effectively calling for this principle to be abandoned as unnecessarily constraining.<br />
<br />
<span style="font-weight: bold;">Is it important?</span><br />
Crikey! Yes indeed it is. This is all about the signals that governments send to investors, manufacturers, engineers, architects, shoppers, R&D labs etc. If the message is "we'll be doing it all in China" then they will not see a market opportunity in providing green energy, low carbon products, vehicles, buildings & services for a carbon-constrained market. It's a crucial issue for the EU Emissions Trading Scheme [see WWF report: <a href="http://www.panda.org/about_wwf/what_we_do/climate_change/news/index.cfm?uNewsID=106620"><span style="font-style: italic;">Emissions Impossible</span></a> showing that most or all of the cuts made in this system can come from developing countries through the CDM] and the Climate Change Bill for exactly these reasons: just how carbon constrained is the UK and Europe going to become?<br />
<br />
<span style="font-weight: bold;">Note -forests...</span><br />
On a related subject... the numbers above are for energy-related CO2 emissions. Some developing countries become big contributors when forests are taken into account - and Malaysia ends up with the highest emissions per capita and Brazil and Indonesia enter the top four total emitters (though of course most of the deforestation serves timber, pulp and paper demand in richer countries). perhaps rich countries could start by doing more to stop the demand for Brazilian, Indonesian and Malaysian forest products. See my charts below showing per capita emissions and total emissions, including non-CO2 gases and land use changes (ie. mostly deforestation):<br />
<br />
<a href="http://1.bp.blogspot.com/_77g3DtXDJXE/RsxZgp5YRVI/AAAAAAAAAkc/Znzi_HSHsI0/s1600-h/allemissions.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5101550895441134930" src="http://1.bp.blogspot.com/_77g3DtXDJXE/RsxZgp5YRVI/AAAAAAAAAkc/Znzi_HSHsI0/s400/allemissions.jpg" style="cursor: pointer;" /></a><br />
<a href="http://1.bp.blogspot.com/_77g3DtXDJXE/Rsxacp5YRWI/AAAAAAAAAkk/nhusfUfjIk8/s1600-h/emissionsstructure.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5101551926233285986" src="http://1.bp.blogspot.com/_77g3DtXDJXE/Rsxacp5YRWI/AAAAAAAAAkk/nhusfUfjIk8/s400/emissionsstructure.jpg" style="cursor: pointer;" /></a></span></span></span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-28078378.post-16134373709827514852007-08-18T11:17:00.001+01:002011-06-26T23:34:58.771+01:00Escaping the reckless EU renewables targets<a href="http://4.bp.blogspot.com/_77g3DtXDJXE/RsadakLtMOI/AAAAAAAAAkE/lHYRJ5305oo/s1600-h/primaryrenewables.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5099936707758600418" src="http://4.bp.blogspot.com/_77g3DtXDJXE/RsadakLtMOI/AAAAAAAAAkE/lHYRJ5305oo/s400/primaryrenewables.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">The Guardian exploded with indignation this week [<a href="http://www.guardian.co.uk/environment/2007/aug/13/renewableenergy.energy"><span style="font-style: italic;">Revealed: cover up plan on energy target</span></a>; <a href="http://www.guardian.co.uk/leaders/story/0,,2147400,00.html">leader</a>; <a href="http://www.guardian.co.uk/letters/story/0,,2148102,00.html">letters</a>], at the discovery of a <a href="http://image.guardian.co.uk/sys-files/Guardian/documents/2007/08/13/RenewablesTargetDocument.pdf">leaked government memo</a> discussing how the UK might wriggle out of a European Union renewables target - to reach 20% of EU energy consumption from renewables by 2020. In fact, the real story is different and more worrying than the Guardian has it. The real problem is how this target ever was agreed in the first place and the negative consequences for climate change that will flow from it. It might seem counter-intuitive to see a highly 'ambitious' renewables target that way, but I think these targets an own-goal that will discredit the EU, cause negotiating sclerosis, distract from more important objectives, and fail to deliver what would in any case have been the wrong approach, whilst missing renewables targets for 2010 by miles. I think this is bad policy and the civil servants are right to be looking for a way out, so let me explain why...</span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><br />
<br />
<span style="font-weight: bold;">First a little background...</span><br />
<br />
<span style="font-weight: bold;">The target:</span> is a political agreement of the 8-9 March Council of Ministers under the German presidency of the EU (see <a href="http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ec/93135.pdf">presidency conclusions p.20-23</a>). The target is: <span style="font-style: italic;">a binding target of a 20 % share of renewable energies in overall EU energy consumption by 2020</span>. That 'overall' is taken to mean 'primary energy', meaning all the commercial energy inputs to the economy, including transport fuels, gas supplies to houses, coke used in blast furnaces etc. Most renewables targets so far have been expressed as percent of <span style="font-style: italic;">electricity </span>production.<br />
<br />
<span style="font-weight: bold;">How achievable?</span> Let us be under no illusion, that is a very large amount of energy to come from renewables. The chart above shows that only 2% of UK primary energy comes from renewables (2005) [source: <a href="http://www.dti.gov.uk/energy/statistics/source/total/page18424.html">Digest of UK Energy Statistics (DUKES)</a> - <a href="http://stats.berr.gov.uk/energystats/dukes1_1_1.xls">XLS</a>]. Even within that, the two biggest sources are waste of various kinds, but mostly landfill gas, and large hydro, mostly in mountainous Scotland. [source: <a href="http://www.dtistats.net/energystats/dukes06_c7.pdf">DUKES report on renewables p2</a>] Neither of these are easily 'scalable' as the supply of waste is mercifully limited and the supply of mountains fixed and protected from the dam-builders. So we cannot even say that it is a matter of merely doing 10 times what we have done so far in the next 13 year. I'm not sure it's worth discussing further, but a rapid 10-20 fold increase in anything that we have already struggled with over many years, should have caused a "pause for reflection", as civil servants might describe complete incredulity. To their credit it does look as though civil servants were restless back in February (see earlier Guardian article: <a href="http://politics.guardian.co.uk/green/story/0,,2011783,00.html"><span style="font-style: italic;">Britain tries to block European target for renewable energy</span></a>) - at least they are consistent!<br />
<br />
<span style="font-weight: bold;">Burden sharing</span>. The target is set at EU-level, so perhaps there is a prospect that other countries will take on more than 20% and we in the UK can take on less? This is a process known as 'burden sharing', or the divvy up of a collective target amongst the member states according to objective criteria or, more usually, political gaming. And in fact the EU average is better than the UK's: about 6.4% of EU primary energy comes from renewables, compared to our 2%. But the EU's total depends heavily (c. 70%) on waste and the large hydro schemes of the Alps and Pyrenees, which are not easily scalable. [See my earlier post on the EU numbers, with sources: <a href="http://baconbutty.blogspot.com/2007/02/renewable-energy-targets-why-is.html"><span style="font-style: italic;">Renewables - why is the EU involved?</span></a>]. The EU agreement leaves the thorny question of burden sharing for a later date, giving the guidance that:<br />
</span></span></span><br />
<blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-style: italic;">From the overall renewables target, differentiated national overall targets should be derived with Member States' full involvement with due regard to a fair and adequate allocation taking account of different national starting points and potentials, including the existing level of renewable energies and energy mix (cf. paragraphs 10 </span><span style="color: #666666;">[clean fossil fuels and carbon capture and storage]</span><span style="font-style: italic;"> and 11 </span><span style="color: #666666;">[nuclear]</span><span style="font-style: italic;">), and, subject to meeting the minimum biofuels target in each Member State, leaving it to Member States to decide on national targets for each specific sector of renewable energies (electricity, heating and cooling, biofuels).</span></span></span></span></blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">Well, that should settle it! Because the overall target is so extreme, each member state will be trying to massage the burden sharing methodology in its favour: and there is no political agreement on how this should be done.<br />
<br />
<span style="font-weight: bold;">So what is wrong with this?</span> A few points about these targets - doubtless there are more:<br />
<br />
<span style="font-weight: bold;">1. Discredits EU policy-making</span>. The biggest failure is that the EU Council agreed this at all - and I think that is the angle the Guardian missed: it tells us something very bad about the EU. We should be concerned about the negotiating dynamics and accountabilities that cause leaders to agree such unrealistic targets. It isn't a matter of them being ambitious and going for it, it's more a matter of making crowd-pleasing gestures and then exiting before the day of reckoning arrives. This, I fear, is a rather fundamental feature of the way the EU does policy at the highest level - a need for visible 'wins' but with policies subject to inadequate scrutiny and challenge and the collective abdication of responsibility that the 27-member council allows for. Also, a high price paid by the leader who wants to 'wreck' the political consensus by injecting a note of realism and scaling back the . I am describing a variation of the fable of the <a href="http://en.wikipedia.org/wiki/The_Emperor%27s_New_Clothes"><span style="font-style: italic;">Emperor's new clothes</span></a> - a collective blindness and group-think in the face of facts. I think the target will fail, and well before 2020, discrediting the EU and strengthening the opponents of action on climate change.<br />
<br />
<span style="font-weight: bold;">2. Distraction and introversion</span>. Immense efforts will now be squandered on the argument over burden sharing or the type of bureaucratic ingenuity on display in the memo leaked to the Guardian. At a time when the EU should be leading the world into the next phase of the Kyoto Protocol, it will instead be consumed by internal wrangling over the share of the renewables target. It important to understand that 'bureaucratic resources' are basically fixed, and if they are spending their time fighting over renewables targets, they are doing less of something potentially useful.<br />
<br />
<span style="font-weight: bold;">3. Fails basic test of EU 'competence'</span>. There is every reason to agree some aspects of EU energy policy at EU level - carbon targets and how to share them, those aspect of the response that bear on the single market (for example the EU ETS, energy efficiency standards for traded products) and external relations - for example dealings with Russia and the participants in the Kyoto Protocol. But where is the case for specifying renewables targets at EU level? This is a technology choice and should be left to member states, which should work out how best to meet its targets taking account of its own circumstances and resources. If the Commission feels it needs to be prescriptive to make sure the carbon targets are met then there are two better approaches: first fine the countries if they exceed their targets through 'infraction proceedings' (this is widely practised for other failures to meet agreed EU goals - eg. water quality); second, become prescriptive and interventionist only when a country is falling behind and off track.<br />
<br />
<span style="font-weight: bold;">4. Unconvincing analysis.</span> Given the scale of the target, the analysis behind it is very thin and does not seem to have had much challenge. Have a read of the Commission's <a href="http://ec.europa.eu/energy/energy_policy/doc/03_renewable_energy_roadmap_en.pdf"><span style="font-style: italic;">Renewable Energy Road Map</span></a>; <a href="http://ec.europa.eu/energy/energy_policy/doc/02_eu_energy_policy_data_en.pdf">EU Energy Policy Data working document</a>; or the <a href="http://ec.europa.eu/energy/energy_policy/documents_en.htm">Energy For a Change World</a> framework. It looks like policy-based evidence making to me. I'm just unconvinced by the projections, modelling and economic assessment. And there is very little on 'barriers'. If I can find time, a thorough hatchet job will follow.<br />
<br />
