Monday, March 28, 2016



There is a very high correlation between political attitudes to climate change, and attitudes towards Britain's continued membership of the European Union.

A recent piece by YouGov, Provincial England versus London and the Celts, highlights the fact that the EU referendum is producing a quite unusual demographic divide between "stay" and "leave" voters. The authors claim that "On most issues, different groups vary less than might be imagined. On taxation, say, or the health service, or welfare reform, there is a large overlap in the views of Mail and Guardian readers, young and old voters ...."

But Europe is different.  "For once the differences do match the stereotypes. There is a huge contrast between the kinds of people wanting Britain to stay in the EU and those wanting Brexit." The  figures are interesting, with very pronounced divisions between older (Out)  and younger (In) voters, as well as large differences measured by levels of education and national and regional identity.

Even more dramatic, but less often noticed, is the correlation, at least within the political class, between views on Europe and views on climate change and climate policy. It is unusual for two issues, neither obviously party political, and not obviously linked in their essential content, to divide opinion in this way.

Politicians for staying in Europe and action on climate change.

Lord Deben, formerly Conservative cabinet minister John Selwyn Gummer, is Chair of the UK Committee on Climate Change, and a member of the steering group of Environmentalists For Europe.  "... without the EU we wouldn’t have clean beaches, we wouldn’t have the quality of water that we do, and we wouldn’t have taken the action we have on air pollution (particularly with regard to motor vehicles)..."

David Cameron, who once promised the "greenest government ever", is recommending a "stay" vote. "Man-made climate change is one of the greatest threats to the UK and the rest of the world, David Cameron has said. The Prime Minister risked a backlash from climate-sceptic Conservative ministers and MPs by insisting that humans are responsible for climate change. His comments appeared to create an immediate division in his own Cabinet, with Chris Grayling, the Justice Secretary, refusing to fully back Mr Cameron’s claim." [Daily Telegraph,. 26 February 2014] 

Tony Blair as PM, and with all party support, introduced the 2008 Climate Change Act, and is a strong supporter of EU membership. The minor parties, notably the Green party, the SNP, Plaid Cymru and the Liberal Democrats have always been strong supporters of EU membership and of action on environmental issues.

Politicians for Leave, and opposed to "climate alarmism".

Nigel Lawson is a major figure behind the Global Warming Policy Foundation (a leading vehicle for sceptic views on climate science), and also a lead figure in the campaign to exit Europe. Other luminaries of the Leave campaign include: Chris Grayling (see above), and John Redwood ("BBC peddles climate change alarmism", September 2013).

Boris Johnson and Jacob Rees-Mogg are other major Conservative figures in both the Leave EU and the sceptic camp. "It is widely accepted that carbon dioxide emissions have risen but the effect on the climate remains much debated while the computer modelling that has been done to date has not proved especially accurate. Sceptics remember that computer modelling was behind the collapse of Lehman Brothers and the global financial crisis."
[Rees-Mogg, reported in Daily Telegraph, 23  October 2013]

Unsurprisingly UKIP's official position fits this pattern, with doubts on the validity of climate science as well as its main preoccupation of exit from Europe. There are of course exceptions, the most prominent being Labour MP Kate Hoey, a strong supporter of action on climate. Conversely Michael Fallon, Tory loyalist on the EU, has described climate science as theology.


Full explanations are complex. Part of the story is ideological. The Tory party sceptics on both EU and climate tend to be "small state" Tories, for whom the EU as an additional layer of government is anathema. Climate change, as a problem that can only be addressed by government, and , even worse, by global agreements, is increasingly an "inconvenient truth". Somewhat hysterically, other commentators have long branded climate science as a left-wing conspiracy. [Melanie Phillips, Daily Mail, 12 January 2004]. The growing body of incontrovertible evidence, not just for the underpinnings of climate science, but for the reality of temperature measurements showing global rises in line with climate science models, makes this an increasingly uncomfortable position.

But this theory fails to explain the UKIP commitment to climate scepticism. UKIP's support, however, like that of Trump in the US and other movements in Europe, has often been viewed as an outpouring of anger by groups that see themselves as marginalised. Their rage is directed against political, media  and other elites that they feel have failed them. Given the correlation YouGov observes with levels of education, it may be unsurprising that this is also a group that will extend its distrust of metropolitan elites to a distrust of elites in general, and in this case (unfairly and regrettably) to mainstream science. So perhaps the demographics have something to tell us on climate issues too.

However it does suggest that the two questions, Europe and climate matters, should perhaps be viewed in parallel. And we should look at the case for or against Europe in the context of energy policy, and the successes and failures of climate policy in Europe as a particular element in the referendum debate.

Tuesday, March 22, 2016



In substance this paper reflects the paper prepared following the 2013 seminar series on Climate Policy in Crisis, which can be viewed on the BIEE website.


The theme for the 2013 BIEE seminar series on energy policy and climate was Climate Policy in Crisis. This reflected perceptions of a growing gulf between, on the one hand, aspirations for tight emissions limits based on the imperatives indicated by the climate science, and, on the other, the widespread projections of close to “business as usual”, with relatively minor modifications to emissions trends and continuing growth in global emissions.

Following the conclusion of the series this year a number of us decided to set out a summary[1] of what we felt to be the current state of knowledge and analysis on this subject, starting with an appreciation of what understandings could be drawn from climate science  and proceeding through an economic rationale for policies to limit greenhouse gas emissions, the realism of prospects for global agreements, through particular issues associated with policy instruments in markets and regulation, and concluding with some observations on political and economic priorities at national (eg UK) or regional (eg EU) level.  This paper builds on that note and is a reflection on a “state of play” and on how, in the broadest terms, we should be examining the climate issue.


