Grab your coast apocalypse watchers, it is time for another trip down the rabbit hole. The subject of today's journey into the nth dimension of anti-logic: biofuels, or more specifically the government's Renewable Transport Fuel Obligation (RTFO).

Fans of that special form of gallows humour (is there any other kind anymore?) known as the law of unintended consequences will recognise the RTFO as the legislation which originally imposed a target that five per cent of UK fuels come from biofuels by 2010/11.

It was at that point that scientists and environmental groups pointed out that far from helping to reduce carbon emissions many biofuels were directly or indirectly responsible for increasing emissions by driving demand for agricultural land and as a result accelerating deforestation.

After commissioning its own independent review the government accepted these risks did indeed exist, but with billions of pounds of investments already made to help meet the RTFO target it decided it could not put the RTFO on hold until the issue of biofuels' carbon impact was resolved.

Instead it opted for a classic fudge, delaying the five per cent target until 2013/14, launching the independent Renewable Fuels Agency (RFA) to monitor the industry's performance, and rolling out new sustainability criteria that biofuel producers will eventually have to comply with in order to ensure they are not using carbon intensive energy crops grown on formerly forested land.

Yesterday, the RFA released its first annual report on biofuel producer's performance against the new beefed up RTFO. The verdict? Not good.

The government set three targets for biofuel producers to meet: that biofuels must deliver carbon savings of 40 per cent; that data on the origins of their biofuels must be provided in 50 per cent of cases; and that 30 per cent of biofuels must meet sustainability criteria.

The RFA reported that UK biofuels delivered carbon savings of 46 per cent against conventional fuels and that it received complete data for 64 per cent of biofuels, but it also revealed the target on sustainability was missed with only 20 per cent of biofuels qualifying as sustainable.

On the face of it this is already a pretty poor performance. Four fifths of biofuels used in the UK last year failed to meet the guidelines the government had designed to eradicate related deforestation and protect biodiversity. But dig into the figures and it gets worse, a lot worse.

The RFA report admits the stated carbon savings of 46 per cent are, if not quite meaningless, then not far short. The report states: "In 2008/09, 42 per cent of previous land-use was reported as "unknown", this was due to a lack of verifiable evidence gathered from supply chains. Emissions from any unknown land-use change are not taken into account in the carbon savings figure above and it is possible that some fraction of the unknown land-use change may have caused a significant release of stored carbon." In other words, "we do not know for sure these biofuels delivered an overall reduction in carbon emissions".

But this is just the tip of the iceberg, the gaps in the data provided by biofuel producers go on and on. For one per cent of biofuels the RFA was not even informed which feedstock was used to make the fuel, while the country of origin for 19 per cent of biofuels was unknown. You did read that right, in almost a fifth of cases the company importing or selling the biofuel in the UK had no idea where it came from.

Moreover, as previously mentioned 42 per cent of biofuels were produced using feedstocks grown on land where there is no information on what that land was previously used for - meaning there was no way of determining if the biofuel had been directly responsible for a huge release of carbon emissions through deforestation. And for 70 per cent of biofuels there was incomplete information on its performance against sustainability criteria.

In short, the UK is using biofuels in large quantities, despite the fact it has no way of knowing whether it is helping to alleviate global warming or making it worse. It is as if we decided to tackle obesity by forcing people to stop eating crisps and start eating flapjacks, but neglected to check if the flapjacks had fewer calories.

The RFA insists its monitoring is very much a work in progress and that it is making rapid progress. It argues that biofuel producers know they will soon face mandatory rules governing sustainability and are moving fast to improve their supplies of biofuels, adding that it is entirely feasible that a workable system can be developed that ensures we only use sustainable biofuels that deliver net reductions in carbon emissions.

But is it? Supply chains are notoriously difficult to monitor and it seems highly unlikely a system of auditing and inspection can ever prove where imported biofuels have come from and how they have been produced. Companies have proven time and time again that they can't or won't effectively tackle sweat-shop manufactured products, while regulators have similarly proven they can't track the illegal import and export of waste on any meaningful scale.

Moreover, there is no way that even an effective auditing system can ensure that sustainably produced biofuels do not indirectly contribute to deforestation somewhere along the line. The vast majority of land used for biofuels could be used food. If it is being used for biofuels and demand for food rises then farmers have to look elsewhere for land.

The scariest thing is that the RFA's chairman Professor Ed Gallagher is right, the RFA's report represents the "first time anywhere in the world that collated and verified information about the quantity of biofuels supplied, their direct effects and their sustainability has been published". The UK is doing far, far better than most and we still have no real handle on the carbon impact of our growing demand for biofuels.

