Thursday, May 18, 2006

The Green Switch

Chris Huhne has put the flesh (pdf) on his eco-tax bones. I discussed this at the time here and here.

1. An increase In Green Taxes As A Share Of National Income. Green taxes have fallen from 3.6 per cent of GDP in 1999 to just 3 per cent of GDP, and we are committed to reversing this trend. Revenue would be used to cut taxes elsewhere so that this is a green tax switch, not a rise in taxes.
Excellent. This is a very powerful statstic, and worth shouting about.

2. Reform The Climate Change Levy: The Climate Change Levy is a positive step forward but is too complex and bureaucratic. It should be restructured as a tax on carbon across the economy, but we support the Government’s intention for the first time to raise it in line with inflation. That should be the norm, not the exception.
This is good - it is simplest and least distorting to treat all carbon emissions the same. And as the package is to be revenue neutral, there will be direct benefits to low-carbon parts of the economy.

3. Raise Vehicle Excise Duty On Polluting Cars: The Chancellor has increased Vehicle Excise Duty on high polluting vehicles by less than the cost of half a tank of fuel. If it is to be effective as a measure to reduce emissions and encourage greener transport, VED will have to be radically redrawn to penalise emissions and reward clean cars. The top-rate of VED should be significantly higher than at present at £2000 a year for high emission cars.
This is a good measure. Fuel demand is not very elastic, but the choice of large inefficient vehicles is one that can be made to pay its way without hammering those who try to motor efficiently.

4. Keep Fuel Duty In Line With Inflation: Incentives to save fuel depend in part on developments in the oil market, but duty on fuel should normally keep track with inflation rather than decline in real terms. The failure to raise fuel duty since 1999 has led to a rise in emissions, and we support the Chancellor’s intention to raise fuel duty in line with prices in September.
Right, better than real terms cuts. And in my view aviation, industry, and domestic uses are higher priorities for real terms increases in eco-taxes.

5. Tighten Allocations in The EU Emissions Trading Scheme, And Auction 10 Per Cent Of The Permits. The recent fall in the price of carbon for industrial users reflects the unambitious overall cap set by the EU, together with the failure to allow national governments to hold back a part of the national allocation for sale to the highest bidder at auction. We will press for both reforms and for auctioning the maximum 10 per cent of permits currently allowed for 2011.
This may sound a bit dull, but it amounts to putting the cost of carbon up, and generating some more revenue.

6. Tax Emissions Not Passengers: We have led the way in calling for reform of the way air travel is taxed. Instead of Air Passenger Duty on each passenger, airlines should pay an emissions charge per flight. This would reward flights that were full and penalise those wasting a full tank on a few passengers.
This is a good step, and it is a framework that would allow us to move towards treating motoring and aviation more consistently.

7. Provide Help Where Cars Are Essential. In sparsely populated rural areas, cars are essential due to the lack of public transport. To reflect this need, we proposed an amendment to the Finance Bill introducing a 50 per cent discount on all but the top rate of VED for one car registered in such rural households.
I'm not a particularly rural-friendly person: I don't see why the rural lifestyle deserves subsidy any more than any other expensive lifestyle. But the promise was made and this is a good way of delivering on it. It is important that this sort of compensation should be in the form of tax cuts because otherwise you have to find money from elsewhere or lose the revenue neutrality of the package.

Of course this paper doesn't commit us to any particular totals - that would be treading too much on the toes of the tax commission. But I hope it makes a clear impression on that process.

We can see from the appendix that of £35bn eco-taxes levied in 2004, £32bn are taxes on motoring. (The climate change levy and air passenger duty are each less than £1bn.) Motoring is of course a significant environmental problem, but this seems disproportionate. What about industrial and domestic uses of energy? There is a perception that industry=jobs=good, domestic=pensioners not freezing=good, motoring=shopping sprees and school runs in chelsea tractors=bad. And of course there is a good dollop of truth to this, but it is not a balanced picture, and it distorts incentives to place almost the whole burden on motoring.

On the other hand we should probably subtract spending on roads, when considering how much of the £32bn is in fact an eco-tax, rather than a charge for the infrastructre that makes motoring possible. And we should also bear in mind that motoring imposes some specific externalities such as poor air quality that industrial and domestic uses of energy do not, to the same extent.

And before long people may well be charging batteries in their hybrid/electric cars from the mains. This will cause a dent in revenues and eco-taxes even if we go a long way to rectifying the imbalance.

So, it is a little disappointing that the nettle of domestic energy use has not been firmly grasped. The problem, I guess, is that it can't be done in a revenue-neutral way, without cuts elsewhere, if, as would be necessary, we want to compensate the pensioners who might otherwise freeze and various other needy groups. It would still be a good policy: it would promote efficiency and microgeneration more effectively than all the regulations we have (having just had a loft conversion I have immediate experience of this). But it would pour mud on the clarity of the "Green Switch" policy, so it doesn't belong in this paper. One for the following election perhaps.


