If Cameron knew it was coming, his adversarial stance towards Jean-Claude Juncker in the previous months — even his defeat when he tried to prevent him becoming President of the EU Commission — would make much more sense. Now he can say: “See, I told you so.” He may claim that history has proven him right. Now he could wage a campaign against Juncker not only as the public face of the EU — by which he can cater to anti-EU sentiment — but he can also add tax justice to his election campaign, thereby giving it a slightly ‘anti-corporate’ streak, which could help him to neutralise some of the other parties’ reformist agenda points.
However, such a strategy would be severely complicated by the UK’s Overseas Territories and Crown dependencies status as tax havens2.
Recently, I was teaching on emissions trading and the EU Emission Trading System (ETS). In preparation for this it took me quite a while to get a good overview of the different phases of the EU ETS. So I thought I’d share my overview table here:
If you have any suggestions for improvement, I’m quite happy to update it.
A majority of French parliamentarians has signalled that they would agree to a law stipulating the reduction of nuclear energy in France’s energy mix from 75% to 50% until 20253. Instead, energy efficiency and renewables shall receive more support. The national assembly is due to vote on the new law on 14 October 2014.
France has historically seen much less public resistance to its huge nuclear power installations than Germany. Why does it now seem so easy to announce such drastic cuts?
A major factor could be that most nuclear reactors belong the EDF, an energy corporation whose vast majority of shares are still held by the French government. In the French case, the government still controls one of the “commanding heights” of the economy and is thus far less affected by private sector lobbying.
Nuclear power is a technology that corresponds well to centralisation, as it is based on big projects and needs a lot of security measures in place. The question is now whether France will follow such a centralised approach in the case of renewables, which lend themselves much better to decentralised approaches than nuclear power. If the road of decentralisation is chosen, this may well result in the emergence of a stronger lobby group for renewables.
Hopefully, the French government retains control over EDF until its energy portfolio is much less nuclear than today. Otherwise, a strong lobby force, blocking the transition from nuclear to renewable power, may result.
Yesterday I taught the seminar “Climate Change Policies in Comparative Perspective” and one of my students asked me whether the countries who have emissions targets under the Kyoto Protocol had actually been on target during the first Commitment Period (2008-2012). I knew that they were within the target range overall, yet I didn’t have a good overview of which individual countries had actually been on target and which hadn’t. Realising this I trawled through the net and it actually took me a while to come up with a good overview. The document I finally found states that
…complete and detailed official data regarding the countries’ emissions and transactions of carbon credits in 2008-2012 was not available until April 2014. 4
So until recently it wouldn’t have been possible to produce an authoritative overview. Now that I found the document, here I provide a screenshot of the relevant overview page with a link to the original report.
Canada, who had the greatest overshoot, had dropped out before the end of the first commitment period. Japan, with a much smaller overshoot, has withdrawn from the second committment period.
Interestingly, Norway also had a sizeable overshoot. I wonder if that’s a factor behind the country’s heavy engagement with the establishment of Reduced Emissions from Deforestation and Degradation (REDD) programmes5.
Without the economic crisis Spain would certainly have been even less on target.
As I understand it, these numbers don’t take into account the use of flexible mechanisms (offsetting and emissions trading). Thus, they cannot really provide the whole picture in terms of compliance. All in all, a handy overview.
After a half century of extremely sophisticated mathematical work on this problem, we can say that the chief contribution of formal game theory to our understanding of rationality has been to demonstrate rather convincingly (if not mathematically) that there is no satisfactory definition of “optimal” rationality in the presence of opportunities for outguessing and outwitting.
Herbert A. Simon, Bounded rationality in social science: Today and tomorrow, Mind & Society 1 (2000), no. 1, 25–39.
One could think of many interesting extensions or alternative applications: For example, one could adapt it to other polities by drawing on datasets from other countries or it would be possible to switch the perspective from lawmakers to firms and represent information on firms’ lobbying history via mouse-overs.
In their book “Full Disclosure. The Perils and Promise of Transparency”, Fung, Graham and Weil (2007) call this type of emergent transparency “collaborative transparency”. In the age of big data, ubiquitous information technology and smart kids, this is going to stay exciting for a long time to come.
Climate change mitigation and the preservation of antibiotics effectiveness are two of today’s greatest public policy challenges. Each call for a similar measure, wherefore they should be considered in a joint perspective:
First, the looming threat of climate change calls for concerted action. Among the vast array of different measures, reducing methane emissions from farm animals could make a great contribution. Also, the pressure to convert land to produce food for animals reduces the availability of carbon sinks. Thus, reducing demand for animal feedstock can contribute to climate change mitigation efforts.
Second, the routine use of antimicrobials/antibiotics for increasing animal growth or preserving animal health is likely to lead to the to the development of infections resistant to antibiotics treatment in humans6. While the case for banning the use of antibiotics for maximising animal growth is particularly strong, there are also good arguments for further restricting its use even for preserving animal health. Antibiotics have been the „wonder drugs“ of the 20th century, saving immeasurable lives. Yet, today their effectiveness is becoming more and more diminished due to the development of resistant bacteria strains. Trading human health off for animal health is problematic. Even more, in today’s industrialised farming the living conditions of animals are often dismal, necessitating the standard use of antibiotics in the first place. If farm animals had more decent lives, the need for antibiotics would decline. This is reflected in the limitations on the use of antibiotics in organic agriculture7.
By looking at the joint benefits of policy responses to these problems, the argument base for taking action to address any of them is broadened and the costs calculus changes:
If antimicrobials use on animals were rigorously restricted, it would have strong implications for the dairy and meat industry. Animals couldn’t be crowded together as extremely as they are today, thus reducing feedstock input and methane emissions output per land unit. Feedstock is often sourced from abroad, the demand for which is adding pressure to turn more biodiverse and CO2 storing land into agricultural land. Letting cows graze on grassland is associated with lower emission than intensive grain feeding8. Thus, under the assumption that not simply more land will be used for putting animals on the pasture or in the barn, limiting animal antibiotics use can have a double climate policy benefit: less methane and less pressure to convert land for feedstock supply.
Happy cows, healthier humans, and a more stable climate: restricting the use of antibiotics on animals can support all of this.
If you wanted to have journalism for the whole population, for the entire citizenry, it would require massive postal subsidies, to make it possible for the abolitionist press, for example, to come into existence, or the suffragist press. All that took enlightened public policy making, and we need another strong dose of that today. Interview with Professor Robert McChesney
Will humanity be collectively able to avert dangerous tipping points for climate change? Probably not, according to BP’s Energy Outlook 20359. Sadly, this may well be true. Is it good news for BP? Yes, rather so.
Is BP’s Energy Outlook 2035 an objective assessment of reality? Only to an extent.
BP Energy Outlook presents itself as a realistic assessment of reality, yet it is
a reality that BP actively shapes and
it creates a perception of reality that is beneficial to BP.
It also wittingly or unwittingly aids the perception that industrialising countries are responsible for emissions reaching a level that makes dangerous climate change likely, thus generating a sense that climate action in OECD countries will only have a limited impact.
When presenting the BP Energy Outlook 2035 at University College London on 1st April 2014, BP’s Group Chief Economist and Vice President, Christof Rühl, left no doubt that he considers climate policy to be low on the agenda of policy makers. According to the Outlook climate change policies will remain too lax for staying within the emissions confines recommended by scientists: “Global CO2 emissions from energy use grow by 29% or 1.1% p.a. over the forecasting period. Policies to curb emissions continue to tighten, and the rate of growth of emissions declines, but emissions remain well above the path recommended by scientists.”10
What if climate policies would become stringent enough for staying within the 2 degree limit? Following HSBC 25% of BP’s proven and probable reserves would be ‘unburnable’ under a low carbon policy environment consistent with a scenario (‘450’), which limits global warming to 2C, with “BP’s value at risk from unburnable reserves [being] equivalent to only 6% of its market value as most of the ‘lost’ reserves are low margin. “1112. This doesn’t sound too bad. Yet BP is still investing into more exploration and extraction, ensuring that their interests continue to be pitted against the successful implementation of a low carbon regime with extensive coverage.