The only type of biofuels that can deliver a guaranteed reduction in emissions are produced at a local level and use feedstocks made from waste or plants that have categorically been grown on land that is not and can not be used for food production.

Biofuel producers will rant and rave about the investments already made and the fact that stalling the market now will slow the development of those genuinely sustainable second generation biofuels. But for the vast majority of biofuels used today the environmental risks are simply too high and the data too incomplete. We need a moratorium on all biofuels that lack rock solid guarantees that they have been produced in a sustainable manner. Currently, that means almost all biofuels. Failure to impose such a ban could simply mean increasing carbon emissions in the name of cutting them - and, unintended consequence of not, that can't be good.

Posted by James Murray on January 29, 2010 | Permalink | Comments (0)

It probably won't bother him all that much, after all you don't get to be one of the world's richest men without ruffling a few feathers, but Bill Gates critique of climate change policy for the Huffington Post looks set to stir up a whole hornets' nest of criticism.

In case you haven't seen it, Gates' central argument is that climate change policy tends to focus too much on short term targets for 2025 rather than the long term goal of cutting emissions 80 per cent by 2050, and as a result is wrongly tilted in favour of incremental improvements in energy efficiency rather than genuine game-changing low carbon innovation.

It is hardly a surprising line of argument from a man who styles himself as an innovative entrepreneur (whatever his many critics say to the contrary) and there are a few valid and interesting points hidden away in the article. But if you are going to find them you have to wade through so many glaring factual errors and irrational conclusions that it makes you wonder if his grasp on climate change policy is as weak as Microsoft's grasp of the search engine market.

Let's start at the beginning with Gates' opening assertion that "people often present two timeframes that we should have as goals for CO2 reduction - 30 per cent (off of some baseline) by 2025 and 80 per cent by 2050". Well, that sentence is wrong, wrong, and wrong.

If Gates is referring to the scientific consensus (as set out by the most recent UN-backed report from the IPCC) the recommended target for industrialised nations is for them to reduce carbon emissions by 25 to 40 per cent on 1990 levels by 2020 and 80 per cent or above by 2050. Almost all scientists are agreed that we should be aiming for the upper end of those ranges. If he is referring to the US policy debate, President Obama wants legislation passed that would cut carbon emissions 17 per cent by 2020 and 80 per cent by 2050 against a 2005 baseline.

So Gates' numbers for 2025 are just plain wrong on both counts and the parenthetical dismissal "off of some baseline" is crass in the extreme - the 14 year difference between the proposed US baseline and the 1990 baseline adopted by most other countries is central to why the international climate change negotiations have stalled. The US commitment actually equates to a cut in carbon emissions of around four per cent on 1990 levels, or a tenth of what scientists think we need.

Gates second glaring error is in his argument that we focus too much on the short term target and ignore the "key" goal of cutting emissions 80 per cent by 2050.

This is just plain daft, the real "key" target is to stop concentrations of carbon dioxide in the atmosphere from reaching a level - somewhere between 350 and 450 parts per million, depending on how much risk you want to take on - where climate change become irreversible and catastrophic.

Surely an analytical brain as sharp as Gates should realise that the total amount of carbon you pump into the atmosphere over the next 40 years is dependent not just on the scale of the cuts in emissions you deliver, but the rate at which you deliver them.

For example, a steady reduction curve will result in a much smaller amount of carbon being emitted overall than if you emit at current levels for the next 35 years and then in 2045 quickly roll out all the wonderful zero carbon technologies that will allow you to decarbonise the economy and meet the 2050 target of an 80 per cent cut in emission levels. That is why we have interim emission targets for 2020 and why they were such a critical and contentious issue at the Copenhagen Summit.

Gates flawed analysis of the 2025 and 2050 targets is then used to downplay the significance of the "modest" emission reductions that can be achieved in the short term through efficiency gains, and argue that we should instead focus on the long term innovation in power generation and transport that can deliver deep cuts in emissions by 2050.

The problem is that these "modest" emission reductions that can be achieved through energy efficiency actually equate to around a third of all emissions in most economies - and they can be delivered at low cost and at net benefit to the economy.

Moreover, reducing energy use through efficiency improvements makes the innovation of which Gates talks far easier to achieve. It stands to reason that if you want to build a decarbonised energy supply, be it through wind turbines, solar panels, fuel cells or nuclear power, it is far easier to build the necessary infrastructure if the amount of energy you need to supply is as low as possible.

"Should society spend a lot of time trying to insulate houses and telling people to turn off lights or should it spend time on accelerating innovation?" Gates asks.

The answer is both.

