The week of Monday, August 7: The U.K.’s net zero lesson, regulation, inflation, industrial policy, and much, much more.
The week of Monday, August 7: The U.K.’s net zero lesson, regulation, inflation, industrial policy, and much, much more.
In 2019, Theresa May, a failed British prime minister of quite remarkable cluelessness, decided that she would create a legacy for herself by ensuring that the U.K. became the first country in the world to legally commit itself to net zero greenhouse gas (GHG) emissions by 2050. It was, in short, a vanity project, only cursorily costed and approved through a procedure that meant it passed into law with barely any parliamentary scrutiny or debate, not that this would have made any difference: Fixing a firm date was supported by all the leading parties. The madness of crowds is what it is.
The choice of 2050 was, the British government explained, “based on advice from independent experts: the ‘Committee on Climate Change.’” This technocratic touch was accompanied by a corporatist flourish, “businesses, academics and people across society” were on board, and:
For the first time, young people will have the chance to shape our future climate policy through the Youth Steering Group. The Group, set up by DCMS and led by the British Youth Council, will advise Government on priorities for environmental action and give a view on progress to date against existing commitments on climate, waste and recycling, and biodiversity loss.
Proudly, the (Conservative) government proclaimed that the U.K. (which is responsible for about one percent of global GHG emissions) already leads the world in tackling climate change. This new commitment would take its “lead” to the next level. Further turns of the ratchet, most notoriously one that advanced the date for the prohibition of the sale of “traditional” cars from 2035 to 2030 came from May’s successor, the genially destructive Boris Johnson, a convert to deep greenery for reasons that probably owe more to a new wife and an old father than to any rational thought process.
This move too was well received in Britain, but, as time moves on, and the cost of net zero becomes increasingly apparent, that approval is beginning to wobble. As I have noted before, as net zero starts to bite, some voters will start to bite back. And this is more than a matter of “traditional” cars (although that it is no small thing) or heat pumps. Some observers are rightly highlighting the way that net zero can be used to fuel an overmighty state.
And so, writing in the Daily Telegraph this week, Allister Heath:
A green nomenklatura now yields immense power. Tories, Labour, Lib Dems: all have signed up to legally binding five-year plans, known as “carbon budgets”, which stipulate a detailed programme to re-engineer society to cut emissions by a specific amount. Scandalously, what the electorate thinks of these grossly under-scrutinised plans matters little.
Did you know, dear reader, that we are now on our fourth such carbon budget, valid from 2023 to 2027? Did you realise that the next two – up until 2037 – have already been enshrined in law, making a mockery of the next two or even three general elections? Were you aware that all of the consumer-facing changes – in 18 months, no newly built home will be fitted with a gas boiler, in seven years’ time, it will be illegal to buy new petrol cars, in 12 years, you will no longer be allowed to replace your existing boiler like-for-like – have been accounted for in the plans, gravely limiting room for political manoeuvre? Did you realise that any significant deviation from these carbon budgets could trigger legal action from pressure groups?
And will.
Over at Bloomberg, Olivia Rudgard and Liza Tetley write:
Britain’s environmental targets are legally binding under the 2008 Climate Change Act, which sets five-year carbon budgets for emissions. The UK was already behind on progress before this latest backtrack. A successful court case brought last year by campaign groups forced the government to revise its net zero strategy. It’s still lacking around 15% of the cuts needed to meet the requirements of the fifth carbon budget, which covers 2028-2032, according to analysis by the Green Alliance think tank.
More backtracking would mean more legal action, says Jennine Walker, legal manager at the Good Law Project, which was one of the groups involved in previous cases. “A further watering down of the strategy could mean the Government ends up back in court and forced, once again, to come up with a plan that is fit for purpose. Running away from the climate catastrophe only means that we end up wasting precious time.”
Climate catastrophe! I don’t remember seeing that one before. Climate change, yes, climate crisis, yes, climate emergency, yes, climate chaos, yes, but never, I think, catastrophe. The apocalyptic thesaurus expands just a little more . . .
