The EU ETS and its lack of political leadership

There is a criminal lack of political leadership in the matter of the EU ETS.  The European Commission’s hapless bureaucrats are trying to fill the gap, but their hands are tied, so the results are feeble.

The Commission has been worried for some time about low carbon prices.  The EUA price is so low that it is not stimulating the desired level of investment in clean technology.  And it is cheaper for power stations to burn coal than gas.  As a result the current EUA price influences neither operating nor investment decisions.

So in order to boost the carbon price, today the Commission published its proposals for structural reform of the EU ETS.  The document is so lightweight that I sighed in exasperation and it shot across my desk and slipped into the bin.  (http://ec.europa.eu/clima/policies/ets/reform/docs/com_2012_652_en.pdf)

The document lists six options for restructuring the scheme: a more ambitious target, cancellation of allowances, a steeper annual reduction factor, expansion of the scope of the scheme, limiting of use of international credits and a discretionary price mechanism.

Nothing is quantified (except for the possible 30% target); the document is so short that it cannot deal with the issues with the thoroughness they merit; there is a glance beyond 2020, but insufficient emphasis is placed on raising the profile of the long-term reduction targets.

This piece of paper is indecisive and it is not surprising that the EUA price fell 60 cents in response.  It is merely the promise of consultation on wide-ranging topics.  It gives no direction, no confidence to the market that something can or will be done.  In short, it shows no leadership.  Without leadership, there is no confidence.

But what could the Commission do?  If it does not show many options to please everyone it will be castigated for being undemocratic.  If it shows too many options (and the wrong ones!) then it will be accused of being wobbly and spineless.

This happens because the European Commission is not a political body and therefore it cannot show leadership.  It is a body of bureaucrats.

The real people to criticise are not the European Commission.  They are “just doing their job”.  The people really at fault, the ones letting us down, are the politicians who abdicate their political responsibility: they are happy to let the Commission muddle on with trying to fix the EU ETS.  Yet, as elected representatives and political leaders, they are the ones who should be up there calling loudly and clearly for reform.  But it’s not a priority.  Such is their cowardly silence that I can hear the cracking of melting ice from thousands of miles away.

Perhaps I am overreacting.  Perhaps this is the reality of politics.  Perhaps Sandy and the PWC report about 11 degrees temperature increase by 2100 and the warnings about the new IPCC report … perhaps they are making me unduly sensitive to the problem of climate change.  Perhaps.  But probably not.

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Restraint, not sacrifice is key to cutting emissions

The word “sacrifice” is used when people want to mock and reject the idea of behavioural change to cut emissions.  They say “saving the planet can’t be about sacrifice because no-one will do it”.  Then they start talking about sackcloth and hair shirts.

There is another word which gets less press, but is more important: “restraint”.

Whereas “sacrifice” is about suffering in the service of a greater goal, “restraint” is just about holding back and not having everything we want when we want it.  There is a huge difference between the two.

Turning the heating down a few degrees is about restraint, not sacrifice.  Eating meat once a week is restraint, not sacrifice.  Taking public transport is restraint, not sacrifice.  Investing in insulation rather than spending the cash on replacing the Iphone 4 – again, this is restraint and not sacrifice.

Restraint is the mark of a great leader: when someone who holds power does not exert the full force of that power, but only wields it to the extent needed.  The message is particularly relevant for America’s climate-denying religious right, paralysed with excitement as they wait for Armageddon: As holder of dominion over the planet, man has to exercise restraint.  Exercising power like a fox in a chicken run is not great leadership, it is gross wantonness.

Our culture must become one where restraint is a celebrated quality and where prudent care of the environment is seen not as painful sacrifice, but a sensible and admirable exercise of restraint.  That will take a lot of courage from opinion formers and people who have influence.  But it will be a valuable complement to existing efforts to cut emissions by technological development.

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Sandy’s silver lining – a chance for a new narrative on climate change

The cloud that was Sandy was so vast, that it was statistically likely to have a silver lining.  That silver lining is the fact that Americans can now talk about climate change without embarrassment.  They might even start talking about global warming.

