26 May 2010

Climate Policy Boundary Conditions

The Times reports that the European Union is set to propose increasing its unilateral emissions-reduction target to 30% by 2020:

The European Commission is determined to press ahead with the cuts despite the financial turmoil gripping the bloc, even though it would require Britain and other EU member states to impose far tougher financial penalties on their industries than are being considered by other large economies.

The plan, to cut emissions by 30 per cent on 1990 levels by 2020, would cost the EU an extra £33 billion a year by 2020, according to a draft of the Commission’s communication leaked to The Times.

What's that you just read?
"£33 billion a year by 2020"
That is a total of about 400 billion Euros over 10 years. [UPDATE: A reader writes in to suggest that the Times has its currency wrong, the 33 billion should be in Euros. If so, then the total for the decade is 330 billion Euros. Thanks MW.] It is not going to happen. EurActiv reports the realpolitik:
France and Germany yesterday joined the growing ranks of European countries opposed to making further unilateral moves on climate change, as the European Commission today plans to make the case for raising the EU’s greenhouse gas reduction goal from -20% to -30% by 2020. . .

The common declaration by France and Germany signals a hardening of Europe’s policy on climate change, six months after the failure of UN climate talks in Copenhagen.

It also deals a blow to Connie Hedegaard, the EU’s climate action Commissioner, who is expected to recommend today (26 May) that Europe raises its greenhouse gas reduction target from -20% to -30% by 2020.

For emissions reductions policies to succeed they simply cannot involve high costs (and yes, for the EU 400 billion Euros is a high cost). This is just a political reality, there is no point in complaining about it.

12 comments:

  1. Notice that in the cloud-cuckoo-land of European climate policy, they're still referring to 1990 as a base-line. Why? Why not make future cuts with 2010 as a baseline?

    That's a rhetorical question. They use 1990 because it allows the major carbon generators to keep gaming the system, just like they did for Kyoto. So even at this late date, they apparently still don't believe their own propaganda. If they truly believed that these cuts were needed, they wouldn't protect their own industries from their fair share of the burdens. If you're on a sinking life raft, you don't argue over whose responsibility the leak is, you bail as fast as you can.

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  2. The more zealots push incomprehensible and indefensible action, the more strains in the EU will tear the fabric of common destiny.

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  3. Typo in second to last sentence: millions / billions. Or is there a joke I am missing?

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  4. -3-Matti Virtanen

    Thanks .. typo. Now fixed!

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  5. Roger: If I have my numbers correct, the GDP for the EU is around 12,000 billion Euros per year, so the 33 billion Euros would be less than 0.3% of GDP. Is that really so outrageous a price to cut emissions to 30% below 1990?

    The EU also spends about 48 billion euros per year on agricultural subsidies, but these receive nowhere near the vitriol decarbonization does.

    In a fantasy world, re-allocating money from agriculture to decarbonization would make a lot of sense; but I do understand the point of your title: cutting agricultural subsidies to fund decarbonization is utterly off the table as a policy move, no matter how much one might howl at the moon.

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  6. -5-Jonathan Gilligan

    Thanks. I often engaged in such debates back when i was working on space policy and weather policy.

    Space enthusiasts and weather scientists would advance the argument that doubling the costs of public investment in space/weather would only cost the average taxpayer pennies a day, or variations on that theme. Yet, policy makers have yet to double investments in space or weather, despite such arguments.

    I don't think that such abstract arguments can carry the argument, no matter how accurate or rational. A better answer would be to be able to identify what the short-term benefit is for the short-term investment.

    In the context of the EU paying 750 million Euros (and soon maybe more) for financial bailouts, further investments measured in the tenths of a percent of DP just don't seem realistic unless they have a demonstrable short-term payoff.

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  7. Forget. It's over.
    Another nail in the coffin.

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  8. Too funny.

    The tall forehead types in Brussels are behaving like it is business as usual, as if an economic tsunami hadn't swept over the land, as if their nation state benefactors were sitting in buckets of money they can give to them to squander on Feed In Tariffs and wind turbines, as if the nation states don't now realize "Green Jobs" cost Billions and deliver negative growth.