Americans who think that none of this could happen here need to pay closer attention. We already have had some early glimpses of what may lie ahead with the gas-stove saga, and, of course, the attack on conventional cars, whether at the state level in places such as New York or California or, critically, the latest regulatory changes being proposed by the EPA. The deployment of the EPA and other regulatory agencies is a reminder of the way that the current direction of climate policy is being structured in a way that, so far as is possible, bypasses the democratic process, an effort, of course, in which ESG plays a prominent role.
The Daily Telegraph’s Heath, rightly, can see “Brexit-intensity political warfare” (a term implying ferocity that is not easy to convey outside the U.K.) breaking out “ahead of the fifth [carbon] budget (2028-2032) and especially sixth (2033-37), which will include aviation and shipping, coincide with the ban on new petrol cars and all new gas boilers, a massive, hugely costly insulation drive and require a cumulative 77 per cent cut in emissions.”
And he identifies the core political problem:
The Government has very little leeway if it wishes to continue to accept the strictures of the Climate Change Act. This is like membership of the EU, albeit entirely self-imposed. As we saw with Ulez [ultra-low emission zones], the public is greatly supportive of decarbonisation, but only if their pocket isn’t visibly picked and only if their quality of life doesn’t decline. Voters will furiously oppose many of the looming changes, and will demand to take back control when they are told that MPs are powerless to do anything about them.
Put another way, the British government is caught in a trap. The only way out is to overhaul (or scrap) the Climate Change Act, but that is something that will be immensely unpopular until the moment comes when it is not. Moving ahead of that tipping point would be politically catastrophic, but so will allowing that tipping point to be reached.
British academic Matthew Goodwin cites polling from YouGov showing that 71 percent of U.K. voters support the general aim to reduce Britain’s carbon emissions to Net Zero by 2050, but:
When they are simultaneously presented with policies geared toward achieving this they became much less supportive.
Ban the sale of new petrol and diesel cars from the year 2030? More people oppose it than support it. Phase out new gas boilers from 2035? They’re evenly divided between the 42% who support it and the 37% who oppose it.
Look at the underlying trade-off and you find a similar story —an electorate that is generally on board with the theory of Net Zero but which becomes more sceptical once you begin to work through its practical application.
Here, for example, is a revealing question:
“Should the government introduce policies to reduce carbon emissions even if they impose extra costs on ordinary people, or should policies to reduce carbon emissions only be introduced if they do not bring extra costs?”
Again, most voters, 55%, choose the latter…
Nor, by the way, is this the only area where the public mood on climate change is at odds with the mood among the expert class who are increasingly imposing these policies from above…Look, for example, at prime minister Rishi Sunak’s recent decision to issue new licenses for oil and gas drilling in the North Sea. While the decision shocked many environmental campaigners, in reality more voters support the move (42%) than oppose it (27%).
Fortunately, the nature of the American (if not the EU’s) political system makes it much more difficult to hobble the democratic process in the way that has occurred in the U.K., but that does not mean that regulators, lawfaring litigators, pressure groups, environmentalist end-times cultists, climate policy’s rent-seekers and all their collaborators are not beginning to try.
Rishi Sunak is trying on a little (so far mainly verbal) backtracking for size. He has emphasized that he remains committed to reaching net zero in 2050, but “in a proportionate and pragmatic way that doesn’t unnecessarily give people more hassle and more costs in their lives.” Unfortunately, as things currently stand, those two objectives are in direct contradiction to each other. Net zero in 2050 or “proportionate and pragmatic.” Choose one. That, the political conundrum described above, and the legal and bureaucratic web in which Britain has entangled itself, mean that, apart mainly from some relaxation on rules affecting landlords, there has not been much evidence of this new “proportionate and pragmatic” approach.