<span style="font-weight: bold;">6. Bad economics</span>. This very heavily directs the response to climate change to the some of the most expensive technological responses per tonne of carbon saved. The energy market regulator OFGEM estimates that the mechanism for supporting UK renewables will cost £32 billion over its life (to 2027), and that it save carbon at an average of £400/tC compared to £66/tC for the EU ETS and lower or negative costs for many energy efficiency measures [<a href="http://www.ofgem.gov.uk/Sustainability/Environmnt/Policy/Documents1/16669-ROrespJan.pdf">OFGEM document</a>]. Though part of this is the design of the mechanism rather than the underlying technology cost, a <span style="font-weight: bold;">much larger</span> mechanism would be needed to meet any plausible UK share of the EU target. the policy also favours biofuels within the renewables mix (there is a target to convert 10% of road fuel to biofuels by 2020, but other technology choices would be down to member states). But biofuels are about the least efficient option for deploying biomass - a <a href="http://www.dti.gov.uk/files/file39040.pdf">DTI economic assessment of biomass</a> shows bioethanol from wheat to save carbon at £152/tCO2 (equivalent to £557/tC) and that bioethanol and biodiesel are the most expensive ways to reduce carbon with biomass.<br />
<br />
<span style="font-weight: bold;">7. Side-stepping the likely embarrassing failure to meet 2010 targets.</span> The agreement deflects attention from the rather pertinent point that we have EU renewables targets for 2010 (see directive <a href="http://europa.eu.int/eur-lex/pri/en/oj/dat/2001/l_283/l_28320011027en00330040.pdf">2001/77/EC</a> which sets 'indicative' targets for 22% of electricity and 12% of primary energy from renewables by 2010) <span style="font-weight: bold;">and these are going to missed by miles</span> - see evaluation and tracking by EurObserv'ER Barometer (<a href="http://www.energies-renouvelables.org/observ-er/stat_baro/barobilan/barobilan6.pdf">2006 report</a>):<br />
<span style="font-style: italic;"></span><blockquote><span style="font-style: italic;">...the important European objectives, the 22% of the Directive on renewable source electricity and </span><span style="font-style: italic;">the 12% of primary energy of the White Paper, shall be far from being reached in 2010</span></blockquote><span style="font-style: italic;"></span>Great! The new super-ambitious targets, which are over the horizon of political riskiness for those making the agreements, have been made whilst failing to meet targets that they can actually do something about.<br />
</span></span></span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-28078378.post-691976412256262062007-08-11T10:32:00.000+01:002008-12-09T17:24:46.855+00:00Cap and trade for cigarettes?<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/_77g3DtXDJXE/Rr1t7t8jtmI/AAAAAAAAAjc/Vt6Qav9o0gk/s1600-h/cig+production.gif"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://1.bp.blogspot.com/_77g3DtXDJXE/Rr1t7t8jtmI/AAAAAAAAAjc/Vt6Qav9o0gk/s320/cig+production.gif" alt="" id="BLOGGER_PHOTO_ID_5097351225966573154" border="0" /></a><span style="font-size:85%;"><span style="font-family:trebuchet ms;">If a country wanted to reduce tobacco use to a level that meant it was comparable with other public health risks, then why not simply reduce the amount that can be sold or number of customers they can have, by allocating quotas to manufacturers and allowing trade in quotas? This proposal has surfaced in the US as a legislative proposal: <a style="font-style: italic;" href="http://enzi.senate.gov/public/index.cfm?FuseAction=NewsRoom.NewsReleases&ContentRecord_id=e04eb904-802a-23ad-4157-dd5d44e9d647&IsPrint=true">Help End Addiction to Lethal Tobacco Habits Act</a> (geddit?) </span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;">[<a href="http://www.govtrack.us/congress/billtext.xpd?bill=s110-1834">full text</a>] </span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;">by Senator Enzi. This is partly in response to the pointless industry-sponsored <a style="font-style: italic;" href="http://www.govtrack.us/congress/billtext.xpd?bill=s110-625">Family Smoking Protection and Tobacco Control Act</a> , which mystifyingly also attracts support form big US public health campaigns. I think have vested misplaced faith in regulation and regulatory bureaucracies. The Enzi approach is an alternative and the idea also has people talking in the public health world [<a href="http://www.nzherald.co.nz/section/story.cfm?c_id=204&objectid=10455938&pnum=2">article in New Zealand Herald</a> and <a href="http://www.smokeless.org.nz/NZHerald6Aug07_Enzi.htm">here</a>]. But does it make sense? I'm not so sure... here are a few tentative thoughts (and I'd welcome responses from those promoting the idea).... <span class="fullpost"><br /><br /><span style="font-weight: bold;">1. What does cap and trade add compared to increasing taxation on tobacco?</span> Both systems tend to raise prices and bring supply and demand into line. Taxes, however, have the great benefit that the premium paid flows to the government, rather than the tobacco company (unless the quotas are auctioned, which I would recommend as an amendment to the Enzi Bill, in which case the premium flows to the government, but adds a lot of complexity).<br /><br /><span style="font-weight: bold;">2. The 'allocation programme' is cumbersome</span>. Based on historic market share, Enzi's proposal grants important rights (effectively access to market) to incumbents. Again it could be improved by auctioning quotas, but adds nothing to cigarette taxes. The Enzi proposal actually makes the <span style="font-style: italic;">number of users</span> the regulated quantity... but given the great heterogeneity in what makes a user and how much this changes over time, this is a really poor idea for a regulatory base.<br /><br /><span style="font-weight: bold;">3. Control of price volatility will dominate quota setting</span>. This is a major problem with cap and trade systems (and we are suffering from this in the EU Emission Trading Scheme)... Whilst it is possible to set, quotas as Senator Enzi does, that give a desired outcome with certainty, in practice politicians are not indifferent to price hikes in widely used products. The result will be a fudge on quota setting that effectively guarantees that the price volatility is manageable. An economist's view is one thing, but these ideas have to be seen in terms of <span style="font-style: italic;">political economy</span>.<br /><br /><span style="font-weight: bold;">4. Physiology</span>. Smokers control their nicotine dose from smoking and, within limits, can get their fix from fewer cigarettes. This effect is already seen with poorer smokers, who will often smoke fewer cigarettes but achieve a higher blood-nicotine level by smoking more intensively. This is an issue for taxation of course, but proponents should remember that there isn't a linear relationship between a quota (whether number of sticks or number of users) and health impact.<br /><br /><span style="font-weight: bold;">5. Gaming.</span> With complex regulation and definitions, there always comes the scope for innovative gaming. And you would surely expect that here. If the quota is users, can some new product be designed that takes them out of the user definition? Can users be encourage to lie to surveys? If the quota is measured in product terms, can longer cigarettes be introduced? <br /><br /><span style="font-weight: bold;">6. Scope of responsibility</span>. It's generally a good principle of regulation to give organisations duties or targets only for things they have control over. Tobacco companies don't control the number of users, they are just one influence - health care support for quitting, taxation, public health advertising, smoke-free policies, marketing restrictions are all more important. They can control the quantity of product they sell and its price.<br /><br /><span style="font-weight: bold;">7. Legal constraints</span>. The slightest sign that the allocation regime disadvantages importers or foreign brands, then a challenge at the WTO would be expected. In fact, it would happen just to get in the way. Anti-trust law or other consumer protection principles might be expected to be deployed by those disadvantaged in the market carve up. What would happen when people wished to bring in cigarettes they'd bough overseas?<br /><br /><span style="font-weight: bold;">8. Distraction</span>. This could tie up administrators in knots and expend valuable political capital to little purpose. I think there is only a limited role for supply-side interventions in reducing harm from tobacco. these are primarily by:<br /></span></span></span><ul><li><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost">raising the price through taxation that keeps pace with growth in incomes, and so reduces affordability of tobacco use over time; </span></span></span></li><li><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost">differentiating the tax rates according to the harm. I strongly support a much lower tax rate for smokeless tobacco products and no tax differentiation between smoked products (eg. by tar or nicotine yield) as there is no real health difference between smoking products, whatever you've been led to believe about 'lights' etc.</span></span></span></li><li><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost">giving meaningful information to tobacco users about relative risk of products - again, especially about the vast difference in risk between smoking and smokeless tobacco.</span></span></span></li></ul><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost">More important are the measures designed to act on the demand side - smoke-free policies, advertising bans, support for quitting, counter-advertising being the most effective.<br /><br /><span style="font-weight: bold;">9. Finally, an advantage</span>. Where taxation is a dirty word and political non-starter cap and trade systems can have much the same economic effect (raising the price at the margin) but may be more easily implemented than a tax. Something similar happened with the <a href="http://ag.ca.gov/tobacco/msa.php">US Master Settlement Agreement</a> in which State Attorneys general sued the companies for health care costs, won $250 billion settlement, causing the companies to raise prices by 40-50 US cents to pay for it. Not far off taxation, but a lot of lawyers got rich too. I think lawyers would do well from a cap and trade system too... and that's never a good sign.<br /><br />Of course... I very much doubt Senator Enzi's proposal will go anywhere, but always worth discussing innovative ideas.<br /></span></span></span>Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-28078378.post-77543096839697673122007-08-09T11:19:00.000+01:002008-12-09T17:24:46.983+00:00Achieving culture change<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://4.bp.blogspot.com/_77g3DtXDJXE/RroHiN8jtiI/AAAAAAAAAi8/i3ARvvkrs4M/s1600-h/culture.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://4.bp.blogspot.com/_77g3DtXDJXE/RroHiN8jtiI/AAAAAAAAAi8/i3ARvvkrs4M/s320/culture.jpg" alt="" id="BLOGGER_PHOTO_ID_5096394212763743778" border="0" /></a><span style="font-size:85%;"><span style="font-family:trebuchet ms;">An excellent new publication from the Prime Minister's Strategy Unit, <a href="http://www.cabinetoffice.gov.uk/strategy/work_areas/culture_change.aspx"><span style="font-style: italic;">Achieving culture change: a policy framework</span></a>. It's open for discussion until 31 August and will be finalised once they have had views in. It's an important area because many policy objectives depend on influencing, or are thwarted by, deep-seated attitudes and entrenched behaviours... environment, skills and employability, anti-social behaviour, and public health to name a few.<br /><br />This develops work on 'behaviour change' (see my <a href="http://baconbutty.blogspot.com/2006/10/soft-paternalism-changing-behaviour-for.html">posting on soft paternalism</a> for a discussion) to reflect the idea that behaviour is embedded in culture: a stock of attitudes and beliefs - and that behaviour is conditioned by culture, but that changed behavioural norms are eventually consolidated into culture (see graphic from report). If that sounds either obscure or so obvious it isn't worth stating, I think it is worth having a read of the report - it's an excellent synthesis of the knowledge and experience in this area with some good analytical tools...<br /><br />I attended the launch of this report and was asked to give some remarks in response. My six main points were as follows: <span class="fullpost"><br /><br /><span style="font-weight: bold;">1. Death of 'rational man' economics</span>. As soon as real world behaviour and culture are examined, it is obvious that the key assumption of utility maximising behaviour (where utility is usually erroneously conflated with income) fails. One quite (I suspect inadvertently) amusing part of the report is on <a href="http://www.cabinetoffice.gov.uk/strategy/downloads/work_areas/culture_change/culture_change_framework.pdf">page 58</a>, where a list of behavioural 'biases' are noted in which human behaviour departs from the rational model. In most of science, when the model is different from reality, we usually conclude the weaknesses and biases are in the model, not the real world! Only economics can suspend humility I recently read <a href="http://www.mckinsey.com/ideas/books/originofwealth/overview.asp"><span style="font-style: italic;">The Origin of Wealth</span></a>, by <a href="http://en.wikipedia.org/wiki/Eric_Beinhocker">Eric Beinhocker</a> a fascinating challenge to the highly deterministic and reductionist assumptions of classical economics, in favour of 'complexity economics' comprising system dynamics and emergent behaviour, agent interactions, networks, and evolutionary models for innovation and markets. But much policymaking rests on the simplistic and wrong assumptions of neo-classical economics - in fact it is elevated to the status of religion in some quarters. If not time to bin it, then it's time to recognise its limitations - I'm arguing its approach is sometimes necessary (eg. getting prices right), but rarely sufficient to deliver desired outcomes.