It’s one thing to approve of Net Zero in principle, and quite another to support it when it starts to bite. As I’ve been arguing for a while now, voters have been showing early signs of discontent about aspects of the climate agenda. And some politicians are now starting to try and catch up. The German government, therefore, succeeded in amending the EU’s proposed ban on sales of new internal combustion engine cars (ICEVs) after 2035 so that it excluded ICEVs running on eFuels. Whether eFuels can be scaled up by enough in time seems unlikely, but at least the exemption is there.
Now the U.K., which had committed to ban sales of new ICEVs as early as 2030, looks as if it may extend that deadline until 2035. The reason that Britain, which earlier had a deadline in line with the EU’s 2035, had moved up the date owed nothing to reason, and everything to the vanity of then prime minister Boris Johnson. The U.K. was chairing COP-26 (the 2021 edition of the UN’s rolling climate conference) and Johnson wanted to look good. If banning ICEVs in 2035 is both unacceptably coercive and, in practical terms, a nightmare (spoiler: it is), Johnson’s decision to advance the arbitrarily dated ban with an earlier arbitrarily-dated ban added an extra, and reckless, dose of stupidity into an already destructive mix.
Deadlines have a way of creeping up on you, and so do elections. The governing Conservative party faces a general election no later than January 2025, which it is expected to lose badly. Despite that, in July the Tories managed to eke out victory in a by-election (special election), partly because of voter opposition to an imminent extension of London’s ULEZ (ultra-low emission zone) to outer London. ULEZ is only tangentially related to climate policy, but that’s not the perception. It seems likely that that vote was one crucial element in Prime Minister Rishi Sunak’s decision to push the ICEV prohibition until 2035. The vote will have reinforced the idea (which I discussed in a previous Capital Letter) that while voters favor Net Zero policies in principle, that support will ebb away when the cost of Net Zero becomes imminent. Add to that the fact that British car buyers are proving more reluctant to buy EVs than the central planners had expected, and there were good practical reasons to push back the date of the ICEV ban.
Matt Goodwin has some interesting polling data on this:
Pushing back a ban on the sale of diesel and petrol cars to 2035?
When I asked all voters what they thought about the ban 50% said they opposed it and only 34% supported it (the rest were undecided). YouGov find the same…
It’s the same story when you ask voters whether environmental-related taxes and penalties on motorists have ‘gone too far’, are ‘about right’, or ‘should go further’.
Only 17% of all voters in the country think the status-quo is about right and only 11% want environmental fines and penalties to go further.
It will be interesting to see if U.S. voters start to feel the same way as EV and other Net Zero mandates start to bite over here.
The Daily Telegraph (September 20):
Rishi Sunak on Wednesday held a hastily-arranged press conference in Downing Street to announce major changes to his environmental policies to make them more affordable for hard-pressed households.
While he said he was still committed to the target of making the UK net zero by 2050, the Prime Minister said changes had to be made in the wake of the cost of living crisis to ensure families could afford green laws.
The changes will delay the switch from petrol and diesel cars to electric vehicles, and from gas boilers to environmentally-friendly heat pumps.
The ban on the sale of new petrol and diesel cars will be put off by five years, from 2030 to 2035.
It means families who do want to switch will be able to take advantage of falling prices for electric vehicles over the coming decade.
After 2035 all new cars will have to be zero emissions, but people will still be able to buy and sell second-hand petrol and diesel vehicles.
Judging some of the screams from the Net Zero camp, Sunak had become a “denier,” but all he has done is to bring the U.K. in line with the EU and such hotbeds of climate skepticism as New York and California.
More than that, there seems to be a catch.
The Daily Telegraph (September 21):
Four in every five vehicles sold must be electric by the end of the decade, ministers have told car bosses, despite Rishi Sunak’s decision to delay a ban on new petrol sales.
Mark Harper, the Transport Secretary, is understood to have told companies building charging points that the Government is pressing ahead with the so-called zero-emission vehicle (ZEV) mandate, which sets sales targets that ramp up each year.
