The art of going green lies in hiding the cost

Irwin Stelzer

“COLOUR THEM GREEN,” warbled Barbra Streisand. That was in 1963, and she was singing about her envious eyes. But flash forward to today and those words would equally apply to the myriad players in the let’s-make-environmental-and-energy-policy game.

We are all green now. Al Gore took time off the speech circuit to collect a Nobel Prize for persuading the world that global warming threatens our very existence. Arnold Schwarzenegger, not content with painting California green, has formed an alliance with Tony Blair to press Europe’s politicians to do the same, and they have responded by seeking ways of forcing car makers and airlines to cut their emissions. Ken Livingstone has persuaded leading companies to sign up to a “Green 500” group that will publish its progress in reducing carbon emissions.

There’s more, but you get the idea: the green wave is rolling, and has drowned those who doubt whether the Earth is really warming, and question the role of human activity in any warming.

The physical science question having been resolved to the satisfaction of the greens, the question now becomes just what to do. Here we find strange bedfellows: oil producers and environmentalists.

The Opec oil cartel, which recently met in Abu Dhabi, and the 15,000 – or is it 20,000 – ministers, advocacy groups, journalists and suntan-hunting politicians meeting in Bali might not know it, but they have a common goal: high oil prices. The oil producers want to keep prices high so that the huge shift in wealth from consuming countries to their sovereign wealth funds continues.

The greens favour high oil prices because consumers use less of the stuff when it costs more, and because high prices for oil make other forms of energy more competitive. Nuclear power, solar energy, wind power or any of the other substitutes for fossil fuels can become more economically viable only if oil prices stay about where they are – and politicians stump up some generous subsidies, sceptics would add.

Meanwhile, the hunt for the proverbial free lunch is on. The most efficient way to cut the use of fossil fuels is to make them more expensive by taxing them, or the emissions they create. But politicians are as unenthusiastic about transparency in the cost of cleaning up the environment as they are about increasing the transparency of the funding of political parties. So most proposals to cut carbon emissions are built around a single proposition: hide their cost from voters.

Motor vehicles always come in for special attention. Some would require car companies to increase the fuel efficiency of their fleets, but fail to mention that the cost will be reflected in the price of cars and the higher death toll associated with lighter vehicles. Others mandate greater use of ethanol, but do not mention that current mandates have already driven up the price of corn and wheat, and of meat and poultry by making animal feed more expensive. Consumers of electricity will also pay for cooling the world when utilities are required to obtain more of their electricity from expensive renewable sources and nuclear power. And new taxes on oil producers will certainly drive up the price of petrol and heating oil.

Even the emerging favourite in the United States and Europe, a cap on emissions followed by a trading of permits, is a hide-the-cost device: costs of compliance will be passed on as higher prices. So the blame will go to car makers, supermarkets, electricity utilities, and oil companies, the applause to politicians. All so politicians can avoid the transparent device of a tax on carbon or carbon emissions.

This brings us back to Bali, where the negotiators had two main tasks. The first was to formulate an agenda that keeps America in the emissions-reduction game, which means persuading a Senate that was prepared to reject Kyoto by unanimous vote that the greening of America will not stifle economic growth. The second was to attract the developing countries, most notably China and India, into the game. Whether the agreed “road map” will achieve those goals, or prove as useless as the one designed to bring peace to Israel, remains to be seen.

That’s because so-called clean sources of energy have their own problems. A source high up in Britain’s nuclear industry tells me that there will be no new nukes unless the regulators agree on a uniform licensing standard, curb litigation, and cut construction delays. This is no more likely than a politically acceptable solution to the nuclear waste disposal problem.

Nor will renewables provide a free lunch. Offshore wind power, the poster-boy du jour of British policymakers and Greenpeace, “is more expensive than gas-fired”, notes Alan Moore, managing director of National Wind Power. And we have yet to see what will happen when objectors raise questions about the impact of specific wind farms on birds, wildlife and views.

Meanwhile, lurking in the background is the environmentalists’ bête noire, coal. Britain has approved ten new opencast coal mines, and China is building new coal-fired power stations this year with a capacity exceeding that of the entire UK electricity grid. That will make China the world’s largest emitter of greenhouse gases, and more than offset any reductions the developing nations manage. And in America some 45 new coal-fired power plants are under construction or have obtained planning permission.

So it’s going to be a long road from Bali to a meaningful agreement to reduce emissions. Followers of the new road map will have to pass through Washington, Beijing and New Delhi, places that have not yet been coloured a deep shade of green.

Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute.