Sunday, October 28, 2012

Helm's new book on facing climate change

It is not the failure of the regulations that is the problem but their basic design. They have caused people to focus on the most expensive ways of mitigating climate change, rather than the cheapest, imposing high costs for little gain. Moreover, by concentrating on their own carbon production, and how to reduce it, Europeans have ignored the impact of their continued demand for goods made using carbon- intensive processes. Since Chinese and Indian manufacturing is usually dirtier than Europe’s, the real upshot of Europe’s choices has been an increase in global emissions. The regulatory approach, argues Mr Helm, has got the worst of all worlds. It is expensive, it has not cut emissions and its treaties are unworkable. No wonder the public is growing sceptical.

I have not read the book (yet), but it seems to me that current policies are not working. So it may be worth looking at alternatives


Victor Venema said...

How about protecting the countries or regions that are prepared to be forerunners? If, for example, the EU would like to make its industry more energy efficient by imposing a carbon tax, the EU should also be allowed to tax the import of energy intensive products.

Under the current rules, energy intensive industries have a hard time in the EU. Under such new rules, they could flourish if they are more energy efficient.

The only thing we would need to agree on internationally is that such levies would not be seen as trade barriers, but as a solution to the tragedy of the climatic commons.

hvw said...

Leaving aside the question whether making the WTO reconsider its guiding principles for the sake of the climate is really less impossible than agreeing on a global cap:

How do you assess the "CO2 emission contents" of a product?

1. Just use energy contents times CO2 emission factor (average of the originating economy)
Lots of problems can show up here (What if Kia Motors goes all green but Taiwan as a whole doesn't?). But anyways,

2. How to determine the energy contents, of, say your Kia Sorento arriving at an EU port?
Energy for transport of the car, for assembly at factory, for transport of parts to factory, for manufacturing of parts, .... some recursion happening here, down to the pre-cursors (made in EU) of the pre-cursors (made in China) of the plastic of the fender.

Trying to implement this, you'd create a bureaucratic monster of calculation rules, attached to an enormous database about production processes and materials in the need of constant updating (with partly confident information).

OK, loose precision, use rules of thumb. But how unprecise can you get before this really becomes almost arbitrary protectionism?

I really hope to overlook the simple solution here, as a decoupling of advanced societies from the pressures of the global market generally appears to be a good idea to me too.

@ReinerGrundmann said...

Dieter Helm advocates the use of gas as an interim energy source. The fight is on within the UK govt of how to plug the energy gap which will arise in the coming years if no big investments in power generation are made. Part of the environmentalist lobbying firmly opposes the dash for gas, for example this article in today's Guardian

The argument is that US shale gas expansion has led to a fall in coal prices and increasing exports of US coal to Europe. So the amount of dirty energy is growing and gas is to blame. Neat. What a feat of logic!

Victor Venema said...

@hvw. It is hard to answer your questions with certainty, I have not made a study out of the idea, but I am a bit more optimistic.

The WTO is always blocking when it comes to ethical, social or environmental standards. That is why we would need an international treaty to allow regions to press ahead with combating climate change.

I would expect that it should be sufficient to tax a small part of all products with a high indirect energy content. To simplify matters we could just take the energy needed to produce the materials into account and ignore the rest. I would hope that that would give sufficient protection to the local industry. For these materials you could assume an average energy intensity to produce then, but allow the producer to proof that he was able to produce them more efficiently.

I do not think it would make import taxes that more complex. Already every product has its own tax rate. I just say: Bünderfleisch.

RainerS said...

I have not read the book, but it seems Helm is pointing in a similar direction as Pielke Jr. who advocated a Carbon Tax and its use for financing research (which wouldn´t happen, given our ever-hungry-for-money govts).

hvw is right in principal about the obstacles for a CT. I have not followed up on developements in Australia recently - but didn´t they implement a CT? Possibly, one could get some insights from their approach?

Anyway, looking at the mess e.g. the Renewables Act (EEG) is creating in Germany, it might well be worth to face the fact current approaches might leave room for approvement.

RainerS said...

@3 Reiner

The Guardian piece is a case in point many acitivists appear not to be interested in anything less than a "Grand Solution", preferably of the type "No energy use by anybody except WE allow it".

The critique voiced here is so naive one needed to do a 2,000+ word essay just to identify and dissect the underlying implicit - and not very clever - assumptions.

Instead of attending some churnalism school, it ought to be compulsary for these writers to work with a medium-sized, internationally actice company for a couple of years before being granted access to a keyboard. Might help to keep in touch with basic economic realities.