Science continues to be incremental in adding evidence and understanding on climate questions, but there has been no fundamental change in the messages that we can draw. There are known imperfections and anomalies in our understanding of the processes involved and our ability to reconstruct the past, and limitations to the predictive power of climate modelling. Substantial uncertainties remain, therefore, both around particular features of how climate systems work, and around the climate and consequential human and economic outcomes that would result from different atmospheric concentrations. To a significant degree these reflect imperfect understanding of the factors responsible for natural year on year variations in temperature and climate, and the difficulty in distinguishing these from man-made effects.

However none of these qualifications provide significant comfort on the very high risks associated with major climate change; nor do they challenge the general conclusions that can be drawn from the strength of the underlying science.  These are best summarised as the presumption that continued increase in atmospheric concentrations of CO2 , and other greenhouse gases (GHGs), is at best a dangerous and possibly a catastrophic experiment with the planet. The same messages, in essence, can be drawn from reports or reviews presented in the last year by the IEA[2], the IPCC[3] and the UK’s Committee on Climate Change (CCC)[4].  The reported projections from climate modelling have in essential respects been remarkably consistent over several years.  

In the context of national and EU policies, it is worth noting that the 2oC aspiration and associated emissions targets are based not on the optimal achievable outcomes but on the best available estimate of the maximum global temperature rise that provides a reasonable chance of escaping much more serious or catastrophic consequences.

However while the scale of the issue is widely recognised if not universally accepted, there are also fundamental features of the science that are understated or ignored in policy making.[5]  Most important are the cumulative nature of emissions, especially for CO2, the consequent irreversibility of the processes involved, and the long time lags between cause (atmospheric concentration levels) and their full effect on climate. This should lead to much more emphasis on a number of principles.

The first implication is recognition of cumulative emissions as the primary target for policy.  It is the cumulative stock of atmospheric CO(the most significant GHG)  that matters, not the level of annual emissions per se.  Inter alia this attaches a significantly higher value to reducing current and near term emissions.  Early emissions that persist indefinitely have an effect for longer and will bring forward particular atmospheric concentration milestones and climate consequences; this reduces the options both for future amelioration and for adaptation. National targets should, for equity and other reasons, focus on cumulative emissions in any well designed global agreement.

The second is recognition of the significance of current or near-term policy decisions in maintaining, improving or foreclosing future options. The key factors here are the substantial irreversibility of cumulative emissions (of CO2 if not of some other GHG) and the long time lags involved.    Options theory suggests that the highest benefit often attaches to avoiding irreversible actions.[6]   It is early action for immediate emissions reductions that provides more options for the future, since it is current emissions that are irreversible actions. The notion that options can be kept open at low cost by a policy of “wait and see”, pending some future appreciation of the long term economic and human consequences of inaction, is the opposite of the truth. 

Maintaining and improving future options by early action should therefore be the highest priority. Early reduction in emissions, globally, has several “option benefits”.  It postpones “climate milestones”, the dates at which any particular concentration of CO2 is attained. It therefore allows more time to develop low carbon alternatives.  It also allows more time for more effective adaptation to the future adverse impacts of rising atmospheric concentrations of GHG, some of which are now unavoidable.  

A corollary is that the cost of delay is high. For any given target or acceptable limit to CO2 concentration, failure to take timely early remedial action implies larger, more costly and more disruptive remedies at a later date, as well as earlier and more severe climate impacts.  Costs include those of accelerated replacement of capital stock and significant stranded assets.  The CCC has recognised and analysed at least some aspects of this issue explicitly in its recent report.[7]

Ceilings on cumulative emissions imply very tight carbon budgets. Attempts to limit cumulative emissions to levels consistent with a high chance of limiting global average temperature change to 2o C are, in global terms, becoming very close to unachievable.[8] This does not mean that mitigation policies can be abandoned, simply because targets may not be met. It does mean tighter future carbon budgets and more costly measures in mitigation than might have been required with effective earlier action, or higher risks of adverse outcomes across a wide range of food and environmental issues, or both.


The scientific prognosis, therefore, points to very substantial risks of severe adverse or even catastrophic outcomes, corresponding risk to the value of existing physical and human capital, and the potential for additional global conflict as climate change leads to increasing competition for water, food and habitable land.  Given the scale of risk, formal arguments over the economic case for action on climate, at least in a global context, may seem superfluous in what many see as an essential and prudent course of action.  However failure to make a sound and compelling economic case would weaken the arguments for policy action, and effective formulation and presentation of the real case has proved surprisingly challenging.

Conventional applied economics, in the form of cost benefit analysis, has displayed some serious shortcomings in dealing with issues of this magnitude. The problems are both conceptual and practical. Conceptually they reside in the difficulties of dealing with risk and uncertainty, non-linearity, non-marginal changes and non-market effects, and the appropriate rate at which to discount future costs, or “inter-generational discounting”.  The major practical problem is the widely perceived inability[9] of conventional macro-economic or integrated assessment models to capture the complexities, or indeed the potential scale, of the major economic and social disruptions that are considered as likely consequences of significant climate change (a fact that should provide little comfort).

In consequence the economic argument still needs to be stated in a fuller and more rigorous way.  This requires a decision theory context that deals more explicitly with issues of risk and uncertainty, including choices between  mitigation or remedial action, evaluating the possibility of a simple technical fix (such as low cost carbon sequestration), and maintaining options that provide for an acceptable future. 

This would represent major improvement on the cost benefit approach that has, implicitly at least, tended to dominate debate hitherto, and would be closer to “risk of ruin” approaches adopted in the insurance industry.  Done effectively, a more compelling argument could increase public acceptance of policies aimed at damage limitation.

However the essence of the case is clear, and is largely summarised in this note.  If we believe there is a significant risk of truly severe adverse or even catastrophic effects from climate change, then we should note that the costs, even of the very substantial actions to mitigate change, are in reality quite modest in relation to other shocks that global and national economies have endured in recent decades, including oil price shocks and recessions induced by financial sector mismanagement.  In terms of an insurance analogy the premiums would be very modest in relation to the scale and risk of the really adverse outcomes, even if these were of relatively low probability – a comforting assumption that has little or no analytical basis.