The tragedy of Gates flawed critique is there are some valid arguments trying to get out. There is too little focus on the huge task of genuinely decarbonising our economies and there is definitely a case for avoiding some of the technologies that promise marginal reductions in carbon emissions, but which could lock us into a path that does not curb carbon emissions far enough and fast enough. Biofuels are a prime example, as is the flirtation in some countries with natural gas as a long term alternative to coal.

Gates is also accurate in his assessment that "all the talk about renewable portfolios, efficiency, and cap-and-trade tends to obscure the specific things that need to be done". These measures are necessary to drive investment in clean technologies, but Gates is correct to imply that policy makers often get obsessed with the policy and lose sight of the actual work that needs to be done on the ground.

However, Gates suggestion that the need to increase our focus on long-term innovation means we should ridicule those advocating action to tackle the "low-hanging fruit" represented by energy efficiency is both irrational and more than a little insulting.

A cynic might suggest that Microsoft's eternal embrace with the computer hardware manufacturers who continuously upgrade their products to cope with the next version of Windows has something to do with Gates' criticism of energy efficiency measures. But whatever his motivation, the only thing worse than Gates analysis of climate change policy is the sight of a retired 55-year-old signing up to Twitter.

Posted by James Murray on January 21, 2010 | Permalink | Comments (5)

For years now, waste has been the dirty little secret of the UK's environmental strategy.

Over the past decade the country has emerged as, if not a pioneer, then certainly a leading player in the development of a low carbon economy. The government's energy strategy may have been badly neglected in the past, but the last few years have seen the emergence of a coherent plan for developing low carbon power; our industrial and business strategy is far from perfect, but there is a realisation across all political parties that we need to develop a clean tech industry and provide a framework of legislation and incentives to encourage businesses to curb carbon emissions; and while the transport strategy remains decidedly contradictory, there is at least an understanding that greener alternatives must be sought.

And then there is waste - an area of environmental policy that the government continues to tip-toe around as if it has found itself lost in one of the grotesque landfill sites it has done so little to address.

Today, the Environmental, Food and Rural Affairs Committee of MPs pulled on the rubber gloves and attempted to rake over the mess that is the government's waste policy. It does not make pretty reading for Defra.

According to the report, the waste policy for England and Wales is "disproportionately" focused on domestic waste, despite the fact it contributes less than 10 per cent of overall waste; contains hardly any "firm targets" for commercial and industrial waste; has delivered "premature" funding cuts to services designed to help businesses manage their waste; and has singularly failed to establish waste as "valuable resource" that can be re-used, recycled or used to generate energy.

And it gets worse: the government has not done enough to tackle food waste or increased textile waste; its timeline for banning certain recyclable materials from being sent to landfill is "unambitious"; its targets for household recycling need increasing; it has failed to clearly make the case for waste charging schemes; failed to remove planning barriers for waste-to-energy plants; and not done enough to ensure that the agencies tasked with enforcing waste regulations are properly funded.

The government will claim that it is making progress, and it is true that targeting households has resulted in the amount of waste being sent to landfill in England and Wales falling by 23 per cent between 2001 and 2007, while household recycling rates have climbed to 37 per cent. However, the UK still lags far behind its continental neighbours where recycling rates frequently top 70 per cent, while it comes as no surprise that the first environmental services to face the axe as a result of government spending cuts have been in the waste sector.

The committee may offer a damning assessment of the government's waste strategy, but there is hardly anything in the 67-page report that will surprise anyone familiar with the challenges faced by the UK's waste management industry. It is encouraging for the sector to see its concerns aired in public, but those involved in the waste management and recycling industries will also be frustrated that it has taken so long for the these blindingly obvious issues to be addressed.

It is hard to explain rationally why the UK has such a poor record on waste management and recycling. The Dutch and Germans have proven over and over again that there are economic benefits to be realised from treating waste as a resource, while report after report has shown that waste-to-energy and anaerobic digestion systems represent one of the most cost effective forms of renewable energy technology around. Meanwhile, reducing business waste is one of the easiest and most effective ways of trimming corporate costs.

Of course, if you can't explain a phenomenon rationally, it is best to try and explain it irrationally. I am reluctant to revert to national stereotypes, but perhaps the reason for our failure to tackle waste head on lies in a certain reserved prudishness when it comes to the messy subject of rotting food and used nappies.

If this is indeed the case, and it is cultural factors that explain our reluctance to address the UK's waste mountain, then, as the committee concludes, the onus has to be on the government to take action.

The fact that the economics are broadly in favour of treating waste as a resource means it would be remarkably easy for the government to develop a zero landfill policy, curbing greenhouse gas emissions and bolstering a genuinely green industry in the process.

