Tucked away in an article a few weeks ago in the Financial Times written by Kenneth Rogoff (a Harvard professor and chief economist at the IMF in 2001–03) on the topic of long-term interest rates was a little surprise.

As background, Rogoff does not see a return to ultra-low real interest rates anytime soon. No bad thing in my view, at least if such rates were the result of intervention by the Fed and other central banks (the consequences of a decade of, in essence, mispriced money have, in my view been . . . unfortunate).

Rogoff’s forecast is worth noting for a number of reasons. Not least this:

Global debt, both public and private, has also skyrocketed. This would not be such an issue if forward looking, long-term real interest rates were to take a deep dive, as they did in the secular stagnation years prior to 2022.

Of course, those ultra-low rates did a lot to make that skyrocketing possible, as Rogoff acknowledges. But among the reasons he gives for a more sustained period of higher interest rates (which, incidentally, are currently still negative in real terms, certainly at the shorter end) is this:

the massive costs of the green transition.

Oh.

I’d missed the FT article, but, writing for RealClearEnergy, sharp-eyed Rupert Darwall had not:

In any field other than climate, this wouldn’t be news. The trade-off involved in climate policy is higher costs in the near term for a better climate some decades in the future. Thus climate policy makes us poorer (the cost) than we would otherwise be for the sake of a better future (the benefit). Politicians pushing action on climate aren’t going to admit this, but one might expect better of economists. Instead, much of the economics profession has been complicit in the spinning of this fairy tale and has forsaken the tools of its science to disabuse politicians and the public of the net zero goldilocks story.

Following the first oil price shock of the 1970s, the International Energy Agency (the IEA) was created to protect the interests of Western energy consumers. When it sketches out various policy scenarios — including net zero by 2050 — the IEA uses the same global growth rate as an input assumption. This practice misleads the credulous by implying that net zero has no negative impacts on economic growth. The IEA’s net zero roadmap foresees rapidly falling demand for oil, causing oil prices to drop to $35 a barrel by the end of the decade. This is fantasyland economics.

Less than two years ago, the IMF was telling governments to embark on a huge green stimulus program, amounting to one percent of GDP, to stave off “catastrophic” climate change. It was terrible advice that would have meant even higher inflation than the inflation we’re now experiencing…

While he’s looking at the topic of junk economics, Darwall also turns his attention to the question of subsidies for fossil fuels, something about which we hear a lot:

IMF economists have also produced misleading estimates of the scale of fossil fuel subsidies, which a 2019 paper estimated at an implausible $4.7 trillion in 2015. Dig deeper, and the definition used by the IMF for fossil fuel subsidies would include delays to EVs caused by traffic congestion and EV tire wear resulting in PM2.5 particulate pollution. Based on the IMF’s misleading definition of fossil fuel subsidies, if the world went 100 percent EV, there would still be fossil fuel “subsidies” caused by EVs stuck in traffic jams, involved in fatal accidents, and from PM2.5 pollution.

Were the IMF’s fossil fuel subsidy estimates the product of a good-faith exercise, progressively eliminating fossil fuels would throw up large and growing fiscal surpluses. That’s not what the British Treasury found in its October 2021 review of the impact of net zero on the public finances. Net zero, it reckons, results in “a large and relatively rapid structural shrinking of the tax base as motorists move away from using petrol and diesel vehicles. This leads to a significant and permanent fiscal pressure.” How come the elimination of fossil fuels doesn’t lead to the disappearance of government subsidies for fossil fuels? Far from being an objective analysis — though it’s widely quoted and cited, it’s wholly misleading — the IMF’s fossil fuel subsidy estimates are little more than IMF-branded climate propaganda.

There’s plenty more I could quote from Darwall’s article, which is well worth reading in full. Would-be censors often like to include climate “disinformation” as the sort of expression they would like to see curtailed. Somehow I don’t think that includes the work that Darwall is citing. Curious.