Turning to the important issue of costs within an economic argument, climate and emissions policy emphatically does not currently, nor in the foreseeable future, present a major macro-economic problem.  On a macro level, dealing with climate change, if done early enough, is relatively low cost and the investment and other expenditures involved are relatively small. 

To put into perspective, the cost of mitigation measures has typically been estimated to be around 1-2% of GDP.  Even if it were somewhat higher than this, the cost is, in relation to national economies, of comparable scale to, for example, the effect of oil and gas price movements of the last decade which most Western economies have handled without major disturbances. Compared with these, or the effects of shifts in fiscal policy, or the effect of the financial crisis, with major economies at 15% below trend, the impact of climate policies, on growth and standard of living, should appear as relatively small and manageable.

The problems arise primarily through numerous micro-economic issues, the many distributional and perceived competitiveness impacts, the effects on particular interest groups, and the difficulties in managing those effects.  But these should not be magnified into unsupportable arguments that world economies “cannot afford” action.

A part of the concern over cost has been concern with financing issues.  But there is no reason to suppose that capital availability, or its cost, should be a real constraint on mitigation.  Globally, capital has never been so plentiful or so cheap.   Its deployment in the energy sector, for low carbon generation, and “utility” and infrastructure activities, is intrinsically a low risk and hence modest reward set of investments, and should always be considered as such. (This is certainly so in any application of conventional capital theory.)  

Any failure to secure investment capital on reasonable terms can therefore only result from a poor allocation or appreciation of risk, of which the prime cause is poor or absent policy frameworks, policy uncertainty and lack of policy commitment.  This emphasises the role of government. Getting financing arrangements right, in this case through clear policy and regulatory commitments, is a critical policy instrument.

Establishing a valid case for action leads on to consideration of policies to achieve better outcomes. 


Road maps are the first step.  The broad policy framework required by governments engaged in action to reduce emissions is clear.  The first requirement is a clear pathway that allows the major tasks to be identified and sequenced.  Indicative projections have an essential role in identifying the sequencing of the major infrastructure and other investments, and provide a road map for policy and investment strategies for all parties.  The work of the CCC in the UK provides a useful example.  

The most important element within almost any national or multinational policy framework, with few exceptions, remains recognition of the central role of the power sector.  Decarbonisation of the power sector remains a necessary although not sufficient condition for meeting ambitious emissions targets. The power sector therefore remains absolutely centre stage in any discussion of climate policies.

The second major challenge lies in defining the roles of the three main classes of policy instrument.  These are well recognised as falling in three groups: various forms of regulation, instruments based on markets and pricing of GHG emissions (including taxation), and measures to promote and implement innovation and transformational change.  The challenge is to balance overall policy so that these instruments work in the same direction and are not in conflict.

Markets and Regulation

In this context the biggest single issue is the appropriate balance between markets on the one hand, and regulation or planning and central direction on the other. The dichotomy is to some extent a false one.  There are clear examples, for example in the transport sector, where simple regulatory measures have worked very effectively without creating significant market distortions.  Equally the importance of working with rather than against competitive markets ought to be obvious, since this increases the incentives for innovation and deployment of low carbon technologies.

However the prime problem is that market solutions are only possible within a context of interventionist policies that successfully reflect the externality of the damage caused by CO2 emissions.  Current EU policies have produced low current carbon prices, with promised adjustments offering an indication of higher future prices, even though the importance attaching to the cumulative stock of emissions should attach a very high priority to early emissions reduction.  This provides very limited and uncertain incentives either for current fuel substitution, in gas for coal, for example, or for future investment.

EU policy towards energy and climate, and in particular its emissions trading scheme (the ETS), provide some clear indications of the problems.  The effectiveness of carbon pricing has been undermined by a combination of excessive lobbying for over generous allowances and the effect of recession, combined with insufficient flexibility in adjusting caps to changing circumstances. In addition the effectiveness of the EU ETS in securing a realistic carbon price is undermined by additional EU and national policies such as those on renewables which, even if appropriate on their own, have not been sufficiently taken into account in the design and parameters of the EU ETS. It can also be argued that the timescales in the EU scheme have been too short to provide the confidence necessary to underpin major investments.

In consequence opportunities for early, and hence highly worthwhile, emissions reductions are being missed.  This is particularly evident in failure to engage in gas for coal substitution in power generation – a perverse outcome that results from the poor calibration of the EU carbon market, combined with the advent of cheap US coal exports. On a longer term perspective, carbon prices have not been sufficiently robust to stimulate the investments needed for transformative change.

There is a real risk that dissatisfaction with this experience will discredit future proposals for the necessary and sensible use of market mechanisms.  This is unfortunate since their essential role in promoting efficient and effective solutions, especially in an international and trading context, ought to be widely accepted.

Markets and Policy Commitments

The strengths and limitations of the marketplace have also become a central tension in the crucially important area of electricity policy. Prices alone do not drive through transforming technologies; frameworks and plans with other policy instruments are necessary too. This is very evident in the slow progress of carbon capture (CCS) technologies, as well as in UK efforts to promote low carbon power sector investment.

In this context it is increasingly clear that whole areas of activity, especially in electricity capital investment, will not now function at all without government commitment to a clear policy.  Inevitably that is drawing governments in to decision making.  The challenge is to make sure that this is done competently and effectively, and that may require some institutional change. In the UK, for example, the only entity bearing any responsibility for key strategic decisions is DECC.  There is a case for assigning more explicit responsibilities to the industry in respect of reducing carbon intensity. In principle this could be done through supply obligations or by a separate body, at arms length from government, with responsibility for contracting future low carbon generation requirements.

