27
Cucumbers into Sunbeams
America is addicted to oil … By applying the talent and technology of America, this country can dramatically improve our environment, move beyond a petroleum-based economy and make our dependence on Middle Eastern oil a thing of the past.
George W. Bush, 31st January 2006[1]
We will harness … the soil to fuel our cars.
Barack Obama, 20th January 2008
Economists assumed governments would adopt optimal policies to reduce greenhouse gas emissions at the lowest possible cost. What actually transpired bore greater resemblance to what Gulliver witnessed on his travels.
At the grand academy of Lagado, Gulliver saw a professor working to extract sunbeams from cucumbers. In another eight years, he should be able to warm the governor’s garden. Would Gulliver give him something to encourage him in his ingenuity? Gulliver’s master had given him money for this very purpose ‘because he knew their practice of begging from all who go to see them’. (In the age of global warming, tendering financial inducements would be obligatory to encourage renewable energy.)
A second professor was engaged in a project to return human excrement to its original state as food. (Recycling human effluent was a particular fixation during the first environmental wave.) A third was contriving a method of building houses starting at the roof and working downwards. (New houses in England have small windows to reduce their carbon footprint.)
But it was the political school where the professors appeared wholly out of their senses – ‘a scene which never fails to make me melancholy’, Gulliver says. Economists urged politicians to set a mechanism to price carbon dioxide emissions and let the market find the most efficient means. But politicians couldn’t stop themselves from prescribing what people and businesses should do – irrespective of the cost per ton of carbon dioxide saved or whether it actually reduced emissions. European politicians were especially partial to wind farms, producing some of the world’s most expensive electricity (solar power, which German politicians favoured most of all, was even more costly).
Neither could politicians evade the global logic of global warming. Without a global agreement, unilateral action was pointless. Governments committed to massively costly renewable energy programmes thus had incentives to inflate the prospects for successive rounds of international climate change negotiations. Living under its Kyoto bubble, politicians in the European Union would point to the faintest possibility of a son-of-Kyoto at the end of the rainbow. In 2006, California’s politicians passed a state-wide cap on greenhouse gas emissions, inviting competing states to help themselves to some of California’s GDP.
The global warming policy spectrum ranged from petty infringements of personal freedom, such as the ban on incandescent light bulbs in the EU, Australia and Canada, to policies harming the world’s poorest and damaging the environment. When the EU leaders discussed the light bulb ban in 2007, Angela Merkel complained that the green replacements weren’t as good as the old ones. ‘Most of the light bulbs in my flat are energy-saving bulbs,’ Merkel said. ‘They’re not yet quite bright enough. When I’m looking for something I’ve dropped on the carpet, I have a bit of a problem.’[2] Merkel wasn’t alone. In the UK, the prospect of withdrawal of high-wattage incandescent bulbs from supermarkets sparked a stampede.
Further along the spectrum were attempts to create markets for permission to emit carbon dioxide. Government-planned markets are inherently problematic. As Martin Wolf has written, ‘Wherever there is a gap between the market value of something and an official price or the price government is prepared to allow, there is an incentive to cheat and bribe.’[3] Because it does not cost anything to emit carbon dioxide, when politicians legislate a value on it, they created a universe of opportunities for fraud and organised crime.
The EU’s Emissions Trading Scheme (ETS) is the most ambitious and complex cap-and-trade scheme – a Common Agricultural Policy for the atmosphere, a sort of Gosplan meets Milton Friedman. The largest ETS scam is carousel trading. Fraudsters buy carbon credits in one country without paying VAT, then sell them in another with VAT, pocketing the difference, costing European taxpayers an estimated €5 billion. According to Europol, up to ninety per cent of all 2009 trades could have been carousel trading.[4]
Analysts at investment bank UBS reckoned that in 2012 the ETS will cost consumers €18 billion, but will have only reduced power sector emissions by between one and three per cent since its inception. By 2025, the cumulative windfall to electricity producers could total €210 billion.[5] The ETS also pumps billions of euros to countries not subject to emissions caps via the Kyoto Protocol’s Clean Development Mechanism, which failed for the reasons Raùl Estrada anticipated in his 1998 critique.
