The “race” to net zero is a race the winners lose. Its top-down, dogmatic approach has led to a race being run in the wrong direction, away from an approach to a changing climate more heavily weighted toward adaptation, nuclear energy, and research that might ensure that alternative technologies will actually be ready for the primetime role they are being handed. It’s a race that, to the extent it hits economic growth (and it will), will make it harder to afford the steps needed to deal with the challenges posed by a changing climate. It’s a race that doesn’t recognize that policymaking will involve trade-offs. It’s a race that is making the perfect the enemy of the good: If hybrid and more efficient internal combustion engine vehicles lower the rate of greenhouse gas (GHG) emissions from earlier levels, they are part of the solution, not the enemy. If LNG lowers GHG emissions when compared with other fossil fuels, it should be encouraged, not discouraged. And if 2050 is the date by which net zero must be achieved, it is a race that is already lost.
Such thinking is unacceptable to those now running climate policy. For an example of that, take a look at the U.K., an epicenter of climate fundamentalism on the “Right” and “Left” of the country’s political spectrum. The occasional (supposed) nods to realism, such as the much ballyhooed postponement of the ban on the sale of new internal combustion cars from 2030 to 2035, turned out to be Potemkin pragmatism.
Looking ahead, what’s going to count, however, is what the Labour party decides. Britain’s next election is widely expected to be held in the fall. Labour are expected to win a clear, perhaps overwhelming majority. The party remains dedicated to pushing on with net zero. Its climate supremo is former Labour leader Ed Miliband, best known for an unfortunate photograph of his attack on a bacon sandwich, and for changing the rules for a Labour party leadership contest in such a way that after he stood down he was succeeded by Jeremy Corbyn, the fanatic who led Labour to catastrophic defeat in 2019. In 2008, Miliband was the Labour government’s Secretary of State for Energy and Climate Change, and, as such, cut the country’s GHG emissions target for 2050 from a reduction of 60 percent to a cut of 80 percent, a change, it should be noted, supported by the Tories. Miliband has, to a greater or lesser extent, been on the climate beat ever since. He is now the Shadow Secretary of State for Energy Security and Net Zero (choose one, I reckon) and will presumably take the equivalent job when Labour gets into power.
Under the circumstances, this recent report by Jonayhan Leake in the Daily Telegraph is worth noting:
Ed Miliband, the shadow Climate and Net Zero Secretary, has confirmed plans for a new crackdown that would force bosses to ensure their companies are aligned with the goal of keeping global temperature rises below 1.5C this century.
The new laws planned in the event of a Labour victory would legally oblige directors to publish their company’s carbon footprint every year. They would also have to show that their business’s policies were compliant with the UN Paris climate treaty signed in 2015, under which the world agreed to try to limit temperature rises.
The treaty was agreed between governments but Mr Miliband wants the obligations it enshrines to also apply to FTSE 100 businesses including energy producers like Shell and BP, significant energy consumers such as Easyjet and major supermarket chains Tesco and Sainsbury.
Perhaps more importantly, he also wants it to apply to the banks and financial institutions that lend to all businesses. It could potentially mean companies could only get loans if they were “climate compliant.”
It’s not too difficult to detect a pattern here. As with ESG and the efforts of various regulators on either side of the Atlantic, an effort is being made to enforce climate policy through access to capital. This time that effort, if approved, would at least have the approval of the electorate, although how, in practice, it would work is anyone’s guess. What is clear, however, is that it would represent the state supervising the investment flow of a significant slice of private capital, something that is unlikely to work very well.
Labour’s ideas (which, if implemented, would only represent another stage in the forced march to net zero) are also the latest reminder that net zero will not be achieved without the imposition of something disturbingly close to a command economy. On top of the obligations to be imposed on banks, there would, Miliband has explained, “be a [legal] requirement for companies to have transition plans for how they’re going to comply with the 1.5C target [to reach net zero].” This requirement would almost certainly open them up not only to regulatory micromanagement but also to lawfare as activist-litigants claim that companies were not doing enough to satisfy their obligations. As reasons go for relocating a business from the U.K., these proposals are right up there.
These plans had apparently “been inspired by advice from former Bank of England governor Mark Carney and other leading figures from the UK’s investment and financial services sector.” I don’t know the identities of those other “leading figures,” but Carney’s presence on the list is a warning sign. Carney, a former governor of both the Bank of England and the Bank of Canada, has deftly maneuvered his way through the climate/ESG eco-system for years.
He is the United Nations special envoy on Climate Action and Finance, he was the finance adviser to British prime minister Boris Johnson ahead of the COP 26 climate conference, and he was a key figure behind the launch of GFANZ, the Glasgow Financial Alliance for Net Zero (he is now its co-chair). GFANZ is “the world’s largest coalition of financial institutions committed to transitioning the global economy to net-zero greenhouse gas emissions,” with, naturally, other people’s money.