Other policy issues

Apart from questions arising over the role of markets, there are other clear choices to be made over the balance of policies and the priority to be assigned to low carbon objectives.

One is the attention to be paid to the demand side, including distributed generation, which arguably has received too little attention in policy making.  Governments will need an integrated strategy to harness this potential effectively.  However it remains the case that many of the biggest choices remain primarily supply side questions – especially in power generation.  Demand side policies that reflect the increasing opportunities offered in decentralised and renewable generation and smart grids are essential, but, under currently foreseeable technologies, will tend to reinforce the importance of central grids and coordination and system control issues.

Caution is also required on assumptions about the contribution of energy efficiency measures.  Energy efficiency  may be beneficial per se, but the established “rebound” effect, where some efficiency gains are taken as increased consumption,  suggests that, without  accompanying price increases (to reflect the cost of emissions or low carbon energy), it may be partially offset by increased use of energy services.  It is also important to distinguish energy intensity from carbon intensity, as higher energy efficiency does not always equate to lower emissions.

Numerous policy conflicts are also apparent. In Germany[10], the phase out of nuclear will substantially increase CO2 emissions (which arguably pose by far the greater global risks). There have also already been serious conflicts between measures for early emissions reduction, and the norms of national competition policy.  In the Netherlands plans by generators to substitute gas for coal were challenged on competition grounds, and similar issues are evident in the EU in relation to the single market, competition and state aids. Comparable questions will arise for the WTO and global trade policy.

Other fundamental conflicts arise through the impact on costs and prices, with higher prices for poorer households coming into conflict with attempts to alleviate poverty or reduce inequality.  Although most of the increase in household energy prices in recent years has been due to the rising price of gas, the impact of emissions reduction policies on prices remains an important political issue.  In fact a wide range of measures are available to protect low income households from the effects on energy bills and alleviate impacts on vulnerable groups, so this should not be a pretext for limiting action to reduce emissions.

Similar apparent conflicts have been introduced by concern over the impact on national “competitiveness”, particularly in the UK and EU, and also deserve attention.  However rational analysis has to recognise some basic considerations.

First is the simple comparison of the costs of goods in international trade on an economy wide basis.  Comparative energy costs are demonstrably of limited importance compared to real wages or exchange rate movements, and of little competitive significance for much of industry. Given that exchange rates adjust over time, to reflect inter alia trade surpluses and deficits, raising energy costs in an individual geography will lead to exchange rate adjustments that benefit less energy intensive local industries at the expense of the more energy intensive.  Countries, in this sense, are not “competitive”; companies and industries are.

Second, adopting a different concept of competitiveness for national or regional economies, to mean those that appear innovative and capable of high growth, once again energy prices appear to have little influence.  Germany is widely regarded as the most competitive economy in Europe but has had among the highest energy costs.  Asia Pacific faces some of the highest wholesale gas import prices by a significant margin, but also has a very high proportion of high growth “competitive” economies.

Third, the EU may need to accept that the US in particular has advantages in natural resource endowment that confer comparative advantage in certain high energy content activities, and are not easily countered other than through exchange rate adjustment.

There is however a real policy issue, not for general competitiveness per se, but for trade and the efficacy of climate policy for particular emissions intensive industries. This will arise if some countries remain competitive in energy intensive industries by not following emissions reduction policies – thus increasing global emissions through “carbon leakage” from those countries that do follow such policies.  If this occurs, the issues are best dealt with on a sectoral basis, through measures that target the particular issue directly.  Search for enduring solutions may be difficult, but a variety of measures can be considered. These include the current approach of free allocation of emissions allowances and financial compensation for electricity intensive industry, alternative approaches such as border adjustment taxes in a few industries, and other derogations or compensation packages as transitional arrangements.

A general conclusion is that the seriousness and urgency of the climate issue should indicate a first priority to an objective of fundamental importance such as emissions; and many other important objectives, such as poverty alleviation, need not be impeded by measures to reduce emissions.


A further fundamental feature of the climate policy problem is the dependence of its resolution on collective action.  Global agreements on mechanisms for action, and on burden sharing, are therefore of first order importance, and their absence is frequently invoked as justification for inaction in national or EU terms. There are several counters.

First, global recognition of the serious nature of the problem is growing, not least in the business community. A growing proportion of emissions are covered by taxes or cap and trade limits of some kind, or by instruments designed to reduce emissions. This at least partly answers the argument that unilateral action is of no value.  Purely in terms of national interest, and irrespective of climate outcomes, there are risks in failures to take action at a national level, and in falling behind on policy development.

Second, China is of huge significance and there are encouraging signs that China is taking action, with ambitious targets for reducing the carbon intensity of its economy.  China’s emissions levels will, on their own, have a significant climate impact, and the exemplary effect of successful Chinese policy is potentially of equal significance.

Third, suppositions of EU leadership and of the EU moving “too fast” on climate policy are no longer justified.  There are serious shortcomings in EU policy which need to be addressed.  Improving EU policy has to be a priority for member states, both because it matters in global terms and to make their own policies more effective.

The 2015 Paris discussions will be critical in meeting the urgency increasingly apparent in the science consensus.  They follow a series of disappointing summits, many reflecting serious weaknesses in the framework of global governance for decision taking on these issues.  These have included the ability of relatively small interest groups to delay or veto agreements in pursuit of relatively insignificant opportunistic gains.

An important element in global agreement is maintaining and developing global markets in carbon is an important instrument. One objective should be to continue the search for agreements and policies that provide market linkages, even if some of these are bilateral (eg EU and others) and not global.  Linkages increase the incentive for effective and efficient low carbon innovation, and promote more effective and lower cost solutions than would be possible with a patchwork of national regulations.  Inter alia this means that we should be reluctant to allow the decline of the only global linking mechanism which currently exists, the Clean Development Mechanism (CDM). 