And so, Heath explains:
For all of Rishi Sunak’s recent messaging, anti-car policies that go beyond the ban on the combustion engine are already baked into the carbon budgets. One policy requires “increasing average road vehicle occupancy” (even with electric cars) and another “high annual investment in cycling and walking infrastructure” (Low-Traffic Neighbourhoods are one way of doing this).
As I’ve mentioned on a number of occasions before, it’s a similar story in the U.S. (and the EU). The war against conventional cars is only part of a broader war against any type of car.
Heath:
Crucially, the CCC [the Climate Change Committee] doesn’t believe that technology alone will get us to net zero. Electric cars aren’t enough; we will still have to drive less. We will need to fly less, even with sustainable fuels. We will need to eat 20-35 per cent less dairy and meat.
But the current direction of climate policy will be hard to square with democracy. As a giant exercise in central planning it is, by definition, impossible to reconcile with free markets. And, as with so many exercises in central planning in the past, this one shows no sign of having been thought through with much care.
Juliet Samuel, writing in the London Times:
Ministers appear to think that if they legislated the ends (all new cars electric by 2030, all electricity green by 2035 and net zero by 2050), the means would simply appear. But the energy system is not a dartboard. It is more akin to a patient undergoing a blood transfusion. If you wish to switch the blood supply from red to green, the responsible approach would be to secure a supply of compatible green blood before draining out the red. To perform the operation any other way, it should be obvious, risks severe damage to the patient. Yet the UK’s approach has been the opposite. We have set legal targets requiring a reduction in regular blood use and simply assumed that green alternatives will be available on the desired timescale. This is grossly irresponsible.
This too sounds very similar to the situation emerging in the U.S.
To ensure that c should follow b should follow a is simple common sense. But beneath for all the spreadsheets, and the year-by-year targets, and the advice expensively bought from Big Climate’s rent-seekers, there is, as so often with central planners, nothing other than guesswork, fanaticism, and a refusal to accept their own fallibility.
Samuel:
Politicians themselves engage in a sort of doublespeak. I recently saw the shadow energy secretary Ed Miliband appear on a Chatham House panel and claim, with great conviction, that “going green is not some expensive luxury — it’s the cheaper option”. A few minutes later, a fellow panellist declared that investing “a hundred billion” was not enough and “we need to move to trillions”. “I agree,” exclaimed Miliband. “This is 200-dimensional chess.” In the 200th dimension, trillions come cheap.
If, as seems likely, the Conservatives lose the general election which will probably be held in 2024, Milliband will be in government.
Samuel:
Instead of fixating upon how many magic costless zeroes they can attach to pledge cards and placards, climate campaigners ought to engage with the practical problems of the energy transition. How is it possible, for example, that our government can outlaw new petrol cars while doing almost nothing to ensure a sufficient car-battery industry is available to replace them? How can our officials claim to be doing their jobs when they are implicitly relying solely on the principle that “China will provide”?
Ah yes, China. Handing over Britain’s — and not just Britain’s — auto market to China, a hostile power. To use a fashionable word, that’s about as sustainable a policy as you can get. Not.
Samuel:
It is the same with the grid. Supposedly, all our electricity will come from “green” sources by 2035. This requires the construction of floating offshore wind farms on a scale never seen before. So where is the government’s plan to secure a fleet of service ships to lift 1,000-ton wind turbines in and out of the sea, to build and maintain them? How many orders is it placing at Singapore’s busy shipyards to construct these expensive vessels, and what discount might it gain by planning ahead? What incentives is it creating to clear the unbelievable backlog for connecting new infrastructure to the grid? What is the official assessment of new power-storage technologies, from batteries to liquid air, needed to make renewables reliable, and what is the backup plan if they don’t come through? How is any of this “cheap”?
“Policy,” argues Samuel, “is set by default: if in doubt, ban,” something that is rapidly becoming the approach in the U.S. too. She sees the Climate Change Committee (as the Committee on Climate Change is now known) as “a perfect example of unaccountable officialdom not bound to consider real-world consequences of its proposals,” something that may (to take one of many examples) sound familiar to automakers warning that America’s regulatory push behind EVs is going too fast.