<br /><br /><span style="font-weight: bold;">2. The importance of time</span>. The report is a manifesto for 'slow wins' - substantial changes achieved over a long period, in which interventions to change behaviour become self-sustaining and consolidated into culture. Time is much underrated in policymaking but it is critical in reducing transition costs and allowing everyone to adapt. So for example if there was a desire to apply a high carbon tax (say £50/tCO2) it could be introduced over 10-15 years. There has been a steady culture change effect around domestic violence - once the police deciding to ignore 'domestics', implicit societal permission to thwack the wife was withdrawn, and domestic violence has fallen very substantially over time. Most of the great changes in society have been realised over many years: slavery abolition, universal suffrage, the Enlightenment rejection of religious dogma, human rights, etc.<br /><br /><span style="font-weight: bold;">3. The moving policy frontier</span>. Attitudes and culture change over time, and what is impossible at one point, may become acceptable as time passes and attitudes change. The 40-year effort to restrict smoking in public places is a good example (see <a href="http://baconbutty.blogspot.com/2007/07/england-goes-smoke-free-wider-lessons.html">post on lessons</a>) and there is a good discussion of this in the report. With recycling there has been a steady change in attitudes, and ideas that were ahead of their time just five years ago, are under discussion now. See PM Strategy Unit 2002 report <a style="font-style: italic;" href="http://www.cabinetoffice.gov.uk/strategy/work_areas/waste/index.asp">Waste not, want not</a>, which recommended charging households for the amount of rubbish produced and caused a storm at the time, but see 2007</span></span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost"> <a href="http://www.defra.gov.uk/news/2007/070524c.htm">Defra announcement</a> and <a href="http://news.bbc.co.uk/1/hi/uk_politics/6685409.stm">BBC</a>.<br /><br /><span style="font-weight: bold;">4. Credibility and consistency</span>. If long term culture change is the objective, then everything done needs to show the direction is consistent and the intention credible - otherwise the signal is mixed. Perhaps this problem afflicts us most in responding to climate change... the language on climate change is strong, but in other policy areas the signals about climate change are are mixed - eg. housing, transport and even energy. I think was done well with drink driving, where detection, penalties, advertising etc all lined up with a single clear message. Culture eventually changed and no-one jokes </span></span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost"> any more</span></span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost"> about driving home because they are too drunk to walk. One argument I made for consistency reasons was to build on, not replace, the behaviour change model of the 2005 Sustainable Development Strategy: <a href="http://www.sustainable-development.gov.uk/publications/pdf/strategy/Chap%202.pdf"><span style="font-style: italic;">Securing the future</span>, chapter 2</a>.<br /><br /><span style="font-weight: bold;">5. Where does the mandate come from?</span> Intervention in behaviour and culture change can be paternalistic or appear paternalistic. How does the government secure a mandate from the public to do this? The report p30-32 gives a characterisation based on liberal principles governing the case for government intervention (though the 2-dimensional space drawn on <a href="http://www.cabinetoffice.gov.uk/strategy/downloads/work_areas/culture_change/culture_change_framework.pdf">p32</a>, doesn't reflect the case where people cannot exert full 'agency'). However, I think this is only part of the story. It gets to the heart of the relationship between a government and its electorate. I recently attended the Green Alliance summer garden party and debate: <a href="http://www.green-alliance.org.uk/grea1.aspx?id=1894"><span style="font-style: italic;">Is it up to politicians to save us?</span></a>, which was excellent - but the question begs a careful answer. I don't see politicians as simply aggregating public opinion - we usually elect them to lead us, and lead us beyond where we currently think we are or want to go. That is, we place some trust in them. We give them a metaphorical tow-rope and ask them to tow us along in what looks like the right direction. Sometimes they can go too fast or be excessively libertarian, authoritarian or paternalistic, and the tow-rope reaches its elastic limit and then snaps - in a 'crisis' (like the fuel protests, too much immigration etc.). If we trust the politicians less, we reel in the tow-rope and give them much less scope. the important thing is that the public ultimately controls the 'permission' it gives to politicians, but politicians can act in such a way that they enjoy greater just and more slack... consistency, credibility, taking times, avoiding excessive intervention, listening etc.<br /><br /><span style="font-weight: bold;">6. Where is the space for this sort of policy work?</span> Chapter 4 (<a href="http://www.cabinetoffice.gov.uk/strategy/downloads/work_areas/culture_change/culture_change_framework.pdf">p66</a>) sets out a seven part policy framework for operationalising the ideas in the report (see diagram below - click to enlarge). My observation is that this sort of work is a very substantial undertaking, and it's far from obvious to me that the civil service is geared up to do this. I think it needs: ministerial buy-in and patience, multidisciplinary teams, time and resources, developing a programme of policy-focussed research, clear agreement on problems and scope.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/_77g3DtXDJXE/Rrrggd8jtkI/AAAAAAAAAjM/dNwuet8WGU0/s1600-h/culturepolicy.jpg"><img style="cursor: pointer;" src="http://1.bp.blogspot.com/_77g3DtXDJXE/Rrrggd8jtkI/AAAAAAAAAjM/dNwuet8WGU0/s400/culturepolicy.jpg" alt="" id="BLOGGER_PHOTO_ID_5096632776722200130" border="0" /></a><br /><br /><span style="font-weight: bold;">The fat tax - my confession...</span> I also offered the meeting a confession - it was me that penned the infamous '<a href="http://en.wikipedia.org/wiki/Fat_tax">fat tax</a>' concept into the PM Strategy Unit's earlier work in this area [Report: <a href="http://www.cabinetoffice.gov.uk/strategy/work_areas/personal_responsibility/index.asp"><span style="font-style: italic;">Personal responsibility and behaviour change</span></a>] causing the report to be changed following another media storm (see <a href="http://www.timesonline.co.uk/tol/life_and_style/health/article1024002.ece">The Times</a>, <a href="http://news.bbc.co.uk/1/hi/health/3502053.stm">BBC</a>). I thought I was being clever by saying that it would be a tax on food not bodyweight!<br /><br />Needless to say, this idea is eventually percolating into the mainstream - exactly as you would expect as concern mounts over obesity [see recent articles: <a href="http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=390171&in_page_id=1770&in_a_source"><span style="font-style: italic;">Doctors call for Fat Tax</span></a>, <a href="http://www.ifs.org.uk/publications.php?publication_id=1797"><span style="font-style: italic;">Institute of Fiscal Studies report</span></a>, <a href="http://society.guardian.co.uk/health/news/0,,2124850,00.html"><span style="font-style: italic;">Fat tax could save thousands of lives</span></a>, <a href="http://observer.guardian.co.uk/comment/story/0,6903,1153380,00.html"><span style="font-style: italic;">Fat tax would be a throw back to the nanny state: so what?</span></a>, <a href="http://www.dailymail.co.uk/pages/live/articles/health/healthmain.html?in_article_id=388001&in_page_id=1774"><span style="font-style: italic;">Shouldn't we tax fatties?</span></a> ]. I suppose the lesson from this is that the government should allows others to make the running (even if it is egging them on), so that an idea seems to be a natural progression of policy. This was an example of stretching the policy frontier too far, too quickly... but given this frontier is moving, it's time will surely come.<br /><br /></span></span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><span class="fullpost"> </span></span></span>Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-28078378.post-66615026026506959912007-07-30T10:54:00.001+01:002011-06-26T23:36:00.254+01:00Urban flooding - 15 things to do<a href="http://1.bp.blogspot.com/_77g3DtXDJXE/Rqye898js2I/AAAAAAAAAcU/ENE89N5jQYA/s1600-h/urbanfloodrisk.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5092620048907088738" src="http://1.bp.blogspot.com/_77g3DtXDJXE/Rqye898js2I/AAAAAAAAAcU/ENE89N5jQYA/s320/urbanfloodrisk.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">We've had some horrible urban flooding impacts recently. But the outlook is pretty bleak too - the chart is from the 2004 Foresight Report <a href="http://www.foresight.gov.uk/Previous_Projects/Flood_and_Coastal_Defence/index.html"><span style="font-style: italic;">Future Flooding</span></a>, showing both potentially high future costs (rising from £270m to up to £15 billion) and large uncertainties involved. Now we have been reminded how bad it can be, what's to be done? Let me set out some views on the problem, which is far from straightforward and little to do with flood defences, and then 15 ideas for how to respond...</span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><br />
<br />
<span class="fullpost"><span style="font-size: 100%;"><span style="font-family: trebuchet ms;"><span style="font-weight: bold;">How flooding works</span><br />
'Flash flooding' has played a big role in the recent misery - this arises from very intense downpours overwhelming urban drainage systems creating dramatic surface water flows downhill into river basins. This creates immediate flooding wherever water can collect, fed by these surface flows. The pathways may be quite unpredictable - depending on building, roads, and even small obstructions like walls, and the 'flashiness' will depend on how absorbent the surface is and how much rain runs off over the surface and into drains and sewers. Eventually, water reaches the rivers and the whole catchment drains into the river causing the more predictable type of 'fluvial' (river) flooding, whereby river levels rise and overwhelm the river banks and may 'overtop' flood defences. The faster the catchment drains, the more severe the peak river level is likely to be. If the river level exceeds the banks or defences, water flows into the floodplain, gradually moving up the land contours until all the flow volume can be accommodated. Other types of floods come from the sea and groundwater (also see graphic at the end of this posting).</span></span><br />
<span style="font-size: 100%;"><span style="font-family: trebuchet ms;"><br />
The basic strategy for dealing with flood risks is as follows:</span><br />
<br />
</span></span></span></span><br />
<ul><li><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">Characterise the risks and how they will change over time - producing flood risk maps and guiding investment strategy </span></span></span></span></span></li>
<span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-size: 100%;">
<li><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">Avoid development in high flood risk areas</span></span></li>
<li><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">Build defences to get the highest value for money in terms of risk reduction with the available funds</span></span></li>
<li><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">Go with natural processes as far as possible to slow the movement of water, create buffering and flood storage</span></span></li>
<li><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">Improve resilience - for example by having a warning system that enables all involved - householders, emergency services, infrastructure owners - to respond.</span></span></li>
</span></span></span></span></ul><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-size: 100%;"><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">The government's 2004 flooding strategy has one of the best titles in the sense of communicating the governing idea of the approach: <a href="http://www.defra.gov.uk/environ/fcd/policy/strategy.htm"><span style="font-style: italic;">Making Space for Water</span></a> </span></span><span style="font-family: trebuchet ms;">[<a href="http://www.defra.gov.uk/environ/fcd/policy/strategy/outline.htm">summary</a>]. </span></span><span style="font-family: trebuchet ms;">The government has been widening the approach to flooding to deal more effectively with flash flooding and is conducting pilots on different approaches [see <a href="http://www.gnn.gov.uk/Content/Detail.asp?ReleaseID=256552&NewsAreaID=2">January 2007 prophetic announcements</a>]. Much work is going on, but this type of flooding presents quite a challenge.<br />