We need a renewed and improved assessment and statement of the real case for climate action.  The conventional (cost benefit) analysis almost certainly understates the “risk of ruin” implicit in late realisation of the extent and nature of the dangers posed by (say) a +4o C world, and of the very severe economic and human costs of late mitigation or adaptation. It may also fail to create a sufficiently positive vision of the prospects offered by a low carbon economy.  This needs to accompany continued demonstration, to the public, of the real science and economic case.

There is, at a global level, a dangerous and growing gap between the actions demonstrably necessary to contain climate risk, as established within the context of climate science, and “business as usual, slightly modified” projections within the energy sector. However postponement of national or EU actions on the grounds of lack of international progress is both dangerous and misleading. Realisation of the scale and importance of the issue is growing, not least in Asia.

Early action carries a double benefit in postponing adverse outcomes, and improving options both for mitigation and adaptation. Early abatement of CO2 is especially important given that a large proportion of emissions persist in the atmosphere for centuries.  Inter alia this implies action to accelerate early substitution of gas for coal in the EU; this is not taking place with current carbon markets, and has in some instances been inhibited by focus on policies, such as competition policy, which should be considered of lesser importance. Primacy of policy on climate is essential, even at the expense of other objectives.

The power sector remains the central focus of any effective policy to lower emissions, but the necessary investments require government commitments to both decarbonisation policy, and to the individual investments, to make them happen. This inevitably draws governments into decision making, but currently they often lack the institutional framework to deal with this effectively.

For the UK two particular conclusions stand out.  First, the UK should continue to urge international action aimed at reducing the risk of exceeding the so-called 2oC target, and follow domestic objectives consistent with that aim.  This holds despite the probability  that global emissions cannot now be curtailed sufficiently to eliminate the risk of dangerous climate consequences. Indeed the imperative to reduce the worst of the risks is all the stronger.

Second, the ability to make progress is everywhere constrained by insufficient political commitment to the problem, and weak perceptions of the nature of the risks associated with irreversibility in global climate systems.  Improving the effective communication of these risks should be a high priority.

The authors of the BIEE paper were: Christopher Allsopp CBE, Christopher Beauman, Robert Gross, Joan MacNaughton, CB,  Michael Parker, OBE, John Rhys,
Anthony White MBE, and Adam Whitmore.

Christopher Allsopp, CBE, is an Emeritus Fellow of New College Oxford, and Editor of the Oxford Review of Economic Policy.  He is the non-executive President of the Oxford Institute for Energy Studies, having been its Director from 2006 to 2013. He is also a former Member of the Monetary Policy Committee and of the Court of Directors of the Bank of England.

Christopher Beauman has been an Adviser on steel industry modernisation and financing in Eastern Europe to the European Bank for Reconstruction and Development since 1991. He is a former Adviser, Central Policy Review Staff, and a former Group Planning Director, Morgan Grenfell.
Dr Robert Gross is Director of the Imperial College Centre for Energy Policy and Technology (ICEPT). He is also a Co-Director of the UK Energy Research Centre and the Policy Director at Imperial’s Energy Futures Lab. He has been a specialist advisor to the Energy and Climate Change Select Committee enquiries into energy market reform (EMR),  a member of the DECC academic advisory council on EMR, and a Specialist Adviser to the House of Lords Committee on the EU inquiry into the feasibility of the 2020 targets for renewable energy. He is currently Chair of the British Institute for Energy Economics.  He has undertaken research and consultancy for utilities and oil companies, the UNDP, World Bank and Greenpeace.
Joan MacNaughton CB is Executive Chair of the World Energy Council Trilemma, an annual assessment of 129 countries' energy policies; Past President (2011-13) and Honorary Fellow of the Energy Institute; and was formerly Director General of Energy at the Department of Trade and Industry; Chair of the Governing Board of the International Energy Agency; and Vice-chair of the UN High Level Committee on the Policy Dialogue on the Clean Development Mechanism.
Michael Parker, OBE, is a former Director of Economics at British Coal.  He was a Member of the UK Government Energy Advisory Panel, 1993-2003.  He has been a Visiting Fellow at the Sussex Energy Group, University of Sussex. 
Dr John Rhys is a former Chief Economist at The Electricity Council, the body then responsible for the state owned electricity industry in England and Wales. He was also over many years responsible for developing and directing the international energy practice of the leading economics consultancy NERA, and Managing Director from 1997 to 2004.  He is currently a Senior Research Fellow at the Oxford Institute for Energy Studies. He also chairs the BIEE programme of seminars on energy policy and related climate issues.
Dr. Anthony White, MBE, was a founding member of the UK Government's Energy Advisory Panel, a member of the National Grid's Executive Committee, Head of the European Utility Research teams at Kleinwort Benson and Citigroup and a founder of Climate Change Capital.  He is a non Executive Director of Green Energy Options, The Crown Estate and 2OC Limited. He now provides strategic and financial advice on the energy markets through BW Energy Limited.
Adam Whitmore is currently Chief Advisor, Energy and Climate Policy, at Rio Tinto.  He has over 20 years’ experience of working in the energy industries and has taken a particular interest in climate change policy for much of that time. 
above author details correct as at March 2014

[1]Further details and the summary can be viewed at this link:  The BIEE site also archives summaries of the presentations and much of the discussion which provided material for this paper.
[2] World Energy Outlook Special Report 2013: Redrawing the Energy Climate Map. International Energy Agency (IEA). 2013
[3] Fifth Assessment Report (AR5). Impacts, Adaptation, and Vulnerability.  Intergovernmental Panel on Climate Change (IPCC). 31 March 2014
[4] Fourth Carbon Budget Review – part 1 – Assessment of climate risk and the international response. Committee on Climate Change. 7 November 2013
[5]Cumulative Carbon Emissions And Climate Change: Has The Economics Of Climate Policies Lost Contact With The Physics?’, John Rhys, OIES Working Paper EV 57, July 2011.
[6] Investment under Uncertainty, Dixit, A.K. and Pindyck, R.S.  1994.   Princeton, NJ: Princeton University Press.
[7] CCC. Op cit.
[8] This is apparent both from the projections of intergovernmental bodies such as the IEA, cited above, and from the scenario projections outlined by some of the major oil companies.
[9]. "Climate Change Policy: What Do the Models Tell Us?" Pindyck, Robert S. 2013. Journal of Economic Literature, 51(3): 860-72.
[10] A Comment on Current German Energy Policy- The “Energiewende”.  A UK and Climate Concern Perspective.  John Rhys.  OIES Energy Comment.  April 2013.

