Global Politics, International High Finance, Propaganda

Sunday, 26 April 2015

How Much The Global Warming Catastrophists Cost Britain

The "Climate Change Act" 2008 and also the "Stern Report"

This article reviews different financial assessments of the method chosen the UK government for solving the "problems" of Climate Change. 
These financial assessments were in:- 
  1. The Climate Change Act (2008) and
  2. The Stern Report (2006)

There are basically two ways of dealing with the "planetary emergency" that Man-Made Climate Change is claimed to be:-
  1. "Mitigation" - which means STOPPING climate change before it happens by reducing carbon dioxide.
  2. "Adaptation" - which means ADAPTING to climate change as and when it happens, and not  reducing carbon dioxide.
Adaptation is much cheaper than Mitigation and yet the UK government always chooses the much more expensive option of Mitigation. I believe that the proper debate should be about whether adaptation is better than mitigation.

The Climate Change Act 2008

In 2008 the UK Government passed a law called the "Climate Change Act" which committed the UK  - by law - to ensure that the net UK carbon account for all six Kyoto greenhouse gases for the year 2050 is at least 80% lower than it was in 1990.

The law contained a summary of the financial impact, which estimated the annual cost to be between £14.7bn and £18.3bn. Thus, we in the UK have legally obliged ourselves to spend a total of  £734 billion to reduce our emissions of carbon dioxide by 80 per cent by 2050.  (But, for a quibble about the exact amount, you might also choose to see:-  Challenge to that calculation of £734 billion)

That financial impact assessment also claimed that the benefits would be greater than the costs.

However, the benefit that it considered was the benefit to the whole world, not the benefit to just Britain. Thus the cost/benefit analysis that it used compared apples to oranges.

None of the "benefits" it considered were directly related to the UK; instead they were simply calculated from the “Social Cost of Carbon” (SCC) for the whole world, as originally calculated by the Stern Review.

This SCC is no more than a theoretical guess at the “avoided global damage cost of emissions”.  A theoretical guess at the benefit for the whole world, not the benefit for the UK

To say that again in a slightly different way.  UK politicians decided to spend £734 billion of UK money because that is less than the cost to the whole world  if we don't spend it.  It isn't less than the cost to just Britain.

We are going to spend £734 billion in order to save the entire rest of the world from spending more than that. 
We are currently (2011) cutting public spending so much that we are closing fire stations, schools, hospitals, magistrates courts, coast-guard stations etc - but we are going to spend (at least) seven hundred billions in order to save the entire rest of the world from spending more than that. 

Aren't we kind!

The information about the cost/benefit analysis being so un-balanced is from:-


Here is a very revealing documentary on the same topic:



Here is a another documentary about costs versus benefits:


Peter Lilley – (an MP who was elected to the Select Committee on Energy and Climate Change in 2012 and who also has a degree in Physics from Cambridge University) gave a speech during the Energy Bill debate in the House of Commons on Monday 18 Jan 2016 that is well worth a read. This is the text, lightly edited

Mr Peter Lilley (Hitchin and Harpenden) (Con):

…Wherever we are on the spectrum on global warming, from sceptical to alarmist, we can surely all agree on one thing: that we should try to achieve the targets to which we are committed for reducing CO2 at the least cost to our constituents, - because it is ultimately they who bear it either through their [household] budgets or their jobs. So when the Secretary of State found that subsidies were proving unnecessarily generous to achieve our targets and we were achieving them ahead of time, so that without changing those targets she could reduce those subsidies, I assumed the whole House would be in universal agreement with what she was proposing; even I, for once, was on her side. But it was not so: there were calls from the green lobby and the Opposition to keep subsidies higher than necessary for longer than necessary to achieve the targets to which we are committed. 

Above all, we have created a framework that commits us to load higher costs on UK consumers and businesses via the Climate Change Act 2008 and all its ramifications than any other country in Europe. Despite all that, we will ensure, because of the way the system works, that we do not reduce the amount of carbon dioxide emitted into the atmosphere by one molecule more than would be the case if we were doing the same as the rest of Europe.

Let me explain why that is so. At Paris all the countries of the world agreed to make commitments on what they were going to do in future to curb the growth of their CO2 emissions. The only exceptions were the countries of Europe, who put in a total figure for the whole of Europe and are now to allocate that figure among the member states. Because we are committed to doing so much more than the average in Europe—indeed, than anybody else in Europe—all that does is to reduce the amount by which the other countries in Europe will have to reduce their emissions. So we have increased the burden of costs on British households and business, reduced the burden of costs incurred by our partners in Europe, and not reduced the emissions of CO2 by a single molecule.