As the committee points out all that is needed are targets for cutting the amount of waste sent to landfill and requirements for large businesses to report on the waste they produce - essentially a replication of the emerging strategy for tackling carbon emissions. If these targets were backed up by sufficient penalties, they would immediately provide the incentive for increased investment in the recycling facilities, anaerobic digestors and waste-to-energy plants that would make it possible to divert waste away from landfill.

There might not be many votes in it, but it is about time the government held its nose and got to grips with the messy reality of its faltering waste policy.

Posted by James Murray on January 19, 2010 | Permalink | Comments (1)

It might have gone largely unreported on this side of the Channel, but over in France a battle is raging that could eventually determine the pace and manner at which not only the French economy, but the entire global economic system, transitions towards a low carbon future.

In a surprise move the French Constitutional Council last week ruled that a carbon tax that was due to come into effect on January 1st was unconstitutional on the grounds that the large number of loopholes offered to businesses meant that the tax "violates the equality enjoyed by all in terms of public charges".

The decision represents a major blow to the political authority to President Nicolas Sarkozy, who had faced down huge public and political opposition to impose a carbon tax of €17 a tonne on oil, gas and coal that he argued was essential to the country's efforts to curb emissions, and has prompted a rapid response from the government which has vowed to have a reformed version of the legislation in place by April.

As a result, a debate is now raging within government as to how to impose the new tax equitably while still protecting those industries that would see their international competitiveness irretrievably damaged and avoiding a bout of the French national pastime of oil drum-burning, pitchfork-waving public protest.

A number of proposals are now being debated, including removing some of the exemptions, removing all the exemptions but imposing a lower carbon tax on those sectors such as farming and haulage that would be worst affected, and removing the exemptions for industrial emitters and carbon intensive firms but then allowing them to buy the emission allowances they have to purchase under the European emissions trading scheme at a reduced price.

Policy makers the world over will now be watching closely to see which approach the French opt for and how effective it proves.

Their interest is driven the two crucial issues which the French are wrestling with and which all governments will have to address if they are to adequately accelerate the transition to low carbon energy sources.

The first problem is how to impose an effective price on carbon without simply incentivising energy intensive industries to up sticks and move to territories where there are no such charges.

To date the European emissions trading scheme, the French government and others have opted for the exemption model - effectively offering a free ride to those industries most likely to leave. So far this approach has sort of worked and there have been no reports of firms exiting the EU because of the ETS. But as the French Constitutional Council pointed out there is an inherent problem in this approach which means that a larger chunk of the financial burden associated with carbon pricing mechanisms falls on those sectors of the economy that are least able to pack up and leave.

This is doubly problematic as those sectors that can't easily move elsewhere - energy generation, food production, retail, and on a human level the poorer sections of society - could do with the money they are shelling out on carbon taxes or emissions allowances to spend on the technologies they need to cut their emissions. Carbon pricing may mean they have an increased incentive to cut their emissions, but they are effectively subsidising businesses which due to the exemptions they are granted have more money in their back pocket but less of an incentive to cut emissions.

National policy makers have long been desperate to work out a solution to this conundrum, and will have become even more desperate after the fudged outcome from the Copenhagen Summit made the chances of a genuine solution in the form of global carbon pricing mechanism even less likely.

It will be intriguing to see how the French go about tackling the problem. Will Sarkozy simply seek to strike a slightly different balance that still protects those industries that argue they represent a special case, or will he take on board the central concern of the Constitutional Council and simply impose the tax across the board? If he goes with the latter option, it will be interesting to see if, as they have claimed, a relatively modest carbon tax really will bring French industries to their knees. Will companies really up sticks in large numbers and leave for China and India as a result of €17 a tonne charge on carbon? Personally, I'm guessing not.

Which leads nicely to the second reason, all eyes should be on France over the next few months. Namely, will a national carbon tax in a large industrialised economy work? Will it cut emissions and accelerate the development of a highly competitive and prosperous low carbon economy?

There is a growing school of thought - including amongst some of the energy firms and other carbon intensive businesses that will directly impacts - that a carbon tax would prove more effective at providing the certainty firms need to justify long term investments in low carbon infrastructure.

A cap-and-trade scheme may prove more sophisticated and is in theory a more cost effective means of cutting emissions, but as the EU emissions trading scheme has proven time and time again it also introduces a volatility to carbon pricing that makes it very difficult for businesses to judge their low carbon investment plans.

With the UK preparing to launch a national cap-and-trade scheme in the form of its Carbon Reduction Commitment, the French carbon tax raises the prospect of two test cases on either side of the Channel which will provide the perfect opportunity to compare the different models' effectiveness.

I may be a self-admitted Francophile, but personally my prediction would be that while a carbon tax will prove less popular and more challenging for many carbon intensive firms, it will also deliver deeper and faster cuts in emissions while providing a greater competitive advantage to emerging low carbon businesses.