    Ya . . too funny.

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  9. I find it amazingly interesting to read the knee-jerk reactions of people here who (my guess) wouldn't be able to point out Brussels on a map. The EU countries collectively pretty much met their Kyoto targets (yes I know, Spain and all that, but that's why there was a bubble and still, it's more any other economic block achieved); yet this comment is ridiculed. Roger, just keep this post up for a sufficient number of years and we'll see just how ignorant those Europeans are.

    And to all others I would like to say, your Europe-bashing is getting quite boring. When Bush was in charge there was still some excitement about the with-us-or-against-us philosophy. Now it's just old politics, while old Europe is getting on with things.

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  10. The story in the FT says it's 33 billion British Pounds per year on top of the 48 billion already committed to for a total of 81 billions British pounds.

    81 billion pounds = $113 billion per year.


    http://ec.europa.eu/dgs/jrc/downloads/jrc_reference_report_200907_fossil_fuel_electricity.pdf
    The EU has 397 Gigawatts of fossil fuel generating capacity(page 45).

    All but 63 Gigawatts worth of fossil fuel generation capacity is due to be retired by 2030(page 47)

    So given a flat electricity energy demand the EU will need to replace (330/20) 16 gigawattts of generating capacity per year for the next 20 years.

    An average new nuclear power plant generates 1.3 Gigawatts.

    So if they went 'nuclear' they need to build 1 nuclear power plant per month.

    Regardless of what one feels about climate change, a significant investment in new power generating capacity will be needed.

    $100 billion per year sounds about right.

    Of course it doesn't account for expenses that will have to be incurred no matter what.
    16 Gigawatts of coal fired plant will go for pretty close to $50 billion, then there is the cost of the coal.

    I think I would present the case differently.

    How much generating capacity will need to be replaced because of 'end of useful life'.

    Then I would present the costs of the various replacement options, as well as the various pro's and con's.

    Everyone understands that the car eventually needs to be replaced. Replacing it early because of 'climate change' might save a few years emissions, but the public sees a perfectly good car being wasted.

    It's a much easier sell to wait until the car needs replacing, then arguing the additional costs and benefits of buying a 'green vehicle'.

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  11. Anyone postulating that money spent by the government delivers negative growth doesn't know how gdp is calculated (see http://www.mindtools.net/GlobCourse/formula.shtml). Government spending adds to gdp growth, by definition, and yes it usually creates jobs too. So it's best to talk about roi, not gdp.

    These carbon limits are designed to push the issue onto future governments while still pretending to be holier-than-thou. Only China and india sre facing up to reality. The first item on any Western agenda remains creating the jobs to pay back the debt so we can have real money to spend on whatever the future problem might be (like Harry I say energy gap).

    I'm amused though at the schadenfreude of US/UK pundits over the generally better performing Eurozone economy. Is this an attempt to gloss over their own rather more massive structural problems? I'd personally like to see the euro tumble a whole lot more as these previous plunges of the dollar and pound hurt those who receive in dollars and buy in euros. At the moment the euro is still the most stable currency of the three and Europe has been more fiscally responsible. Ironically that ill-conceived Greek tragedy was merely the Eurozone copying the manic debt splurge of the US, using the odd assumption that US mainstream economists know what they are doing (despite all evidence to the contrary).

    The bottom line is that trying to fix a problem that was caused by huge debt by dishing out more debt is putting hope before experience and it doesn't matter whether the nom-de-plume is stimulus, recovery or rescue, because the real name is still debt. The markets are fooled only until their cocaine wears off, when they then move from panic buy to panic sell. The reason they hung on every obscure, nonsense uttering of Greenspan is because they didn't themselves have a clue about anything.

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  12. #11

    Yes gov's create job's albeit inefficiently. I'll remind you that the USA's post recession unemployment has been consistently lower then Europe. Do you think Greece, Spain, Portugal, Ireland, etc as doing well economically. France and Germany have been living off brand particularly in Asia. This will not last. Europe's rigid labor markets and debt are a huge problem.

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