A report was quietly slipped out by the Department for Business, Innovation and Skills last week which shows just how damaging an effect this Government’s climate change policies are having on British industry.
BIS commissioned the 231-page report from ICF International and I daresay that the findings will make less than welcome reading at the Department for Energy and Climate Change.
The report – An International Comparison of Energy and Climate Change Policies Impacting Energy Intensive Industries in Selected Countries – shows that UK-based energy intensive industry is now at a huge competitive disadvantage compared with our main competitors, and that things are only going to get worse.
Look at this key graph from page 11 of the report, for example, showing the impact on the electricity price of climate change policies:
Government policies are clearly impacting on British industry far more seriously than those of our competitors in other countries, which is very bad news for both British industry and British jobs.
Responding to the report’s publication, Matthew Sinclair, Director of the TaxPayers’ Alliance and author of Let them eat carbon, said:
“Draconian climate regulations and extravagant subsidies for renewable energy are pure industrial masochism. They sabotage British industry and hand a huge advantage to other countries, costing workers here their jobs. Sadly too often the best politicians offer is some inadequate compensation for the most severely affected businesses, leaving other companies and families lighting and heating their homes to pick up the bill.”
It is absolutely vital that the Government is challenged over this report’s findings and we shall certainly do so at every opportunity.
Over the weekend, Air Passenger Duty (APD) was hiked yet again. If you want to enjoy a well-earned break this year, you’ll have to pay significantly more.
The Telegraph reports that a family travelling to Sydney will pay £500 in APD, compared to just £80 in 2005, and a “family of four living in Scotland or Northern Ireland to visit relatives in England three times a year” will pay £420 in APD, compared to £120 in 2005. All that despite the fact that, as far back as 2007, the Government’s own research found it was excessive compared to the environmental costs created by flights, and a whole new tax has since been imposed on flights with their inclusion in the EU Emissions Trading System.
The Aviation Cost Assessment 2008, produced by the Department for Transport, found that after the doubling of APD rates in 2007, “aviation would cover its climate change costs with an excess of some £0.1 billion”. That means that people are already paying for the carbon footprint created by their flights. But the Government isn’t going to take “we still want to travel” for an answer so they try to correct for the same externalities in lots of other ways as well.
They are blocking airport capacity, meaning more inconvenient indirect flights and more time spent loitering in the skies over London waiting for a landing slot at Heathrow. And by including aviation in the EU Emissions Trading System, they introduce a whole new tax on flights. The EU ETS is a regulation that requires businesses to hold allowances for the carbon dioxide they’ll emit before doing something like generating electricity in a power plant. It adds to your electricity bill and now the cost of your flights too.
Given that airline passengers pay for the infrastructure through their tickets, airports aren’t built with taxpayers’ money, and the existing taxes more than pay for the greenhouse gas emissions flights generate, this is looking more and more like politicians are victimising them as a convenient source of revenue. We’ve seen from Fuel Duty where that leads. Higher and higher prices.
That is bad news for anyone flying away on holiday but also bad news for Britain’s economy. Most of our competitors don’t impose anything like the same unilateral taxes on flights. That means tourists deciding where to travel and businesses deciding where to invest, or who to trade with, have to pay more to get to Britain. When we should be supporting companies here to compete for growing markets around the world that is an economic disaster. With plenty of other countries to visit, do we really want to put such a hefty charge on coming here?
Ever higher APD is bad news for families enjoying a holiday this Summer. In the longer term it will mean fewer jobs and opportunities for all of us.
To celebrate Climate Week, Biteback Publishing have announced a special offer. You can buy Let them eat carbon for £4.99 – half the normal price – from their website.
A number of Parliamentarians have used the book to challenge expensive climate policies in the House of Commons, and actively debated on TV and radio, and in the newspapers. Former Chancellor of the Exchequer Nigel Lawson called it “a great insight into climate policy.” The offer won’t last for long, so do get yourself a copy if you want to find out more about how the climate policies in place today are an increasingly disastrous rip-off, transferring a huge amount of money from ordinary families to rich special interests.
All the way back in February 2010, I submitted a Freedom of Information request to the Department of Energy and Climate Change (DECC) about the cost of climate policies. The Government had backed the European Union’s plan to increase its target to cut emissions from 20 to 30 per cent, which was projected to mean an even tougher target to cut emissions by 42 per cent by 2020. I asked for how much the Government thought that would cost the British economy but they clammed up, claiming it would affect “international relations”. After a number of appeals they are still sticking to that argument, although it means we can’t scrutinise the basis of that pledge in Copenhagen which the Government still hope to revive, but now fortunately Dominic Raab MP is taking up the case in Parliament, pushing for DECC to answer the question.