In the meantime, let's hope that Sarkozy gets his way and manages to get a carbon tax in place, otherwise we'll never know.

Posted by James Murray on January 5, 2010 | Permalink | Comments (2)

If you were a Whitehall civil servant and you had to release figures that will almost certainly show that central government departments have delivered a, shall we say, patchy performance against environmental targets, what day of the year would you choose to release them?

Yup, you've guessed it. An email from the Office of Government Commerce (OGC) arrives this afternoon revealing it will publish data showing how government departments are performing against their own sustainability targets at 9am on Friday December 18, just as world leaders convene in Copenhagen for the last day of the Summit to Save the World.

A quick phone call to a dimension governed by different rules of plausibility to the one you and I inhabit (otherwise known as the OGC's press office) confirms that there is nothing untoward whatsoever about this arrangement.

It is also preposterous to suggest the scheduling consititutes an attempt to sneak out the figures at a time when the all the UK's environmental journalists are focused firmly on developments on the other side of the North Sea.

A diary notification has been issued, adds the spokesman, and the release date for the information has been scheduled for some time. Besides, it is also the same date the information was released last year - so that would be right at the culmination of the last big UN climate change summit in Poznan then.

Is it just me, or does The Thick of It look more like a documentary every day?

Posted by James Murray on December 16, 2009 | Permalink | Comments (1)

I'm not usually big on conspiracy theories. It strikes me that those who believe that the moon landings never happened or that 9/11 was an inside job invariably occupy a position on the eccentricity spectrum somewhere between mildly offensive crank and full blown fantasist. And don't get me started on the "climate change is a hoax" brigade and their passing acquaintance with such tired concepts as rational thought and observable reality.

But putting aside my natural scepticism for a moment you can begin to see why the Copenhagen Summit is likely to become such a fertile source of fresh conspiracy nonsense.

With the central cast list constantly changing, the key decisions apparently being made in private rooms dotted around the cavernous conference centre, clashes with police outside, media struggling to get inside, NGOs being asked to leave, and logistics looking like they were put together after a lengthy trip round the local Heineken brewery, it is little wonder that even observers who have been close to the negotiations for years are confused by the opaqueness of proceedings. When ever people don't know what is going on, it is a short leap for them to start making it up.

In fairness, most of the problems so far appear to have been the result of cock up rather than conspiracy. But that said, the organisers have hardly helped themselves this morning with the surprise decision to replace the Summit president Connie Hedegaard with Danish Prime Minister Lars Lokke Rasmussen. If, as was claimed, this was a procedural move why was it such a surprise? It might be entirely logical for a head of state to chair a meeting that from now on will be dominated by heads of state, but the unexpected nature of the move only serves to fuel rumours that Hedegaard has been ousted for being too sympathetic to poorer nations.

Developing countries might have thought Hedegaard was too tough on them, but if that is the case they can expect a nasty shock now Rasmussen is in charge.

Of course, the apparent personal antipathy between Hedegaard and Rasmussen is insufficiently outré to qualify as a full blown conspiracy theory, but should the talks collapse expect plenty more off-the-wall explanations to emerge.

With so many countries apparently wanting a deal to be reached, one likely source of conspiracy theories lies in the fact that an agreement that is boycotted by some developing countries would provide some benefits to those that do choose to sign up.

For example, at the time of writing the draft texts still contain room for "trade measures" that would effectively allow the imposition of carbon tariffs on products from countries that do not deliver verifiable climate change commitments.

It would be a genuine disaster for the planet and I am not for a single second suggesting that any countries are pushing for such a negative result. But if certain countries make good on their threat not to sign up, those nations and individuals in favour of protectionist measures could find themselves waking up on Saturday morning to find they have been given the international legitimacy they crave.

Hopefully, this threat of carbon tariffs will be effectively used as the ultimate bargaining chip to get all countries on board and committed to action. That is certainly the way the US team appears to be interpreting the current state of the talks, and we can only hope their game of brinkmanship with the Chinese over emissions targets, climate funding and carbon tariffs ends well for both sides.

But the very real danger is that if this carbon tariff bargaining chip fails then a flawed and unevenly supported Copenhagen deal will not only condemn us to climatic catastrophe, it will also deliver an escalating trade war to keep us occupied while we wait fior disaster.

Posted by James Murray on December 16, 2009 | Permalink | Comments (5)

First the good news: the green section of the pre-budget report or budget has now become so normalised it is as much a part of budget days as the jeering response from the opposition benches.

The pledge to support the "industries of the future" and the name-checking of Kyoto, Copenhagen, and carbon budgets has now featured in pretty much every budget of the last few years - and if anything environmental issues become more significant each time the Chancellor rises to the dispatch box.

