Pat Michaels is Right

Of course, Pat Michaels is “right-wing”, but that’s not what I meant.

Some folk will be surprised that I agree with anything that Patrick Michaels says, as he is consistently inaccurate about the Science of Global Warming.

However, he is right that a Carbon Tax is the wrong way to proceed.

Carbon pricing, whether by direct taxation or by a trading scheme, effectively creates a double disincentive for change.

We have a large number of companies and organisations that are highly dependent on the use of Fossil Fuels. Carbon pricing will make these companies and organisations less financially efficient, and they will try anything they can to pass on the costs of Carbon to their consumers and clients, in order to remain profitable.

Carbon Taxation will therefore stimulate cost offsetting, but not Carbon reductions.

Moreover, if companies that make and sell energy are forced to pay for Carbon, they will have less funds available to deCarbonise their businesses; less capital to invest in new lower Carbon technologies.

Carbon Pricing will not alter the patterns of emissions significantly, if at all.

We have to face facts : the economists are largely wrong about environmental taxation. Record fines and levies demanded of Fossil Fuel companies in the last ten years have not stopped the spills, the leaks, the poisonings of waterways; nor have they helped the companies change course and start to develop Renewable Energies.

The pricing of large scale environmental pollution is a failed disincentive.

The way to prevent Carbon Dioxide emissions is to stop focussing on the outflow of the “Carbon pipe”, and instead look at the source, where the Fossil Fuels enter the economy.

A few simple measures could re-structure thinking and re-orient direction very quickly :-

1. Ban new coal-fired power plants

Coal is Climate Enemy Number 1. There is great justification for banning it from being burned in thermal power plants. This regulatory measure will be relatively straight-forward to implement in all countries, because coal-fired power plants are all built by a small number of large companies, or government departments. If we have a Coal Non-Proliferation Treaty, it will be a matter of months to get the whole world, even China, to sign up. They know what coal does to their own air.

2. Green procurement

There are many levels of government, both national and regional, that ostensibly enact the articles of the United Nations treaties. The United Nations could agree to require “green procurement” from all public bodies, and this would have a massive impact on the demand for green energy and clean technologies. How would this work in practice ? For example, my local government, when commissioning public services and purchasing energy and manufactured goods and vehicles, should specify in the contracts signed with companies for this procurement that all products, services and energy should be green and clean.

3. Green investment

Despite the fact that during the 1980s and 1990s governments loosened their control from their national banks, in the recent few years, public money has been used to “bail out” banks threatened by the credit crisis. Governments in industrialised countries are now major shareholders in many banks, so they could start to regulate that investment should be directed towards energy efficiency, energy demand reduction and green energy. The “stimulus” could become genuinely “green”. If the banks stop creating credit lines for Fossil Fuels and start lending to clean technology for new energy facilities that get built, that would create a huge gradient of deCarbonisation. The world needs to spend a lot of money on new energy systems in the next few decades. It had better be green investment.

4. Create a green power gradient

One of the biggest problems with energy is the electricity production system. It is irrational to continue to burn Fossil Fuels very inefficiently to generate electricity. The governments of the world need to have a clear and robust set of strategies to affirm the preference for green power – both in electricity sales and in building new power plants. It doesn’t take much of a “subsidy gradient” to tip the balance in favour of green power production. Simply giving tax breaks to green electricity suppliers, and tax breaks to green power developers, and enforcing rules for the banks to offer cheap credit to new green power developments, can create a trend. Other measures could include targets for how much green power, in terms of a percentage, energy suppliers have to offer to their customers and clients.

When people advocate Carbon Taxation to me, my first reaction is : who is going to be in charge of the tax revenue ? And will they spend it appropriately ?

It is much more efficient and effective in my view to tilt the scales in favour of making sure that new money is green money.

Money is created by inventing an obligation to pay back with interest – known as a debt or loan. Those with the accredited authority to create money in this way are the banks and international financial institutions, who have a legal obligation to secure the money and make sure the investment becomes “realised” in the form of a healthy return. Returns on investment are made by people, organisations, companies and countries that take the debt-loans and work hard and pull in more natural resources to increase production. This is called “economic growth”.

The ex-British Prime Minister Gordon Brown called for the abolition of heinous, onerous world debts that poorer countries, for example the Least Developed Countries (LDCs), have become saddled with, due to a combination of poor governance and economic imbalance (and immorally high interest rates).

Yet, it has been hard for all these debts to be written off. Despite polite, acquiescent noises, it has proved hard to get the nations to comply with their own promises on this, just as it is hard to encourage them to fulfil their international aid obligations by contributing 0.7% of GDP.

It’s even harder to raise finance for Climate Change Adaptation and Mitigation. I think trying to raise cash at the end of the value chain is too hard, and liable to be ineffective – and I think we should “tax” at source. Why should the banks be permitted to create money without some obligation to the poor and environmental issues ?

If I were in a position to have any input whatsoever, I would recommend that as part of the normal process of creating new money, banks are obliged to cancel part of the global unpayable debt, and be required to favour Climate Change lending over other kinds of lending.

A good reason for strong action on reducing debts from poorer countries is that these countries will be really struggling to finance Climate Change Adaptation in future, if they continue to be burdened with massive international debt.

Having the debts of the poorer countries cancelled will be part of what the developed countries should do to compensate for the coming Climate Changes.

Nicholas Stern and others have been promoting the idea that the developed countries should create a mega-fund to finance Climate Change projects in poorer countries for both Adaptation and Mitigation.

The developed countries will need to finance the mega-fund by using the services of the banks, since they are struggling with the credit crisis. The banks should be required to make credit easily available to developed countries who wish to finance Climate Change Adaptation and Mitigation, both in their own countries and in poorer countries.

This would not be a system of taxation, but a system of targeted spending, a much more efficient economic solution.

To solve Climate Change, we need new energy systems, which needs new investment, and that’s where Pat Michaels is right, even though he is off-target with most of the rest of his pronouncements.

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