Thursday, March 17, 2016


Will NASA's  measurements finally silence the climate sceptics?

Last week NASA reported that global temperatures in February 2016 had exceeded long term historical norms by a record amount, 1.35 degrees Centigrade above the long term average, taken for this purpose as the 1951-1980 average, and even further above estimates of the pre-industrial era.

It is rare for serious climate scientists to treat one month's data as conclusive evidence of anything, but in this case the dramatic and surprising scale of the temperature anomaly has caused some climate watchers to sound a note of alarm. This is partly because it follows on from a string of observations in 2015, itself a record year, which had already suggested that any temporary hiatus in warming, if it ever existed, was now at an end.

“We are in a kind of climate emergency now,” Stefan Rahmstorf of the Potsdam Institute of Climate Impact Research told the Sydney Morning Herald. “Governments have promised to act [to curb greenhouse gas emissions] and they need to do better than what they promised in Paris.”

The proximate cause for the dramatic rise in temperatures in 2015 and 2016 is the latest el Nino climate event. Even so the latest numbers suggest a rise, compared to the 1998 el Nino temperature spike, of about 0.45 degrees Centigrade. Climate sceptics have made much of the apparent "slowdown" or hiatus in warming since 1998, frequently claiming that there has been little or no increase in observed warming since 2000.

So will the climate sceptics finally admit reality?

One of the strongest and most professionally organised sceptic groups has been the Global Warming Policy Foundation (GWPF), closely associated with former UK Chancellor Nigel Lawson, and with a large number of prominent climate sceptics on its Academic Advisory Council.  These include academic and other figures prominent in the public debate such as Robert Carter, Ross McKitrick, Freeman Dyson, Richard Lindzen, Matt Ridley and others.  Elsewhere on this site we present a summary of the positions taken by a number of  GWPF authors, including those named above, in responding to the Royal Society on the subject of climate change, and a personal critique and summary of the positions taken by both parties. The prominence of these authors means that we are looking at the work of the most serious sceptics, presumably chosen from the GWPF's top academic support in order to argue the sceptic case.

It is very apparent from this critique that the GWPF authors rely heavily on the supposed hiatus in warming. In terms of hard evidence it has been their central claim.  This was always evidence of dubious quality, relying on a highly selective "cherry picking" of the time series data. In reality no serious scientist or statistician should have made the kind of claims the GWPF authors have made - averaged data continued to show a steady rise in temperature decade on decade. But it was also in strategic terms a foolish argument on which to place so much weight, since it was always true that the next el Nino was likely to demolish once and for all the spurious notion of a "hiatus". That is what has happened. The frequently repeated claim of an 18 year "pause" looks increasingly foolish in terms of the evidence.

We await the GWPF reaction. Most popular sceptic responses, on the evidence of past behaviour, are retreats to a position that temperature increase will be beneficial or does not matter, on the one hand, or refuge in conspiracy theory, coordinated falsification of data by the world's scientists and governments,  on the other.

How alarming is this? Delayed response and irreversibility.

It is difficult to judge whether the sudden apparent acceleration in warming should make us even more concerned about the underlying trend.  On past experience, the years following el Nino might be expected to take temperatures back towards the underlying upward trend. The NASA report may suggest that climate models are unlikely to be overestimating the pace of warming, but it is too early to suggest they are underestimating the climate effects. But there are two under-appreciated aspects of the science that should give cause for concern, at least on the risks of dangerous levels of warming.

The first is the very substantial time lags, the delay between any change in atmospheric concentrations of CO2 and the time at which any new temperature equilibrium is reached.  This is measured in decades. So any current overall warming attributable to CO2 may be the product of  actual atmospheric concentrations over a long period up to two decades previously.   Even if CO2 and other greenhouse gas emissions ceased altogether from this year, we would still have to wait many years to observe the full effects.

The second is the essential irreversibility, at least with current and easily foreseeable technology, of CO2 emissions. Every year that passes without halting emissions, or even curtailing their annual increase, condemns us to further future change which is essentially outside any human control.

Paris. Was it enough?

The Paris negotiations have been widely represented as a success, especially in the context of earlier failures. But in the absence of binding commitments it was always clear that real success would then depend on just how much progress the major emitting countries would make without the discipline of a negotiated constraint. The possibility of some dramatic temperature records this year, even if the underlying  climate model predictions remain broadly unchanged, may well provoke increased realisation of the gravity of our situation and pressure for more urgent measures.

Tuesday, March 1, 2016



This material was originally prepared for The Oxford Magazine and published in 2015

The threat

Both the science of CO2 related climate change, and the dangers and dilemmas it poses for mankind, are easy to state.  Modern economies still depend on oil, gas and coal for their large energy needs, resulting in huge emissions of the most important greenhouse gas, carbon dioxide (CO2).  Together with other greenhouse gases (GHG), and in the absence of other natural mechanisms to re-absorb the CO2 or stabilise Earth’s climate, higher atmospheric concentrations of CO2 will result in a warmer planet, a major consequence of which is significant climate change. Unlike water vapour, an important natural GHG, but one whose atmospheric concentration tends to be self limiting or self stabilising through precipitation as rain, CO2 and some of the other man-made GHG are essentially cumulative.  

