David Cameron last week renewed his promise to cut the U.K. government’s carbon emissions by 10% in the next 12 months, and is now taking suggestions on how to achieve that. Here’s a thought: How about cutting the central government itself by 10%? That’s about the only way the new Prime Minister can simultaneously reduce government emissions and the cost of government.
If, on the other hand, the government’s plans for shrinking its emissions involve similar measures as its plans to “green” the private sector, Mr. Cameron might ask himself whether, with a budget deficit of 12% of GDP, he can afford this particular boondoggle.
It’s fashionable to profess that “greening” the economy can be accomplished at no cost, so great are the benefits of efficiency gains and renewable energy. But the history of civilization, from start to finish, can be seen as one long drive to make more efficient use of available resources. If something can be done more efficiently, at least outside of the public sector, someone is probably already doing it. And if they’re not, it’s because the costs outweigh the benefits. This is for the simple reason that “greening” the private economy requires subsidies, or heavy-handed regulation, or both. But government can’t subsidize itself, so Mr. Cameron’s quest is certain to cost taxpayers more than they get back in the form of more-efficient government energy use.
Take the Government’s plans for the private sector. Both the Conservatives and Liberal Democrats emitted many tons of carbon during their campaign speechifying about reinvigorating British industry and creating hundreds of thousands of jobs with a “green economy.” Their proposals include the Lib Dems’ promise of a “green, £3.3 billion economic stimulus package that will create 100,000 jobs.” But if the past two years of Keynesian stimulus have taught us anything, it’s that governments are bad enough at creating jobs, even when not burdened by the additional hurdle of ensuring that those are “green” jobs.
Meanwhile, the Tories and Lib Dems both want to offer handouts to homeowners for “energy improvement measures.” Mr. Clegg’s Lib Dems, in particular, argue that the U.K. version of “cash for caulkers” will “create jobs and cut carbon emissions.” But just as breaking someone’s window to make work for the glazier doesn’t add to total economic output, a flurry of spending on boilers and windows that don’t need replacing is more likely to destroy value than generate it.
The Tories have also touted “Britain’s first Green Investment Bank,” which would use public funds as seed money to finance “new green technology start-ups.” To paraphrase Pee-Wee Herman, these must be the start-ups that are so promising, private financiers forgot to invest.
We would have thought that after Gordon Brown’s tenure, Britain had had enough of hiding spending by calling it “investment,” regardless of the expected returns. But when it comes to fighting climate change, Westminster isn’t alone in ignoring the costs when tallying up the benefits of going green. The U.N.’s Intergovernmental Panel on Climate Change inspired such creative bookkeeping in a 2007 report that said industry could cut carbon pollution by up to 14% per year between now and 2030—at a net cost of zero. The fallacy in the IPCC’s analysis is to conflate the energy efficiency gains that occur naturally, because they do pay for themselves, and to assume a similar win-win equation for government-mandated “improvements.”
Richard Tol, an environmental economist with Dublin’s Economic and Social Research Institute and himself a contributor to the IPCC’s reports, tells us that this confusion about the costs and benefits of energy efficiency has been known to researchers for decades, and was highlighted to the report’s authors prior to publication. “These are big sins of omission—though not commission,” says Mr. Tol, who adds that the current trend is for energy efficiency to improve at a rate of about 20% per decade, absent government intervention.
Instead of U.N.-grade accounting, Mr. Cameron & Co. might instead look to Spain, where the government did indeed create thousands of “green jobs” with subsidies to the solar industry that totaled €1.1 billion ($1.4 billion) in 2008. But most of those jobs vanished just as quickly after crisis-hit Madrid slashed the handouts. Spanish taxpayers will never see a return on their “investment.”
With all due respect to Chris Huhne, the Government’s Energy and Climate Change Secretary, it’s not hard to predict a similar fate for many of the British Government’s “investments.” If Mr. Cameron really wants to improve the government’s energy efficiency, it might be easier to start by killing the cabinet department devoted to climate change altogether.