Earlier this week he tabled a number of written questions to the Minister, attacking the issue from a number of different angles. Unfortunately so far all he is getting is more refusals to answer the question. However if we keep up the pressure, hopefully the Ministers responsible – particularly the Secretary of State Chris Huhne, will live up to their own rhetoric about Freedom of Information and enable a more informed debate about policy in this area.
On Monday, Dominic wrote a brilliant article for the ConservativeHome website setting out why the information should be disclosed and citing Chris Huhne’s own argument that the Government should:
Strengthen freedom of information by giving greater powers to the information commissioner and reducing exemptions … Scrap the ministerial veto that allowed the government to block the release of the cabinet minutes relating to the Iraq war.
Sky News have reported about how pressure is growing to disclose the information and Neil O’Brien, Director of Policy Exchange, has written for the Telegraph website mentioning the case and asking why DECC is “so defensive about the costs of renewable energy”.
Neil also talks about some new research by Policy Exchange which points out a number of the reasons why the Government’s claim that their climate policies, and particularly renewable energy subsidies, won’t increase bills is nonsense. The report “estimates the full impact of renewable energy subsidies on an average household by 2020 (through bills, tax and costs of products and services) to be £400 per year – equivalent to 2.5p on VAT”.
It is really important that we keep challenging the Government in this area. With the huge scale of the investments planned, it just can’t be right to steam ahead without a transparent and honest debate about the costs of the targets politicians have already put in place, and the ones they are still trying to sign us up to.
Over the last week we have seen the end of the Durban summit and a new report from the Committee on Climate Change, trying to play down the extent climate policies are set to push up energy prices. At the TaxPayers’ Alliance, we’ve been arguing online and in the media that the Government shouldn’t ignore the pressure being placed on families and needs to put in place reforms to give families a better deal, building on the case set out in Let them eat carbon. Here is a round-up:
It is clearer than ever that climate policy needs to change. We will keep making the case.
Early last Sunday morning Connie Hedegaard, the European Commissioner for Climate Action, wrote on Twitter that: “We made it. EU’s strategy worked.” It was the end of another climate summit in Durban where the parties had been starkly divided into two camps: the European Union and lots of smaller countries pushing for rapid decarbonisation; and major emitters like the United States, China and India who were unable and unwilling to commit to binding limitations on their own emissions. The same divisions meant that Copenhagen collapsed in acrimony and the negotiators at Cancun limited themselves to addressing details. Was it really the “breakthrough” that Hedegaard claimed? Did the EU’s strategy really “work” and secure the global deal to ration greenhouse gas emissions they want?
No. The EU’s negotiators were willing to accept new commitments under the Kyoto Protocol, which doesn’t include the major emitters. But in return they initially wanted all the parties to commit to agreeing a legally binding deal covering everyone by 2015. The major emitters wouldn’t do that and so it looked like the talks were going to break down. Instead they got creative with the language and now the major emitters are only committed to an “outcome with legal force”.
Enthusiasts in Europe can claim that is basically the same thing, but the reality is that just about anything can be described as “an outcome with legal force”. If the major emitters don’t want a legally binding deal to limit their emissions in 2015, nothing will stop them rejecting it. That is why they would sign a deal with the vaguer language but not when it was more specific.
So the EU has committed itself to emissions cuts in return for a Durban Platform that pledges a deal by 2015, but that Platform isn’t made of much stronger stuff than the Bali Roadmap back in 2007 which pledged a deal by 2009. That certainly isn’t a triumph. It would be better described as a disastrous performance if it wasn’t for the fact that the EU was planning on going ahead unilaterally anyway with the existing 2020 targets. The result in Durban was another breakdown, not a breakthrough.
Canada added to the environmentalist gloom by dropping out of the Kyoto Protocol on Monday. Their Environment Minister Peter Kent said that complying would mean the equivalent of taking every motor vehicle in Canada off the roads, or shutting down their entire agricultural sector and cutting the heat off in residential, industrial and commercial buildings. The leader of the Canadian Green Party was apparently almost in tears at a press conference responding to the announcement but there is no sign ordinary Canadians care much either way.
The European Union is now the only major economic area still committed to rationing fossil fuel energy. It has been going ahead without the largest emitters taking equivalent action since the Kyoto Protocol came into effect in 2005. Even if a new deal is built on the Durban Platform it won’t start until 2020. Our leaders have already pressed ahead for six years in the vain hope a global deal was just around the corner. There is nothing to show for it. The global increase in emissions in 2010 was, according to the US Department of Energy, the largest ever. Can politicians here really sustain that for almost another decade?