That is an extraordinary thing to achieve. 
It puzzles me that the political class is committed to such perverse policies. Then I found a possible hint of an explanation, when someone mentioned to me, Madam Deputy Speaker, a book that I am sure, like me, you have not read but have heard about called …  “Fifty Shades of Grey”. The surprising popularity of that book demonstrated that sadomasochism, or the infliction of pain and the submission to pain, are far more widespread tastes than we had previously thought.

It seems to me that in the political sphere there is a similar belief that it would be popular to inflict pain or submit to pain by green policies. We might say that what we are suffering from in this country is “Fifty shades of green”.

The trouble is that Members who are committed to this doctrine measure the success of their policies not by what they will achieve, but by what they will cost; and not by how effectively they will reach a given destination, but by how onerous are the burdens they can place on Britain, British households and British business.
That pain is very significant. The Committee on Climate Change worked out the costs of climate change policies in 2014-15, and it came out at about £250 per household. [Interruption.] The right hon. Member for Doncaster North (Edward Miliband) may disagree with the Committee on Climate Change, which he helped set up; if so, please intervene—but of course he cannot sustain his position. That figure is set to double by 2020, to double again probably by 2030, and to double again by 2050. That is the direct effect on household budgets both through their energy bills and the cost of more expensive products because energy prices feed through to product costs.
There is also the cost on jobs. We have lost the aluminium industry already, and earlier today we were seeing the serious the impact of job losses in the steel industry. Of course, the basic reason why there are job losses in the steel industry is that there is a worldwide glut of supply, but the reason that falls excessively on this country is that our industrial energy costs are higher than those anywhere else in Europe. That is why we are suffering disproportionately at the moment. I am reliably informed by my right hon. Friend the Member for Wokingham (John Redwood) that we are importing bricks. I recently had lunch with a businessman who said that 7% of his output comes from the UK but that 28% of his energy costs were in this country.

 … My appeal to the House is that we start looking at this whole business in a rational way. Let us take all the targets to which we are committed as a given. Like the hon. Member for East Antrim (Sammy Wilson), I think they are unnecessary and unwise, but let us take them as a given and seek the least costly way of achieving them. Let us seek to achieve them in a way that will place the fewest burdens on British households and result in the fewest job losses and the least destruction of industry and output. Let us not measure our success by how much pain we can inflict and how much harm and burdens we can submit to, as we have done through the 50 shades of green up to now.

[End of quote from Peter Lilley in 2016]

Here's another good article on the topic from Peter Lilley MP from Tuesday, 25 November 2008 . It is called:-
"Coughing up to curb climate change"
Peter Lilley is a Conservative MP and former Trade Secretary. He was one of only three MPs who voted against the Climate Change Act which was piloted through Parliament by then Labour Energy Secretary Ed Miliband.  He was elected to the Select Committee on Energy and Climate Change in 2012. Peter Lilley has a degree in Physics from Cambridge University


The STERN Report

The Stern Report was a report on the Economics of Climate Change written in 2006 for the Prime Minister and the Chancellor of the Exchequer of the United Kingdom.  It ignores the Adaptation option and considers only Mitigation.
"Stern systematically downplays or ignores possible trade-offs between adaptation to (ADAPTATION), and prevention of (MITIGATION), climate change"
What follows below are two important reviews of the Stern Report. 
  1. One from Richard Toll - an economist.
  2. The other from Peter Lilley - an MP who was elected to the Select Committee on Energy and Climate Change in 2012.
I (personally) believe that the proper debate should be about whether it is :-
  1. cheaper to try to prevent global warming today or
  2. cheaper to wait and then adapt to its imagined net-adverse consequences the day after tomorrow
I (personally) believe that it is many times cheaper to adapt later than to mitigate now.

Stern, however, argues firmly in favour of expensive mitigation.


by Richard S.J. Tol October 30, 2006
"The Stern Review of the Economics of Climate Change (Stern et al., 2006) is a report to the Prime Minister and the Chancellor of the Exchequer of the United Kingdom. A team of 23 people, led by Sir Nicholas Stern and supported by many consultants, worked for a little over a year to produce a report of some 700 pages on the economics of climate change."

"the Stern Review argues that "the benefits of strong early action outweigh the costs"

"In this commentary, I review the impact estimates in the Stern Review and assess the cost-benefit analysis in that report before reaching a conclusion."