The mandate will require 22pc of cars sold by manufacturers to be electric from next year. By 2030, the quota will gradually rise to 80pc.
Carmakers that cannot hit the annual targets must either sell more electric vehicles in future years, purchase credits from rivals, or pay a fine of £15,000 per car.
Central planners are what they are.
The final details of this mandate, have, however, to be confirmed. It would seem nuts to extend the ban’s deadline to 2035 (to be clear, it’s nuts to have any mandate), and then not extend the phase-in, but we will have to see what emerges. As you can see from the above, there has been no change, so far. There have been hints that, after this year, the phase-in may be spread out to reflect the shift from 2030 to 2035. If it not, expect an (upwards) squeeze in ICEV prices (particularly new ones) in the next few years.
Oh yes:
Dr Andy Palmer, a former top Nissan executive and chief executive of charging company PodPoint, said: “My understanding has been that few UK or European manufacturers support the [January] 2024 target and many of them would fail it – the only ones who will easily achieve it are the Chinese.”
As becomes more and more evident, imports of Chinese EVs will impose a massive threat to Europe’s car manufacturers (thus the louder voices within the EU for a boost to import tariffs on Chinese EVs).
But there is another problem, set out by Allister Heath in the Daily Telegraph:
The central problem is Gordon Brown and Ed Miliband’s subversive 2008 Climate Change Act. The original idea – a legally binding, 60 per cent net reduction in emissions compared with 1990 levels by 2050 – was hardened to 80 per cent during the process. In 2019, during the dying days of her calamitous premiership, Theresa May increased the legally binding reduction to 100 per cent by 2050.
Supporters of the Act knew what they were doing: its legal-technocratic infrastructure was deliberately structured to prevent the sort of rearguard, common sense action now being advocated by Sunak. There isn’t just a 2050 deadline, but also five-year rolling carbon reduction targets that must be met by law. These “carbon budgets” must be agreed 12 years’ ahead of time, and accompanied by credible policies – although, scandalously, as the PM noted yesterday, they are not properly debated by MPs.
The Act created an extremely powerful quango, the Climate Change Committee, to “advise” the Government on where to set the budgets, and how exactly various sectors are squeezed to ensure they are met. The politicians have some room for manoeuvre, but not much.
What’s a quango? For those who don’t speak British-English, Wikipedia is helpful:
A quango… is an organisation to which a government has devolved power, but which is still partly controlled and/or financed by government bodies. The term was originally a shortening of “quasi autonomous NGO”, where NGO is the acronym for a non-government organization.
Heath:
The terrible truth is that Sunak is probably overstepping the mark. He has pressed the nuclear button: he has rejected the CCC’s advice and potentially torn up the fifth (2028-32) and sixth carbon budgets (2033-37). The latter was enshrined into law by Johnson in 2021…
Johnson, again.
I wrote about the role of the CCC here.
It should be noted that the Conservative Party, then led by David Cameron, supported the Climate Change Act.
One of the more interesting aspects of Sunak’s decision has been the reaction to it.
Fraser Myers in Spiked:
Rishi Sunak is set to water down some of Britain’s Net Zero policies has been branded a ‘moment of shame’ for the nation by former cabinet minister Zac Goldsmith. Apparently, it will be remembered as ‘the moment the UK turned its back on the world and future generations’. Worse still, the entire planet will now be put ‘on life support’, according to COP26 president Alok Sharma. Former environment minister Chris Skidmore is so incensed that he has openly mooted trying to bring down the government.
Boris Johnson is, of course, outraged, saying that Britain “cannot afford to falter now or in any way lose our ambition for this country.” He has, so far as I recall, no explanation for why no other country has followed the example he compelled Britain to set.
Michael Bloss, a German MEP with the Greens, said: “Rishi Sunak is becoming the leader of the fossil backlash. He is making the UK a climate villain and destroying its international reputation as a climate leader. These policies are destructive for the planet, which is already boiling, and they will be negative for the UK’s economy.”