<br />
<span style="font-weight: bold;">Some of the difficulties</span><br />
<br />
</span><span style="font-size: 100%;"><span style="font-family: trebuchet ms;"><ul><li><span style="font-family: trebuchet ms;">Intense downpours and urban flash flooding have been a big factor in the recent floods and these risks are much harder to characterise than the more gradual (though highly destructive) flooding associated with high river levels. These have been truly extreme events - setting records for summer rainfall [<a href="http://www.metoffice.gov.uk/corporate/pressoffice/2007/pr20070726.html">Met Office</a>] and there is some force to the argument that we will never be (and shouldn't try to be) geared up for <span style="font-style: italic;">the most extreme</span> events. But the pattern of underlying risks is changing with climate change and we should expect more extreme and unpredictable events. </span></li>
<li><span style="font-family: trebuchet ms;">Much development already exists in the flood plain (about £200 billion worth of property) and is unlikely to move - and in the case of urban flash flooding the problem is that water can't get into rivers fast enough, not that water is overflowing from rivers. </span></li>
<li><span style="font-family: trebuchet ms;">Flood defences don't help much with urban flash flooding (and can hinder as they can block surface flows to rivers). Flood defences are built to a particular standard (usually designed to meet a 1:200 year event, though much more for London - the Thames Barrier was initially designed for 1:2000 year event). Flood defence investment is not an attempt to prevent all flooding - it is an attempt to trade-off costs and risks and give the best value for money in the trade off. </span></li>
<li><span style="font-family: trebuchet ms;">Warnings for flash flooding are difficult to give - it depends on exact location, intensity and duration of downpours and surface characteristics where the rain falls - and these are constantly changing. In the recent floods, the Met Office predicted heavy weather 6-7 days in advance, but it can only identify more precise locations much nearer to the event.</span></li>
<li><span style="font-family: trebuchet ms;">In some case there was a 'system' failure - ie. roads failed due to landslide, meaning mobile flood defences couldn't be moved into position. It is extremely hard / expensive to guard against all possible scenarios for multiple failure. </span></li>
</ul><span style="font-family: trebuchet ms;">Here are some of the things that need to happen.... we need to manage the critical infrastructure that control urban flooding. The means by which water is drained from the landscape into rivers or other water bodies is through drains and sewers, what might be termed 'Hidden Infrastructure' (which also includes water supply, wastewater, waste and flood protection). The Environment Agency proposes a four-pillar approach to hidden infrastructure (see <a href="http://publications.environment-agency.gov.uk/pdf/GEHO0307BMCD-E-E.pdf">Hidden Infrstructure report</a> and more detailed <a href="http://publications.environment-agency.gov.uk/pdf/GEHO0307BMEJ-e-e.pdf">Policy Briefing</a>). The four pillars are: (I) getting the location for development right; (II) have a long term planning framework; (II) demand management; (IV) funding investment with the right incentives. This approach is implemented in the recommendations below.<br />
<br />
<b><span style="font-size: 100%;">I. Controlling development</span></b><br />
<br />
<span style="font-weight: bold;">1. Control development - there must be rigorous application of </span><a href="http://www.communities.gov.uk/index.asp?id=1504639" style="font-weight: bold;">PPS-25: <span style="font-style: italic;">Development and flood risk</span></a><span style="font-weight: bold;">.</span> There isn't a straightforward choice between building and not building on the flood plain - and not all the flood plain is equally at risk. PPS-25 introduces a risk-based approach through its 'sequential test' - building on the lower risk areas in preference to the high risk areas. PPS-25 introduces greater focus on urban flash flooding and sources of flooding other than rivers and the sea. As a means to understand these sources of flooding, it requires local authorities to undertake an SFRA. Some local authorities have been reluctant to undertake SFRAs, but that has to change.<br />
<br />
<span style="font-weight: bold;">2. Objections to planning applications on drainage grounds</span>. Under PPS25 and related regulations, it is possible for the Environment Agency to define flood risk areas to include those with critical drainage problems in the lowest flood risk zones (zone 1) and object to planning applications where it believes the development would increase the risk to others. If there was a dispute, the application would be 'called in' for resolution by the Secretary of State. This option became available in January 2007 under the <a href="http://www.communities.gov.uk/pub/952/Circular0406CommunitiesandLocalGovernmentTheTownandCountryPlanningFloodingEngla7_id1504952.pdf">Town and Country Planning (Flooding) (England) Direction 2007</a>. This power is new and has not been used so far, but should be in future.<br />
<br />
<span style="font-weight: bold;">3. Strengthen the building regulations</span> to build in greater flood resilience to building design. This could be done as part of the government's ongoing review of the building regulations: <a href="http://www.communities.gov.uk/index.asp?id=1509043"><span style="font-style: italic;">The Future of Building Control</span></a>. The government's <a href="http://www.communities.gov.uk/pub/312/DevelopmentandFloodRiskAPracticeGuideCompaniontoPPS25LivingDraft_id1506312.pdf">'living draft' guidance</a> on implementing PPS-25 has advice on resilience at paragraphs 5.36-5.45. There is a case to examine if <a href="http://www.opsi.gov.uk/si/si2000/20002531.htm#sch1">parts C and H of the 2000 Building Regulations</a> (resistance to moisture and drainage respectively) should be strengthened, perhaps with higher flood resilience standards in areas of higher flood risk. It is, however, the stock of existing buildings that is most at risk. Here, insurers might start demanding policy conditions to improve flood resilience, just as they demand better locks in high crime areas.<br />
<br />
<span style="font-weight: bold;">4. Limitation of ‘Permitted Development’</span> (development that does not require planning permission) to reduce scope for sealing surfaces leading to increased run-off and to encourage the use of permeable paving etc. The government is <a href="http://www.communities.gov.uk/index.asp?id=1508888">consulting on changes to permitted development</a> and wishes to widen the use of this approach to simplify the planning system as part of its Planning White Paper. It could make it simple to do the right thing.<br />
<br />
<b><span style="font-size: 100%;">II. Long term planning</span></b><br />
<br />
<span style="font-weight: bold;">5. Joined up planning - surface water management plans. </span></span></span><span style="font-family: trebuchet ms;">There are many organisations involved in urban drainage and flooding (local authorities, water companies, Environment Agency, Highways Agency, <a href="http://www.defra.gov.uk/environ/fcd/policy/opauths.htm#idbs">internal drainage boards</a>, land managers, private property owners etc). It really does require a 'joined-up' approach to understanding the risks, preventing the worst impacts and effectively managing surface water. The place that has done best with this is Glasgow - following its 2002 flash floods. The <a href="http://www.wapug.org.uk/past_papers/Autumn_2005/A2005fleming.pdf">Glasgow Strategic Drainage Plan</a> has been Glasgow's response with the pain of hindsight [<a href="http://www.coastms.co.uk/Conferences/Outputs%20and%20Reports/A%20IUD%202007%20conference/IUD%20May%202007%20Gillon.pdf">see presentation</a>]. Few others had the foresight to follow Glasgow's example, though being no less at risk. However, things are happening: there are now <a href="http://www.defra.gov.uk/environ/fcd/policy/strategy/ha2.htm">15 integrated drainage pilot projects</a> in place. I hope and expect we will see more 'Surface Water Management Plans' arising from the Strategic Flood Risk Assessments required as part of regional and local development planning under the government's <a href="http://www.communities.gov.uk/index.asp?id=1504639">Planning Policy Statement 25: <span style="font-style: italic;">Development and flood risk</span></a>.<br />
<br />
<span style="font-weight: bold;">6. Full implementation of existing emergency planning policy</span>. The <a href="http://www.ukresilience.info/preparedness/ccact.aspx">Civil Contingencies Act 2004</a> requires emergency services, NHS bodies, local government and the Environment Agency to be prepared for emergencies (<a href="http://www.opsi.gov.uk/acts/acts2004/40036--e.htm#sch1">schedule 1- responders</a>), including floods (<a href="http://www.opsi.gov.uk/acts/acts2004/40036--b.htm#1">section 1 - what is an emergency</a>).There are duties to assess risk from time to time, to prevent or reduce impacts, to plan a response, to have plans in place to maintain business continuity (including addressing the risk that emergency services will be disrupted by an emergency) and to warn the public (<a href="http://www.opsi.gov.uk/acts/acts2004/40036--b.htm#2">section 2 - duty to plan and advise</a>.These legal duties should form the basis of a coherent multi-agency response to flood emergencies, with considerable effort undertaken pre-emptively. It should be clear for example, that the fire and rescue service are responsible for inland water rescue, and resourced to do the job.<br />
<br />
<span style="font-weight: bold;">7. Create necessary powers in the Climate Change Bill</span>. It might be stretching 'prevention' duty under the Civil Contingencies Act (<a href="http://www.opsi.gov.uk/acts/acts2004/40036--b.htm#2">2.1.d</a>) to cover more structural responses to reducing urban flood risk like sustainable urban drainage, green roofs etc. Section 37 of the <a href="http://www.official-documents.gov.uk/document/cm70/7040/7040.pdf">Draft Climate Change Bill</a> could be strengthened to: 1) create, deliver and report on a comprehensive adaptation programme; 2) introduce expert independent scrutiny; 3) create the means for the Secretary of State to allocate duties to particular bodies charged with addressing climate related risks, such as flooding.<br />
<br />
<span style="font-weight: bold;">8. New institutional arrangements</span>. Clarifying roles, responsibilities and accountabilities would help a lot, and this is the subject of consultation at present. Local authorities should own the Surface Water management Plans, with the Environment Agency taking strategic overview role for all types of flooding, including urban flooding (where responsibilities are currently ambiguous). For example, the Environment Agency could sign off Strategic Flood Risk Assessments and advise on SWMPs. [see excellent <a href="http://www.defra.gov.uk/environ/fcd/policy/strategy/ha1bltranb.pdf">Defra discussion of options</a>]. In a similar move, the Environment Agency has been given the strategic responsibility for coastal flooding [<a href="http://http//www.defra.gov.uk/news/2007/070622a.htm">announcement</a>]. I don't agree with <a href="http://www.dieterhelm.co.uk/">Dieter Helm</a> (see his <a href="http://www.dieterhelm.co.uk/details_comm.php?commid=258&hdr=comm&main=comm">July 2007 commentary</a>) that the flood management part of the Environment Agency should be spun out and a new Flood Agency created. If anything, there is a case for more, not less, integration in the management of different aspects of the water environment and also the link between water and land policies. The argument that it is too much put in a single organisation is plainly wrong: large private sector organisations run multiple businesses(think of IBM, BP, or Barclays). A new nationwide organisation would create new inefficiencies and duplication (management, IT, premises etc) and add to inter-agency communication overheads. Finally, when there are peak emergency demands, it makes sense for the resources needed at the peak to have other things to do when there is no peak. I think a much more useful avenue for institutional reform is looking at the efficiency incentives of the bodies already involved, not adding another one.<br />
<br />
<b><span style="font-size: 100%;">III. Managing demand</span></b><br />
<br />
