McCarthy on the Green New Deal, Tol on the carbon tax Post author By Richard Tol Post date October 9, 2009 Colm is not impressed in today’s Irish Times This continues the earlier discussion in this house He also comes out in favour of a carbon tax, which I discuss at another page of the same newspaper Categories In Environment, Fiscal Policy 37 Comments on McCarthy on the Green New Deal, Tol on the carbon tax ← Greens Against NAMA Youtube Videos → Stiglitz on Internal Devaluation 37 replies on “McCarthy on the Green New Deal, Tol on the carbon tax” Two great articles. Hopefully people will agree. For some reason folks assume anything “green” must be a good idea regardless of cost or degree of “greenness”. I have a couple of questions though: 1. Would the introduction of a carbon tax lead to much arbitrage? 2. Where can one find a good breakdown of govt subsidies and grants to wind energy? I’ve googled about but can’t find anything solid… A devastating piece by McCarthy. Ths implication appears to be that “Comhar, the Sustainable Development Council” fall far short of the mark in formulating advice on sustainable development. This technical incompetence appears to go beyond a lack of knowledge in specialist areas. They appear not to understand the major concepts and their plans are pie in the sky nonsense. It is interesting that they have suggested the NTMA, the one part of the public service that appears to be compentent (though some would like to pay them less as a reward) be given responsibility for part of their plan. Disbanding Comhar does not solve the problem. This body was created to advise on the crucial policy issues of sustainable development. We need to look at how such a body could be so badly constituted that it would come up with such a flakey report. The ill-conceived report and the lack of ability of Comhar in this regard are symptoms rather than the disease. The disease is the flawed mechanism for constituting these boards in the first place an the lack of monitoring thereafter. Comhar may be snipped now but that is no guarantee that its successor, when we can afford it, won’t be just as flawed. @ marcus http://www.dcenr.gov.ie/Energy/Sustainable+and+Renewable+Energy+Division/ Look at the word doc terms and conditions of REFIT: Section 5.1 With regards to Comhar it may have been inevitable for them to produce reports like that. Would privately funded think thanks be more effective and/or less independent? Al @zhou, What you get out of an advisory body like Comhar tends to reflect the makeup of its governing council. Just looking at the Comhar web site, its council seems heavy with NGOs and with people whose institutional or professional affiliation points towards a particular interest in environmental protection or alternate energy sources. There is a mainstream business/economics/trade union presence, but it is numerically small. You want a different output? Change the makeup of the council. @zhou I agree that Comhar has done itself a major disservice, and at a time of uncertainty about the budget and while the chairperson is about to retire. Ireland probably needs a talkshop on the environment. What we need more, however, are cost cutting and people who talk sense. Touch of irony really from the author of a report on public expenditure that was heavy on accountancy skills and very light on economic analysis! On the article by Richard Tol, something which didn’t read quite right was the following: “An increase in benefits and tax credits would compensate households across the income distribution.” Does this not remove the price signal on the areas where there is the worst inefficiency – ie decrepit heaters/poor insulation? If these incentives benefits are decoupled from the amount of fuel used, then that would still be ok. I’d like to thank you for debunking the fact that Irish energy costs are central to our uncompetitiveness. As SEI report: “97% of industrial enterprises spend 6% or less of their direct costs on energy and these enterprises account for 98% of industry’s contribution to GDP.” (http://www.sei.ie/Publications/Statistics_Publications/EPSSU_Publications/EPSSU_Industry2007_rpt_Fnl_Jun07.pdf). On the Colm McCarthy article, he gives a shout-out to the Academy of Engineering. As part of a summer project I was part of, we wrote a response to their energy policy report. You can find it here: (http://eni.ucd.ie/ENI/ENI%20Response%20to%20IAE.pdf). Suffice to say we thought that it was short sighted. On the risk of overgeneration, all investment decisions are commercial in the new market so the risk is with investors. The capacity payments have been reduced for next year which reduces incentive to build. McCarthy trots out the false statement that “Irish targets for wind penetration are well above EU requirements”. They’re not. We have a binding target of 16% of energy to come from renewable sources by 2020. Getting 40% electricity from wind contributes 7% to that target. Power generation as Richard has stated, is the easiest and cheapest area to reduce carbon so that is why we have placed the burden there. The rest is through electric cars/biofuels and the use of solar thermal/biofuels for thermal energy. “The Government is considering the introduction of a carbon tax on fossil fuels not already subject to the emissions trading regime. ” Does Mr McCarthy agree that removing the heaters and air conditioners from police patrol cars and thus getting more of the members of the force out on the beat, would contribute to reducing the carbon footprint of our law enforcers, as well as increasing their effectiveness in combatting crime and protecting the ordinary person on the street? @Eamon An increase in benefits and tax