Which country, after all, would want to lose its “international reputation as a climate leader,” I ask rhetorically. No one cared what Britain did about the climate before. And it remains difficult to see how Britain becomes a “climate villain” by aligning itself with the EU’s own target. Contrary to what Bloss suggests, the planet will be unaffected by the British move: the U.K. accounts for about one percent of global greenhouse gas (GHG) emissions.
Bloss knows this perfectly well. His real concern is contained within the phrase “fossil backlash.” Bloss is worried that voters in other countries will see what Sunak is suggesting and start thinking that some of their country’s net zero targets could be shifted. I’d be surprised if those voters paid much attention to what Sunak is proposing, but they are beginning to pay close attention to how Net Zero will affect them. Bloch’s words reflect unease about the prospect that Net Zero may be about to come under much tougher scrutiny by voters than in the past. He’s right to worry.
It’s worth noting this from the same Guardian report:
[A] senior diplomat from eastern Europe said the developments seemed to “follow the trend on the continent”.
In recent months, the EU’s top climate envoy, Frans Timmermans, has left Brussels to run in the upcoming Dutch elections, the centre-right grouping in the European parliament has taken a tougher line on green policies, and the European Commission president, Ursula von der Leyen, has said the European Green Deal is entering its “next phase”.
“It is clear that the green deal in the next commission will not top the agenda [and] will be much more realistic, pragmatic, oriented towards industry and competitiveness,” the diplomat said.
This may also help explain Bloss’s concerns.
Meanwhile, Lara Williams, writing in Bloomberg:
Maybe Rishi Sunak needs some climate reeducation…
Well, with images of the Gulag now lodging unwanted in my head, I’ll just leave it at that.
True leadership, however, would involve finding ways to carry voters with him through the challenges ahead and seizing on the green transition to rekindle growth and spur innovation.
That would be the sort of “true leadership” summarized by (as I have noted before), by Blackadder’s Anthony Melchett (a somewhat harsh caricature of a World War I general:
If nothing else works, a total pig-headed unwillingness to look facts in the face will see us through.
The reality is that the green transition is going to dampen growth, not rekindle it. Capital destruction is not a good economic model.
From a near-hysterical article by Sam Knight in the New Yorker:
As the news broke on Tuesday night of Sunak’s retreat from the government’s climate ambitions, it was possible to sense the shock of financial institutions, manufacturers, climate scientists, and fellow-Conservatives feeling abandoned by one of their own.
The horror, the horror.
Knight:
“I just came out of a meeting where a chunk of the British economy was assured by ministers that net zero was a top priority and that policy stability was crucial for investors,” Emma Pinchbeck, the chief executive of Energy UK, which represents the country’s energy industry, told the Guardian. “Now this.” Lisa Brankin, the chair of Ford U.K., which has invested more than five hundred million dollars in its British car plants to meet the 2030 phaseout of new gas- and diesel-driven cars, expressed her dismay: “Our business needs three things from the U.K. government: ambition, commitment and consistency. A relaxation of 2030 would undermine all three.”
Ford’s Brankin should be ashamed of herself. If she does not have the confidence that she can sell adequate numbers of EVs in the U.K. without the benefit of a (slightly slower) ban on its main technological rival, she should explain why. Henry Ford never insisted that the horse be banned.
If Ford’s EVs just aren’t that good a buy, she should just say so.
Other carmakers, such as Volkswagen, which seems to be having some trouble selling EVs in Germany in the quantities that it had hoped, also joined in the criticism.
Toyota has been a source of common sense in the EV debate. What has it said?
Toyota…said it welcomed the move as it helps the industry and consumers adapt and that it “recognises that all low emission and affordable technologies can have a role to play in a pragmatic vehicle transition.”
Of course, like the other carmakers it is also acting in its own interest. Toyota is the world’s leading hybrid manufacturer, and foolishly having assumed that the EV transition would be handled rationally, has been a laggard in the EV “race.” More time would be handy, but so would more willingness to allow new hybrids to be sold after 2035. New hybrid sales are still, as they always were going to be, scheduled to be banned in 2035, as they are in the EU.
