Low-Energy Joe v. High-Carb Donald

In last week’s column I compared the energy-related policy agendas of the two men, Joe Biden and Erin O’Toole, who have been chosen to lead their parties, both in opposition, in the United States and Canada respectively. It was a task requiring at least some subtlety and fine distinctions, because both men claim to be pursuing the same goal of zero-carbon emissions by . . . well, by different dates but let’s not quibble yet.

O’Toole is the more cautious politician, and he has hedged this pledge about with more qualifications than does Biden, who in his embrace of Green policies is a purist missionary devoted to environmental virtue at any cost. Joe’s 47 years in politics haven’t exactly demonstrated this selfless devotion to principle, but it’s possible that, like President Truman, he’ll be a different man if he makes it to the White House. Anyway, let’s take the charitable view.

Besides, now that President Trump has accepted the GOP nomination for the 2020 November election, we can compare Biden with Trump directly which means we have at least to start by treating their energy-related policies at face value. Just to show that we’re not naïve, however, we’ll lay out a key reality test:

Economic growth means more energy. Growth needs more energy and it generates more energy. Sure, there are qualifications and off-sets which is why we always add the rider, “other things being equal.” And innovation can produce more growth without using more energy in those cases where an entrepreneur arranges the factors of production more efficiently. But the overall truth remains that growth and energy go together like a horse and carriage—with the horse providing the energy and the carriage representing the greater comfort and wealth of a economically prosperous society.

All aboard for the 21st century!

Most politicians try to confuse this truth and avoid the difficult problem it imposes on them. Since they want both to increase growth and to reduce the carbon emissions that fossil fuels generate, they have to avoid putting realistic prices on their “carbon net-zero” policies and to argue that as yet elusive technological innovations, such as carbon capture, will enable them to produce the same amounts of energy with lower carbon emissions.

Boris Johnson is a prime example of this approach since his energy policy is deep green and his signature economic policy (before the Covid-19 pandemic) was to borrow large sums on money at low interest rates in order to fuel a U.K. recovery via infrastructure spending. Nice work if you can get it, as Gershwin wrote, but there’s a car crash in the future of such a contradictory policy.

So it’s a pleasant surprise that both Trump and Biden do their best to be honest about their choice in the Growth versus Greenery debate. Trump favors a policy of encouraging economic growth above all else; so he accepts that it will require energy policies that exploit as many new ways of generating energy as possible. His motto might as well be “Let 'er rip!”

Biden makes the opposite choice. He wants to move the U.S. away from fossil fuels and towards “cleaner” energy as quickly as possible and he seems to accept that this will mean less economic growth overall even if it encourages jobs growth in specific areas. He doesn’t spell out that choice exactly, but the phrase “economic growth” is hard to find in his grand $700 billion economic program.

It’s low-energy Joe versus the high-carb Donald.

Of course, we already know what Trump is about because his first term was based on the policy choice of liberating energy production, de-regulating, and cutting taxes in order to hike growth. Just in case we’ve forgotten, however, his acceptance speech this week reminded the viewers of how he began four years ago:

Days after taking office . . . I approved the Keystone XL and Dakota Access Pipelines, ended the unfair and costly Paris Climate Accord, and secured, for the first time, American Energy Independence. We passed record-setting tax and regulation cuts, at a rate nobody had ever seen before. Within three short years, we built the strongest economy in the history of the world.

And the future?

Over the next four years, we will make America into the Manufacturing Superpower of the World. We will expand Opportunity Zones, bring home our medical supply chains, and we will end our reliance on China once and for all. We will continue to reduce taxes and regulations at levels not seen before. We will create 10 million jobs in the next 10 months.

All that’s clear enough. But what of the environmental costs of Trump’s booming pre-Covid US economy? These should have been visible in rising carbon emissions. But, remember, that depends on “other things being equal.” In reality carbon emissions in the industrialized world—the US, the EU, and Japan—fell in the last few years because these economies were switching to cleaner fuels. And they fell faster than most in the U.S. because the “fracking revolution” in America meant that cleaner natural gas was replacing dirtier coal.

For the future, Trump is banking not only on the continued spread of fracking and its benefits but also on the likelihood that a booming economy will produce innovations that to make both renewables and fossil fuels cleaner, cheaper, and safer.

