We are now within three months of the climacteric year of 2012 around which the 1997 Kyoto Protocol was built, and therefore within fifteen months of a period in which the Kyoto restrictions will no longer have effect. No fewer than sixteen conferences have been held in an attempt to find a successor to Kyoto, the largest in Copenhagen in 2009. A seventeenth such conference will be held in South Africa at the end of November. Since decisions must now be made on Kyoto’s successor, it seems appropriate to add this column’s recommendation to the press clamor that will surround those negotiations.
Start with the science of global warming. There’s clearly something there, but it might be infinitesimal. The warming effect of additional carbon dioxide in the atmosphere makes sense even to my vague memories of high school chemistry. It is also certainly clear that the level of carbon dioxide in the atmosphere has been increasing steadily in the last half century, at least. What’s not at all clear is the size of the effect the additional carbon dioxide is having on temperature – will we warm by 5 degrees Celsius in 2100, or only by 0.05 degrees Celsius?
In addition, there is both theory (again according with my vaguely remembered high school chemistry) and evidence to suggest that the effect of additional carbon dioxide in the atmosphere is asymptotic, not exponential, in other words that each additional tonne deposited has less effect than the previous one. If you read the 2007 Fourth Assessment Report of the Intergovernmental Panel on Climate Change, a report deliberately written to maximize the resources devoted to climate change initiatives, you will find that the probability of a temperature rise beyond 2 degrees Celsius in 2100 is quite low.
The work of climate change scientists, much of which has been based on construction of elaborate computer models rather than direct observation, has however been suspect. Data used in the IPCC reports has been discovered to have been tampered with, and the integrity of climate change science called into question. It’s not surprising that corners have been cut and inconvenient data suppressed. These scientists’ livelihoods and funding depend entirely on there being something real to worry about and we should not realistically expect higher standards of integrity in today’s scientific profession than in the remainder of our sadly degraded intellectual and political life. A further question has arisen, casting no further doubts on the integrity of existing scientific work but making its results highly questionable, from recent research at CERN in Geneva, which suggests that cosmic rays have a substantial effect on climate, a factor not taken into account in existing climate change models.
The claim by the left that climate change represents “settled science” is thus laughable. The magnitude of the effect is not settled and much of the work in the field, constructing computer models based on dubious and incomplete assumptions, should not be dignified with the name of science.
The prestige of “settled science” has in any case received an additional blow in the past week with the apparent discovery at CERN of neutrinos travelling modestly but significantly faster than the speed of light. If these results are confirmed, they contradict Einstein’s Special Theory of Relativity, formulated in 1905 and apparently verified by observations of the transit of Venus in 1919. On the Special Theory has depended a large part of the edifice of twentieth century sub-atomic physics, from quantum mechanics, an invention of the late 1920s that poses several unpleasant philosophical problems, through to the “string theory” that includes ten dimensions, most of them infinitesimal, on the basis of which we spent untold billions constructing CERN in an attempt to find the mysterious and so far untraceable Higgs Boson.
If an important theory in the hard sciences, more than 100 years seasoned, that was apparently confirmed by observation 92 years ago, and on which untold billions have been spent and Nobel Prizes won, can turn out to have been materially in error, then it can only be concluded that we know less than we think we do. Distorting the world economy beyond recognition, lowering global wealth by a substantial fraction for decades to come, would have been unwise even if climate change theory had been as firmly established as Special Relativity. As it is, while there is reason to pay attention to the climate change question and invest significantly in improving our knowledge in the area, the uncertainties of measurement, causality and data integrity are far too great to reorganize the world around it.
The Kyoto process and the climate change hysteria that followed it have however been useful in giving us a number of demonstrations of what won’t work, as well as a few things that have worked.
The Solyndra debacle, the collapse of a solar power company with a $535 million U.S. government loan, has shown us not only that government funding of individual companies doesn’t work, but why it doesn’t work. Government not only lacks the expertise to choose between competing technologies, but is subject to all kinds of unpleasant political and donor-related pressures to do the wrong thing. Direct funding of new technologies by government, other than in the pure research phase, is a corrupt waste of taxpayer money.
A second failure of the Kyoto years has been government-mandated “cap-and-trade” schemes. Like direct government investment in companies, they have proved to be appalling nests of corruption. The unpleasantness of the phony subsidies to Chinese energy-savings scams is only exceeded by the Enron-like shenanigans in the emissions permit trading markets. The cap-and-trade structure was devised in part by Enron itself before its demise, and it shows all the hallmarks of other constructs of the unfortunate Jeff Skilling – on paper an elegant market-based solution, in reality an invitation to cronyism, corruption and rip-offs. The central fallacy of these schemes is that central planning bureaucrats can magically be expected to decide a target for carbon emissions each year – the schemes thus abdicate the market’s most important function. They need to be closed down forthwith.
A third failure of the Kyoto years has been government’s attempt to select preferred technologies for subsidy. Like direct investment, such an attempt inevitably descends into a mass of corruption and ineptitude. One such example was geothermal power, where environmentalists were blinded by its lack of carbon emissions and failed to take account of the possibility that drilling deep into geologically unstable rock formations was likely to cause earthquakes. Another was corn-based ethanol, where the George W. Bush administration, egged on by its financial and electoral paymasters in the farm lobby, installed an economically outrageous subsidy system that increases rather than diminishes carbon emissions.
Finally, as was suspected even in 1997, direct regulation does not work and imposes intolerable costs on the economy. The EPA’s current attempt to use a dodgy Supreme Court decision to override the political process altogether and through regulation of carbon emissions meddle in all sectors of the U.S. economy is potentially a major addition to the blizzard of regulations currently holding back economic recovery.
On the other hand, even opponents of the Kyoto process have to admit a couple of successes (assuming the global warning threat has any reality– otherwise these too are wastes of money.) One is the German Renewable Energy Act of 2000, which established above-market feed-in-tariffs for various sources of renewable energy, under which the power grid was compelled to purchase power from new sources for 20 years at fixed prices. These have resulted in over 20% of German power generation currently deriving from non-nuclear renewable sources, at a cost of about 4 euros per month added to the average domestic power bill. The main disadvantage of the German legislation, apart from its direct cost, is that it has made the country uncompetitive in power-intensive industries, such as steel and aluminum production.
The German renewable energy law has also contributed substantially to the remarkable recent development of solar power generation, which has reduced its cost to the extent that within 5-7 years it seems likely to be fully competitive with other power sources without any subsidies. That development owes nothing to direct investments on the Solyndra model, but has derived from the tariff subsidies available for solar power generation in the German and other systems, which have produced a remarkably rapid technological development and cost reduction, primarily among Chinese solar panel producers. Thus at least in this case, government subsidies directed at results rather than inputs have accelerated technological change in the desired direction.
It is thus clear what should succeed Kyoto. The entire national and international bureaucracy of regulatory design should be swept away, bringing enormous direct cost savings and even greater indirect economic benefits. Modest carbon taxes, linked directly to the result of carbon emissions, not to the input technologies to reduce them, should be imposed. A small portion of those taxes’ yield should go to direct research into the precise nature and extent of climate change and into new technologies for energy production and for mitigation of climate change’s effects. Those countries wishing to do more should adopt a version of Germany’s feed-in tariffs, which will produce a more or less painless conversion of power generation to renewable sources, at the cost of losing much of the country’s heavy industry capability.
Finally, programs of population reduction should be instituted in countries where population growth rates are still excessive. For reasons far beyond the threat of climate change, we will greatly ease the problems of mass enrichment if the masses to be enriched are kept well within this modest-sized planet’s carrying capacity. More on this in a couple of weeks, to coincide with the appearance of Earth’s seven billionth occupant.
Combating environmental threats cannot be undertaken entirely by the free market, because of cost externalities. But that’s always the best way to try first, and with intelligent policy design you can get pretty close.
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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)