South Korea turned out to be the biggest winner of the CDM jackpot, scooping eighteen per cent of all the credits issued worldwide. The French owner of a factory in Onsan was expected to reap more money than the whole of Africa. ‘We didn’t make the rules of the game,’ an executive of Rhodia SA told the Wall Street Journal.[6] Rhodia could expect to earn more than $1 billion over seven years from destroying laughing gas, but the real joke was on European consumers and taxpayers. ‘It’s good business, because the Western world is basically desperate,’ a consultant explained, as it needed to buy emission reductions credits.[7]
Biofuels are at the most harmful end of the policy spectrum. When more than three quarters of the three-year increase in world corn production is diverted to non-food use, economics predicts that the price of corn will move in one direction: up. Between January 2002 and June 2008, food commodity prices more than doubled, with nearly half that increase occurring in the eighteen months from January 2007.[8]
An internal World Bank paper estimated that most of the seventy to seventy-five per cent increase in food prices not accounted for by higher energy costs and the fall in the dollar was ‘due to biofuels and the related consequences of low grain stocks, large land use shifts, speculative activity and export bans’.[9] In March 2008, the director of the UN World Food Programme told the European Parliament that the shift to biofuels production has diverted lands out of the food chain. ‘In the short term, the world’s poorest are hit hard.’[10]
Spiralling food prices led to rioting across the globe. In Haiti, the government fell. Rioting spread across vulnerable Muslim countries, including Egypt, Yemen, Mauritania and Bangladesh. There were street protests in Italy at the price of pasta, although the government in Rome didn’t fall.
Global warming was predicted to raise food prices and create instability in vulnerable parts of the world. ‘Warming of a few oC is projected to increase food prices globally, and may increase the risk of hunger in vulnerable populations,’ the IPCC warned in 2001.[11] Temperatures overall hadn’t risen in the first decade of the new century, but food prices and hunger did. The cause was global warming policies – in a brutal form of the Global Warming Policy Paradox (GWPP).
Global warming policies damage the environment. Rising global temperatures were also predicted to harm ecosystems and reduce biodiversity. Cutting down tropical rain forests to turn into palm oil plantations certainly does destroy wildlife habitat and reduce biodiversity. The GWPP is not an accident or down to bad luck. It is an inescapable outcome of the economic and political dimensions of the global warming idea.
Some of the most vociferous proponents of the global warming orthodoxy, including leading scientists and a large number of NGOs such as Greenpeace, Friends of the Earth, Oxfam and the WWF, reject mainstream economics and dismiss concerns about costs. The catastrophist conclusions of the Stern Review reduce the near-term costs of cutting carbon dioxide emissions relative to the potential gains (in terms of losses avoided) in a far distant future. To the extent such costs aren’t accorded their due weight, harmful policies will be adopted.
Hyping global warming as a planetary c
atastrophe and driven by a deep-seated hostility to fossil fuels, NGOs shared responsibility for the ensuing policy insanities. Having campaigned tirelessly for bio-energy, in 2010 Greenpeace was caught out by the policies it had advocated. After an outcry at the destruction of Indonesian rainforest, Greenpeace UK’s John Sauven denounced subsidised palm oil power stations as ‘orang-utan incinerators’.[12] The plantations weren’t ‘sustainable’. According to Liz Bossley of energy consultants Consilience Advisory, ‘While there is a food shortage in the world, there will always be a question mark over the use of land to grow plants for power generation.’[13]
The Royal Society for the Protection of Birds (RSPB) is a vociferous supporter of wind farms, although they kill eagles and other raptors. ‘Switching to renewable energy now, rather than in ten or twenty years, is essential if we are to stabilise greenhouse gases … Wind power is the most advanced renewable technology,’ the RSPB claims.[14] In similar vein, America’s Audubon society ‘strongly supports’ wind farms, while acknowledging that its stance ‘will not be without some impact’ on birdlife.[15]
More concerned with fundamentally changing the economic basis of modern urban civilisation than preserving the countryside and wildernesses, environmental NGOs ended up supporting the despoliation of rural areas and uplands with arrays of alien wind farms. It represented the negation of what their spiritual forebears stood for, transcendentalists such as Emerson and Thoreau and the trio of John Muir, Gifford Pinchot and Teddy Roosevelt. The attitude of environmental NGOs to the environment became that of the American major in the Vietnam War: it became necessary to destroy the village to save it.
