The EU has a wide policy agenda designed to “fight climate change”. That raises a number of questions. Is it necessary? Will it work? And are we approaching it in the most cost-effective way?
The cost of the EU programme is a subject for debate, but the switch to “a low-carbon economy” will certainly cost hundreds of billions of euros, and probably trillions. If the answers to the questions above are “no”, then we are wasting the money. If the answer even to just one of the questions is “no”, then we are wasting all or part of the money.
The question whether human activity and CO2 emissions are driving serious or catastrophic climate change remains hotly disputed. Contrary to Al Gore’s script, the science is not settled. Many thousands of qualified scientists take a contrary view, including a significant number who are or have been panellists and reviewers for IPCC studies. Some argue that if a risk exists, we should take action to mitigate it — the “Precautionary Principle”. Yet despite the Stern Review, most serious economic studies of climate mitigation suggest that costs greatly exceed potential benefits. Even the British government’s first impact assessment of its Climate Act showed a net deficit, and had to be hastily fudged.
The approach of Lord (Nigel) Lawson in his book “An Appeal to Reason” is that we should undertake adaptation, as and when required, and only if needed, rather than to incur eye-watering up-front costs, on a globally unprecedented scale, for mitigation efforts which may not be needed and may not work.
So, will it work? The UK produces only around 2% of global emissions, so UK action would be trivial. Taking Europe as whole, its efforts will be quickly negated by rapid economic and industrial growth in the BRICS. Green campaigners laud China’s commitment to green technology, yet China is building a new coal-fired power station every week, with India not far behind. The EU aims to lead the world, yet no one is following. European industry takes a vast hit on energy costs, but CO2 levels continue to rise.
Finally, do we have the most cost effective approach? Let’s assume that we want to reduce CO2 emissions, despite the disputed science. We would look for the lowest cost-per-ton reductions, so as to reach our objectives with least damage to competitiveness. Low-cost ways of reducing CO2 emissions might include building nuclear power stations (effectively a zero-cost option, since electricity from nuclear is competitive with other mainstream technologies). We might switch from coal to gas. We might focus on energy efficiency.
For example, the EU’s emissions regulations on automobiles are estimated to cost around €250 per ton of CO2 saved, while insulating buildings delivers a cost of €10 to 20 per ton.
The Commission has decided on the most expensive approach imaginable. It has mandated highly challenging targets for renewables, like wind and solar. These produce high-cost electricity. Even then, published cost estimates generally do not include the high cost of back-up. Unpredictable and intermittent technologies like wind require instantly-available back-up, which almost inevitably means gas. But gas run intermittently is inefficient, driving up both costs and emissions. On some estimates, the package of wind-plus-gas may produce no CO2 savings at all. And we’ve paid twice-over for generating capacity — once for wind, again for the gas. Better to build gas, and forget the wind altogether.
The remaining green argument is that fossil fuel prices are rising, and that gas depends on imports. But we should look at the USA, where shale gas reserves are estimated at up to 500 years. America is looking forward to a new industrial renaissance based on cheap, indigenous gas. Yet we in Europe are driving industry away with massive energy and carbon taxes. The EU seems to have a death-wish.