Update: The carbon tax will include household emissions, with "provision" for the less well off. So my disappointment was due to not reading carefully enough. And of course if the "provision" amounts to a rebate on the carbon tax, then it needn't comporomise revenue neutrality despite what I said above.

No zealot like the convert

Got a bit of a dialogue going with Matt Sellwood here

Lets take his points a little out of order...
Renewables can go *some* of the way towards solving climate change, but not all of it - what is needed (and what Blair cannot, under any circumstances mention - hence nuclear) is a reduction in demand. Which, under capitalism, leads to a recession.
You would be against a recession Matt? OK. Anyway, what is the limit, do you think, of the generating capacity of renewables? The answer of course is that they could generate all our energy many times over (thousands or millions of times over). So why couldn't they go all the way to solving climate change? Of course they could. A better practical solution would doubtless include some fossils and some efficiency measures. But there is no denying that this problem is solvable at a cost.

We live on a finite planet. Capitalism needs infinite growth. You can shout 'communist' all you like, but unless you address the serious flaws within the market system (a complete inability to deal with environmental or justice externalities, a dependence on growth, a tendency towards monopoly etc) then you will have your head stuck as far into the sand as the proverbial ostrich. Just because a system is the status quo doesn't make it right.

Are you admitting the 'communist' or not? Of course we are in a sense around 40% communist already - that much is taxed and spent by the state, as it should be. Do you think the state/community should be directing more, or all of the nation's wealth? If it is more, say 60%, that's not really a different system, a "radical change", just a change of priorities. If it is all, then that is more or less communism, isn't it?

Capitalism doesn't "need" growth, it generates growth, and that is good, it means people are richer, live longer, are able to do more of the things they want to do, and governments can spend more on health and education, and so on. Stopping growth is easy - whack up taxes, pile on the regulation, no problem. If this is what the environment needs, the Green Party should say so, and we will all understand. It's still not really a change of system, just a change of objectives - rejecting prosperity in favour of the environment. A clear and legitimate political option to offer. (Whether it would work is another question of course.)

Of course there are flaws with the market system, and there are no pure market economies anywhere, it wouldn't be possible. So we have, as we should, things like the welfare state, and environmental regulations and so on. And it requires constant political vigilance to keep it working well. Does the clean air act, or the end of leaded petrol represent a "complete inability to deal with environmental ... externalities"? Of course not.

The environmental crises we face *cannot* be solved simply by a few more pieces of regulation here and there and an absurd faith in the market.

OK so scenario A: Government builds 100GW of wind turbines (other countries do similarly). Global warming averted. Scenario B: Government whacks a whopping tax on carbon emissions and the private energy industry builds 100GW of wind turbines. Global warming averted. What is the difference? Why are you so keen on problems being unsolvable? How exactly would economic planning, if that is what you are advocating, make them solvable?

Capitalism is based on the growth principle. We cannot KEEP growing our way out of environmental problems.

Growth of what? Growth is a statistic. It adds together lots of different things as if they were the same. And they don't all involve despoiling the planet, mostly it is about how much we value the services we provide each other. So if there is anything at all that people do for each other that you regard as good, then good growth is possible. If not, then your values are so warped that we ought to all drop dead.

Of course Green Party policies are not consistently anti-capitalist. Sure, there are coded references to economic planning like:
EC511 Policies to promote local economic management and planning include creating Partnership Bodies to enable a wide range of local people to participate in the development of policy, strategy, projects and enterprise; undertaking a wide ranging audit of local social, economic and environmental affairs and concerns; drafting appropriate sustainable economic development strategies for the locality.


Alongside sugar-coated support for free enterprise like
EC404 ...changing planning and building regulations to encourage home based enterprises, providing grants for re-skilling, and for the necessary tools and technology necessary for home-based enterprises.

The paper as a whole is a breathtakingly inconsistent mixture of the utopian and the banal. But it is clearly a state-driven reshaping and contracting of economic activity, and restraints on trade, which will further reduce efficiency. Redistribution is generous, so the better off will lose more in relative terms, making it a triple whammy against incentives to work.

But even with all that, it is clear that there would be capitalism at work. The roads may have been dug up to make trading difficult, but investment is actually encouraged! (EC512) Encouraging investment more or less directly implies some form of capitalism.

So is this the radical change? Make it hard to do business but "encourage" people to do business anyway?

And what is it intrinsically about this sort of economy, that it doesn't, say, contribute to global warming? The inefficiencies of central planning and autarchy will make us much poorer, but I don't see why they would intrinsically reduce environmental impacts. Building 100GW of wind turbines would only cost us a little in comparison, and seems rather better focussed on an actual problem.