credits is an increase in disposable income. It does not create an incentive to use any particular type of energy, but of course the overall demand for energy does increase (slightly). This is the first time I’ve read an article about the introduction of a carbon tax and been perusaded that it’s a good idea. Maybe that’s because the article was factual, concise and direct and not weighed down with tendentious platitudes about creating a carbon-free ‘green’ paradise on earth for the children of our children’s children, which always tends to bring out the worst in me. As for Colm’s piece, I suspect that a ‘right to reply’ will be invoked, or else a counter-article from the IT’s resident climate change correspondent in next Thursday’s edition. We shall see. Like Marcus O’ above, it struck me as unusual to find such a robust critique of an environmentalist inspired proposal being published in any Irish media. In general, journalists here do not apply much in the way of critical analysis to so-called ‘green’ proposals and editorial policy also tends to follow suit. It’s a welcome development to see the media inviting the views of economists whose credentials, and independence, must command respect. An intelligent and properly focused debate on climate change policy initiatives is overdue in Ireland, not least because of the long-term implications of investment in this area which we cannot afford to get wrong. But is the publication of these articles a ‘once-off’ or the start of something new in our public debate on these matters? @Veronica You may have noticed that my piece was published on the “economy” page of the IT. A more balanced discussion of the environment will come about now that it is beginning to cost real money that we really don’t have. @ Everyone I have been an advocate of a carbon tax for years, but it won’t overcome the preponderant market failures which quite obviously exist. You can draw your own conclusions from the debate on the previous thread, but it’s pretty clear to me that Richard and Colm are unable to explain this: “Take CFLs – there is already a powerful market signal to switch from CFLs to incandescent bulbs. The investment pays itself off in the FIRST year and CFLs last 8 – 15 times longer than incandescent, and there would be innumerable positive externlities if this was done on a wide scale. And yet people don’t switch for a wide variety of reasons, probably mostly incomplete information in this case. Carbon tax will not change this” When they speak of carbon tax as some sort of magic silver bullet that cures cancer, solves climate change and does the dishes, and all without breaking sweat, they are probably overegging it a bit. A real carbon tax would look tackle agriculture, meat production and abuse of soils. It would include credits for carbon sinks, such as to the owners of peat bogs, forests or scrup. None of this is to be included, because its too complicated. The proposed “carbon tax” is a tax on fossil fuels and a tax on people who don’t have access to public transport. Maybe it will remove a few anomalies, but this tax is hardly new. Maybe muddled greenthink has peaked in this country with the Comhar report. Personally I doubt it. @jc The simplest explanation is that the different lightbulbs are not perfect substitutes, different in fixed and variable costs only. Their shape is different, for instance, as is the colour of the light. Typically, when people don’t know things, it is because they don’t need to or don’t want to know. If the price of electricity goes up, for instance, people may want to inform themselves about CFLs. When they then learn about the mercury, they may conclude that they do not want that around the kids. @Eamon Keane: There is no EU requirement to go to 40% wind for powergen, and no other EU member, so far as I know, plans to do so. Methinks you are being a tad disingenuous. Starter question: if the carbon tax is set on the trajectory to achieve whatever the climate scientists believe to be the sustainable concentration, should governments be (a) technology neutral, or (b) pick winning technologies? Pete Briquette: did you used to play rhythm guitar in the Boomtown Rats? @ CMcC I was wondering, did you hear the interview one day with Tom Parlon of the CIF where he raised the same point. Basically that NAMA could end up with too many functions to perform. I thought that Tom made the point in a sensible way and I don’t always agree on everything with Tom, but I thought he made that point straightforward enough in his radio interview. Unfortunately, John Gormley came on the radio a while later and accused Parlon of interfering. It is a strange sort of medium radio, even though it is over a century old, it is still very much embedded in our system of politics. I would venure to suggest that had CMcC gone on radio and made the exact same point as he made in the IT opinion piece today, it might have suffered the same faith as when Tom Parlon made it several weeks back. I once heard a lecture given by Jaron Lanier, one of the founding fathers in ‘virtual reality’ technology. It was Lanier who improvised a lot of the stage props, like the ‘data glove’ and stuff for Spielberg’s minority report. Anyhow, Lanier has a very interesting view of the history of media technologies. He told of the history of the telephone. When the telephone first came about, they thought that people would use the telephone to listen to live events such as football matches, concerts and debates. So in the beginning they tried to have crowds of people sitting around a telephone listening to a concert miles away. But that didn’t work out, so ‘chatting’ instead became the killer application on the telephone media. When television later came along, they didn’t want to make the same mistake, so they envisaged television to be like the telephone. With television, Bell laboratories were doing experiments in tele-conferencing back in the 1920s. But with television, it turned out the opposite of the telephone. People did want to sit and watch a television broadcast of a concert that was happening many miles away. Remember ‘radio stocks’ featured in the stock market bubble of the 1920s. I kind of did what the original inventors of the telephone had hoped to achieve with their medium. Sorry, couldn’t resist giving the potted history. I find it fascnating in a way, we are still coping with the limitations of these various media, many of which are around since the 1800s. Tom Standage has an excellent little book called the Victorian Internet in which he talks about telegraphs. But he also mentions the fact that Napoleon ran his empire using an early analog signalling system throughout Europe. I find it quite funny that centuries later in Europe, we are still struggling to achieve a similar kind of unity of organisation and purpose, with NAMA and all kinds of stuff. Sorry, I meant above, that NTMA could end up with too many functions to perform. BTW, I might as well make a useful point while I am here. I was very interested in CMcC’s piece on the Comhar report. I know several of the people in Comhar for a number of years now. The problem is simply as follows. In Ireland we have lots of really talented, bright and worthwhile people. But trying to get paid any money to use your noodle in the right way, seems to be one our biggest difficulties. The trouble with the entire ‘environmental policy creation network’ that exists in Ireland, it is a bit like the golden circle in Anglo Irish bank. Namely, that people are borrowing money with no recourse, in order to prevent stocks hitting the market. The stocks being those of the very institution, which is lending them the money. I mean, how incestuous is that? What I mean is, there is a very small bit of money that dribbles out into the ‘golden circle’ of environmental policy research and sustainable think tanks. I know a large proportion of that network myself at this point. There are dozens and dozens of nodes in the network. But they all basically buy and sell research work and reports from each other. I will not go into naming any names, but basically it has to appear as though the Department of the Environment commissions independent guidance and reports – but all that is happening most of the time is the appearance of independent thinking. It is all one group giving work to another group and visa versa. So the same little bit of funding that dribbles out of the DOE is distributed and re-distributed in some shape or fashion within the small network. The only people who come in for ‘flak’ are those who try to look at the same problems to do with sustainability and the environment, but who do not depend on the network I refer to. Hence, you hear statements like: Engineers Institute of Ireland or the CIF are bad, because they only want to sell you a new bridge, or a new sewage system. In other words, those big professional organisations don’t depend on ‘funding’ like the environmental network does to function – they actually go out and build things. Wow! Basically any reports that come from the closely knit environmental network – a mixture of private consultants, public think tanks and voluntary foundations – is basically a distribution network. Every report is therefore a horse designed by committee, a camel. It has to reflect almost every single hair-brained, odd ball and off-the-wall notions and concept that anyone in the network has. Omissions of elements for clarity or to beef up the major point of the repor is hard to do. Because doing so, may risk upsetting the ‘delicate balance’ within the network of funding and distribution. It may risk upsetting someone and making them feel small. The Irish environmental network is basically a small economy within itself. But heh, why don’t we turn that around to our advantage instead? Last night only I heard Brian Leavy of DCU Business School describing projects such as Innosight, Innocentive, IDEO – basically all marketplaces for ideas. Where intellectual property can be freely and openly exchanged and re-arranged within the one network. The Irish environmental network could be great, we just need to call it what it is, a mini-economy. Rather than trying to conceal the fact of what it is. By concealing we are ultimately obscuring what could be it’s ultimate strength – that it is a strong network. @ Richard Consumers have high discount rates and incomplete information. There are other reasons (not the ones you mention which you might want to raise with the NSAI). That’s why we use another policy instrument: regulation (in this case a ban). It is superior to a carbon tax in this instance. @ Colm You seem to suggest that Ireland has a 40% target for wind for 2020. Ireland has a target of 40% RENEWABLES in power generation,some of which will come from biomass, some from hydro, and yes most from wind. As for this being somehow out of the ordinary in EU terms, several member states already have in excess of 40% renewables on-stream already. While most of this does not come from wind, it should be remembered that our resources are the best in Europe. Eamon is right that our 16% TPER target requires a very high share from renewables in power gen. Starter answer: Some technologies are desirable for social and environmental reasons. The following is a reasonable proposition for a responsible government: “According to consensus climate science, global emissions must be reduced by 50%, requiring