Frack this.

It’s a bold gamble, but so far it’s paying off.

Now, Biden makes his choice almost as clear. If you type “Joe Biden and economic growth” into Google, what you get back is this: The Biden Plan To Build a Modern Sustainable Infrastructure and an Equitable Clean Energy Future. In other words, you get an economic program that subordinates the need for economic growth to other desirable things—notably, a switch to cleaner energy.

That’s very clear in his plan’s section on what he proposes for those communities who powered the industrial revolution over centuries. He means people working in the fossil fuels industry, and his policies include “securing the benefits coal miners and their families have earned, making an unprecedented investment in coal and power plant communities, and establishing a Task Force on Coal and Power Plant Communities," etc. In other words, coal miners and perhaps other fossil fuel producers will not be part of Biden’s sustainable and equitable clean energy economy, but their workers will be economically protected.

The key elements of the Biden Plan to Build a Modern, Sustainable Infrastructure and an Equitable Clean Energy Future include:

  1. Build a Modern Infrastructure
  2. Position the U.S. Auto Industry to Win the 21st Century with technology invented in America
  3. Achieve a Carbon Pollution-Free Power Sector by 2035
  4. Make Dramatic Investments in Energy Efficiency in Buildings, including Completing 4 Million Retrofits and Building 1.5 Million New Affordable Homes
  5. Pursue a Historic Investment in Clean Energy Innovation
  6. Advance Sustainable Agriculture and Conservation
  7. Secure Environmental Justice and Equitable Economy Opportunity

In fact, there’ll be a Biden program costing $2 trillion that will finance both the transition from dirty to clean energy production and a large variety of other infrastructure expenditures and industrial subsidies to, for instance, the auto industry. But all economic forecasts of the costs of switching to non-fossil fuels show that it will be extremely expensive. And though two trillion dollars will finance many good things, unless there’s economic growth overall—and the Biden plan doesn’t seem to promise that—there won’t be any net additional jobs. What there will be is “jobs growth” in the industries favored by the Washington planners granting the subsidies.

So instead of Trump's policy rooted in growth and abundant cheap energy, we have a Biden policy based on cleaner energy and state industrial investments financed by . . . redistribution and tax increases.

And a very substantial overall increase in taxation at that. The Democrat candidate has so far proposed the following:

US Budget Watch, synthesizing the estimates of several other economic consultancies, suggests that the plan would increase taxes for the top 1 percent of earners by 13 to 18 percent of after-tax income; indirectly hike taxes for most other groups by 0.2 to 0.6 percent; and moderately slow the pace of economic growth by discouraging work and capital accumulation.

Biden’s gamble here is a kind of mirror image of Trump’s: he proposes to increase taxes sharply and use the proceeds to re-direct investment from existing industries to "cleaner" and more sustainable ones, leaving them to achieve higher growth and technical breakthroughs in the future. A lot of bad decisions can occur that way.

Moreover, whereas overall growth and technical innovation will be financed from the proceeds of a growing economy in Trump’s plan, much of the state finance for growth and innovation in Biden’s industrial plan is earmarked for the expensive transition to carbon neutrality, and his tax plan will leave much less for private investors to spend on inventing the future. On top of which the psychological atmosphere of an economy powered by state control and direction of investment is unlikely to inspire the kind of entrepreneurial innovation we saw in the pre-Covid Trump economy.

What have I done?

How do things look, however, when we leave the Big Picture and go micro-economic? Consider how the contenders fare on fracking, nuclear power, and renewables.

Fracking is a clear advantage for Trump who has encouraged it with deregulation and who has been helped by its contribution to reducing carbon emissions. If fracking were a flag, Trump would be waving it. On the other hand, Biden has got himself twisted into knots on the issue, having earlier promised the illogical policy of “no new fracking” under pressure from the Green lobby. Unless Biden can embrace fracking fully, his overall energy policy becomes significantly more expensive. Plus, it’s a vital jobs issue in Michigan, Pennsylvania, Ohio, and New Mexico on which hundreds of thousands of job depend.