<span style="font-weight: bold;">9. Change the way water moves to manage the demand on drainage infrastructure. </span>Move to much more widespread use of <a href="http://en.wikipedia.org/wiki/Sustainable_urban_drainage_systems">SUDS - sustainable urban drainage systems</a>. The key on-the-ground strategy, is to make sure water in urban areas is slowed down, stored for use or soaked into the ground, rather than being moved quickly through a catchment. This can be achieved using a wide range of sustainable drainage systems (SUDS) techniques, including <a href="http://en.wikipedia.org/wiki/Green_roof">green roofs</a>, <a href="http://en.wikipedia.org/wiki/Rainwater_harvesting">rainwater harvesting</a>, <a href="http://en.wikipedia.org/wiki/Permeable_paving">permeable pavements</a>, <a href="http://www.defra.gov.uk/environ/fcd/policy/Wetlands/">wetlands</a> and <a href="http://www.scotland.gov.uk/Publications/2005/03/29114359/44001">natural flood storage</a>. To make these part of urban design we need both incentives (such as grants or other economic instrument) and requirements on developers to use the SUDS approach and on asset owners to adopt and maintain them. Section 106 obligations could be a way to achieve this. There is a considerable literature on Sustainable Urban Drainage Systems (SUDS). Time to put it into practice. See the following: The <a href="http://www.ciria.org/acatalog/C697.html">SUDS Manual</a> & <a href="http://www.ciria.org/acatalog/C698.html">Site Handbook</a> and the <a href="http://www.blogger.com/www.ciria.org/suds/icop.htm">National SUDS Working Group: <span style="font-style: italic;">Interim Code of Practice</span></a>.<br />
<br />
<span style="font-weight: bold;">10. Limiting the automatic right of connection to the drains and sewerage system</span>, which may not always be designed to cope. The right is established in <a href="http://www.opsi.gov.uk/acts/acts1991/Ukpga_19910056_en_13.htm#mdiv106">Section 106 of the Water Industries Act 1991</a>. Removing the automatic right to connect will encourage developers to use innovative and more sustainable drainage solutions.<span style="font-size: 0pt;"> </span>There could be requirement on developers to show that SUDS approaches are not feasible before connection is permitted – ie. create a presumption in favour of sustainable drainage. As often happens with water, there is a 'boundary problem' - water companies are obliged to operate sewers, but the most cost effective options for increasing capacity may be by reducing the volume of water entering the system, rther than putting in bigger drains.<br />
<br />
<b><span style="font-size: 100%;">IV. Investment and incentives</span></b></span></span><span style="font-size: 100%;"><span style="font-family: trebuchet ms;"><span style="font-weight: bold;">11. Reinforce the duty of care on owners of sewers and drains.</span> Failures of sewers and drains can create serious hazards to life and property during flood events. It is important that the ownership of these assets is clear and the owners have a <span style="font-weight: bold;">duty of care</span> to maintain them in good condition (they can easily fill with rubbish or debris and become ineffective at times of high flow). Owners should also identify safe routes for flows in excess of the design capacity of the system.<br />
<br />
<span style="font-weight: bold;">12. Enforce water company duties and investment.</span>Under <a href="http://www.opsi.gov.uk/acts/acts1991/Ukpga_19910056_en_12.htm">Section 94 of the Water Industry Act 1991</a> the sewerage undertakers have a duty to ensure that their areas are "effectually drained and that the contents of their sewers are effectually dealt with by means of sewage works or otherwise". Water company assets include public foul sewers (combined and separate) and public surface water sewers. The water industry regulator OFWAT, has performance standards for flooding from sewers [<a href="http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/Content/what_levels_of_service_should_companies_provide">see target 5 here</a>], but this could be strengthened by requiring a more thorough risk-based asset management regime (of the type the Environment Agency has for flood defences).<br />
<br />
<span style="font-weight: bold;">13. Define overland flood routes</span> It will not be possible to defend against all flood events. So when floodwaters do rise they need to be given somewhere to go – they need to be established and managed by the local authorities who manage these areas and deal with events when they happen. This would be done as part of a Surface Water Management Plan.<br />
<br />
<span style="font-weight: bold;">14. Protect critical public and private sector infrastructure</span>. An analysis(unpublished to my knowledge)of the <a href="http://www.halcrow.com/html/proj_popup/nafra.htm">National Flood Risk Assessment NaFRA</a> by the Halcrow Group in 2005 showed the following to be at risk of flooding:</span></span><br />
<ul><li><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">17% of emergency services properties, including 21% of fire stations, 16% of police stations, 17% of ambulance stations. </span></span></li>
<li><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">41% of major energy installations (risks to smaller installations within the distribution grids are unknown</span></span></li>
<li><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">37% of sewerage works</span></span></li>
<li><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">41% of water treatment works</span></span></li>
<li><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">12% of telephone exchanges</span></span></li>
<li><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">9% of major roads (A-roads and motorways) - note a single interruption can spread across a network </span></span></li>
<li><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">25% of railway stations</span></span></li>
</ul><span style="font-size: 100%;"><span style="font-family: trebuchet ms;">These should be taken as indicative rather than definitive, but nevertheless, it is important that a ‘business continuity’ approach is taken for critical infrastructure and that relevant responsible bodies and regulators secure a high level of resilience to flooding – that may be better defence, emergency temporary defence or other coping strategies. As the boss of the Environment Agency put it to the <a href="http://www.telegraph.co.uk/earth/main.jhtml?xml=/earth/2007/07/28/eayoung128.xml">Daily Telegraph</a>.<br />
<span style="font-style: italic;"><br />
<br />
</span><span style="font-style: italic;"><blockquote>All public authorities and utility companies should, she says, have a legal responsibility to plan for severe weather conditions. "If you think about how close we came to losing power, there clearly needs to be a fresh look at how we protect some of these vital pieces of infrastructure. There are hundreds of electricity sub-stations that would cause chaos if they went out."</blockquote></span>For the emergency services, including the Environment Agency, the Civil Contingencies Act already requires business continuity planning for floods.For utilities, the flood proofing for critical water and electricity infrastructure should be considered within the <a href="http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/Content/navigation-publications-periodicreviewsandinterimdeterminations">OFWAT periodic review process</a> and <a href="http://ofgem2.ulcc.ac.uk/ofgem/work/template1.jsp?id=9986&section=/areasofwork/distpricecontrol&isbgpage=yes">OFGEM distribution</a> and <a href="http://ofgem2.ulcc.ac.uk/ofgem/work/template1.jsp?id=12296&section=/areasofwork/transpcr&isbgpage=yes">transmission price control reviews</a>.For rail, the <a href="http://www.rail-reg.gov.uk/server/show/nav.75">Office of Rail Regulation</a> ensures that Network Rail manages the infrastructure efficiently and safely. For roads infrastructure, the <a href="http://www.highways.gov.uk/roads/1500.aspx">Highways Agency</a> manages motorways and trunk roads (c. 7,800km) under the direction of the Secretary of State for Transport, with local authorities having responsibility for the rest (c. 40,000 km A-roads). Telecoms (and power) infrastructure is vital for business generally, but is also integral to the response to flooding - as '<a href="http://en.wikipedia.org/wiki/Telemetry#Water_Management">telemetry</a>' is used to monitor water levels in real time.<br />
<br />
<span style="font-weight: bold;">15. Recognise the investment case for flood defences.</span> Although the current focus has been on urban drainage and surface water flash-flooding, this should not become an exclusive focus as there are steadily increasing risks from river and coastal flooding. In particular, new approaches are required to enable risk reduction and management of communities at the coast.The basic problem is one of under-investment in defence and prevention and overspending on dealing with the consequences. The marginal flood defence schemes have a benefit-cost ratio of about 6:1 - ie. they reduce the cost of mopping up and rebuilding by at least £6 for every £1 spent. That sounds impressive, but it means that there are a lot of projects with benefit-cost ratios of 5:1, 4:1 etc that are not done. In these cases, we are paying £5 or £4 in mopping up for every £1 not spent on prevention. This is a colossal '<a href="http://en.wikipedia.org/wiki/Allocative_efficiency">allocative efficiency</a>' failure arising from unwillingness to make cost-effective public spending investment and apparent indifference to the private costs that arise as a result - making society worse off overall. The Association of British Insurers (<a href="http://www.abi.org.uk/">ABI</a>) has summarised the case well in its briefing <i><a href="http://http//www.abi.org.uk/BookShop/ResearchReports/A%20Future%20for%20the%20Floodplains.pdf">A future for the floodplains</a></i>. Spending has been rising since 2000, and the governemt has committed to increase from £600m to £800m by 2010-11 [<a href="http://www.defra.gov.uk/corporate/ministers/statements/hb070705.htm">announcement</a>]. The investment needs to rise steadily becfore that (ie. not all come in the last year) and then continue to rise to over £1 billion in real terms. The underlying risks are increasing because of climate change, construction price inflation at about 5% eats into the budget, there are particular challenges in dealing with coastal and urban flooding, and it keeping the £20 billion worth of flood defence assets maintained in good condition and dealing with the backlog takes another large slug. It's expensive, but overall it's worth the investment.<br />
<br />
<span style="font-weight: bold;">How flash flooding works...</span><br />
<br />
<a href="http://2.bp.blogspot.com/_77g3DtXDJXE/Rqzb1N8js3I/AAAAAAAAAcc/yQh_8Cb_B1U/s1600-h/surface+flow.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5092686985972396914" src="http://2.bp.blogspot.com/_77g3DtXDJXE/Rqzb1N8js3I/AAAAAAAAAcc/yQh_8Cb_B1U/s400/surface+flow.jpg" style="cursor: pointer; float: left; height: 226px; margin: 0pt 10px 10px 0pt; width: 441px;" /><br />
<br />
<br />
</a><span style="font-size: 0pt;"><span style="font-size: 0pt;"><a href="http://2.bp.blogspot.com/_77g3DtXDJXE/Rqzb1N8js3I/AAAAAAAAAcc/yQh_8Cb_B1U/s1600-h/surface+flow.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"></a></span></span><br />
<br />
<span style="font-size: 85%;"></span><br />
<span style="font-size: 85%;"><span style="font-family: trebuchet ms;"></span></span></span></span></span></span></span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-28078378.post-59778640437553703692007-07-29T09:17:00.001+01:002011-06-26T23:36:45.324+01:00Is the UK flooding down to climate change?<a href="http://2.bp.blogspot.com/_77g3DtXDJXE/Rqxk8N8jszI/AAAAAAAAAb4/WMJYmQ_JA6k/s1600-h/trend+in+downpours.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5092556264347775794" src="http://2.bp.blogspot.com/_77g3DtXDJXE/Rqxk8N8jszI/AAAAAAAAAb4/WMJYmQ_JA6k/s400/trend+in+downpours.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">As an employee of the Environment Agency, I am increasingly asked "what an earth is going on with all this flooding?".<br />
<br />
<span style="font-weight: bold;">Is climate change to blame?</span><br />
Maybe, but only maybe - and maybe not. There has been highest rainfall in parts of England since records began in 1766 (<a href="http://www.metoffice.gov.uk/corporate/pressoffice/2007/pr20070726.html">Met Office stats</a>), but many have leapt in with rather more certainty than is justified to attributing this to climate change - citing the usual formula (to paraphrase) that "no single event can be attributed to climate change, but this is consistent with the predictions".<br />
<br />
Actually the picture is far less clear than even this. Whilst the global picture on climate change is ever clearer, characterising climate change impacts at small geographical scale (ie. English regions or cities) is very difficult. This is done by the <a href="http://www.ukcip.org.uk/">UK Climate Change Impacts Programme</a> (UKCIP). In the most recent (2002) UKCIP assessment, <a href="http://www.ukcip.org.uk/resources/publications/documents/14.pdf"><span style="font-style: italic;">Climate Change Scenarios for the United Kingdom</span></a>, the modelling finds more intense rain in the winter, but that: <span style="font-style: italic;"><br />
<br />