He is also the chairman of Brookfield Asset Management and the head of its Transition Investing: “In this role, he is focused on the development of products for investors that will combine positive social and environmental outcomes with strong risk-adjusted returns.” Hmmm.
Oh yes, last year Carney was appointed chairman of Bloomberg. The media has to be kept on message, you see.
Carney’s involvement in helping Labour and in the broader net zero project is worth noting as this review of his book (modestly entitled Value(s): Building a Better World for All) which appeared in Canada’s Financial Post in 2021 (and which I have previously discussed here and here) makes clear.
In it, the reviewer (Peter Foster) notes that:
[Carney] claims that western society is morally rotten, and that it has been corrupted by capitalism, which has brought about a “climate emergency” that threatens life on earth. This, he claims, requires rigid controls on personal freedom, industry and corporate funding . . .
Carney draws inspiration from, among others, Marx, Engels and Lenin, but the agenda he promotes differs from Marxism in two key respects. First, the private sector is not to be expropriated but made a “partner” in reshaping the economy and society. Second, it does not make a promise to make the lives of ordinary people better, but worse. Carney’s Brave New World will be one of severely constrained choice, less flying, less meat, more inconvenience and more poverty: “Assets will be stranded, used gasoline powered cars will be unsaleable, inefficient properties will be unrentable,” he promises.
Let no one say that Carney is not consistent, not least in the way that, as Foster emphasizes, he wants to harness private capital rather than expropriate it. As such, his approach is closer to the economics of fascism or Xi (to the extent there’s a difference) than those of Lenin, Marx, or Engels. But it’s worth focusing, as Foster does, on the way that the regime Carney envisages will be one that restricts what we eat, where we travel, how we cook, how we travel, and, well, the list is endless…
Allyson Chiu in the Washington Post (May 12, 2024):
Showering accounts for roughly 17 percent of the water Americans use in their homes, according to the Environmental Protection Agency. Your steamy showers also consume energy: Nearly half of a home’s hot water is used for bathing. A cold shower uses less energy than a hot one.
Former Green Party leader Baroness Natalie Bennett warns Mike Graham about the ‘enormous terrible environmental effects’ of BBQs. “We don’t want to stop people on special occasions having fun, but we do need to think about all of the issues around barbecues.”
And so on and so on.
There are a number of reasons why that list is endless, many related to power, privilege, and the psychology of control, as well as to the penitential/punitive nature of so much of climate policy (we have sinned, after all). But there’s something else.
In The Road to Serfdom, Hayek noted, referring to West rather than to USSR, that central planners offer the reassurance that their activities would “only” apply to economic matters. Hayek, rightly, did not believe that to be true, but climate policy’s central planners do not have to restrict themselves in this way. The countless ways in which humanity benefits from the use of products, services or amenities that generate GHG emissions is that there is almost no limit to the extent to which the GHG police can intervene in what once would have been considered matters for individuals or businesses to decide for themselves.
But how much more will the net zero ratchet have to tighten before people begin to push back? There have already been signs of discontent, from the wave of farmer protests across Europe to last year’s Dutch elections. Elections to the European Union parliament next month may prove to be another test. If the swing to the non-establishment Right now reflected in the polls occurs, the battle over the EU’s green new deal will be worth watching.
Labor unions have also begun to stir. The general secretary of Britain’s Unite union has recently said that a Labour government should not ban new North Sea oil and gas licenses (which the party has promised to do) without demonstrating that it has a plan to replace the lost jobs. That may be tricky. A few months before, the general secretary of GMB, another large union, had gone further, arguing that such a ban would be bad for jobs, investment, and (accurately enough) national security.
Here in the U.S. concern about the impact of the transition to electric vehicles (EVs) was a worry running through the United Auto Workers strike. It would be amazing if that had not played a part in the Biden administration’s recent decision to increase tariffs on (among other items) imported Chinese EVs from 27.5 percent to 102.5 percent. The tariff on imported lithium-ion EV batteries will increase from 7.5 percent to 25 percent. A national security case can be made for these increases, as can a fair trade case and (the ghost of Friedrich List smiles) an industrial policy case. A case can be made against all those cases too, but that is a debate for another time.
What’s more interesting for now is the signal that the White House is sending, especially as there are no direct imports of Chinese EVs coming into the country. In effect the administration is saying that it will not allow imported Chinese EVs to threaten the U.S. auto sector, and the jobs of those who work in that sector, and, for that matter, those that supply it. Some cynics might say that’s just the sort of signal that an administration hoping for union votes might want to send ahead of an election, and some cynics might have a point. Nevertheless, the more interesting signal is the one that the administration is sending about net zero.