Both Trump and Biden favor a revival of nuclear power, but Trump has an advantage there, too, because a year ago he asked his Energy Secretary to assemble a nuclear energy working group to find ways to expand the U.S. nuclear energy industry in an effort to compete globally (i.e., versus China).

Renewables should be an easy win for Biden because he’s been a champion of them (his plan depends heavily on their success), whereas Trump has been a loud skeptic about the industry. Such is the unfairness of life, however, that last year there was a surge of investment in the U.S. industry. Expect more “America First” rhetoric about renewables, therefore, from the president. That said, better news for renewables is better for Joe Biden, just not that much better.

On those micro-economic measures, therefore, Trump wins two out of three, and when they’re added to the macro-economic outlook for their plans, Trump expands his lead over Biden by a head.

Trump and Biden are both to be congratulated on giving us a generally clear idea of how they would govern economically and especially on energy policy. It’s not a K.O, for either.

But on the evidence so far, High Carb Donald has it over Low Energy Joe.

'Climate Change': Passing the Paris Parcel Back Again.

Boris Johnson received a very early Christmas present this week when the courts told him that Her Majesty’s Government could not proceed with its plan to build another runway at Heathrow Airport on the grounds that an extension would clash with its legal commitments on climate change. That may not sound like much of a gift, but the court’s ruling saved the Prime Minister from betraying a well-known personal pledge.

As the MP for a constituency in the path of Heathrow, he had told his discontented voters that he would personally lie down in front of the bulldozers rather than let the extension proceed. And though election promises are like pie-crusts, made to be broken, as Lenin remarked, voters tend to remember those promises that directly affect their personal and local interests, especially when they have been expressed with Boris’s trademark vivacity.

As a very new Prime Minister, however, he had inherited an established policy of Heathrow expansion that was supported by the Transport ministry and—moreover—in line with his wider economic policy of letting Britain rip in an orgy of borrowing and infrastructure development. He was trapped in the jaws of a dilemma.

Now, with one bound, our Boris was free.

The Court of Appeal had lain down in front of the bulldozers instead, ruling that it was illegal for HMG to approve a third runway without taking its own climate change commitments under the Paris Treaty (subsequently put into UK law) into account. Its judgment is interesting. It attributes HMG’s error as follows: “the reason why it was never done is that the secretary of state received legal advice that not only did he not have to take the Paris Agreement into account but that he was legally obliged not to take it into account at all.” In particular HMG had not issued a National Planning Statement as it is required to do.

That’s quite a mistake.

Ministers were free to appeal the judgment but decided not to do so. It’s true they have other options. They could now re-embark on the process of developing the case for Heathrow expansion by consulting with interested parties, holding hearings, and, of course, taking the Paris accords into account. But that process would add at least eighteen months to something that has already taken a decade. It would extend the uncertainty that, like the Brexit uncertainty (still quietly continuing), has so far bedeviled the plans of business and exporters. Above all, it would still not guarantee that any future Heathrow expansion plan would be approved by courts examining its fidelity to the Paris agreement.

Those are the immediate costs of saving Boris’s face. So stitch-up or cock-up? My guess is the latter because, as we shall see below, the costs of this judgment go higher and further than Heathrow.

It’s customary at this point for those who, like me, deplore the intrusion of the courts into what have hitherto been political decisions to denounce the rise of undemocratic judicial imperialism. And I shall give mild vent to these opinions lower down. But there is no avoiding the fact that in this case the courts have been invited by government and Parliament to intervene. A succession of laws have laid down that government planning and economic decisions must observe the legally-binding obligation to reduce carbon emissions consistent with holding a global temperature rise to within 1.5 degrees between now and the end of the century.

That’s the Paris agreement, but Britain had already proposed even more drastic carbon reductions in earlier domestic legislation. The Climate Change Act of 2008—passed with only five brave, honest, and intelligent MPs voting against it, among them the Cambridge science graduate, former deputy prime minister, Lord (Peter) Lilley—laid down that Britain must reduce its carbon emissions by 80 per cent by 2050. And this target was made still more unrealistic by Theresa May’s government in 2016 when the 2050 target was raised to 100 per cent of carbon emissions.