While negotiators in Durban were committing their countries to expensive action to reduce greenhouse gas emissions, others in Brussels were trying to save the euro. If they are going to have any chance, they will need to credibly commit to fiscal austerity. And that will be much harder if low and middle income families are struggling to pay higher energy bills, at the same time as benefits are cut or taxes are hiked. If Europe could ever afford a vain attempt to lead the world into cutting greenhouse gas emissions, it can’t now.
That is why many countries are making cuts in some particularly inefficient climate policies. Britain recently cut subsidies for small solar installations under the feed-in tariff scheme roughly in half, from 43p per kWh to a still extravagant 21p per kWh. Environmentalists and lobbyists are up in arms but the Government insist it is needed to keep feed-in tariffs affordable.
Lots of other countries from Spain to the Czech Republic have taken similar steps, but they need to go further and consider a more realistic approach to climate policy overall. Right now too many European politicians are still trying to work out what their allotted share of the burden would be if some disinterested world Government set climate policy. Instead they should be asking what their country can usefully do in the real world, where even when treaties can be arranged they are invariably limited and messy products of self-interested negotiation.
Britain is a good example. Given that less than two per cent of world emissions are produced here we can make a limited contribution by cutting the amount we emit. But we do still have significant financial and technical resources at our disposal. Instead of investing £200 billion in our energy sector alone, as Citigroup argue we would need to in order to meet environmental targets, squandering a large part of it on exorbitantly expensive offshore wind turbines, why not put a far smaller amount of money into directly supporting research that can make low carbon energy more affordable?
Durban definitely wasn’t an example of the EU’s approach to climate policy working, quite the opposite. The only question now is whether or not the politicians are honest enough to admit it, and flexible enough to consider other options.
Earlier this week, I appeared on Sky News to debate aviation taxes with John Stewart, Chairman of Airport Watch. We were asked whether we supported scrapping Air Passenger Duty – a tax that, according to the Government’s own research, is excessive compared to the emissions aviation creates.
In addition to this, the Government plans to extend the EU Emissions Trading Scheme – which I have written about previously – to aviation, effectively taxing holidaymakers twice. This is not only unfair, but hits tourists, and the tourism industry, at a time they can afford it least.
You can watch the debate below:
Matthew Sinclair’s recent book, Let Them Eat Carbon, continues to attract the attention of parliamentarians at Westminster. Last week it was mentioned twice in the House of Commons chamber, firstly by Wycombe MP Steve Baker during a debate on Wednesday, while explaining his concerns that government-backed EU climate change policies are distorting energy prices and increasing bills for every British family. Watch what he said here:
Then on Thursday, there was an exchange at Energy and Climate Change Questions between Bury North MP David Nuttall and DECC minister, Charles Hendry. The clip below begins with the minister’s reply to David Nuttall’s question asking what the Government is doing to reduce the cost of gas and electricity for consumers:
It was somewhat surprising to hear Charles Hendry so merrily dismissing the figures on the relative costs of meeting environmental targets as cited in the book: they come from table four on page seven of this Citigroup analysis which the Department for Energy and Climate Change itself has used as a source – see footnote 9 on this official DECC document, for example.
I await Mr Hendry’s response to my email pointing this out with interest…
David Cameron and Chris Huhne have written for the website MoneySavingExpert.com this morning and argued that “everything that can be done will be done to help people bring their energy bills down”. It is a fine sentiment but not matched by their actions. They are continuing to impose regulations that will drive up bills, and are no friends of consumers. Attacks on energy companies are thinly veiled attempts to distract from politicians’ complicity in rising in energy prices by attacking a sector which will enjoy higher profits as a result of the regulation they have put in place.
Prices have risen for a number of reasons including instability in the Middle East; rapid rises in demand with strong growth in major developing economies; and climate regulation. But with instability in the Middle East subsiding for now and oceans of shale gas being discovered there should be every reason to be a bit more optimistic about the pressure on households easing a little. Unfortunately, they are going to have to pay for hundreds of billions of pounds in investment under draconian climate regulations, in order to meet Brussels targets. Citigroup estimates suggest Britain has to invest around £200 billion. That is far more than our European competitors, let alone the rest of the world:
Paying for that investment will require the energy companies to make more profit. That will drive up prices by over 50 per cent in real terms according to Citigroup. Even with greater efficiency, they think we will have to pay over a third more in dual fuel energy bills in real terms, and that is before paying for the extra insulation.