Intense rainfall events become rather less frequent in summer just about </span><span style="font-style: italic;">everywhere</span>. </span></span><span style="font-size: 85%;"><span style="font-family: trebuchet ms;">(<a href="http://www.ukcip.org.uk/resources/publications/documents/14.pdf">p. 55</a>)</span></span><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"></span></span><br />
<a name='more'></a><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><br />
<br />
</span></span><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost">And this is consistent with the trend over the last few decades. The chart above (fig 12 in the UKCIP report) shows the trend (1961 to 2000) in the fraction of the total seasonal precipitation contributed by the “most intense” precipitation events in winter (lefthand bars) and in summer (right-hand bars) for a number of UK regions. The negative (orange) numbers for summer indicate an decreasing trend in the proportion of the total precipitation that comes from the “most intense” events.<br />
<br />
<span style="font-size: 85%;"><span style="font-family: trebuchet ms;">Not only is this the trend, it's also the forecast. The models also predict lower intensity summer downpours as the climate warms to 2080 - see this <a href="http://picasaweb.google.co.uk/batesclive/BlogImages/photo#5092544453187711762">graphic - with my emphasis added</a> from the report.<br />
<br />
<span style="font-weight: bold;">Enter the jet stream...</span><br />
But I think this says more about modelling than it does about climate change. The proximate explanation for the current rainfall is a southwards shift in the Atlantic <a href="http://en.wikipedia.org/wiki/Jet_stream">jet stream</a> - see <a href="http://www.ft.com/cms/s/ed389170-3c68-11dc-b067-0000779fd2ac.html"><span style="font-style: italic;">Change in jet stream brings woe</span></a> report in the FT, and <a href="http://news.bbc.co.uk/1/hi/magazine/6911918.stm#maps">BBC article and graphics</a>. The Met office is unsure whether this is as a result of climate change:<br />
<br />
<span style="font-style: italic;"></span></span></span></span></span></span><br />
<blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span style="font-style: italic;">It is not possible to say whether this is a result of climate change or not. The position of the jet stream, which steers frontal systems, can vary naturally in response to changing patterns of ocean surface temperatures. But climate change can also cause the position of atmospheric circulations such as the jet stream to shift. We do not yet know why it is further south this year but we do know that, in general, warmer climates experience more intense rainfall. </span> [<a href="http://www.ft.com/cms/s/678e4888-3bd9-11dc-8002-0000779fd2ac.html">Letter to Financial Times, 27 July</a>]</span></span></span></span></span></blockquote><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span class="fullpost"><span style="font-size: 85%;"><span style="font-family: trebuchet ms;"><span style="font-family: trebuchet ms;"><div class="MsoPlainText"><span style="font-weight: bold;">The modelling problem</span><br />
This gets to the point I think... climate change destabilises atmospheric systems in ways that will not always be foreseen or easily modelled. The modelling itself will tend to understate these risks because climate scientists are playing 'catch-up' with real world phenomena, and the modellers are playing catch up with the climate scientists. Perhaps the most obvious example of this are poorly understood feedbacks [see <a href="http://pubs.giss.nasa.gov/docs/2007/2007_Hansen_etal_2.pdf">alarming paper</a>] and new mechanisms for the collapse of ice sheets (see <a href="http://www.davidsuzuki.org/Climate_Change/Impacts/GlobalMeltdown/Collapsing_Ice_Sheets.asp">discussion on David Suzuki foundation site</a>). I think there is growing awareness that 'known unknowns' and 'unknown unknowns' will be what eventually do us in (see <a href="http://baconbutty.blogspot.com/2007/02/climate-change-what-ipcc-tells-us-and.html">my posting on IPCC fourth assessment</a>).<br />
</div><div class="MsoPlainText">On the other hand, it could be just a natural variation. And that's the point: understanding will lag events, prediction will lag understanding, and response will tend to lag prediction unless we adopt a more robust approach to resilience to the known unknowns and unknown unknowns.<br />
</div></span></span></span></span></span></span>Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-28078378.post-86489568774319786452007-07-24T19:05:00.001+01:002008-12-09T17:24:48.489+00:00Emissions trading - notes on a scandal<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/_77g3DtXDJXE/RqY_qt8jsrI/AAAAAAAAAaU/V6-j7Ozi2to/s1600-h/ets+prices.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://2.bp.blogspot.com/_77g3DtXDJXE/RqY_qt8jsrI/AAAAAAAAAaU/V6-j7Ozi2to/s320/ets+prices.jpg" alt="" id="BLOGGER_PHOTO_ID_5090826431909573298" border="0" /></a><span style="font-size:85%;"><span style="font-family:trebuchet ms;">Another day, another broadside against carbon emissions trading. The FT's Martin Wolf offers advice to the new Chancellor, including:<br /><br /><span style="font-style: italic;">While simplifying tax, he should also take a close look at green taxation. Simple taxes that apply across-the-board are what is needed. The grant of valuable rights to big polluters through systems known as “cap-and-trade” is a scandal. </span>[<a href="http://www.ft.com/cms/s/0f5a18ae-258b-11dc-b338-000b5df10621.html">here</a>]<br /><br />This is an increasing theme, with even American giants like Alan Greenspan and Paul Volker coming out against cap 'n' trade and in favour of a carbon tax [<a href="http://reason.com/news/show/120381.html">see article</a>]. I have to say I'm ever more swayed by this view, see my posting <a href="http://baconbutty.blogspot.com/2007/06/to-cap-or-to-tax.html"><span style="font-style: italic;">To Cap or to Tax</span></a>. <br /><br />But is the EU system 'a scandal', as Martin Wolf says? You can certainly make the case - the permits are given away to businesses, but they are valuable because they are scarce 'property rights' - the right to use the atmospheric sink for carbon. It's hard to put an exact value on these permits - see charts of the market price for EU allowances from <a href="http://www.pointcarbon.com/">Point Carbon</a> showing the collapse of price in 2007 but a steady price of about €20 so far for the future price of 2008 EUAs... but in total they are worth a great deal. <span class="fullpost"><br /><br /><span style="font-weight: bold;">€billions for what purpose?</span><br />So if, say, €20/tCO2 is used to give an illustrative value of the ETS price, the value of the rights to emit over 200MtCO2 to UK industry comes to over €4.3 billion. To the power sector alone, it comes to €2.7 billion (see numbers in this <a href="http://spreadsheets.google.com/pub?key=pf6IJHIcU_ArRB3qk8WIuIg">Google spreadsheet based on 2005-06 ETS results</a> [<a href="http://spreadsheets.google.com/pub?key=pf6IJHIcU_ArRB3qk8WIuIg&output=xls">XLS</a>]. The power sector is especially annoying because it actually passes these costs on to the consumer, even though it doesn't actually pay for the permits, which are mostly given away in the EU system. They have adopted this as an accounting convention, reflecting the opportunity cost of holding the allowance for each unit of electricity sold. They can pull this trick off because they are an oligopoly and don't face competition from producers outside the system. So even allowing for the permits that they have to buy because they are given fewer allowances than they need, <span style="font-weight: bold;">the power companies profit from this by €1.8 billion</span>... and the bigger and dirtier they are, the more they make, because allowances are given to them in proportion to their historic emissions! What exactly is the public purpose served by transferring billions from energy consumers to energy company shareholders in approximate proportion to how polluting they are? Is that a scandal? Well you could defend it by saying that it was necessary to get the system off the ground - an argument that works <span style="font-style: italic;">if and only if the system is changed as soon as possible</span>. Alternatively, you could see it as gullible fearful governments and bureaucrats being outsmarted at every turn with the poor public bearing the cost for nothing.<br /><br /><span style="font-weight: bold;">What to do?</span><br />This does in fact partially implement the polluter pays principle, in that the consumer is effectively 'taxed' for their pollution through this system because the permit costs are passed on. It's just that the 'tax' revenue goes to the companies not the government - and therefore the scope to do something useful with €4+ billion in the UK is lost. The answer is to auction the permits so that the government gets the revenue. The international competition arguments against making them buy their right to pollute are mostly hogwash and really apply only with force where the industry is energy intensive and highly traded internationally. Excellent <a href="http://www.electricitypolicy.org.uk/pubs/tsec/grubb.pdf">analysis by Grubb & Neuhoff</a> summarised by the Carbon Trust, [<a href="http://www.carbontrust.co.uk/Publications/publicationdetail.htm?productid=CTC609">here</a>] suggest that competitiveness is a minor concern and only aluminium should be a worry. There should be no question of violating the polluter pays principle, options include ideally reaching international sectoral agreements through the Kyoto Protocol or tax adjustments at borders to correct for ETS costs for trade across EU borders. <br /><br /><span style="font-weight: bold;">A novel approach for aviation in the ETS...</span><br />My suggestion is to bring as much EU aviation as possible into the system <span style="font-style: italic;">but give the sector no initial allowances at all</span>. This would mean it would have to buy <a href="http://cdm.unfccc.int/index.html">CDM credits </a>or allowances from other emitters in the EU system. This has the equivalent effect of making '<a href="http://en.wikipedia.org/wiki/Carbon_offset">carbon offsetting</a>' mandatory for all flights. It's economically equivalent to taxing aviation and spending the proceeds on reducing emissions in developing countries. <br /><br />This lot needs to be agreed in time for the third phase of the EU ETS - which starts after 2012, but is under discussion now.<br /><span style="font-size:85%;"><span style="font-family:trebuchet ms;"> </span></span></span></span></span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-28078378.post-39816643578431441342007-07-01T15:23:00.000+01:002008-12-09T17:24:48.632+00:00The irreducible Stern - limerick contest<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://4.bp.blogspot.com/_77g3DtXDJXE/Roe5Sy0Dt3I/AAAAAAAAARY/vCjel08KIGM/s1600-h/stern.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 330px; height: 236px;" src="http://4.bp.blogspot.com/_77g3DtXDJXE/Roe5Sy0Dt3I/AAAAAAAAARY/vCjel08KIGM/s320/stern.jpg" alt="" id="BLOGGER_PHOTO_ID_5082234437039798130" border="0" /></a><span style="font-size:85%;"><span style="font-family:trebuchet ms;">Are you tired of trying to understand the <a href="http://www.hm-treasury.gov.uk/independent_reviews/stern_review_economics_climate_change/stern_review_report.cfm">600-page Stern Review</a> (eg. this perplexing <a href="http://www.hm-treasury.gov.uk/media/5/7/stern_gurukulchevening_presentation.pdf">graph</a> showing a 13.8% loss of GDP in 193 years from now!)? Luckily, the government's finest minds are rumoured to be preparing a simplified version in <a href="http://en.wikipedia.org/wiki/Limerick_%28poetry%29">limerick form</a>. Here's my effort:<br /><br /><span style="font-weight: bold;">Warming will cost twenty per cent</span><br /><span style="font-weight: bold;">But stopping it will barely dent</span><br /><span style="font-weight: bold;">The world’s GDP</span><br /><span style="font-weight: bold;">Or its security</span><br /><span style="font-weight: bold;">So it must be money well spent</span><br /><br />As must be obvious, poetry was never a strength - and that probably isn't even a limerick. So I'm sure others can do better... Please submit entries as comments to this blog posting and forward to any talented colleagues. If we get enough, I'll ask the great man himself to judge. Haiku also accepted.<br /></span></span>Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-28078378.post-63395499082674862012007-07-01T08:48:00.001+01:002011-06-26T23:37:53.000+01:00England goes smoke-free - wider lessons<a href="http://2.bp.blogspot.com/_77g3DtXDJXE/RodcuS0Dt0I/AAAAAAAAARA/Wnp7jEhyTyg/s1600-h/smokingrates.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5082132654904817474" src="http://2.bp.blogspot.com/_77g3DtXDJXE/RodcuS0Dt0I/AAAAAAAAARA/Wnp7jEhyTyg/s320/smokingrates.jpg" style="cursor: pointer; float: left; margin: 0pt 10px 10px 0pt;" /></a><span style="font-family: trebuchet ms;"><span style="font-size: 85%;">Long awaited 1st of July arrives, and most enclosed workplaces (including pubs and restaurants) in England will go smoke-free today [<a href="http://news.bbc.co.uk/1/hi/uk/6258034.stm">BBC</a>]. It's a triumph for all involved - both <a href="http://www.smokefreeaction.org.uk/">campaigners</a> and <a href="http://www.dh.gov.uk/en/Policyandguidance/Healthandsocialcaretopics/Tobacco/index.htmhttp://">government insiders</a> - following a sustained struggle. It's also a vital next step in dragging down smoking rates - see chart based on <a href="http://info.cancerresearchuk.org/cancerstats/types/lung/smoking/">ONS and Tobacco Advisory Council data care of Cancer Research UK</a>, [<a href="http://info.cancerresearchuk.org/images/excel/cs_lu_f6.1.xls">XLS</a>]. Still at about 25%, that's a huge number of people using an addictive product that kills one in two long term users - and does a lot of damage before death.<br />