Successive governments had kept their fingers crossed and hoped they could argue that these targets are aspirational—and, hey, we made a good faith effort but we just missed again! But if you make such targets legally binding, then both Ministers and the general public must anticipate that the courts may intervene to require their enforcement. An earlier and more deferential generation of British judges might have been more willing to accept ministerial prerogatives on such plainly political matters. But today’s judges are more interventionist than those in the past. And, after all, they can reasonably claim that they were invited to ensure that on climate change HMG would keep its word and fulfill its treaty obligations.

Accordingly, it seems that the courts—other things being equal—will now help to impose a zero-carbon policy on the British economy. As Margaretha Wewerinke-Singh, “an international public law expert at Leiden University” in the Netherlands, told the Guardian: “For the first time, a court has confirmed that the Paris agreement temperature goal has binding effect. This goal was based on overwhelming evidence about the catastrophic risk of exceeding 1.5 C of warming. Yet some have argued that the goal is aspirational only, leaving governments free to ignore it in practice.”

Her judgment seems more authoritative on the law than on science. For activists will certainly mount legal challenges to any future substantial infrastructure or energy exploration projects. The government, other public bodies, and industry will find that many of their legal arguments have been foreclosed by this judgment. All industrial projects will be slowed down; many, perhaps most, will be either abandoned or not proposed in the first place.

Heathrow itself would struggle to meet the requirements of the UK’s climate legislation even without the lawyers’ mistakes. Its third runway is estimated to likely to bring in 700 more planes a day with a consequent large rise in carbon emissions contrary to the law. But that’s true also of the policy now touted as an alternative to another Heathrow runway—namely the expansion of existing British airports, especially Birmingham, to accommodate the rise in passenger and goods traffic that is the aim of Boris’s policies of overall economic expansion and the economic “leveling up” of regions outside the South-East.

It would also prevent his other great personal infrastructure project: the HS2 super-railway between London and Birmingham in the next decade and to Scotland and the North later. Indeed, objectors would be able to kill almost any industrial project that increased carbon emissions overall from a small power-station to a massive national industrial program like HS2—kill either by direct prohibition or, more likely, from endless legal delays as in Canada over pipeline construction. When other nations from the US to China are building runways and exploring new energy sources, oblivious to the fact that a British court had outlawed such things (pace Professor Wewerinke-Singh), Britain will be suffering from a historically unique plague: a legally-binding rule of national impoverishment. Such a policy might have been devised by the European Union to make Brexit an apparent failure.

Not surprisingly, HMG is coy about the likely costs of this. Ministers have outsourced the estimates of a zero-carbon economy by 2050 to the Climate Change Committee established under the 2008 legislation which estimates a £50 billion cost for 2050. But the Committee is composed mainly of enthusiasts for climate puritanism, and its estimates have been challenged both within and outside government. An overall review of cost estimates has been made by Harry Wilkinson of the Global Policy Warming Institute which includes a warning from the then-Chancellor of the Exchequer, Philip Hammond, to Prime Minister Theresa May that the cost was likely to be 40 per cent higher, at £70 billion per annum—with households paying an average of £2,400 every year between now and 2050. Ministers have since gone quiet on making estimates about the costs of their policies, but Wilkinson quotes an overall estimate by Andrew Mountford that total costs would probably exceed £3 trillion when the investments needed for decarbonising transport and industry are taken into account.

Cut this estimate in half and it is still staggering!

If this policy continues unchanged, it will prove extraordinarily unpopular with the voters who have been given no warning at all that the idyllic Green future they have been promised (and which they have largely embraced) would come with such a massive bill both in money and in job losses. Only climate zealots from the parliamentary climate committee to Extinction Rebellion will be happy with the outcome—and perhaps only Extinction Rebellion, which actually wants the pre-industrial world of equality in misery that a zero-carbon planetimplies in the absence of major scientific advances such as nuclear fission on which it would be reckless to depend.