There is no way of making £200 billion cheap. Fiddling around the edges trying to bring down energy company margins might help some people in the short term but won’t address the fundamentals. Any politician who was serious about helping to bring energy bills down would reconsider some of those regulations and targets. There are a few ways they could do that: stop picking losers and giving extravagant subsidy to the least efficient sources of power; scrap the renewable energy target and just focus on the emissions target; scrap the new carbon price floor that Credit Suisse think will mean £7 billion more in profit for energy companies while just shifting emissions from Britain to other European economies according to the IPPR.
If they want to be more ambitious, and really do all they can to ease the burden on consumers, they could rethink the fundamentals of our energy policy. Instead of trying to deploy expensive sources of energy now we should focus on research. Even if we were happy to pay higher prices for our energy, major emitters aren’t going to do the same so developing new alternatives is the only way we make a practical contribution. After all, our paltry under two per cent of global emissions won’t make much difference to the climate. There is a lot more detail on how to do that in Let them eat carbon.
I’ve written an article for City AM about the Solyndra scandal, mentioned before on this website, and the implications for draconian climate regulations. It looks at the price we’re paying for these policies; the financial challenges they are facing; and the fact they don’t deliver jobs.
“The particularly sad and venal story of that loan guarantee is just one example of how attempts to secure green growth so often end in disaster. The pattern is clear. Huge amounts of consumers’ and taxpayers’ money wasted; the promised boon to employment not living up to its billing; and a nasty aftertaste of cronyism.”
In other news, reports from Australia suggest we might see yet another vindication of the Second Law of Climate Change Politics soon, which I coined in Let them eat carbon: Climate change regulation will tend to proceed by the least democratic route. This video explains what has happened pretty simply:
In Let them eat carbon I looked at some of the problems we already knew about with the Clean Development Mechanism (CDM). The idea is that sometimes it will be cheaper for richer countries like us to pay poorer countries to cut emissions on our behalf. It doesn’t matter to the climate where emissions are produced so why not do that to meet our targets? So how does that end in the New York Times reporting families in Uganda being driven off land at gunpoint and an 8-year-old child being burned to death?
Unfortunately the simple idea has in practice been a corrupt attempt to buy the notional involvement of poor countries in the Kyoto Protocol, in particular. Huge subsidies are available for a project that can be approved by the United Nations body charged with overseeing the scheme as having cut emissions.
Most of the Certified Emissions Reductions (CERs) issued so far have gone to schemes to destroy particularly potent greenhouse gases like HFC-23 produced as byproducts in industrial processes (in that case, the production of HCFC-22). Academic study suggests that the scheme have been so generous that they have encouraged companies to produce more of these byproducts in the first place, making the whole scheme monstrously inefficient.
There are massive conflicts of interest in the critical validation process deciding whether or not projects will actually cut emissions, and whether they would have gone ahead anyway without subsidy. Two of the biggest validators have received temporary suspensions and reviews suggest many projects don’t provide evidence that CDM funding makes a difference.
But now the New York Times reports a particularly disturbing case where the prospect of carbon credits seems to have driven an ugly land grab in Uganda:
“I heard people being beaten, so I ran outside,” said Emmanuel Cyicyima, 33. “The houses were being burnt down.”
Other villagers described gun-toting soldiers and an 8-year-old child burning to death when his home was set ablaze by security officers.
“They said if we hesitated they would shoot us,” said William Bakeshisha, adding that he hid in his coffee plantation, watching his house burn down. “Smoke and fire.”
According to a report released by the aid group Oxfam on Wednesday, more than 20,000 people say they were evicted from their homes here in recent years to make way for a tree plantation run by a British forestry company, emblematic of a global scramble for arable land.
The firm in question, the New Forests Company, has high profile investors like the World Bank and HSBC. Of course, this isn’t the first violent land grab in a developing country, and the Ugandan government is probably right that it is a failure of the rule of law as much as anything, but this is yet another example of how climate policies that sound fine in comfortable offices in London can have awful effects in practice.
Setting up a generous subsidy for emissions reductions in the developing world with limited accountability was always a recipe for a waste of money at best, corruption at worst. British families and businesses pay for all of it in their energy bills.
At the time I wrote Let them eat carbon, Solyndra was already struggling. Since then the American solar panel company cited by President Obama as “a testament to American ingenuity and dynamism” – and given a loan guarantee for half a billion dollars – has collapsed and is now being investigated by the FBI. Jon Stewart talks through the entire gory story for the Daily Show.
This isn’t the only example of green jobs built up at huge expense failing to last. The German solar sector has been in dire straits for some time. Just look at the share price of major firm Q-Cells over the last five years. In October 2010, wind firm Vestas announced major job losses in Denmark.
In the end, the people who get the green jobs will be the ones selling all the wind turbines and solar panels, not the mugs buying them. Draconian climate regulations cost more jobs than they create.
To find out more about this issue, read the book.