Tax hikes, bonuses and bingo may have dominated the headlines, but Alistair Darling gave a surprisingly sizable chunk of his Pre-Budget Report speech over to the environment. The UK's car crash public finances meant there was never going to be a game-changing display of generosity from the Treasury, but there was still plenty for low carbon businesses to celebrate.

The government underlined its commitment to the carbon capture and storage sector, and also reassured investors in offshore wind that current levels of subsidy will be retained until at least 2014. Meanwhile, the microgeneration sector may have to wait until the New Year to see whether it should be celebrating or commiserating over the level feed in tariffs are set at, but it must have been encouraged to hear the Chancellor say income generated by households using the scheme will be tax free.

Firms providing energy efficient products and services will also be happy that changes to the climate change levy will drive up energy bills for many firms, while the electric vehicle sector was delighted that two of its highest priority markets, delivery vans and company cars, will enjoy tax exemptions for five years.

Somewhat surprisingly, there was money too. Not earth-shattering sums, admittedly but not to be sniffed at either. An additional £150m was found for low-carbon investment, with a further £200m also made available for green home improvements, primarily in the form of improved insulation and a new boiler scrappage scheme.

There will be understandable nerves amongst green business leaders that the unspecified cuts in services that will inevitably follow the election will impact low carbon industries, but on the whole there was plenty to pleased about in the PBR.

And yet, listening to Darling you get the impression these new green commitments came a little too easily. There was not a peep from the opposition benches during the environmental part of his speech, because there was nothing there that was in the least bit revolutionary or innovative. Every change that was made constitutes tinkering round the edges, when, as every green business leader you speak to will tell you, what is needed is a comprehensive re-engineering.

Nowhere is this more noticeable than with green taxes. As the Sun front page memorably put it, Darling screwed more people than Tiger Woods on Wednesday with his increase in National Insurance, but there are other ways to raise revenue besides taxing income.

Darling obviously understands the appeal of green taxes as on Wednesday he did announce changes to company car tax bands designed to make polluting vehicles more costly and greener vehicles cheaper. But why not make the same changes for all vehicles? There can only be one explanation: cowardice.

Even in its dog days the government remains terrified of Sun or Mail front pages accusing it of attacking motorists and incapable of making the case that the majority of drivers would benefit from changes to road tax bands that further reward those driving the greenest vehicles.

Equally, where is the VAT cut on green goods and services that was being touted a year ago? It could be paid for with higher rates of tax on non-green products, but again it seems easier for the Treasury to shelve the idea than display some genuinely progressive thinking. Excuses about the need to stay within EU guidelines on VAT do not wash, if the government really wanted to cut tax on green products it would find a way to do it.

More worrying still is the fact that even the ideas that would attract no controversy cannot gain traction. From right across the political spectrum there are calls for the government to either set up a green infrastructure bank or lean heavily on the banks it, sorry we, own to increase lending to low carbon projects. And yet the Treasury chooses to sit on its hands, failing even to offer a coherent reason why it will not support a green bank.

Equally, why make income from microgeneration technologies tax free for households, but not for the businesses that have the potential to really drive the onsite generation market?

With an election on the horizon and the nation's books looking like the Treasury has drafted in a crack team of accountants from Enron you can perhaps understand the Chancellor's caution. But if the government truly believes its own assessment that climate change is one of the gravest threats we face and that the transition to a low carbon economy is essential, then it has a duty to display a little more fiscal boldness. Who knows, explain it properly and ensure all tax hikes are balanced with an explicit reward elsewhere and the public may even respect them for it.

Posted by James Murray on December 11, 2009 | Permalink | Comments (0)

I know this is hardly an original observation, but President Obama really is one very cool customer.

The administration's ability to steadily advance its low carbon agenda while facing conflicting pressures from Republicans (and some Democrats) angry at the proposed US climate bill, and diplomats in Copenhagen demanding the US shows more ambition, has been little short of a master class in political positioning. There is a long way still to go before he can declare victory, but you get the impression Obama will see some form of climate legislation passed early next year - and what is more, his opponents will not be quite sure how he did it.

The influential political blogger Andrew Sullivan has repeatedly observed how throughout both his campaign and his first 12 months in the White House, President Obama has outmanoeuvred rivals through almost preternatural displays of calmness and detachment.

Echoing Muhammad Ali's famous rope-a-dope strategy, Obama has let opponents expose their own position, unleash wave after wave of ill-conceived attacks, and reveal their strength and weaknesses, while all the time he quietly and coolly weighs up his options. Then, just when his rivals think they are heading towards victory, he has acted with swiftness and no little ruthlessness to land his own decisive blows and end up with exactly what he wanted.