‘It all sounded so, well, intelligent,’ New York Times columnist Thomas Friedman wrote in December 2009 on Denmark’s renewable electricity.[16] While the Danes claim that thirty per cent of their electricity comes from renewables, on average, wind power – the largest one – provided less than ten per cent of the country’s needs.[17]* According to Paul-Frederik Bach, who integrated wind power into the Danish grid, ‘maintaining the myth of the successful integration of wind power may be good public relations, but refusing to face realities is self-deception’.[18]
Although Denmark installed around three thousand megawatts of wind power capacity and its Vestas wind turbine company became a world leader, it had not cracked the fundamental problem of generating electricity from wind. Wind farm electricity is unpredictable. Its output profile is different from the profile of electricity demand.
While onshore wind farms generate around one fifth of their theoretical capacity, during calm periods, output plunges. During one twenty-four-hour period, output from all Denmark’s wind farms fell to less than one quarter of one per cent of capacity.[19] Too much wind at the wrong time – and surplus electricity has to be given away to neighbouring countries at spot prices close to or actually zero. When spot electricity prices are negative, Denmark pays other countries to take their surplus wind power.[20]
Germany made the largest commitment to renewables. In 2008, a combined wind and solar capacity of twenty-nine thousand, two hundred and eleven megawatts put Germany just ahead of the US, with twenty-five thousand, nine hundred megawatts.[21] A 2009 study by the University of Bochum described Germany’s renewables experience as ‘a cautionary tale of massively expensive environmental and energy policy that is devoid of economic and environmental benefits’.[22]
Its renewable regime was established in 1991, with generous feed-in tariffs, which in 2000 were extended for up to a further twenty years. Under it, the least efficient technologies receive the highest subsidy.* For producing a fraction of one per cent of Germany’s electricity, solar power producers can expect to receive €53 billion in subsidies – two and a half times the €20.5 billion for wind power.[23] German feed-in subsidies run in parallel with the EU’s Emissions Trading Scheme. Thus marginal reductions in German emissions increase the quantity of tradable emissions certificates to electricity producers in other European countries. The principal beneficiaries turn out to be the coal-fired power stations of Italy’s ENEL and Spain’s Endesa.[24] Far from creating a German win-win, the Bochum study concluded that Germany’s renewables programme ‘imposes high costs without any of the alleged positive impacts on emissions reductions, employment, energy security, or technological innovation’.[25]
Spain, second after Germany in its commitment to solar power, took a different path. Rather than charge electricity users the full cost of renewables, electricity generators received a ‘tariff deficit’ credit from the government. By the end of 2012, they are projected to have accumulated €21 billion of IOUs from the government.[26] Aside from the dire fiscal consequences as Spain struggles to shrink its budget deficit, a 2009 study by Gabriel Calzada Alvarez of Madrid’s Universidad Rey Juan Carlos put a price tag on green jobs: €570,000 per job since 2000. Each green job cost Spain 2.2 real jobs, Calzada estimated.[27]
America was not spared similar follies. California has its own cap-and-trade regime and, in 2005, seven states – Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York and Vermont – formed the Regional Greenhouse Gas Initiative (Massachusetts under Governor Mitt Romney dropped out at the last moment, but re-joined under his successor).