More than half of the blame for this extraordinary leap into the carbon-free unknown, however, has to be placed on the politicians—all but the gallant five MPs who rejected such dangerous extremism in 2008. Politicians of all parties in recent years have wanted to appease Green hordes—which in practice meant never seriously challenging their wildest forecasts. Their method of doing so has been to pass “aspirational” laws that mandated massive emission cuts, and even to make modest bows to the Green agenda where it was easy -- as Boris Johnson did when he ruled out “fracking” in the last Tory manifesto because a non-existent industry has few supporters, while ignoring such laws when they obstructed existing policies they considered important such as his infrastructure agenda. That way they could claim to be following environmentalist policies while putting off their actual more painful implementation until another party took power.

As Ross Kemp points out in the Spectator, moreover, this habit of exiling serious policy commitment to enforcement by the courts or semi-independent bodies like the Climate Committee has grown without anyone really thinking through the consequences: “Is the government going to be able to freeze fuel duty in the Budget? That too could be said to be inconsistent with working towards zero emissions. Then again, is Rishi Sunak going to be able to announce any spending increase? I am not a lawyer, but there doesn’t seem to me to be any reason why, say, the Taxpayers’ Alliance should not go full Gina Miller and take the Chancellor to court on the basis that he has failed to run a surplus – something which was written into George Osborne’s Charter for Budgetary Responsibility."

Boris escaped one minor trap when the court decided to declare the expansion of Heathrow illegal, but it placed him and Britain in a much more restraining one when it made his entire policy of infrastructure expansion dependent upon the approval of activist judges. To escape from that trap, he will have to repeal or amend laws that passed overwhelmingly. And that’s a bigger battle than Brexit.

Will the Yellow Vests Come to Britain?

A few weeks ago I wrote about the rise in populist sentiment in France as a direct response to Emmanuel Macron's tax hike on diesel, and marveled that in the wake of the Yellow Vest movement Democrats continue to push Green New Deal policies which would dramatically raise the price of gas here in the States. Such policies would be utterly disastrous to the American analogue of the "lo-vis people" (in Christopher Caldwell's memorable phrase) who donned those hi-vis vests in France.

While we are right to be astounded that Democrats, who need to win back the Rust Belt, still insist on taking a stroll down the Rue de Macron, we should be even more astonished to see politicians just on the other side of the English Channel doing the same.

First of all, the Labour Party, which had its worst showing since 1935 in the recent general election, largely due to its traditional northern stronghold flipping to the Tories, is in the process of selecting a new leader. The three remaining candidates -- Keir Starmer, Lisa Nandy, and Rebecca Long-Bailey -- have been doing their best to out-socialist each other while also distancing themselves from Jeremy Corbyn, the hard-left leader they're vying to replace.

While all three aspirants have attempted to court the wild-eyed environmentalist/Extinction Rebellion vote, Long-Bailey has gone the furthest, calling for ruinous taxes to be imposed on British oil and gas companies as part of her long-term goal of a "Green Industrial Revolution." Here is a report on her proposed “climate justice fund”:

Fossil fuel companies must pay for the damage caused by extreme weather due to the climate emergency such as the floods devastating parts of England, the Labour leadership contender Rebecca Long-Bailey has said. Long-Bailey, the most leftwing candidate in the contest, said she was calling for a “climate justice fund” to support affected households and communities, paid for by a windfall tax on oil and gas companies “responsible for knowingly heating our planet to dangerous levels.” This would include help towards affordable insurance for those suffering from repeated flooding, she said...

[Long-Bailey] said her version of a tax on oil and gas companies would go directly to communities affected by the climate emergency. “Fossil fuel executives have known for decades that their profiteering from the extraction of oil and gas would lead here: to dangerously high global temperatures and devastating weather events,” she said. “Fossil fuel companies must be made to pay for damage from the impacts they have already locked in.

“Flooding damage costs £2bn every year in England and Wales, and without deep cuts in emissions that could rise to £21bn after 2050. These costs are currently passed on to all homeowners in the form of higher insurance premiums, while properties built after 2009 and small businesses aren’t protected at all...." Her team said taxing oil companies would not put prices up at the pump, as oil is a globally traded commodity.

I love the confidence with which her campaign makes that obviously untrue assertion in that last line. Whether or not the flooding itself can be blamed on oil and gas extraction, their reference to the cost of flooding being "passed on to all homeowners in the form of higher insurance premiums" suggests that they are aware that, ultimately, major costs like this have a tendency to trickle down. Why, then, wouldn't the cost of her tax be passed along to consumers at the pump? The bit about oil being traded globally is a red herring.