He did it with the Clintons, he did it with McCain and Palin, he did it with the health care reforms, he is trying to do it with Afghanistan, and now he is pulling off the exact same trick with climate change and cap-and-trade bill.

For several months the White House has appeared rather detached from the debate surrounding the Boxer-Kerry climate bill. Obama made it plain that he supported the bill and wanted a cap-and-trade scheme that would provide a boost to green businesses and help limit US reliance on foreign oil, while managing the financial impact on carbon intensive firms. However, he carefully eschewed the rough and tumble of the on-going Senate debate, which has seen Republicans and a number of key Democrats rage against the bill as everything from a "jobs killer" to the first step towards a Communist One World government.

Obama has been able to do this because he knew he was holding the trump card in the form of the Environmental Protection Agency's "endangerment finding" that rules greenhouse gases pose a threat to public health and can be regulated under the existing Clean Air Act.

The EPA actually said they would issue the ruling back in the summer - and then, nothing. The Republicans were allowed to do everything in their power to block the Boxer-Kerry bill, demanding additional research on the bill and in a display of childish petulance even boycotting key committee hearings on the draft legislation.

And then yesterday, in a surprise move timed perfectly to coincide with the opening of the Copenhagen Summit, the administration formally approved the endangerment finding.

In one move, Obama has significantly increased the chances of his passing a domestic cap-and-trade bill and securing a genuine deal in Copenhagen.

US negotiators in Copenhagen can now guarantee that the US has the legal power to make good on President Obama's pledge to cut emissions by at least 17 per cent on 2005 levels by 2020 even if Congress blocks the climate bill.

And perhaps more importantly Democrat Senators can offer Republicans and opposing Democrats a stark choice: either get on board and help us shape a workable and ambitious cap-and-trade bill, or we will simply cut emissions through the blunt instrument of emissions standards for vehicles, industrial plants and power stations.

Making the case for the cap-and-trade bill yesterday, Senator John Kerry subtly spelled out precisely this choice, noting that "imposed regulations by definition will not include the job protections and investment incentives we are proposing in the Senate today". The Republicans appear to be over a barrel, they can either return to the negotiating table with their position much weakened or they can put up with more onerous carbon emission regulations.

Inevitably, this has prompted the usual sound and fury from Republican lawmakers who have accused Obama of acting unilaterally and displaying contempt for Congress. Although, accusing anyone of showing contempt for Congress when your Senators can't be bothered to show up for Committee hearings takes some brass neck.

They have also accurately predicted that any attempt to push new carbon rules through the Clean Air Act would face legal challenges. But then again this would not necessarily stop the EPA imposing the new rules while the legal battles proceed. Moreover, the Supreme Court has already ruled in support of the EPA's decision, meaning any law suit would have to come up with some pretty compelling new evidence that greenhouse gases are not a pubic health risk.

For business leaders in general and green business leaders in particular the EPA ruling has given them the investment certainty they crave. Anyone now doubting that the US will impose some form of regulation on carbon emissions, that energy bills will rise, and that low carbon business models and technologies will become more attractive is deluding themselves.

Of course, as the past few years of US politics have proven, plenty of people prefer delusion to reality, but fortunately the president is not amongst them. He has his eye on the main prize, and there is growing evidence that he could yet secure the climate victories he craves in both Washington, and perhaps more importantly, Copenhagen.

Posted by James Murray on December 8, 2009 | Permalink | Comments (1)

So, oil is back above $80 again and officially the International Energy Agency (IEA) is warning that deep cuts in emissions are needed not just to tackle climate change but to avoid a doubling of energy bills by 2030, while unofficially a whistleblower at the agency thinks we are already in the "peak oil zone" and only behind the scenes lobbying stops government's admitting as much.

There are many reasons why climate change scepticism and a refusal to accept the need for urgent reductions in greenhouse gas emissions is a sure fire indicator of a mind deep in the throes of intellectual atrophy - the inability to discern between one off data points and long term trends, the support for theories that have been comprehensively debunked, the unedifying victim mentality - but now we can add peak oil to the list.

As we've argued before it is possible to construct a water tight case for action to tackle climate change without an expert understanding of climate change science - all you need to do is undertake a risk analysis. If the vast majority of the world's scientists are more than 95 per cent certain that human actions are leading to potentially irreversible climate change, then we should act now to tackle the problem on the not unreasonable grounds that it is stupid to gamble with the future of civilisation when the odds of doing nothing and getting away with it are so slim.

It's intriguing to ask what would have happened had the vast majority of the world's economists warned that we were heading for financial crisis? Or imagine what would happen if the world's intelligence community was 95 per cent certain that Iran had the bomb and was readying to use it? Then again don't, it's not a pretty picture.

