Coughing up to curb climate change
The UK’s Climate Change Bill, which commits future governments to cut CO2 emissions by 80% from 1990 levels by 2050, is about to receive Royal Assent but at what cost? Peter Lilley MP asks why ministers failed to mention that the legislation could cost each family in the UK up to £10,000.
Parliament passed the Climate Change Bill, which is set to receive Royal Assent in the coming days, which will force you to cough up.
This legislation binds future British governments to introduce unilaterally, even if other countries do not follow suit, massive spending programmes which could cost up to £200bn; that’s £10,000 from every family in the country.
I’m not talking about rescuing the banks. That involved loans which we should eventually get back. This is real money in taxes and lost incomes – money you will never see again.
The bank rescue was to save the economy. This is to save the planet.
Costing the Earth
Hold on! I hear you exclaim. No-one asked us if we could afford £10,000. We haven’t heard anything about a £200 billion package. That’s enormous.
That’s right; it is enormous and you didn’t hear anything about it. That is the scandal.
Neither Parliament nor most of the media bothered to discuss the cost of one of the most immense projects ever adopted in this country. Indeed, Parliament wafted it through without even discussing its cost and with only five votes against.
In my experience, our biggest mistakes are made when Parliament and the media are virtually unanimous and MPs switch off their critical faculties in a spasm of moral self-congratulation. That is what happened with this Bill.
We all want to save the planet from overheating, just as we all want to save the financial system from meltdown. We accept that both rescues may cost us a lot.
But a healthy democracy should at least debate the cost, compare it with the likely benefits (or costs of doing nothing) and consider whether we can achieve the same ends at less cost.
Had MPs or commentators bothered to read the government’s own estimates of the potential costs and benefits of the Climate Change Bill – the Impact Assessment – they would have found some extraordinary things.
Admittedly, on this occasion government failed to publish copies of the assessment in the normal way so it took a little effort to obtain. Apparently, I was the only MP to obtain a copy.
The contents of the Impact Assessment are astounding. Whereas it puts the Bill’s potential cost as up to £205bn, it says the maximum benefits of this massive expenditure is £110bn.
I am all in favour of taking out an insurance policy, as the government describes it, against the threat of global warming.
But would you insure your home with a company if they charged premiums which could be double the value of your house? There must be a better insurance policy than this.
Moreover, the government admits that their estimate of the “maximum” cost is far from being the real maximum since it omits three huge items.
First, the Impact Assessment admits that it is “unable to capture transition costs which could be 1.3% to 2% of GDP in 2020”.
Second, they make the fantastically optimistic assumption that all businesses will know and instantly adopt the most cost efficient technologies to achieve carbon savings.
Third, the assessment “cannot capture trade and competitiveness impacts”; in particular, the “relatively high risks of the transfer of productive capital to countries without carbon policies”.
In other words, if we pursue the policies in the Climate Change Bill unilaterally, without others doing the same, we could end up driving UK business abroad without reducing carbon emissions because they will still be spewing forth carbon.
Yet this bill legally binds future British governments unilaterally to spend billions of pounds on trying to prevent climate change even if other countries do not follow our lead.
There is a case for Britain taking the lead, but the bill should surely only become binding if a critical mass of other countries follow our lead; we cannot save the planet single-handed.
The bill originally bound governments by law to meet targets for reducing carbon emissions by 26% by 2020 and 60% by 2050.
The new climate minister, Ed Miliband, amended it to raise the final target by a third to 80% – thereby increasing the likely cost by at least a third, although no-one deigned to mention this. He has refused to reveal the extra cost until after the bill becomes law.
These are pretty onerous targets, yet the UN says Britain will fall far short of our existing target to cut 20% off the 1990 level of carbon emissions by 2010.
Climate activists hope that making the new targets legally binding will somehow ensure they will be met. They clearly believe that if only King Canute had passed a law requiring the tide to go out, it would have done so!
The new law will not punish ministers if they fail to achieve these targets. The sole effect of enshrining the targets in statute will be to open government policies to judicial review. Judges will then assess whether current measures will achieve the targets.
I have little faith in any government’s ability to meet those targets cost effectively. But empowering judges to prescribe additional measures costing billions of pounds, without being accountable to the electorate, is a recipe for huge additional costs.
The oddest thing about the government’s cost/benefit analysis is that it contradicts the Stern Review.
Sir Nicholas Stern concluded that the cost of preventing climate change would be small relative to the benefits.
Yet the Impact Assessment reveals that the costs could dwarf the potential benefits.
The Stern Review was much criticised for resorting to unprecedented means to inflate the benefits artificially.
In particular, he used an astonishingly low discount rate thereby giving a huge weight to benefits that will not accrue until centuries ahead. In fact, half the benefits he expects will not occur until after the year 2800!
Ministers have admitted to me that their Impact Assessment rejected Stern’s dubious figures and used conventional discount rates.
Yet they still quote Stern’s conclusions to justify their Bill and never mention their own more recent calculations.
What a disgrace that our legislators failed to scrutinise and amend this Bill as rigorously as the US Congress examined the Paulson package before agreeing it.
If the Impact Assessment is right and Stern wrong there is a strong case for spending more of taxpayers’ billions on adapting to climate change and less on trying to prevent it, but we will not have that option.
Peter Lilley is Conservative MP for Hitchin and Harpenden
The Green Room is a series of opinion articles on environmental topics running weekly on the BBC News website