Prime Minister Rishi Sunak’s decision to delay a ban on petrol and diesel cars has been described as “pragmatic” by Jaguar Land Rover.
The automotive giant, which has major operations on Merseyside and in the West Midlands, said it welcomed the move as it brings the UK in line with a number of other countries. JLR has previously committed to being a ‘pure-electric brand’ from 2025 as well as being fully carbon net zero by 2039.
Jaguar Land Rover also added that they looked “forward to the building of the much-needed infrastructure which will help clients transition to an exciting electric future.” This was a dig at Britain’s still inadequate efforts to build out a charging network.
[Sunak is] also delaying a ban on the sale of new oil and natural-gas boilers that households use for hot water and central heating, and he’ll exempt some 20% of households from having to switch to heat pumps where it is impractical or too costly.
Also gone is a requirement that landlords upgrade the insulation on rental properties within two years. And Mr. Sunak promised never to impose car-pooling requirements for commuters or taxes on flights or meat, all of which are common proposals from the climate-obsessed left.
Oh yes, there’s something else.
[Sunak’s] decision to push back intermediate targets on banning new gas boilers and the sale of petrol and diesel cars followed a similar logic, being mostly couched in cost of living terms. But there is also a deeper issue he did not mention directly: the grid simply might not be able to cope with the additional electricity demand generated by electric vehicles by 2030.
The last of our coal-fired power generation capacity will be gone within a year. We’re set to decommission 5.3GW of nuclear capacity by 2028. On the current trajectory, nameplate renewable capacity is going to be 38% short of government targets by 2030, and the outlook is not improving: witness Vattenfall’s decision to call off its offshore wind project due to rising costs. As Dieter Helm has noted, current electrification plans, let alone Labour’s more ambitious targets, are deeply implausible.
Central planning is what it is.
The Forgotten Book
Capital Matters has a fortnightly feature, The Forgotten Book, which is written by our new National Review Institute fellow, the writer and historian, Amity Shlaes. We live in an age of short attention spans, and one of Amity’s objectives is to introduce readers to books or other primary sources that warrant a second look.
With her Capital Matters column, Amity will dedicate herself to sharing with Capital Matters readers older, forgotten books, along with new books that aren’t getting the attention they perhaps warrant.
Her latest column can be found here, and is focused on Walter Reuther, one of the leading figures in the UAW’s history.
An extract:
The 1960s were different. Reuther still corrected policy-makers on economics, sometimes aptly. At one point he even mocked then-current government notions of inflation, as Fain is doing, advertently or inadvertently: When President Johnson referred to the “wage-price spiral,” a common notion of the time, Reuther edited him — it was a “price-wage spiral,” a suggestion that workers were only reacting to Washington’s economic and monetary policy. He cherished the work in his union sphere and tapped the union kitty to fund the construction of a summer retreat for workers on the shores of Black Lake, hiring his favorite architect, a Corbusian named Oscar Stonorov.
Reuther’s main goal in the 1960s was to reconfigure not just Detroit but all America on the social-democratic model. He built out the UAW education department and sent union members, willy-nilly, to collect votes in countless campaigns. The outcome of the 1960s election is disputed to this day, with many claiming Richard Nixon as the winner. Not disputed is that votes from the million-odd UAW membership gave Kennedy the numbers he did garner. Post election, a grateful new president made a point of publicly praising Reuther’s expansionist vision, telling a vast group of workers, “This organization and this union has not interpreted its responsibilities narrowly. You have not confined yourself to getting the best possible deal at the bargaining table.”
The Capital Record
We released the latest of our series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which appears weekly, is designed to make use of another medium to deliver Capital Matters’ defense of free markets. Financier and National Review Institute trustee, David L. Bahnsen hosts discussions on economics and finance in this National Review Capital Matters podcast, sponsored by the National Review Institute. Episodes feature interviews with the nation’s top business leaders, entrepreneurs, investment professionals, and financial commentators.
In the 137th episode, David was joined by five-time CR guest Sam Rines, the first to earn the special jacket, for a really deep and informative dive into oil prices, their causes and effects, their economic impact, and so much more related to the U.S. energy story.