The very real threat of peak oil further tilts this climate risk equation ever further in favour of low carbon action.

A bit of back-of-the-envelope game theory makes this plain. Imagine the stake is two per cent of GDP and the proposal is to invest it in rapidly transitioning to a low carbon economy.

If the climate scientists are right this would provide us with a reasonable chance of avoiding climatic breakdown and an economic and humanitarian crisis unprecedented in its scope and scale. But look at what we still get if they are wrong (which all the evidence suggests they aren't) - we get rid of the risk of peak oil, and as a result we get massively improved energy security, an end to unpalatable relationships with petro-dictatorships and reduced energy price volatility. Not to mention increased employment as a result of renewables higher level of labour intensity, and a massive fall in the hidden health and economic costs that arise from air pollution.

Now flip the equation around. What happens if we do nothing? Some climate sceptics argue the money would be better invested in poverty reduction and development in poor nations, but anyone who thinks the rich world will stump up a further two per cent of GDP for such admirable purposes is living in cloud cuckoo land (although many sceptics already spend plenty of time there dreaming up their scientific arguments, so perhaps they do genuinely believe this will happen). The reality is the money would be invested in the same old manner and would deliver the same old returns.

If the sceptics are right and there is no climate-related reason to switch to low carbon technologies we get these same old returns - and we still have to find a way to deal with escalating energy security. But if they are wrong, we get something akin to the end of civilisation.

In the complex world of futurology, economics and risk, the low carbon transition option is as close as you get to a no lose scenario, while the do nothing option results in a very high chance that we lose everything. Even the most booze-addled Vegas punter could assess the odds and pick the best option.

I would call it a no-brainer, but given the level of intellectual rigour the sceptics apply to tackling climate science I'm not sure that would preclude them from continuing to argue against action.

Posted by James Murray on November 12, 2009 | Permalink | Comments (8)

How would you like to see a cut in income tax? I'm thinking about a cut of two, maybe even three pence in the pound for those on middle incomes, perhaps even more for those on low and high incomes. How's about similar cuts in National Insurance contributions or possibly even a reduction in corporation tax? Interested? Thought you might be.

Strangely, this is not an exercise in fevered wish fulfilment for George Osborne, nor the latest absurdist report from the Taxpayers Alliance, but serious proposals being put forward by a government-backed commission and an increasingly vocal coalition of environmental groups. Sadly, however, you would not know it from any of the reporting.

Today's recommendations from the Green Fiscal Commission that the UK should double the proportion of the tax take made up of green taxes and introduce around £150 billion in new levies on polluting behaviour is the latest in a long line of studies and reports to make a waterproof case for green taxes, only to be shot down by unbalanced reporting that focuses on tax increases and downplays the accompanying cuts in conventional taxes.

For example, the headline on the front page of the Sunday Times business section yesterday read: "£3,300 a car - Turner to unveil green tax blitz", despite the fact it could just have easily read "Turner proposes £150 billion in tax cuts".

The fact is that almost all proposals for increased green taxes are "revenue neutral" - that is to say that any increases in green taxes are offset by tax cuts elsewhere.

In other words, many people would be massively better off, while most would be neither better or worse off. Only those with unsustainably carbon intensive lifestyles or business models would suffer and they would undoubtedly look to change their behaviour as new green taxes began to bite.

On a purely self interested level, I can't wait for the Commission's recommendations to be enacted. Any cuts in income tax and National Insurance would leave me quids in, while as a city dweller living within walking distance of work increases in energy taxes or fuel duty would have a minimal impact on my outgoings.

Even those balking at the proposed £3,300 tax on new cars need to remember that: a) if they choose to do so they can use the money they save through lower income taxes to help cover this cost, and b) they could avoid the levy by buying greener vehicles.

For businesses the same calculations should apply. If your business is fractionally more carbon efficient than that of your rivals, then you stand to benefit from any increase in green taxes. By definition there will be at least as many winners as losers, but even those firms operating in carbon intensive sectors such as car manufacturing and haulage need not worry too much at the prospect of higher green taxes - the government would almost certainly sort out some form of tax credit protection to help out while the transition is made to lower carbon technologies.

Rather than worrying about the impact of increased green taxes, businesses should be welcoming the prospect of taxes they cannot avoid such as National Insurance and corporation taxation being replaced by environmental taxes they can avoid by simply embracing low carbon best practices.

It is time for the business community to get on board with the growing campaign for green taxes, not simply by promoting increased environmental levies but by lending their voice to calls for significant cuts in conventional taxes.

Posted by James Murray on October 26, 2009 | Permalink | Comments (2)