<br />
The ban on smoking in public places has always been justified around protecting non-smoking workers, for which there is the strongest civil liberties and legal basis, but its biggest public health benefit will come from 'denormalising' smoking - removing the societal support for smoking as a normal activity and role-modelling effects - and raising the cost of smoking in terms of time and hassle. The effect should be an acceleration in quitting and fewer starting.</span></span><br />
<a name='more'></a><span style="font-family: trebuchet ms;"><span style="font-size: 85%;"> <span class="fullpost"><br />
<br />
There is widespread support for the ban - 79% agree with it [<a href="http://www.statistics.gov.uk/pdfdir/smok0607.pdf">ONS summary</a>] and a surprising level of support for the ban amongst smokers - 79% of smokers favour a ban in restaurants and over a third in pubs see [<a href="http://www.statistics.gov.uk/downloads/theme_health/smoking2006.pdf">ONS full report Table 7.1</a>], a high proportion of whom say they will try to quit [<a href="http://www.ash.org.uk/html/publicplaces/pdfs/070531wereholdingourbreathdraftreportYouGov.pdf">YouGov survey</a>]. The remarkable feature of smoking is that over 80% of smokers say they wouldn't do it if they had their time again, over 70% would like to quit. Most have developed protective mechanisms to rationalise the '<a href="http://en.wikipedia.org/wiki/Cognitive_dissonance">cognitive dissonance</a>' that arises from continuing to do what you don't want to be doing - for example, believing that you will quit much sooner than you are likely to in reality - a idea we once termed a 'delusion gap' [see <a href="http://www.bmj.com/cgi/content/full/324/7337/608">BMJ article for discussion as above</a>] and a ban on smoking in public places will strengthen the dissonance and weaken the defences.<br />
<br />
As recently as 2003 and whilst working in public health, I thought this was still a distant, if inevitable, prospect. But the rapid change of outlook has many lessons for government (and me). Here are some:<br />
</span></span></span><br />
<ul><li><span style="font-family: trebuchet ms;"><span style="font-size: 85%;"><span class="fullpost"><span style="font-family: trebuchet ms;"><span style="font-weight: bold;">Value the "slow wins</span>". Larger changes in attitudes and what people are willing to accept are possible, given time, sustained effort, credibility of purpose and consistent direction of travel. I think time is underused in policy-making - too much effort goes into to small (usually botched) 'quick wins' and not enough into 'slow wins'. The smoking ban is a culmination of stepwise changes starting as early as 1604, when King James I slapped a tax on tobacco, but more recently, linking of smoking to disease by doctors in 1961, restrictions then bans on advertising, ever more grim warning labels, increasing visceral anti-smoking advertising campaigns, high and escalating levels of tobacco tax, stop-smoking services in the NHS etc. In the 1980s, a smoking ban would have been unthinkable - but the accumulated changes in attitude arising from this long war of attrition (plus some inspired campaigning by my successors at <a href="http://www.ash.org.uk/">ASH</a> and many others) made it possible in 2007. Today's result has been 50 years in the making and the chart shows the long term change achieved...<br />
</span></span></span></span></li>
<span style="font-family: trebuchet ms;"><span style="font-size: 85%;"><span class="fullpost"> </span></span></span></ul><span style="font-family: trebuchet ms;"><span style="font-size: 85%;"><span class="fullpost"><span style="font-family: trebuchet ms;"><blockquote style="font-style: italic;">Governments overestimate their power to achieve change in the short term, and underestimate it in the long term (Geoff Mulgan, <a href="http://www.prospect-magazine.co.uk/article_details.php?id=6888">Prospect</a>)</blockquote><ul><li><a href="http://1.bp.blogspot.com/_77g3DtXDJXE/RoeHyC0Dt1I/AAAAAAAAARI/-_GSWc5YbSg/s1600-h/bansupport.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5082179998329321298" src="http://1.bp.blogspot.com/_77g3DtXDJXE/RoeHyC0Dt1I/AAAAAAAAARI/-_GSWc5YbSg/s200/bansupport.jpg" style="cursor: pointer; float: left; height: 181px; margin: 0pt 10px 10px 0pt; width: 175px;" /></a><span style="font-family: trebuchet ms;"><span style="font-weight: bold;">Aim for culture change</span>. Policymakers can't go far beyond what the public will wear and still be elected, but they can simultaneously stay within, but also extend, the envelope of what the public is prepared to accept. In other words, there will be a constant feedback between successful policy developments and 'culture' - the stock of attitudes and beliefs in society - that creates possibilities for further measures. It is very common for the public at large to underestimate the scale of challenges and necessary measures (eg. <a href="http://baconbutty.blogspot.com/2007/02/no-10-road-pricing-petition-beware-what.html">see road pricing</a>) and therefore a strategy is needed to engage and win hearts and minds for policies that will be welcomed in retrospect but will opposed in advance. This suggests a clear direction of travel is important - even if you aren't sure how to get there... one good example from an unrelated area might be the <a href="http://www.hm-treasury.gov.uk/documents/international_issues/global_challenges/the_common_agricultural_policy.cfm">HMT/Defra vision for the CAP</a>. </span></li>
</ul><ul><li><span style="font-family: trebuchet ms;"><span style="font-weight: bold;">Don't be paralysed by the losers</span>. Governments are usually excessively '<a href="http://en.wikipedia.org/wiki/Loss_aversion">loss averse</a>'. But this shows they can sometimes be bold and seemingly invasive and that sometimes people will welcome a firm approach to solving collective action problems. Most people recognise a majority will be worse-off if policy-changes are predicated on ensuring no-one is worse-off. Even though there was overwhelming support for tougher measures on smoking, it took the government years to take the plunge and it was fought all the way within the Cabinet. I feel the public is sometimes crying out for the smack of firm action on climate change, food, traffic etc... as long as it is a collective endeavour without wholesale <a href="http://en.wikipedia.org/wiki/Free_rider_problem">free-riding</a>. There's a kind of tyranny of the status quo which would rather continue to frustrate the silent majority than to create enemies of a newly disadvantaged minority... I know that's politics, but it stops a lot of good things happening.<br />
</span></li>
</ul><ul><li><span style="font-family: trebuchet ms;"><span style="font-weight: bold;">Create the good examples</span>. A major factor in the UK moving to smoke-free policies was the nearby inspired and inspiring example of Ireland, which banned smoking in 2004 [<a href="http://news.bbc.co.uk/1/hi/health/3565899.stm">BBC</a> / <a href="http://en.wikinews.org/wiki/Ireland%27s_smoking_ban_a_success_after_first_year">One year on</a>]. For Britain, this created a believable case study on the doorstep involving people a bit like us, not just in far-off California or Australia. This suggests that piloting and experimentation, or simply smaller scale interventions, may be an area where more could be done. One way of doing this would be to devolve more powers to local government (one reason why some places have been further ahead in banning smoking than Britain is that decisions were taken in smaller jurisdictions - with greater diversity and more local champions to take on the cause). This would create more diversity, more lessons to learn from, more evidence of what to copy and what to reject etc.<br />
</span></li>
</ul><ul><li><span style="font-family: trebuchet ms;"><span style="font-weight: bold;">Discount business scare tactics</span>. For years, the tobacco industry used the pub and restaurant trade to say that such a ban will be a disaster for business. In fact, no such disasters have ever materialised at the level of the sector as a whole wherever these measures have been imposed - usually the impact on takings is neutral or spending goes up as new customers come in to the cleaner atmosphere [eg. <a href="http://www.house.leg.state.mn.us/hrd/pubs/smokeban.pdf">this short review of evidence</a>]. Despite the way the private sector is lionised as the fount of flexibility and innovation, business routinely argues that change or regulation will be bad - and is routinely proved wrong [see <a href="http://www.corporate-responsibility.org/module_images/red_tape_to_roadsigns0.pdf">Red Tape to Road Signs</a>, by the <a href="http://www.corporate-responsibility.org/">CORE coalition</a>]. My favourite example was the banning of duty free within the EU - the airports people said it would cause havoc and job losses [<a href="http://news.bbc.co.uk/1/hi/business/the_company_file/269753.stm">BBC</a>]... The reality is that <span style="font-style: italic;">markets </span>respond well to changed conditions, even if entrenched companies don't always - new innovators will sweep away the old. It's just that trade bodies are full of the entrenched companies and often reflect the lowest common denominator views of the those most entrenched and with greatest inertia.</span></li>
</ul></span></span></span></span>Unknownnoreply@blogger.com6tag:blogger.com,1999:blog-28078378.post-68999346880804222892007-06-19T21:59:00.000+01:002008-12-09T17:24:49.146+00:00Replace religious education<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/_77g3DtXDJXE/RnhSV5REm9I/AAAAAAAAAQ4/NzN_lk5vCU4/s1600-h/Religion.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://2.bp.blogspot.com/_77g3DtXDJXE/RnhSV5REm9I/AAAAAAAAAQ4/NzN_lk5vCU4/s320/Religion.jpg" alt="" id="BLOGGER_PHOTO_ID_5077899115963390930" border="0" /></a><span style="font-size:85%;"><span style="font-family:trebuchet ms;">I was pleased to see the schools inspector <a href="http://en.wikipedia.org/wiki/Office_for_Standards_in_Education">Ofsted </a>weighing in on religious education (RE) in schools. The report <span style="font-style: italic;">Making sense of religion: a report on religious education in schools and the impact of locally agreed syllabuses</span> [<a href="http://www.ofsted.gov.uk/portal/site/Internet/menuitem.e11147abaed5f711828a0d8308c08a0c/?vgnextoid=222bd30c30f23110VgnVCM1000003507640aRCRD&vgnextchannel=596c8587fd24a010VgnVCM1000008192a8c0RCRD">release</a> / <a href="http://www.ofsted.gov.uk/publications/070045">report</a>] is interesting - though stops short of a full broadside on the very idea of RE. Ofsted summarises:<br /><br /><span style="font-style: italic;">The report argues that RE should not ignore controversy or the changes in the role and significance of religion in the modern world. Pupils should be taught that religion is complex, that its impact is ambiguous and should be given the opportunity to explore that ambiguity</span>.<br /><br />Amen to that!<span class="fullpost"><br /><br /><br /><br />RE is in the strange position of being mandated by law (<a href="http://www.opsi.gov.uk/acts/acts1988/Ukpga_19880040_en_2.htm#mdiv8">Education Reform Act 1988</a>) but also outside the National Curriculum. As a minimum it should come into the National Curriculum with solid guidance about what is to be taught and how - ie. only as a starting point for debate about values ('learning from religion') and as a factual account of what many people believe, however irrational and perplexing ('learning about religion'). I don't think there is justification for emphasising one religion over another, despite the legal requireemnt to favour Christianity and the dominance of Christianity in declared religion (see chart - <a href="http://www.statistics.gov.uk/cci/nugget.asp?id=954">source ONS </a>)*. If people want to develop their own belief system, isn't that what churches, Sunday schools, temples, mosques and madrassas are for?