No Free Lunch
Earlier this year, David Bahnsen launched a new six-part digital video series, No Free Lunch, here online at National Review. In it, we bring the debate over free markets back to “first things” — emphatically arguing that only by beginning our study of economics with the human person can we obtain a properly ordered vision for a market economy…
The series began with a discussion with Fr. Robert Sirico of the Acton Institute. Later guests include Larry Kudlow, Dennis Prager, Dr. Hunter Baker, Ryan Anderson, Pastor Doug Wilson, and Senator Ted Cruz.
Yes, the six-part series now has seven parts.
Enjoy.
The Capital Matters week that was . . .
Banking
The collapse of Silicon Valley Bank (SVB) as a result of bank leadership’s stunning failure to manage elementary interest-rate risk has prompted well-deserved scrutiny in Washington. But a key provision of the bipartisan RECOUP Act making its way through Congress as a response to SVB’s failure could actually end up significantly weakening the stability of the financial system…
The UAW Strike
The greens and the blues have generally come together to elect a series of Democratic presidents. Yes, there was a split over the Keystone XL pipeline, which the blues wanted for the jobs and the greens rejected because of the heavy crude that would be coming in from Canada. No matter that President Biden then begged the Venezuelans to sell America a similar heavy crude, this time coming to U.S. refineries by tanker rather than pipeline. This time, however, the green agenda is driving the UAW to strike, because banning the internal-combustion engine is equivalent to banning auto jobs…
Kevin Hassett returned to Larry Kudlow’s show the other day, once again reiterating the danger that the (forced) switch to EVs represents to those working in the auto sector. Link here.
The ongoing strike by the United Auto Workers against the Big Three automakers is a perfect illustration of the relationship between organized labor and the progressive movement.
They’re the same thing…
Electric Vehicles
In early April, David Gurrola Jr. got behind the wheel of an electric semi and took it for a spin.
The southern San Diego–based trucker liked the way it looked and he liked the way it drove — the hulking vehicle accelerated smoothly like a car, he said. He was impressed.
But at this point, buying an electric truck makes no sense for Gurrola, a driver and small-business owner with two trucks and one employee. The cost of an electric truck, even with federal tax incentives, is out of reach, he said…
When Boris Johnson moved up the date after which Brits would not be allowed to buy new ‘traditional’ cars from 2035 to 2030, there was plenty of bluster about the U.K. leading the way, setting an example to the rest of the world and so on. Oddly, the rest of the world has been unwilling to follow the U.K. over Johnson’s cliff.
So how are things going in Blighty now?…
The Economy
Rudi Dornbusch, the late MIT economist, used to say that he could understand the Mexican central bank making mistakes. What he could not understand was how the same people could make the same mistakes time after time. Judging by how little attention the Federal Reserve is presently paying to looming financial-market risks, one has to wonder whether the same thing might not be said of the Fed as was said of the Bank of Mexico…
Globalization
When the word “globalization” is used in political discourse, it often connotes some relatively recent historical events. Whether it’s the establishment of the World Trade Organization, the advent of just-in-time supply chains, or the rise of Asian manufacturing, opponents of “globalization” make it sound as though the international exchange of goods and services is a product of recent modernity and there was some golden age decades ago when countries didn’t interact with each other economically.
Scott Lincicome at the Cato Institute has launched a new project to defend globalization. One of the important points he and the other contributors make is that globalization has “been going on since the dawn of recorded history.” …
Manufacturing
In a blog post about the deficit, economist Paul Winfree of the Economic Policy Innovation Center notes a troubling fact about Joe Biden’s much-praised boom in manufacturing construction: “Private fixed investment has fallen by 1.3 percent as manufacturing construction has increased by 55 percent since the enactment of the American Rescue Plan Act.”