Like H.J. Heinz, federal renewable and energy efficiency programmes come in fifty-seven varieties.[28] Some, like a $10 million tribal energy programme, date from the Carter-era 1975 Energy Policy and Conservation Act. Others came about as a result of Energy Policy Act of 2005 and the Energy Independence and Security Act passed two years later. With their help, American politicians developed a serious bioethanol habit, even though seventy-four to ninety-five per cent of its energy content comes from coal and other conventional energy sources. It promised them a double hit – a national security high and a global warming one. Bioethanol wasn’t a fossil fuel, so it was green, and it didn’t come from the Middle East, but pushed up food prices, stoking instability in the Middle East.
Bioethanol producers were enriched with tax credits, grants, loan guarantees and import controls. Most of all they benefited from the Energy Policy Act’s renewable fuel standard which requires bioethanol – costing a multiple of conventional hydrocarbons – to be blended into transportation fuel; 13.95 billion gallons in 2010 rising to 36 billion gallons in 2022.[29]
Other than Australia, the US was the only developed nation not to ratify the Kyoto Protocol – and Australia did after John Howard lost the 2007 election. Some that ratified Kyoto treated it as little more than a statement of intent. Canada’s finance minister John Manley suggested it would be all right to ratify but not comply. ‘The bailiff isn’t going to arrive to seize our property,’ he remarked in November 2002.[30] And when Canada found Kyoto too burdensome, the Harper government decided to withdraw from it. For the US, Kyoto would have been a legal commitment that could have been litigated through the courts. The case of Massachusetts v. EPA, which the Bush administration lost in the Supreme Court, illustrates how judicial rulings can have unforeseen and potentially far-reaching effects.
The political debate in the US was also fundamentally different. In parliamentary systems, legislators are subject to strong party discipline. Even in Canada, with its federal system and hydrocarbon-rich provinces such as Alberta, the Prime Minister Jean Chrétien obtained every vote of his Liberal party caucus to ratify Kyoto. None of Canada’s major parties challenged the scientific rationale for action.[31]
In the US, there was a debate.* In July 2003, Senator James Inhofe of Oklahoma, chair of the Senate Committee on Environment and Public Works, directly attacked the scientific consensus. ‘If the relationship between public policy and science is distorted for political ends,’ Inhofe argued, ‘the result is flawed policy that hurts the environment, the economy and the people we serve.’[32] He ridiculed science writer David Appell for claiming global warming would create greater chaos than the two world wars, and cited political scientist
Aaron Wildasky’s description of global warming as the mother of all environmental scares. ‘Much of the debate over global warming is predicated on fear, rather than science,’ Inhofe said. ‘After studying the issue over the last several years, I believe that the balance of the evidence offers strong proof that natural variability is the overwhelming factor influencing climate.’[33] Concluding, Inhofe asked: ‘Could it be that man-made global warming is the greatest hoax ever perpetrated on the American people? It sure sounds like it.’[34]
At the beginning of the nineties, corporate America responded to the rising wave of environmentalism in much the same way as big business elsewhere: it rode it. Coca Cola’s Don Keough provided Maurice Strong with some top marketing and public relations executives for the 1992 Rio Earth Summit. Strong was thrilled. ‘Since no organisation has a more sophisticated capacity for marketing, this was a gift indeed,’ Strong wrote. ‘Thus were our key messages promulgated throughout the world.’[35]
Strong asked Swiss industrialist Stephan Schmidheiny to mobilise business support. Schmidheiny set up the Business Council for Sustainable Development. It produced a business manifesto, Changing Course, co-signed by forty-seven chairmen and CEOs, including two from oil companies (Chevron and Shell) and three auto manufacturers (Volkswagen, Nissan and Mitsubishi). The largest number was from US corporations.*
The Age of Global Warming: A History Page 43