This is the danger of letting one overriding objective determine huge swaths of policy. Adult policymaking recognizes the need for trade-offs, realism and, quite often, incrementalism, concepts that have a way of being discarded when fanatics are in charge. Samuel argues that, rather than just hoping for the best, the U.K.:
[S]hould adopt a proactive but pragmatic approach. The surest way to get emissions down globally without crashing economies would be to replace coal generation with gas, ramp up nuclear power generation and move to new energy storage systems when they are ready. The government should stop taxing the North Sea to death, stop lobbying allies against gas development and accelerate the glacial pace of nuclear funding decisions.
Good ideas all, although countries such as India and China might have a few things to say about coal.
Meanwhile, clearly unimpressed by signs of any backsliding, Rudgard and Tetley look fondly back to an earlier time:
It’s November 2021, Boris Johnson is the prime minister of the UK, and he’s making a speech to COP26, the global climate diplomacy meeting being held in Glasgow.
“If we don’t get serious about climate change today, it will be too late for our children to do so tomorrow,” he tells the audience of global leaders.
That was arguably the moment when Britain’s international climate influence peaked…
Maybe not. If the British experience with the race to net zero can serve as some kind of ghastly warning to the rest of the world, its influence will be restored, but this time to a good end.
Adam Smith 300
All year, the Adam Smith 300 essay series from National Review’s Capital Matters has been celebrating the tercentenary of the birth of the father of modern economics. Each month, a new essay has reflected on Smith’s legacy from a different perspective.
Now, we’d like you to join us in person to hear from some of the leading voices on Smith’s thought. January author Dan Klein of George Mason University and October author Anne Bradley of TFAS will talk with National Review Institute’s Thomas L. Rhodes Journalism Fellow and Capital Matters contributor Dominic Pino about Smith’s continued relevance today. May author Samuel Gregg of AIER will give a keynote address, followed by a conversation with NRI trustee David Bahnsen.
Whether you’re already a Smith expert or only loosely acquainted with his works, this event is a unique opportunity to celebrate the life of the author of The Theory of Moral Sentiments and The Wealth of Nations. More than a mere symbol of free markets, Smith possessed deep insight into human interaction, and his analysis of what he called the “system of natural liberty” still holds up today. With free markets under attack, it’s important to return to intellectual foundations, and remember why William F. Buckley Jr. wrote in the mission statement for National Review that “the competitive price system is indispensable to liberty and material progress.”
If you are interested in attending, more details here.
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 Jack Welch, the former CEO of GE, and some books that describe it.
Here’s an extract:
It is precisely as a dividend provider that the innovative GE lived the first century of its existence, paying out substantial amounts of cash to shareholders, even as it moved from the light bulb to the first commercial power station to the X-ray, vacuum tube, nuclear power, lasers, and medical devices. In 1938, late in the Great Depression, GE cut its dividend to 30 cents from 40 cents a quarter, and after the war, management strove successfully to avoid a second cut. Even in the 1970s, a rough time for corporations, GE sustained both a dividend and a huge base of shareholders, as authors Thomas Gryta and Ted Mann note in their 2020 Lights Out.
Capital Writing
As part of a project for Capital Matters, called Capital Writing, Dominic Pino is interviewing authors of economics books for the National Review Institute’s YouTube channel. This time, he talked to Mark Moses about his book, The Municipal Financial Crisis: A Framework for Understanding and Fixing Government Budgeting. Moses has held several financial positions in municipal governments over many years. Below you will find an edited transcript of a few key parts of our conversation as well as the full video of our interview.
Here you will find an edited transcript of a few key parts of their conversation, as well as the full video of their interview.
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 131st episode, David was joined by Barry Habib, proprietor of MBS Highway and one of the foremost mortgage-finance and housing experts in the country. They discuss the supply and demand of residential real estate in 2023, the difference between housing’s impact on GDP and home prices themselves and delve into the relevance of household formation when it comes to building needed supply.