But what should they say?  This is critical.  To an outsider the USA seems to be a divided nation.  So that even if both sides are ready to talk about climate change, there will be much disagreement and debate and action will be deferred.  It would be important, therefore, if they say something which they can agree on.

Recently climate scientist wrote that we need a new “narrative” about climate change.  (I don’t like the word “narrative” because it looks like a trendy word trying to seem clever and right on.  But to give it credit, I think it does have some substance).  In fact, getting that narrative right is one of the most important tasks we have ahead of us.  The narrative, or the story which shapes our worldview, influences significantly how we behave and what policies we adopt to address climate change.  In the short term it perhaps does not matter so much: at this desperate stage, with methane bubbling out of the arctic, we should grasp at anything to cut emissions.  But in the longer term, in matters of strategy and direction, it is critical.

That narrative has to redirect our efforts in a very precise way: I see it like a barge passing along a narrow canal.  There are a few inches of leeway between safe passage and a collision.  The narrative also has to work for a large majority of people, reflecting both their personal and their corporate interests.  The effort to cut emissions has to be in unison, because the challenge is so great.

I think the narrative has to weave together several strands.  Here are three:

The first strand of the narrative must appeal to the very best of American (and human) enterprise, creativity, innovation, drive, passion, non-nonsense roll-up-your-sleeves, grit.  Because this is what we need if we are to come up with viable solutions for the predicaments we face – the “silver buckshot” of solutions will need the brightest minds and toughest entrepreneurs.  Happily these are the qualities of which much right-wing ideology is built.  The narrative has to evoke these qualities and everyone can agree on them.

This narrative is conducive to people working hard and is therefore also consistent with the puritan mindset and acceptable to the people of Wall Street.  It should generate economic activity and something we will be able to call growth.

A second requirement of the narrative is that it has to be consistent with human nature and not try to run against its grain.  If it is all about denying or crushing our natural desires, then it will fail.  It needs to help satisfy or vent those desires and not bottle them up.  So it has to be about doing rather than not doing, about opening rather than obstacle, about forward rather than back, advancement rather than retrenchment, and so forth.  It has to be horribly positive, but that’s something we have to swallow.  And genuinely so, because anything fake is quickly seen through.

So far so good, but if I look out of the window I see that the ship is edging towards the right … and there’s a problem in the boiler room!

The problem is that so far this narrative is also consistent with the techno-optimist view of the world.  This is something to be avoided.  The techno-optimist view of the world says that we just need to invest lots of money into clean technology and the economy will grow and we will develop fantastic new gadgets to allow us to live just like we want and not cause any harm to the planet.

Unfortunately techno-optimists ignore three important things.  First, they overlook the rebound effect.  All that green growth will generate great wealth.  But what will we spend all that wealth on?  We are going to spend it on weekend trips to the moon, eating okapi steaks, and going skiing in Dubai.  Moreover, as our “standard of living” gets higher and higher, it becomes socially and morally ever harder to retreat.

Second, techno-optimists ignore the skewed distribution of wealth.  Yes, the richest on the planet will be able to enjoy their weekend trips to the moon, oakapi steaks and skiing in Dubai all using state-of-the-art zero carbon technology.  But we are learning that wealth doesn’t average out.  Like molecules of oil which cluster around themselves and wont mix with water, wealth congeals around the wealthy and leaves the rest as poor as they were before.  So the remaining 7 or 8 billion poor will still aspire to the moon-oakapi-skiing dream, but will have to make do with grubby high carbon alternatives.  The original techno-optimist narrative is a nice story but I don’t see it fitting 9 billion people.

Third, the techno-optimist narrative ignores other species.  It is unashamedly anthropocentric.  It believes in GMOs and geo-engineering.  It uses science to accommodate humans’ unfettered desire for lebensraum without blinking at the holocaust of other species that entails.  Maybe that is scientific hubris; maybe it is just pragmatism.  But it is worth looking to see if there is a narrative which is more accommodating to other fauna and flora.