an 80% – 90% reduction by developed countries. We are also entering a period of energy uncertainty with security of oil/gas supply increasing being questioned. We therefore need to develop low carbon energy systems and choose to incentivise one technology (wind in this case with feed in tariffs) over others”. @ Eamon Keane I’d have a good long think about using Richard’s totally unsubstantiated (dare I say makie uppie) claims about abatement costs in the power gen sector to support your arguments. All MAC studies demonstrate that efficiency, most in buildings and appliances, is by far the cheapest (usually positive cost) way to reduce emissions. One last thought, Of course, outfits such as IDEO and so on are intenational super-consultants. I am suspicious of these consultants. They carry with them a lot of their own baggage. I could go into that discussion at length also, but will refrain. Well, maybe a little bit then. When working at Zoe developments, we tried to build a small ‘internal’ economy of the different components of the construction industry within one company. It resulted in alot of interaction of ideas and people who otherwise would not meet each other. It also avoided a lot of the need for ‘external consultants’. We got away entirely from the consultant mentality, of merely selling your own little piece of the puzzle, and knowing that piece very well. At Zoe we tried to work with the entire jigsaw. I am sad to say, a lot of people in the environmental network do not have that sense of being part of something larger. It is separated down to too fine a small grain in size, where everyone is a vicious consultant trying to out-compete the other. That is a zero-sum game basically. The money pie available is too small for that and strinking fast into the bargain. The network could work if more of it was gathered into one group – a more efficient kind of vehicle like Zoe used to be. Then something interesting may indeed happen. Boy, did the consultants like to attack the Zoe vehicle though. When times are good, the fastest way to make bucks is to divide it back down into fine grains, and simply specialise in the jigsaw piece you want to specialise in. If you do that bit better than anyone else, then there are fortunes made for the brief period of the boom time. Consultants didn’t like the concept of one efficient super vehicle like Zoe to hold everything together. It goes against the concept of very fine tuned individual specialities. What was that Warren Buffet said? Better to be almost right than 100% totally wrong. I would respectfully suggest that the environmental network in Ireland review its situation. To see if it can grab more funding and better funding working in some large arrangement. Rather than the secretive, in-the-background, I’ll scratch my back and you will scratch mine. The Irish network links back into the European scene via this: European Environment and Sustainable Development Advisory Councils (EEAC) But as I said above, as a method of organisation the whole thing is bloathed, unweildy and grossly ineffective/inefficient. Frank Convery is a linch-pin in the whole thing. He acts as a kind of super connector of the entire organisation. I had to laugh though earlier in the year. The group got an article in the IT newspaper, because it received €1.0 million to work on environmental projects. That is the ‘dribble’ I referred to above, which has to slush around the group and be re-cycled many times over, a bit like Tier One capital in a Hypo Real Estate bank. @jc Sorry, I phrased that poorly. Wind (and the 2% hydro; I wouldn’t hold much hope for wave) is the cheapest and easiest way to increase renewables penetration. For carbon reduction, while Richard may have insight that he could point to, efficiency is the cheapest means of doing so. Consider the IEA’s 2009 energy outlook (http://tinyurl.com/yfqhm8n). It states “the energy efficiency investments in the buildings, industry and transport sectors are recovered through energy cost savings”. You have the Siemens Dublin Sustainable Cities report showing a €-190/tCO2 for building energy efficiency (http://tinyurl.com/yhr73ur). The McKinsey MACC shows -€44/tCO2 @ $60/bbl for residential insulation & -€113/tCO2 @ $120/bbl. (http://tinyurl.com/yhr73ur) SEI state: “Insulating the 50 sq.m. attic space of a typical house costs around €254 and could save approximately €76 a year, paying for itself in about 3 years.” “The cost of fitting lagging on your hot water cylinder and pipes can be recouped in 2–3 months, saving more than 30% of your heating costs.” (http://tinyurl.com/ygnqmk4) SEI further inform that the average household consumes 20,000 kWh of fuel for heating at a cost of €900. There are 800,000 pre 1980 homes which typically use more than double the kWh/m2 of post-1980 homes. Up to 40% of homes lack even lagging jackets or roof insulation, not to mention other insulation measures. The lack of insulation is concentrated in the lowest income quintile. (http://tinyurl.com/ygds83b) There seems to me to be clear evidence of a market failure. Information asymmetries, lack of finance or even apathy have prevented people from taking even these basic measures. On the face of it, they have very high net present values even at current prices – without the carbon tax. Perhaps when the carbon tax is introduced, this extra cost will overcome the apathy barrier, is that the suggestion? If it does not, is there a case for government run programmes? @jc A ban is arrogant. It assumes that the state knows best (we’ve seen plenty of examples of that in recent years) and should tell people how to live their lifes. In this case, it is not even a majority view imposed on everybody