I don't mean to sneer at the whole paper, there are some good ideas there. But the vision is not consistent, and it hardly relates to the reality of environmental problems.

Why is a clear consistent policy so difficult for the Green Party to express? I suspect because it can't quite stomach trying to sell the idea of being much poorer on the doorstep as a solution to anything. Especially when in many ways prosperity is associated with environmental improvements.


Monday, May 15, 2006

Make Smugness History

A blog by Edward Lucas Make Gravity History has caught my eye. His argument seems to be, broadly, that a) more and freer trade will help spread prosperity around the world, and so is a good thing (so far so good); and b) that therefore charity is a waste of time (huh?).

The choice of title 'make gravity history' suggests not a better strategy for ending poverty, but resignation to its inevitability. And this is the problem. Lucas shows all the smugness of the fat aristo telling the starving peasant that he won't give him any food 'for his own good'.

Lucas says 'fair trade' would be more accurately called fraud trade. I disagree. It would be more accurately called charity trade, and charity, remember, is a good thing. While it doesn't of course bring prosperity to the recipient, it can keep them alive long enough to enjoy prosperity when it comes.

Lucas is opposing Christian Aid's apparent position of 'trade bad, charity good', with 'trade good, charity bad'. This is worthy of the psycopathically right-wing Ayn Rand. Rand famously claimed that charity is immoral, and that only looking after number one is moral. A hero of right-wing nuts everywhere.

In fact, trade is good, and charity is good. By all means damn a charity for failing to support trade. But don't damn it for doing charity.


Wednesday, May 10, 2006

Why are they voting Green?

I'll take Angus' question here "We need to know why people vote Green and what we can do to get them to support us instead." as a personal challenge.

I was a member of the Green Party for 12 years, a candidate in local and European elections, a member of the party executive and so on. I left it some 5 years ago, disagreeing with many of the policies, and spent some years allowing my head to clear of the party's culture before thinking about politics afresh or considering joining another party.

My principal disagreements with it are:

  • It is essentially socialist, albeit not "central planning" but "local planning". Solutions to almost everything involve more government spending and more regulation. Appropriately for a socialist party, it is very middle class and anxious about it. Who noticed all the working class accents in the latest broadcast?

  • Hostility to trade, and in particular an impractical vision for third world development that would achieve very little. (The desire to support development is genuine.) The evidence is that trade and prosperity go together, and evidence beats dogma in my book.

  • Opposition to medical research on animals. I am clear that benefits to humans, and for that matter to other animals in the long run make this research a morally good thing.

  • A lack of perspective where environmental problems may conflict with other problems, a woolly understanding of what makes a problem an environmental problem, a poor grasp of the science involved (much declined since 1990 or so). This is probably true of much of the wider movement, and to some extent of other parties too.

At the heart of Green thinking there are more problems. Ambition for spending on public goods and redistribution is not reconciled with a shrinking pie as the private sector is squeezed. There is considerable hostility to science, from various philosophical perspectives. Yet it is science that makes environmental problems comprehensible, and scientists who have led the way. "Conventional" progress is rejected, but there is little clarity as to what to replace the idea with - giving a somewhat directionless culture to an appropriately leaderless party.

So why do people vote Green? Here are some reasons:
  • to send a clear message that the environment should have more priority
  • if you are a socialist.
  • as a protest vote
  • in response to good local campaigning
  • if you actually know and agree with the policies

And what do we do about it?

Well I think it is only fair that socialists have someone to vote for. And similarly if mice have a moral significance to you equal to or greater than other people, it may be a fair choice. Tactical considerations aside, these people are voting correctly, leave them to it.

As for the rest - we need clarity. Clear and effective green policies, not one snippet per page of the manifesto, but few, simple, substantial commitments. We need to make the case for trade - that millions of lives are at stake worldwide if development is impeded by anti-traders. We need an optimistic vision of the future.


Sunday, May 07, 2006

Is Blair losing it?

There is a truism that the more out of touch a dictator gets, the more extravagant his wife's hairstyle becomes.

In other news, there are people "out to topple" the Prime Minister.

Of course in a parliamentary democracy, it is quite legitimate for MPs to seek to topple the Prime Minister, particular one who sees fault in everyone but himself. One who can sack a foreign secretary, apparently, for saying that the idea of nuking Iran is nuts - without clearing it with Rove or Rumsfeld first.

Promises to go in the future can be very difficult to keep. Some excuse will always arise as to why one has to carry on. Doubtless, if Brown were to show any public desire for the top job, he would be deemed a traitor, and therefore no longer suitable for it.

The night of the fast-spinning knives has surrounded Blair with his closest supporters - the people who will be least willing to tell him when it is, honestly, time for him to go. This is not the road to an orderly transition, but a very messy one. The saviour of the Labour Party could yet be its downfall.