So, where we got to is that we are harnessing all that great human enterprise and innovation to cut emissions, and this is happening in a way which goes with the grain of our instincts, but we are tilting towards a dangerous techno-optimist narrative.

How do you retain all that right-wing drive and enterprise without veering down the techno-optimist route?

This is where a third strand is needed to the narrative.  It is vital to have aspirations and ambitions because they fuel the entrepreneurial qualities we need.  But the pot at the end of the rainbow simply cannot be material.  If the reward for our efforts is to have the wealth to fly where and when we want and to eat what and as much as we want and to have houses as big as we want, then the enterprise will fail.  Thus, the third strand of the narrative has to turn our material aspirations into spiritual and intellectual aspirations.  It has to remove from our aspirations and the economy the huge demand for material and energy resources.

Yet it should not remove from our aspirations the desire to engage and transact with other people, since we want economic activity (at the very least in order to have the support of the right).

I see this all like the equivalent of building cathedrals in the middle ages.  Somehow, whether by accident or design, people found themselves willing to devote their lives to the economic activity of building vast cathedrals.  I don’t have the figures but I imagine that a significant portion of the economic activity of Chartres, Cologne or Orvieto went into putting up the cathedral.  You put together a plan to build a cathedral over the next hundred years or so and get everyone to rally round and get involved.  And suddenly you are achieving your goals and you have a very brisk economy.  In the same way we have to get people to aspire to something to which they will devote lots of economic activity.  But it can’t be made of stone and cement.  It can’t be about travelling a lot either.

I won’t write a list here of aspirations which fit the bill.  But it’s a hugely important piece of homework to figure out what those aspirations are to be if we want to cut emissions, avoid the techno-optimist nightmare and still enjoy a robust economy.

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Nurturing the inner-treehugger as a policy to cut emissions

In yesterday’s Financial Times Patti Waldmeir writes of China’s discovery of its “inner tree-hugger” (http://ow.ly/f9O7E) and efforts to encourage Chinese children to get outside and see nature.  Have the Chinese been secretly reading Climate Change for Football Fans, chapter 53?  If so, we can soon expect a global shortage of purple fabric dye.

For those who have forgotten, here is the second part of chapter 53…

 

The Professor looked down at his whisky sheepishly.  “Well, if you think that the government should do something about it – not just stand there and wait for Greenpeace and their friends to take the lead.”

He was quiet for a moment.  Then Doris spoke.  “Perhaps there’s another way you can make your bond with nature, Professor.  Look at Joe and Frank.  They were born with Claret blood.  In the first few years all they got was Burnley football club.  And that bond has stuck with them all their lives.”

“Hey, that’s right,” said Joe.  “Forever.  It’s a watermark in our souls.”

“It’s a bloody fire brand,” said Frank proudly.

“You see,” said Doris.  “What happens to a child in the first few years of its life – that sticks with them for ever.  So, in the first few years, give them nature.  Just flood them with nature.”

“Put shrubs in maternity wards,” said Joe.  “No, you’ll need live animals there, too,” he added.

Frank said that they’d shit on the floor of the hospital.

“Someone’ll clean it up.  There’s your unemployment sorted,” replied Igor.

“School visits to the countryside.  To farms.  To zoos,” said Doris.

“Nature reserves.  Safari parks,” added Joe.

“Parks.  Beaches.  The seaside.  Forests.  Mountains,” said Doris.

“Rivers, woodland, and moors,” said Joe.  “Even get them to National Trust gardens.  And doing a half day on the allotments.”

“Oh yes,” continued Doris.  “Definitely allotments and garden centres, butterfly centres, marshes, wasteland.”

“Send them to the bloody jungles,” smirked Frank.  “Or ship the buggers off to the desert.”

“Wonderful,” said the Professor enthusiastically.  “Then there’s naming, of course.”

