Miatta misleads Parliament

Andrew Neil’s recent broadside at the Government, essentially accusing them of systematic dishonesty, has got lots of attention on social media, and I couldn’t help but be reminded of it while reading through some of the answers that DESNZ ministers had given to written questions.

One example was a question from Labour MP Anneliese Dodds on the cost-effectiveness of the Energy Company Obligation, a scheme through which energy suppliers are compelled install insulation measures in their customers’ homes. In response, the minister, Miatta Fahnbulleh, explained that:

ECO4’s final impact assessment projected a positive net present value of £0.8 billion, underscoring the strong social impact and economic value of ECO.

Unfortunately, this is a shameless deception. The impact assessment, which can be found here, sets out a total of £4.4 billion of costs, including £2.4 billion of installation costs and – wait for it – £0.4 billion to pay people to inspect the results (!). It then sets out £5.2 billion of (alleged) benefits, including £1.9 billion of lower bills, £2.4 billion of ‘non-traded greenhouse gas emissions’ and £0.2 billion of ‘improved air quality’.

The lower bills calculation raised my suspicions, because the assessment doesn’t mention what retail gas price they are assuming. However, the £2.4 billion ‘non-traded’ carbon cost saving is easier to diagnose. The assessment says (p. 15) that the unit cost comes from the Treasury guidance on valuing carbon emissions. In the latter document, we find that the government’s policy is to price carbon emissions using the “target consistent” carbon price.

Regular readers will be familiar with this issue, but in summary the issue is as follows. The benefits of a decarbonisation measure will include the cost of global warming avoided – hurricanes avoided, droughts prevented, that sort of thing. These are imaginary of course, since there is no evidence of hurricanes or droughts becoming worse. Indeed the empirical trends, such as they are, are in the opposite direction. The ‘evidence’ for this cost is only the output of computer simulations.

However, if we suspend rational thought for a moment, and accept the reality of these harms, their cost can be encapsulated in a measure known as the social cost of carbon. Estimates cover a wide range of values, but are typically less than £50 per tonne.

The ‘target consistent’ carbon price, on the other hand, is a price set at a level that will make all planned decarbonisation measures appear ‘cost-effective’. In other words, it conjures up some further entirely imaginary benefits beyond all those (already imaginary) hurricanes and droughts prevented, simply so that the policy can be justified.

And that is the basis of nearly half of the benefit that Miatta Fahnbulleh has claimed for the ECO policy. She has conjured up some imaginary benefits, and on that basis has told Annaliese Dodds that the policy is cost-effective. In short, and coming to the point, she has misled Parliament.