 The timing, scale and distribution of GHG induced climate change are part of an immensely complex set of interacting physical and biological processes that make up the world in which we live. This makes it difficult to know exactly how and when change will affect temperature and rainfall in particular parts of the world, although, as we gather more and more information, the science is becoming increasingly confident on at least some of these questions.  The further consequences in terms of effects on agriculture, water resources, national economies and mass migration are even harder to predict.  But there is little comfort in that uncertainty. Those possible consequences that can be anticipated seem certain to provoke more competition for land, water and other resources, increased global migration, and the potential for conflict that stems from all of these.

 It is also quite clear that there are very substantial risks of seriously adverse or even catastrophic outcomes.  The greater the warming, the higher the probability that we move well beyond relatively small changes in climate, to which adaptation might be relatively easy, even if expensive, into much more severe or even catastrophic changes in our shared global environment, for which available means of adaptation will not be adequate.  Needless to say these changes would impact first and most severely on the poorest and least able to cope.

The perfect storm of political and policy problems

The challenges of dealing with climate change present a possibly unique combination of factors that play to several human weaknesses, whether at an individual or collective political level, and make effective responses to the problem difficult. They include the following.

The first factor is that the problem is essentially global, as gases, and climate, are not contained within national or regional boundaries.  Collective agreement and action is therefore a fundamental precondition for any effective policy.  As with other much less dangerous issues, collective agreements are often hard to achieve nationally. They are even harder to achieve on a global scale, and in relation to commodities of huge economic importance associated with substantial vested interests of all kinds. Action on climate may be in everyone’s collective interest but it is in no-one’s individual interest.

The second factor is the long time lag between cause and effect. Thermal inertia means that even the “first round” and more predictable consequences of a given increase in GHG are only fully worked through over periods measured in decades, with consequential effects such as rising sea levels that will continue over much longer periods and are not reversible other than on geological timescales, even if atmospheric CO2   concentrations are stabilised or brought down.  This naturally conflicts with the myopic nature of much political debate and our ingrained human tendencies to ignore or play down risks that currently seem quite distant in time.

It also serves to introduce the third factor, the irreversibility of current emissions of CO2, which does not decay in the atmosphere and is only removed very slowly, if at all, in the natural carbon cycle. It is the equivalent of a centrally heated room where the radiator can only be turned up, not down, but the room temperature responds only slowly to changes in the radiator setting.  We currently have no known means of extracting CO2 at reasonable cost (the artificial “carbon tree”), nor can we have any confidence that such a technology can or will be developed.  In the absence of low cost extraction, this means that fuel choices made now have irreversible consequences. Without action to curtail CO2 emissions, there is an alarming prospect that, by the time we observe actual warming, we will already have baked in a much larger amount of unavoidable future warming and associated climatic change. At a recent presentation in Oxford, Thomas Stocker of the Physics Institute, University of Bern, and co-chair of the Intergovernmental Panel on Climate Change (IPCC), estimated that committed peak warming rises 3 to 8 times faster than observed warming.

 A fourth factor is the nature of the risks and uncertainties involved in any attempt to anticipate the future.  A common observation of human psychology is that most of us find it difficult to make rational and consistent decisions between different types of risk, even if the risks themselves are in principle well understood.  From a rational perspective, the long term threat from climate change is orders of magnitude worse than that of an accident in civil nuclear power, but that has not prevented a German government, with Green support, from calling a nuclear moratorium and building new coal-fired stations, the worst possible option in relation to CO2 emissions.

In the case of climate science, and even though the fundamental influences on climate are increasingly well understood, there have been enough uncertainties relating to specific details and consequences to allow sceptics, without real evidence, to create the impression that the science is of dubious reliability as a basis for policy. So this fourth deadly ingredient is perhaps our inadequate grasp of risk and uncertainty, or at least our collective inability to comprehend the reality of what the climate science is with confidence describing, and failure, in the eyes of some people at least, of the science to provide a sufficiently clear and convincing narrative around a very complex problem.

 Finally these problems are compounded both by the nature of the particular vested interests threatened by any action aimed at reducing the use of fossil fuel, and by the central role of energy in the production and consumption enjoyed by modern economies.  Some vested interests are obvious.  Nations rich in fossil fuel reserves, especially oil, have a clear incentive to deny the problem.  Distinguished Oxford climate scientist Sir John Houghton, a former Oxford professor of atmospheric physics, co-chair of the Nobel Peace Prize winning Intergovernmental Panel on Climate Change's (IPCC) scientific assessment working group, and lead editor of first three IPCC reports, describes this very clearly in his autobiography.  Saudi and Kuwaiti representatives in the IPCC went to great lengths in their efforts to weaken the conclusions of the IPCC Second Report, and to attribute or exaggerate uncertainty at every opportunity. Sir John also details a variety of dirty tricks, dishonesty and sophistry deployed by other parties with a major vested interest in denying the reality of the climate science.

 And of course as energy consumers or as taxpayers we have own vested interests in not changing our habits of energy use, and in avoiding some of the short term costs of mitigating future problems, even if these are, as will be argued below, these are relatively small in relation to the scale of the dangers they aim to mitigate. The US has long been the world’s most profligate user of oil, coal and gas, and has in the past shown a corresponding reluctance to recognise the issue. China, for whom even the per capita carbon footprint now exceeds the European average, has taken a path of rapid coal fuelled economic expansion as it strives to develop.