Economic impacts of climate change

Let us first examine the Stern Review conclusion that climate change will cause economic disruption now and forever. The "now and forever" is preposterous. ,,, But the "forever" part is ...problematic. It assumes that society will never get used to higher temperatures, changed rainfall patterns, or higher sea levels. This is a rather dim view of human ingenuity. It contradicts what we know about technological progress, adaptation, and evolution.

The Stern Review highlights several impacts of climate change.

One is water. The work here is based on Arnell (2004). The Stern Review states correctly that Arnell (2004) does "not include adaptation" and is therefore severely biased.

Food is another highlighted impact. Climate change would hamper agricultural productivity in some parts of the world, particularly Africa. This would be a problem in today's world. However, in all of the socio-economic scenarios used by the Stern Review, African economies would grow rapidly. This is inconsistent with famine.

Middle-income countries would import food (global food production is not threatened by climate change) rather than starve. Furthermore, it is hard to imagine rapid economic growth without substantial improvements in agriculture productivity; at present, African agriculture is particularly inefficient.

For health, the Stern Review makes the same mistake: It worries about people dying of diarrhea and malaria, diseases that can be controlled at little expense.

The Stern Review extrapolates the increase of damage due to weather-related natural disasters. It uses the estimates of Muir-Wood et al. (2006), ignoring the opposite (and peer-reviewed) conclusions by Pielke et al. (2005) and Pielke (2005).

For water, agriculture, health and insurance, the Stern Review consistently selects the most pessimistic study in the literature.

For refugees, the Myers and Kent (1995) are the highest, and the Stern Review duly highlight that "some estimates suggest that 150-200 million people may become permanently displaced". Myers and Kent (1995) was not peer-reviewed. Norman Myers is a known alarmist.

For sea level rise, the Stern Review only quotes the "millions at risk" from Nicholls and Tol (2005) " this metric ignores adaptation, which is very effective against sea level rise "note that Nicholls and Tol (2005) do report impact measures with adaptation too.

In the chapter on the impact of climate change on development, the Stern Review quotes the works of Nordhaus (2006) and Sachs (2001) "who find that a tropical climate negatively affects economic development. The Stern Review ignores the work of Acemoglu et al. (2001) and Easterly and Levine (2003), who argue that climate has at most a minor, indirect effect in the (distant) past " and the climate-change-specific studies of Fankhauser and Tol (2005) and Tol (forthcoming), who show that climate change will have a limited effect on development. In their poverty projections, the Stern Review mistakes the income-loss-equivalent-welfare-losses of the PAGE2002 with actual income losses.

Cost-benefit analysis and emission reduction targets

The Stern Review overestimates the impacts of climate change, and therefore the benefits of emission reduction. Its estimates of the costs of emission reduction are largely inspired by the Innovation Modeling Comparison Project (Edenhofer et al., 2006; Grubb et al., 2006; Koehler et al., 2006), a group of models that make overly optimistic assumptions on technological progress and the costs of emission abatement (see Weyant, 2004, and van Vuuren et al., 2006, for more mainstream estimates). High benefits and low costs together imply that the Stern Review recommends more stringent emission reduction than the standard cost-benefit analysis (Azar and Lindgren, 2003; Keller et al., 2004, 2005; Maddison, 1995; Manne et al., 1995; Nordhaus, 1991, 1993, 1994; Nordhaus and Boyer, 2000; Nordhaus and Yang, 1996; Peck and Teisberg, 1992, 1994; Tol, 1997, 1999, 2001, 2002).

The Stern Review does not, in fact, present a formal cost-benefit analysis. Instead, it compares the magnitudes of the costs of abatement (around 1% of GDP) to the costs of climate change (5-20% of GDP) and concludes that the latter justifies the former. There are two mistakes here.

Firstly, the costs of climate change do not equal the benefits of emission reduction "any abatement will only slow climate change rather than avoid it altogether " therefore, the benefits of emission reduction are smaller than the costs of climate change (Tol and Yohe, 2006).

Secondly, marginal costs should be compared to marginal benefits, rather than total costs to total benefits.6 The Stern Review is silent on marginal abatement costs. It does report marginal damage costs though. For instance, it says "the mean value of the estimates in the study by Tol [2005] was about $29/tCO2" but omits that Tol (2005) concludes that "it is unlikely that the marginal damage costs of carbon dioxide emissions exceed $50/tC [$14/tCO2] and are likely to be substantially smaller than that." The Stern Review does report that "the current social cost of carbon [€] might be around $85/tCO2”, but it does not provide any more detail â€" except that this number is preliminary and results from PAGE2002 (Hope, 2006). $85/tCO2 equals $314/tC, and is therefore an outlier in the marginal damage cost literature (Tol, 2005).