<br /><br /><span style="font-weight: bold;">History of ideas</span><br />I would get rid of RE completely. Much better would be to replace it with more neutral study of the 'history of ideas' - of which the major religions are a undoubtedly part. It would be great, for example, to see comparisons made between the majestic <a href="http://www.un.org/Overview/rights.html">Universal Declaration on Human Rights</a> and the feeble <a href="http://en.wikipedia.org/wiki/Ten_Commandments#Text_of_the_Ten_Commandments">10 commandments</a>, with their four commandments devoted to demanding exclusivity and restraint of religious freedom, silly ideas for universal laws like not working on Sundays, unhelpful strictures about killing that give no clue to when it is alright or even essential, and a lot of stuff about not eyeing up your neighbour's ox or male servant. It would be great to see huge ideas like evolution, democracy, human rights, globalisation, Marxism, capitalism etc. taught and discussed. Great debates are to be had about everything from euthanasia and abortion, justification of torture and the case for terrorism, the limits to free speech to the abolition of slavery, racism and positive action. <br /><br />Schools have one main job to do, and that is to teach kids to think critically and for themselves - in the arena of big ideas there is no case for limiting that to the largely failed or wrong ideas of religion. RE represents a wasted opportunity to engage young people in the really big ideas in the real world.<br /><br />* Much has been made of the 2001 census finding in the chart that about 72% of Brits say they are Christian - evidence that the church is alive and well? But what do people really mean when they say 'Christian' in response to this question? I think they are probably identifying themselves as part of an ethnic group rather than declaring a belief system. If the question was "what religion do you practice?", I wonder what the answer would be? Also, for these numbers to be correct, parents must have filled in the form for their kids - but what does it mean when an intellectually defenceless 5-year old is classified as subscribing to a belief system like Christianity?<br /></span></span></span>Unknownnoreply@blogger.com6tag:blogger.com,1999:blog-28078378.post-65414021450736050192007-06-17T23:15:00.000+01:002008-12-09T17:24:49.444+00:00To cap or to tax?<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/_77g3DtXDJXE/RnXP7ZREm7I/AAAAAAAAAQo/wENF7W9b32A/s1600-h/etsprice.gif"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="http://1.bp.blogspot.com/_77g3DtXDJXE/RnXP7ZREm7I/AAAAAAAAAQo/wENF7W9b32A/s320/etsprice.gif" alt="" id="BLOGGER_PHOTO_ID_5077192774231825330" border="0" /></a><img src="file:///C:/Users/CLIVEB%7E1/AppData/Local/Temp/moz-screenshot.jpg" alt="" /><span style="font-size:85%;"><span style="font-family:trebuchet ms;">I ended my last post noting some recent critical commentary from the FT and Economist about emissions trading being an inferior approach to a carbon tax. Here they are again....<br /><br />+ </span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><a href="http://www.ft.com/cms/s/71faadd0-e88b-11db-b2c3-000b5df10621.html">FT - Undercover Economist: Emission impossible 13 April</a></span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><br />+ <a href="http://www.economist.com/opinion/displaystory.cfm?story_id=9256652">Economist - Cleaning Up - 31 May<br /></a></span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;">+ <a href="http://www.economist.com/surveys/displaystory.cfm?story_id=9217868">Economist - Business and climate change - 31 May<br /></a></span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;">+ <a href="http://www.economist.com/finance/displaystory.cfm?story_id=9337630">Economist - Doffing the Cap - 14 June</a><br />+ <a href="http://www.prospect-magazine.co.uk/article_details.php?id=9648">Prospect - The Cost of Carbon - July 2007</a><br />+ <a href="http://www.ft.com/cms/s/0f5a18ae-258b-11dc-b338-000b5df10621.html">Martin Wolf - advice to the new Chancellor - July 2007</a><br /></span></span><span style="text-decoration: underline;"><br /></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;">The main virtue of the tax approach is the predictability of the cost and impact on business. Environmentalists would usually cite the predictability of the <span style="font-style: italic;">environmental outcome </span>as a major benefit of cap & trade schemes. But that overlooks an important problem with cap setting - that when costs are uncertain, politicians and </span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;"><a href="http://en.wikipedia.org/wiki/Loss_aversion">loss-averse</a> </span></span><span style="font-size:85%;"><span style="font-family:trebuchet ms;">bureaucrats, with will listen to the pleas of business or believe they can game the system for national advantage and will set caps at strongly a risk-averse level - ie. they will sacrifice the environmental outcome in return for confidence that there will not be unexpected price spikes.<br /><br />There are other reasons to be more wary of cap 'n' trade...<span class="fullpost"><br /><br /><br /><span style="font-weight: bold;">Leakage to uncapped systems</span><br />A brutal report on the EU Emissions Trading Scheme by WWF <a href="http://www.panda.org/news_facts/newsroom/index.cfm?uNewsID=106640"><span style="font-style: italic;">Emission Impossible for Carbon Trading</span></a>, showed that the level of project credits from the <a href="http://en.wikipedia.org/wiki/Clean_Development_Mechanism">Clean Development Mechanism</a> would be sufficient to meet between 88% and 100% of the 'effort' (ie. difference between business-as-usual and the caps set for 2008-2012). But the CDM attracts and deserves criticism for offering supposed greenhouse gas savings with dubious additionality (ie. that wouldn't have happened anyway) at very low cost. The bias in the CDM is extraordinary - just over 50% of project credits [source: <a href="http://cdmpipeline.org/cdm-projects-type.htm">UNEP/Risoe</a>] so far relate to closure and conversion of <a href="http://www.wuzhouchem.com/cataloged/ODS/HFC-23.htm">HFC-23 factories</a>, mostly in China.<br /><br /><span style="font-weight: bold;">Leakage to weakly capped systems</span><br />The is much excitement in government about increasing coverage of emissions trading, as this is somehow an end in itself. It isn't. In fact, it just allows over-allocated caps to be distributed for everyone's ease of use and at a profit for those receiving the allocation. This view was uncritically encouraged by the Stern Review [see <a href="http://www.hm-treasury.gov.uk/media/4/5/Chapter_15_Carbon_Pricing_and_Emissions_Markets_in_Practice.pdf">chapter 15</a>, for example, "<span style="font-style: italic;">To reap the benefits of emissions trading, deep and liquid markets and well designed rules are important. Broadening the scope of schemes will tend to lower costs and reduce volatility</span>."] Yes, but... what if these markets are not similarly constrained? It would be just about okay if three conditions were met: first, these were all markets created under a Kyoto protocol negotiation - reflecting a political settlement of atmospheric property rights. Second, that there was a high level of confidence in compliance (ie. there wasn't a lot of money changing hands for permits and then no consequences for going over budget. Thirdly, that consistent rules for allocation were used across the system: ie. preventing gaming, state-aiding, trade distortion and political favouritism. Then who could argue with a right to trade within this political agreement? But nothing like this exists.<br /><br /><span style="font-weight: bold;">Poor carbon price signal for long term investment</span><br />Bureaucrats have been confused about the purpose of the EU ETS - it is there to allow a fairly short-term emissions cap to be met with reasonable economic efficiency. It doesn't plausibly give an adequate long term carbon price signal - the future price depends too much on future caps, future rules (eg. proportion of CDM allowed), future scope (eg. will aviation be in?), future participants etc etc Great volatility is already evident (see price history) - but almost all is in response to political decisions, rather than 'fundamentals'. I think this would be better done by a government or EU collectively announcing that it will place an economy-wide minimum tax on carbon of €30/tonne and that it will never let the carbon price fall below this level, with an expectation that it will rise over time towards the <a href="http://socialcostofcarbon.aeat.com/">social cost of carbon</a>. This could not be binding on future governments, but I think it would be possible to get (present day) political consensus, and once in place it would be hard to abolish ...and who would want to?<br /><br /><span style="font-weight: bold;">High transaction costs</span><br />You only have to look at the scale of the conference industry, bureaucratic expenditure, trading platforms, market makers, traders and speculation built up around carbon trading to see how wasteful it is as a way of achieving so far quite modest objectives. If all the energy going into trading was focussed on how to get emissions down to do well in the system then i wouldn't mind, but that hardly warrants a mention in most forums in which cap 'n' trade is discussed.<br /><br /><span style="font-weight: bold;">Profiteering</span><br />UK power companies have shamelessly added the '<a href="http://en.wikipedia.org/wiki/Opportunity_cost">opportunity cost</a>' of the permits they have been given free to their electricity tariffs and passed the cost on to the consumer. The economic idea is that were it not for the consumer, they would have these to sell and make money, so the consumer should pay - and the money goes straight to the bottom line. It pains me that King and Big power are making money from the efforts to control climate change. Of course, only oligopolies can pull stunts like this. This is however not an inherent weakness of trading - it just means we should move to auctioning as soon as possible so that the government captures the value of scarce property rights and can use the revenues for worthwhile things (tackling fuel poverty, responding to climate change in developing countries, investing in future technologies etc) - not enriching E.ON or RWE shareholders <span style="font-style: italic;">for no reason at all</span>.<br /><br /><span style="font-weight: bold;">Special pleading</span><br />UK has decided to let all the cuts be taken in the power generation sector and has allocated all other industries their 'business-as-usual' emissions? The power sector does not do significant international trade and can pass costs on to consumers, but all other industries are getting a kind of state aid - and because it is the EU countries are competing to feather bed-their industries.<br /><br /><span style="font-style: italic; font-weight: bold;">Having said all that</span>...<br />The EU emissions trading regime is actually in place whereas a carbon tax isn't and isn't likely to be any time soon. The fudges and compromises of the ETS have been done to get something off the ground. This is where the bureaucrats and politicians trump the economists - they have made something work (albeit imperfectly) and now have the task of improving it - which they are steadily doing. The economists first told them the tax and trade systems were equivalent (because they have no idea about getting things done in imperfect conditions and without absolute power) and now say "we told you so" when the difficulties are becoming more obvious.<br /><br /><span style="font-weight: bold;">So, I favour...</span><br />For the EU ETS ...maintenance of the EU ETS with: tougher caps; central cap setting; as much auctioning as possible (probably all but the aluminium sector); use of international project credits restricted to no more than 30% of the emissions reduction 'effort'; pan-European sectoral cap setting (with a view to achieving global sectoral agreements eventually through the Kyoto Protocol); transparent output-related benchmarks to allocate allowances where auctioning is not used, inclusion of more sectors - including aviation... so there's a big reform agenda for the EU ETS. For countries that don't yet have an ETS, I think the economists are right <span style="font-style: italic;">and </span>they can get a carbon tax in place, that would be better in the early stages of developing a response to climate change.<br /><br /><span style="font-weight: bold;">and...</span><br />even where we have the ETS, I think we need a new commitment to introduce an economy-wide carbon price floor through a carbon tax, with a government and hopefully cross party commitment that this will never be less than €30/tCO2. This would have several functions: to set a minimum carbon price expectation for the long term; to raise revenue for good deeds or to displace taxes on employment or investment; to be an adjustable instrument that could be turned up if it looks as though the UK is about to mis one of the 5-year emissions budgets in the new Climate Change Bill. This would both reduce emissions through a price effect, but would also be used to purchase international project credits to make up the shortfall and, if dependence on international credits becomes excessive, to supply a carbon reduction fund that would be used to reduce domestic emissions through an auction of the fund to bodies able to make additional emissions reductions.<br /><br />Perhaps that sounds like sitting on the fence - but perhaps it's just pragmatic.<br /><br />Also see Caspar Henderson: <a href="http://jebin08.blogspot.com/2007/06/tax-not-trade.html"><span style="font-style: italic;">Tax not trade.</span></a><br /></span></span></span></span></span></span></span>Unknownnoreply@blogger.com1