 These five factors also reinforce one another.  Vested interests have proved anxious to encourage or exploit any perception of uncertainty in the science, even if this largely relates to the quantum of damage rather than to fundamental understanding of the physical processes and the risk. The long time delays between cause and effect made it easier for sceptics to suggest that the science was mistaken or at least that the risks are exaggerated.  The dependence on global agreement, and action by all, is a disincentive to unilateral action within one country, or even within such a block as the EU.  Long time lags encourage us to dismiss seemingly distant risks, and make us reluctant to incur current costs for future protection.  Irreversibility amplifies all the dangers of delay.

 Confidence in the science

 These dangers and difficulties highlight the scale of the challenge, but of course they also place  a great weight on the confidence that we can place in the science.  This means not just establishing the best available science, but even more on understanding the nature of its certainties and uncertainties, and their implications for understanding the dangers we face.  So it is perhaps worth reiterating what we know.

 The first part of the science is very clear.  An increase in CO2 does, in the absence of other factors, cause a warming in the atmosphere. This, like most of the building blocks of climate analysis, is not a matter of scientific conjecture, or a “Karl Popper” hypothesis  like “dark energy”, that has a real chance  of being overturned as science advances. It is for all practical purposes a fact established by 19th century physics.  A priori we should be worried.

But climate is a product of a whole set of complex phenomena and processes, not least the natural carbon cycle, in which plants and oceans release and absorb atmospheric carbon every year, and whose size dwarfs even the very large scale of annual human CO2 release.  It was therefore possible to hope and plausible to argue, when we first began to examine climate change seriously, that there might be feedbacks within these complex processes which would have the effect of dampening any changes and create a built-in tendency for climate to stabilise.

Candidates for these helpful negative feedbacks included increased re-absorption of carbon within the natural carbon cycle, for example through increased plant growth associated with increased CO2 concentration, and reduced concentrations of water vapour (a powerful GHG) or changes in cloud cover. Unfortunately there is so far little evidence for negative feedbacks which will stabilise our climate.  Measured CO2 is increasing, so natural re-absorption is not happening on a sufficient scale. At the same time there is increasing concern about dangerous positive feedbacks, such as reductions in polar ice cover, reducing the reflection of sunlight, and melting permafrost which releases methane, another GHG. It is of course possible that some new factor, not previously investigated, will turn up, but it would seem foolhardy to rely on such a happy accident. It is not the kind of foolish risk taking that would be countenanced in most human activities.

Of course the final irrefutable proof that actual man-made climate change is an existential problem, and not just a distant threat, comes only with observed actual warming.  Initially that may have been difficult to disentangle from natural variability and natural cycles, such as El Nino, in Earth’s climate. And further measurement problems arise in determining how much of the additional heat is being taken up at a given time in the different levels of atmosphere and in the oceans.  However in spite of these difficulties the evidence of a steady decade on decade increase in temperature, corresponding to the past acceleration of CO2 emissions and enhanced concentration, is now incontrovertible and has not so far been challenged by any serious science.

 Arguments and inadequacies in meeting the political challenge

For anyone concerned with these issues, one of the most frustrating features of the debates on climate policy has been the argument that we cannot afford the cost of actions to mitigate climate change.  These are generally estimated at around one or two percent of GDP, substantial amounts, but comparable to the shocks and changes imposed on national economies by the oil price shocks of recent decades, which have for developed economies been easily accomodated. Similar shocks are regularly imposed by shifts in government spending patterns, let alone the cost of the post 2008 financial sector induced recession, which is estimated to have sliced perhaps fifteen percent off national income, with a corresponding impact on living standards. Expressed in other terms, building up to an expenditure of an additional 1-2 % per annum of global GDP on mitigation could, by 2050, merely amount to reaching the same standard of living a few months later.

Nor should the availability of investment funds, or their cost, be a constraint. Globally, capital has rarely been so plentiful or so cheap. Its deployment in the energy sector, for “essential” investment in low carbon “utility” and infrastructure projects, should be an intrinsically low risk investment, implying a low cost of capital. Failure to secure investment capital on reasonable terms can only result from poor or absent policy frameworks, policy uncertainty or lack of policy commitment by governments. Nothing better demonstrates the economic feasibility of substantial investment in CO2 reduction, or “decarbonisation”, than the French achievements of the 1980s and 1990s, giving them a much lower carbon footprint than most of Europe, and cheaper electricity as well.  The French achievement was based on nuclear, but its real message is that large scale transformative change is perfectly feasible without adverse economic consequences.

 At the same time we should also question the extent to which global policies are even beginning to treat this subject seriously. A simple truth for policy makers is that anti-social activities, or those that cause general damage, should suffer penalties, and should not be encouraged by subsidies. Yet the International Energy Agency (IEA) estimates that the global subsidies for fossil fuel production and consumption still amount to some 500 billion dollars per annum, equivalent to a subsidy of over 100 dollars per tonne of CO2 emitted into the atmosphere.  The European Union, which has at least made a first stab at penalising emissions and is therefore ahead of much of the world, but has produced a carbon price of less than 10 dollars per tonne, wholly insufficient to incentivise low carbon investment on the scale required. The global disparity between subsidies and penalties is very evident.


 Our conclusions should be very simple. The issue is a proven threat, posing potentially extreme dangers to the global community. Early action carries a double benefit in postponing adverse outcomes, and improving options both for mitigation and adaptation, but is so far lamentably absent. Primacy of policy on climate is essential for the future of humanity, even if this is sometimes at some limited short term detriment to other objectives. 

 Fortunately there are signs that the two largest emitters, the US and China, are now appreciating the need for much more effective action. The EU and the UK, whatever criticisms might be levelled against their application of policy, have already shown at least some degree of leadership and responsibility. The UK, with its 2008 Climate Act, was first in embodying emissions targets in law.

 All this attached a great weight to the 2015 climate negotiations in Paris, under the auspices of the United Nations Framework Convention on Climate Change (UNFCCC). The summit achieved some positive progress, but extremely challenging tasks remain and have never seemed more important.