In sum, the Stern Review is very selective in the studies it quotes on the impacts of climate change. The selection bias is not random, but emphasizes the most pessimistic studies. The discount rate used is lower than the official recommendations by HM Treasury. Results are occasionally misinterpreted. The report claims that a cost-benefit analysis was done, but none was carried out. The Stern Review can therefore be dismissed as alarmist and incompetent.



by Peter Lilley MP - Tuesday, 4th September 2012 

Indeed, Stern's conclusions, that the costs of a crash programme to reduce emissions are far outweighed by the benefits, contradict even the Intergovernmental Panel on Climate Change (IPCC) which said: "costs and benefits are broadly comparable in magnitude" so it could not establish "an emissions pathway or stabilisation level where benefits exceed costs".

Describing future centuries as "now".

Stern suggests losses from global warming will be at least 5% of GDP "each year now and forever". This is simply untrue. The cost of his crash programme to reduce emissions does indeed start now and in the decades to come. But the impact of global warming which he wants to mitigate will be largely in the very distant future. Even on Stern's questionable calculations, it will be the next century before the cumulative benefits of (entirely) preventing global warming would exceed Stern's low estimate of the costs of (partially) limiting it. Stern justifies his claim by saying losses from global warming centuries ahead are statistically "equivalent to" losses "now and forever". He calculates the "now and forever" figure by taking high losses reached centuries ahead and projected to infinity, then discounting and averaging them with the negligible losses for many decades to come

Hidden economic assumptions.

Since Stern projects the impact of global warming to infinity, the rate at which he discounts them to the present is crucial. Stern rejects discount rates normally used to compare future costs and benefits '" including the rates specified by the Treasury Economic Service which he headed. Instead he adopts an ultra-low rate without explicitly disclosing it in his 700-page report. His low discount rate and infinite time horizon mean that over half the projected losses this generation will be paying to avoid will not occur until several centuries hence.

Stern justifies his ultra-low discount rate as being rational and ethical '" arguing that discounting for time is irrational and we should value the well-being of future generations as much as our own. Since discounting to infinity at a zero rate would put an infinite value on even the smallest reduction of emissions, he discounts time at 0.1% per annum (pa) to allow for the risk of extinction (for reasons other than climate change).

Cherry picking unreliable studies.

Stern draws heavily on non-peer reviewed and alarmist literature to paint an exaggerated picture of the key risks of global warming:

a) Hurricanes and storms.

A World Bank study shows that Stern's forecasts of damage to infrastructure from more powerful storms are up to 100 times too large - being based on extrapolating a non-peer reviewed paper which attributed much of the growth of insurance claims (which is mainly the result of more properties being built in storm- prone areas) to greater prevalence of more powerful storms. There is scant evidence of this. The IPCC is uncertain, citing models indicating that the number of storms may decline but intensity may increase.
b) Food and famine.

He neglects scope for adaptation (citing a study showing a 4 degree Celsius rise could cut yields of one crop variety by 70% but assumes farmers will not switch to another variety whose yields would increase '" a fact he withholds). He says a 4°C rise would cut world cereal production by 10%. But he accepts that meeting the bio-fuels target will absorb 10% of the world's arable land. In any case this is insignificant given the massive scope to boost output by using existing agricultural techniques more widely.
c) Water supplies.

Higher temperatures mean more precipitation overall. But Stern highlights the number of people forecast to suffer increased water stress, although twice as many will enjoy reduced water stress.

d) Rising sea levels.
This is the most iconic fear aroused by global warming but the IPCC says it will take millennia for higher temperatures to melt the ice-caps. Meanwhile the oceans are set to rise at a rate similar to the average of the last 18,000 years. A World Bank study suggests that even Bangladesh can prevent projected storm surges at a cost of barely 1% of its GDP.

e) Disease
Stern relies on a study which arbitrarily assumes 2% of all deaths from diarrhoeal diseases, malaria and malnutrition are the result of climate change and that this will double for each 1°C rise in temperature. But these are diseases of poverty and invariably disappear as countries experience economic growth.

[[End of "What is Wrong With Stern" by Peter Lilley]]

What else is wrong with Stern

It assigns only costs to carbon dioxide emissions, and ignores how rising atmospheric levels of this plant-fertilizing molecule are reducing deserts and improving forests, grasslands, drought resistance, crop yields and human nutrition.

It also ignores the huge costs inflicted by anti-carbon restrictions that drive up energy prices, kill jobs, and fall hardest on poor, minority and blue-collar families in industrialized nations – and perpetuate poverty, misery, disease, malnutrition and early death in developing countries

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