That suggests the increase in manufacturing construction is entirely driven by government subsidies and is not serving a market need. The cost of those subsidies is part of the reason the budget deficit has been so large the past two years, which in turn contributes to inflation and to higher interest rates…
When Boris Johnson moved up the date after which Brits would not be allowed to buy new ‘traditional’ cars from 2035 to 2030, there was plenty of bluster about the U.K. leading the way, setting an example to the rest of the world and so on. Oddly, the rest of the world has been unwilling to follow the U.K. over Johnson’s cliff.
So how are things going in Blighty now?…
The Farm Bill
The Farm Bill is up for renewal this year. With a total estimated cost of $1.5 trillion in the next ten years, it includes a myriad of subsidies for U.S. farmers. These consist of insurance programs, agriculture and price-loss coverage, conservation and marketing loans, and export promotions, among others. In fact, there are nearly 150 different programs that together cost more than $30 billion a year. All that money is going to come from American taxpayers…
Pharmaceuticals
Congress is considering multiple bills that aim to restrict the ability of pharmacy benefit managers (PBMs) to negotiate discounts and rebates and to require the PBMs to disclose confidential contracting information. Several hearings are upcoming. In a new Competitive Enterprise Institute paper, I explain why these PBM measures will be counterproductive, resulting in reduced competition, higher costs, worsened health, and an end to market evolution that benefits actors in the drug-distribution system…
Regulation
Sunak said, “For too many years politicians in governments of all stripes have not been honest about costs and trade-offs. Instead they have taken the easy way out, saying we can have it all.” Indeed, that’s what politicians do. In Thomas Sowell’s formulation, the first rule of economics is that resources are scarce, and the first rule of politics is to disregard the first rule of economics.
The advantage for Sunak is that the green deadlines he is now changing were set by other politicians. In most elected democracies, it is rare for a head of government to be in power for longer than seven or eight years. Most of the green deadlines are set a decade or more in the future, so the politicians who set them won’t have to actually see them through to completion most of the time.
Unions
Shawn Fain is not the first UAW president to get a little, uh, political. In the latest edition of her Forgotten Book series, Amity Shlaes looks at the career of Walter Reuther, an earlier (and highly influential) UAW leader. As always with Amity, it’s well worth a read…
Donald Trump is skipping the GOP primary debate to hang out with the United Auto Workers. Republicans have a good case that the Democrats the UAW helped get elected are harming the interests of auto workers by pushing the “energy transition” with EV mandates. But that works under the assumption that the UAW exists to represent the interests of auto workers. It doesn’t. It exists to push progressive politics…
The NLRB is shifting the burden to employers to petition the board for an election if it wants one. To make matters worse, the NLRB says if employers commit an “unfair” labor practice ahead of an election (such as promising improved benefits to employees if they reject unionization), then the results of the vote will be thrown out and the union automatically recognized. A reasonable person might conclude the party really practicing unfairness is the NLRB, by trying to impose unionization where workers do not want it and handcuffing employers who want to make a case to their workers about the deleterious effects of unionization…
The Pandemic
Steve Hanke & Jonas Herby & Lars Jonung:
A recent Royal Society report on the Covid-19 pandemic produced by a team led by Mark Walport, a professor of medicine at Imperial College London, captivated the press. The report concludes that non-pharmaceutical interventions (NPIs), including mandatory lockdowns, “can provide powerful, effective and prolonged reductions in viral transmission.” In sharp contrast, our meta-analysis, Did Lockdowns Work? The Verdict on Covid Restrictions, found that NPIs “had a negligible effect on Covid-19 mortality” in early 2020. For example, we found that mandated restrictions reduced mortality by 6,000 to 32,000 deaths during the first Covid-19 wave in Europe. For context, 72,000 flu deaths occur during a typical flu season.
Why do our conclusions differ so significantly from those of the Royal Society?…
Shareholder Primacy
If McDonald’s is positioning these products first and spending more on advertising them because they are nicely profitable (or could be), that’s fine. If they are doing so to “send a message,” not so much…
Tax
In case you continue to believe that your digital-currency trades are private, consider this: A United States district court in California, on June 30, 2023, ordered the enforcement of an IRS summons that was issued against Payward Ventures, Inc., an online cryptocurrency-exchange platform that does business as Kraken…
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