So it's difficult to understand Long-Bailey's play here. In order to get back to being a serious party, Labour needs to be competitive outside of London. Wooing back those working class voters in the North whose forebears have voted for Labour since the days of Keir Hardie is essential. Brexit was the dominant issue in British politics for years and it is likely that a lot of people in the North held their noses and pulled their lever for the party which promised to finally put it to bed. If you are Rebecca Long-Bailey, or really any potential Labour leader, why would you pledge to enact a policy which would make their lives harder?

Now, lefties alienating their constituents might seem like great news for us right-of-center types, especially with Boris Johnson and his chief strategist Dominic Cummings having pledged to do whatever they can to permanently move into the Tory Party those who merely "lent" them their votes in the recent election. Except... Boris and Dominic seem set on keeping pace with the enviro-nuts on the opposition benches:

Britain's 37 million drivers could face the first fuel duty rise in a decade next month. They may be targeted in the Budget as Boris Johnson’s all- powerful adviser Dominic Cummings eyes up a £4 billion spending pot. He wants to end the fuel duty freeze, which has been in place since 2010 and saves drivers about £1.50 every time they fill up. The tax will probably go up by the rate of inflation, putting 2p on a litre of fuel. However, the rise might be delayed until next year.

Mr Cummings wants to use fuel tax to fund the PM’s promised spending on infrastructure outside the capital, Treasury sources say. Some in No 10 believe it will also boost the Tories’ reputation on the environment. During the election, the PM told The Sun he had “absolutely no intention” of raising fuel duty. But allies of Mr Johnson and the new Chancellor [Rishi Sunak] refused to rule it out.

So Johnson and Cummings are willing to risk alienating blue-collar voters by raising fuel taxes in order to generate some cash and "boost the Tories’ reputation on the environment." There's no other way to describe that than as a slap in the face to the working men and women who carried them to victory in December, as some of the countries new Northern MPs are now pointing out.

Moreover, Johnson has refused to challenge a law passed by his predecessor Theresa May that requires Great Britain to have net-zero greenhouse emissions within 30 years. Two new reports by the Global Warming Policy Forum delve into what this would actually mean:

The reports find that decarbonising the electricity system and domestic housing in the next three decades will cost over £2.3 trillion pounds. The final bill will surpass £3 trillion, or £100,000 per household, once the cost of decarbonising major emitting sectors like manufacturing, transport and agriculture are included....

According to the Committee on Climate Change (CCC) the costs for Net Zero in 2050 are ‘manageable’: “…we estimate an increased annual resource cost to the UK economy from reaching a net-zero [greenhouse gas] target that will rise to around 1–2% of GDP by 2050.”

Yet, the CCC has resisted attempts to have its calculations disclosed under FOI legislation. Even more remarkably, it has admitted that it has not actually calculated a cost for the period 2020–2049. The decision by Parliament to undertake the complete decarbonisation of the UK economy is thus uncosted.

According to GWPF director Benny Peiser, the two new studies represent the first meaningful attempts to pin down the cost of net zero: “Although the Committee on Climate Change claims that net zero can be achieved at modest cost, they have now quietly admitted that they have not actually prepared any detailed costing. Unfortunately, Parliament seems to have taken them at their word, and we are now embarked on a project that risks to bankrupt the country.”

James Delingpole, commenting on the GWPF's reports, hits the nail on the head:

Boris Johnson’s net zero by 2050 scheme — so far largely unopposed and uncriticised, even by Conservative MPs — is an uncosted, ill-considered, virtue-signalling disaster in which the British economy will be forced to commit unilateral energy suicide to no purpose while the fossil-fuel economies of China, the U.S., India and Brazil continue to grow and grow.

All of which is to say, the leadership of both the Conservative and Labour parties would do well to learn a few lessons from Macron's experience. The French president's approval ratings currently sit in the low 30% range and recent polling puts dissatisfaction with his performance at 68%. Whichever party manages to speak to the issues of those disaffected workers is likely to dominate in the future in Britain. And if neither of them do, well, perhaps neither of those parties will have a future.