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 . . .
Statistics
Using data from the Personal Consumption Expenditures Price Index (PCEPI) from the St. Louis Fed, one finds inflation to be (approximately) +20.189% from June 2017 to June 2023 and +69.723% from June 1998 to June 2023. Multiplying these inflation figures by the films’ respective nominal box-office earnings, we find that, in 2023 dollars, Dunkirk grossed $633.396 million and Saving Private Ryan $818.574 million.
In real terms, Oppenheimer has tens of millions of dollars to go before surpassing Dunkirk and several hundred million before it overtakes Saving Private Ryan.
Regulation
Here’s a word of caution for policy-makers looking to help publishers retrieve some of their advertising revenue lost to web giants such as Google and Meta: Whatever you do, don’t look to Canada for inspiration…
Economics
“Journalism is a public good and should be publicly funded,” says an article in Scientific American by journalism professor Patrick Walters.
A public good is non-rivalrous and non-excludable. That means one person’s consuming the good doesn’t leave any less of it for other people to consume, and it isn’t feasible to prevent people from using the good for free. The classic example is missile defense. If my house is defended from missiles, it doesn’t mean my neighbor’s house is less defended, and there’s no way to only defend specific houses from missiles based on whether they’ve paid for it. So, it makes sense for the government to tax people and use the money to provide missile defense to everyone.
Industrial Policy
Arguments about how industrial policy can work often ignore political-economy problems. Yet these problems not only are real, they are significant. Many of us have already mentioned how the CHIPS Act’s semiconductor subsidies are being saddled with counterproductive requirements such as child care, Buy American, union-engagement mandates, and more.
Unfortunately, the expenses of the Biden administration’s labor-union requirements are swelling every day and getting in the way of increasing the output of American-made semiconductors…
Electric Vehicles
The number of electric vehicles (EVs) sold in the U.S. will, I am sure, continue to rise, but look (not very hard) and it’s easy enough to see warning signs that American consumers are not yet ready to switch to EVs at quite the pace the central planners have in mind. If that is the case, things may start to get tricky for the automakers who have been “encouraged” to pour billions into EV manufacturing…
Climate
Marian L. Tupy tweeted (X-ed?) an amazing video of Israeli company Steakholder Foods printing meat. According to the Steakholder representative in the video, the 3D printer is capable of producing tons of meat cultivated from fat and muscle cells per day — no grass-chewing, mooing quadrupeds required.
The fact that a steak can be produced sans a flesh-and-blood cow is nothing less than incredible. That said, some of the firm’s claims are not quite true — i.e., false…
Writing in the Daily Telegraph, David Blackmon looks at the latest stage of the administration’s war on gas stoves…
Fiscal Policy
The $900 number is supposed to shock the reader. That’s a lot of money in terms of household finances. But we could do a similar exercise with other recent government spending efforts and see Ukraine aid in a different light.
The idea that the U.S. is prioritizing Ukraine over domestic concerns is not true. For example, the CARES Act that was passed in response to the Covid pandemic cost $2 trillion. That’s about $15,600 per household. Total Covid relief spending totaled around $5 trillion, or about $39,100 per household. That’s 4,244 percent greater than Ukraine spending per household.
Ramesh Ponnuru has kicked off a debate over just how different the freedom conservatives’ statement of principles is from its national-conservative counterpart. One area of unambiguous clear blue water is the divide over the escalating federal debt. The FreeCons’ statement repudiates the path it’s on and urges a course correction; the NatCons seem to be so relaxed about the debt that they could be called “national-debt conservatives.”
Inflation
Inflation numbers are out, with the headline Consumer Price Index (CPI) ticking up to 3.2 percent from 3 percent in June. The monthly change in CPI was 0.2 percent, which is consistent with annualized inflation of 2.4 percent.
At the same time, core inflation, which excludes volatile items such as food and energy, remained at 4.7 percent — more than double the Federal Reserve’s 2 percent target…
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