“Naming?”

“It’s obvious that if something has a name, you feel closer to it and treat it better.  We don’t worry about Africans because we don’t know their names.  It’s the same with nature.”

Doris giggled.  “You mean-“

“I do.  We’ll have naming days … when the children are taken out of their schools on trips to name trees.  Once trees have a personality, people won’t want to cut them down.”

Joe shook his head.  “This is nutty.”

“Not at all.  It’s a great opportunity for economic growth.  Imagine you could only receive state benefits if you visit natural sites regularly.  Each child would have a record of natural exposures like its medical records.  Imagine the business opportunities around that, Frank.  You should be rubbing your hands.”

“Bloody bonkers,” muttered Uncle Frank.  “Sheer bureaucracy.  A massive social experiment.”

“Exactly that.  So we’d better start as soon as possible.  Space needs to be made in the school curriculum for it.  It’s not an intellectual topic.  It’s purely emotional and spiritual.  Superficial subjects such as information technology and media will have to make way.  Children must emotionally feel the spiritual bond with nature and also understand how their actions affect nature and how we depend on it.  This must become such instinctive knowledge as that when you turn a tap on water comes out.”

“You’ll have a bloody generation of veggie freaks.  We’d be taken over by the Chinese in a trice.”

“Did I say we would disband our armed forces?” said the Professor with surprise.  “Don’t forget that our friends in the jungle have poisoned spears.  Death ensues within seconds.  We’d surely keep our Trident missiles.”

“All right, a bloody generation of veggie freaks armed to the teeth with Tridents.  That’s even more scary,” said Frank.  “We’d be a society of lunatics.”

“Lunatics with calmness of spirit, balance of mind and self-confidence.  Not like the millions of distressed, violent and frustrated urban men.  These children would have a far greater chance of contentment than us.”

“But what about adults?” asked Doris.  We all thought for a while.  Then Joe said: “Once I heard that when someone recovers from cancer or comes close to death, it’s like there’s a reset button.  They start their life again with a fresh view.  They know what’s important again.“

Igor clapped his hands.  “Exactly!  We need to simulate that reset button in the mind of urban man.  A country-wide programme of mental detoxification to reset our world-views.  With quiet … solitude … proximity to nature and animals…”

“Zoo holiday,” said Joe.  “Sounds good.”

“Right.  In bloody Scarborough,” said Uncle Frank.  “Sounds bloody brilliant.

“I like this,” said Doris.  “All this would make us less fussed with shopping and whizzing about.  More time for you boys to watch football.  Frank, what’s your problem?”

“I’ll tell my problem,” said Frank.  “It’s bananas.  Plus we can’t wait twenty years anyway.  I thought you said we need action now not wait another generation.”

“Twenty years?  Why twenty years?” asked Igor back.  “We are only talking about the first few years of a child’s life.  By the age of five or six it would be done; the whole process would only take a few years.  And in any case, it’s quicker to put people through school than to build nuclear power stations.  Don’t you believe that schooling works?  It must work, otherwise it wouldn’t be compulsory, would it now?”

“You know what I mean” retorted Frank.  “If you want change, you need to focus on the here and now.  Just like us.  We’ve a big match tomorrow, and if we don’t win it we’re right up Shit Creek.”

 

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Growth and belief economics

Following the previous post, there is a strong link between green growth and belief economics.

Consider Gordon, the guy who has 10 quid in his pocket which he saved on energy bills because he put in insulation. What he does with that cash determines how big the rebound effect will be.

So how do you get Gordon to spend that cash on the guitar lesson rather than on petrol for his car?

One way is to tax petrol a lot until it is not worth his while to set foot in the car.

Another way is to get him to desire immensely to learn the guitar.

We know how to achieve the first alternative, but we also know that is politically unappealing.

I don’t think we know much about how to achieve the second alternative.  This is where significant policy research should go; to answer the question: How can you ethically get Gordon willingly and joyfully to do low-carbon things without taxing the hell out of him?

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