One of the major objections that consumers have had to EVs is their price. Allowing in imports of cheap (sometimes ultra-cheap) Chinese EVs would be a way of overcoming that objection and doing so very quickly. Given that (we have been told) the planet faces an imminent threat from climate change, and given that (we have also been told) a rapid switch to EVs is an essential part of heading off that threat, it seems somewhat inconsistent to do anything that would delay that switch to EVs, and yet here we are.
It’s all very odd. Or not.
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 170th episode, David is joined by John Tamny of RealClearMarkets and Jack Ryan of REX, the co-authors of the brand new, magnificent book, Bringing Adam Smith into the American Home: A Case Against Home Ownership. They discuss the cartel that is the National Association of Realtors and why mobility, dynamism, and free enterprise benefit from people who can move around and do things. It is a controversial, riveting discussion.
The Capital Matters week that was . . .
Climate Policy
As Einstein famously did not say, running the same experiment repeatedly and expecting to obtain different results is one indicator of insanity. The EPA seems intent on meeting that criterion by proposing the same failed policies as Europe. The essence of these proposals is to accelerate the closure of existing coal and gas plants and, effectively, to prohibit the construction of fossil-fuel-powered replacements by mandating the adoption of carbon capture and other technologies that are both experimental and would impose punitive costs on operators.
Electric Vehicles
Nothing grinds one’s nonexistent EV gears quite like the suggestion that China is leaps and bounds ahead of Western EV technology and that this is somehow concerning. It’s not, and there’s little reason to expect Sino technological supremacy anytime soon.
Big Government
The tastemakers in the media, at political-consulting firms, and at the major philanthropic foundations had all decided that people were tired of hearing about free markets. Americans were victims of globalization, the wealthy, and creative destruction, they said, and government needed to step in. All that limited-government stuff was so 2010, or worse yet, “zombie Reaganism.”
So Biden listened and gave the people what the tastemakers said the people wanted. Perhaps that is to be expected from a Democratic president. But some Republicans have followed his lead…
Privatization
American airports provide economic value to paying customers, like grocery stores, barber shops, and movie theaters — and airports in other countries. They should not be government projects…
Healthcare
As President Joe Biden nears the end of his term, his administration is in a hurry to impose new regulations and shower allies with benefits. The Centers for Medicare and Medicaid Services (CMS) recently finalized a rule that mandates staffing increases at nursing homes that will cost taxpayers and families billions of dollars a year. The regulation is a transparent payoff to politically connected unions with little policy justification…
Tariffs
Free-trade skeptics will say that even Adam Smith recognized national-security exceptions to free trade, and China presents a threat to U.S. national security, therefore tariffs on China are smart and necessary. They’re correct that there are national-security exceptions to free trade, and they are correct that China presents a threat to U.S. national security. But it does not follow from those two facts that tariffs on China are smart and necessary…
Trade
The pre-pandemic peak in employment in the manufacture of motor vehicles and parts was 1,013,000 in January 2019. Today, the sector employs 1,064,000. Zoom out further, and employment is roughly in line with its trend since the Great Recession, which has been a gradual increase. It doesn’t appear that there were any major changes in employment, either.
Gresser notes we should be cautious not to overinterpret these results since the trade agreement is still relatively new. But there’s no evidence yet of the USMCA creating any major swings in U.S. car production patterns or employment, almost four years after it went into effect…
Pay and Productivity
Pay and productivity still track with each other when you look at apples-to-apples comparisons. Parts of Winship’s story may be wrong, but on the whole, it makes a lot more sense than the alternative stories that some cabal of greedy capitalists is conspiring to keep the little guy down, or that something about markets just stopped working in 1973 and has never been fixed despite decades of different government policies and economic trends since then. Policy-makers need to be informed by facts, not vibes, and populist agitation is a poor substitute for economic reasoning.
The Consumer Financial Protection Bureau
Yesterday, Dan wrote about the Supreme Court’s decision to uphold the Consumer Financial Protection Bureau’s funding structure, where it can take money from the Federal Reserve System outside the normal government-budgeting process. This funding structure is a scandal, or it ought to be. But Dan rightly frames it as only one relatively small part of a much larger problem…
Inflation
More than three years on, we’re having the same discussion. Inflation is still high and persistent, the same people continue to beat the dead horse of “transitory” inflation, and few are willing to address the actual problem: fiscal policy…
Labor Unions
Workers at Mercedes-Benz in Alabama voted against unionizing with the United Auto Workers on Friday. Voter participation was high, with roughly 4,700 votes cast out of 5,075 eligible employees, and 56 percent voted against unionizing.
The New York Times describes the loss as a “stunning blow,” but it shouldn’t be stunning….
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