BP does’t just assess what would be the most likely future developments in energy markets, it also actively shapes them. According to BP its Outlook “is based on a “most likely” assessment of future policy trends.”13Is BP just responding to markets signals and expectations of regulatory developments? Past investments, “sunk costs”, mean that “oil companies are unlikely to stop extracting oil, even if they invest in renewable energy”14. If “exit” is not likely, “voice” is: lobbying and the shaping of perceptions. Standard economic approaches treat firms as solely responding to government intervention15. Yet firms such as BP actively invest in politics 1617. Big oil and energy intensive industries want a world with a low carbon price. Others, e.g. renewable energy companies, energy efficiency pioneers and the concerned public, want a high carbon price. What BP tells us in its Outlook is that they think they will win.
BP’s Energy Outlook creates a perception of reality that is beneficial to BP. BP is a publicly traded company. A threshold carbon price can benefit BP as oil and gas gain in desirability when coal’s higher carbon intensity drives it to the sidelines. While a carbon price high enough to stay within a tolerable degree of global warming would also hurt BP it would still hurt oil and gas companies far less than coal companies. BP could probably manage the transition. Its suggestions of substituting gas for coal in the mid-term make sense. However, for BP loosing 6% of its market value doesn’t sound like an enticing proposition. A scenario compatible with a reasonable likelihood of averting dangerous climate change threatens the profitability of BP’s assets. Acknowledging this would presumably not have the most benign effects on its share price. Concerning the argument that some of BP’s assets may prove to be unburnable, they write “we believe that the unburnable carbon approach to assessing the impact of potential climate regulation on a company’s value oversimplifies the complexity of the issue and overstates the potential financial impact.”18 Creating an impression that the future will be benign for big oil may yet turn out to be delusional for investors at large but is still good for current shareholders. The situation could be overdetermined: BP may not have much of a reason to assume that stringent climate policies will be put in place. Yet, even if they had reason to assume it, it wouldn’t be in their interest to admit it. Currently, the markets don’t price in the risk that climate regulation stringent enough to ward off dangerous climate change could impact on fossil fuel companies’ share prices19. If BP recognised a low carbon scenario in their outlook as a realistic possibility, it would raise the question of how such a scenario would impact on their assets, entertaining the prospect that some might become unburnable or “stranded”. This could change market perceptions, with some investments moving out of more and some into less carbon intensive forms of energy. If BP included the possible impacts of a low carbon scenario on market demand in its Outlook it would become apparent that BP is actively investing on the assumption that this is not going to realise — that they bet on a future that entails dangerous climate change.
The Outlook can also be interpreted as suggesting that industrialising countries are responsible for emissions reaching a level that makes dangerous climate change likely. When commenting on Christof Rühl’s talk, environmental economist Paul Ekins, Professor of Resources and Environmental Policy and Director at the UCL Institute for Sustainable Resources, pointed out that the BP forecast graph depicting emissions by regions (see above) may be taken to suggest that the emissions cuts (compared to a baseline scenario) necessary for being in line with the International Energy Agency scenario “consistent with the goal of limiting the global increase in temperature to 2°C” (IEA 450 scenario)20 would need to come from non-OECD developing countries. Yet, in order to make limiting emissions palatable for developing countries, OECD countries clearly need to take the lead.
Considering that the OECD member countries have a joint population of 1,257 million in 201221, with the global population exceeding 7 billion 22, a mere stabilisation of OECD emissions seems hardly adequate. Differences in capabilities as well as historical responsibility clearly mandate a pioneering role in decarbonisation for industrialised countries. While lower demand from industrialised countries for fossil fuels makes them cheaper and thus raises incentives for industrialising countries to rely on them, lower prices also make future exploration and extraction efforts less attractive. As investment for renewables increases in industrialised countries, prices also fall for industrialising countries. It is far from clear that OECD countries’ climate action would be insufficient for remaining below the 2C target. Even if the target was exceeded, such action would be far from futile. If rich countries pioneer low carbon infrastructures, this will also help industrialising countries to rein in their appetite for fossil fuels.
The BP Energy Outlook 2035 suggests to solely give a realistic forecast23. Yet BP forecasts a reality it helps to create. And its forecast further bolsters investments into this kind of reality. BP’s sense of realism is a confidence in its own prospects. While much can be learned from the data, the way it is presented supports fatalism, helps to keep up share prices and aims to provide legitimacy to further fossil fuel exploration and extraction. It provides the rationale for betting on dangerous climate change.