else (which is bad enough), but it is a minority abusing its hold on the balance of power. Besides, incandescant lightbulbs are cheaper and use less energy (over the life cycle) in applications where they are frequently switched on and off. @jc @ Eamonn I post under my own name. People are welcome to have a look at my CV. I do have a claim to expertise in abatement costs. You post anonymously, so people may think that a great expert (say, Jae Edmond) hides behind the pseudonym “jc”. But as one of the administrators of this blog, I know that that is not true. JC, you may want to clean about who you are and brag about the your contributions to the knowledge base on greenhouse gas emission reduction? Or is there nothing to brag about, perhaps? @Brian I agree. Environment Ireland is a fairly closed system, prone to navel gazing and divorced from reality. Occasionally, though, they (indeed, they, as my arrival in Ireland has been largely ignored) do something blatantly stupid, like saying that Ireland should borrow €3.3 billion in 2010 to finance green pipe dreams, and then they are rudely confronted with reality in the form of Colm McC. @Eamonn There is indeed a fraction of Irish houses that is very poorly insulated and has terribly inefficient heating systems. This causes problems with emissions, health, and heating costs. I am not sure about the roots of this problem. The poor and the old live in such houses, so I would think they do not have access to capital to invest in their homes, and they may not want the hassle given that they won’t be around for much longer anyway. It may well be that the landlords play a role too. For the owner-occupied houses, I would solve this as follows. These people are entitled to fuel allowances. I would organize a lottery. The winner gets a new heating systems and proper insulation, but loses the fuel allowance. The money thus saved on fuel allowances goes to next year’s lottery. (At present, only half of fuel allowances are means-tested, and no fuel allowances are needs-tested.) I do not know much about the bottom end of the rental market. I do know that lavish subsidies rarely work, and that in this particular case it is impossible to get details on how subsidies are allocated at present or how past subsidies were spent. I did try and unearth some of this information, but it is not obvious to me that the money goes where it should. We seem, perhaps, to be generating more heat than light on this thread. Ireland has its international commitments to reduce GHG emissions and, in this respect, the focus should be on meeting these commitments (and any enhancement of these commitments that may emerge from Copenhagen) as good global citizens and as efficiently as possible. Richard Tol has argued this case convincingly by focusing on the benefits of a carbon tax. It’s probably a good example of the old adage “If everyone sweeps in front their own house, the street will be clean.” But we shouldn’t overstate our impact on planetary conditions nor expect that reducing emissions even further will have any significant impact. And, even more importantly, we need to be very clear-eyed about demands for significant public expenditure to re-configure the existing energy supply system away from fossil fuels, to incentivise changes in energy consumption behaviour and that will reveal some hitherto hidden Irish comparative advantage and magically create rafts of jobs. No one is more clear-eyed than Colm MacCarthy in this regard. With this as the basis we can move on to two important issues. The first is how can we efficiently and sensibly reduce dependence on imported fossil fuels – quite apart from the GHG reducing commitments. The second is the promotion of more efficient energy consumption. These two issues are clearly related since success in resolving the second will impact on resolving the first. From long experience in energy pricing in various countries I have come to the conclusion that it is often less than effective to rely solely on price signals as a means of altering energy consumption behaviour when many consumers are either unwilling or unable to respond to these prices signals. I don’t view this as market failure per se; it is simply evidence of the limited efectiveness of an economic policy tool in a particular context. My contention is that, given the generally accepted very high levels of energy prices in Ireland – particularly gas and electricity – the use of pricing to influence consumption behaviour has probably been pushed to the limit. Indeed energy intensity has fallen in the last 10 years and more quickly than in other countries. If unexploited potential to increase energy consumption efficiency remains it should, perhaps, encourage consideration of other measures. I remain convinced that more efficient financing of electricity and gas network investment (which could be achieved at the stroke of a Ministerial pen) would reduce prices and release funds for the Government. By all means apply a carbon tax on gas, but the impact on consumption, given the low price elasticity of demand in most applications, would be limited. The price reductions would have a significant impact on household budgets and on the economy – since energy costs are embedded throughout the supply chain for goods and services. And the Government would have additional funds to research and pursue sensible initiatives in energy efficiency and in investigating and promoting feasible approaches to reduce Ireland’s fossil fuel dependency. No, Colm, no such fame! Looks like Dermo won’t close any rural cop shops so getting the boys in blue out of their cars and on to the streets may be a healthier policy option. Reduce fuel bills, car replacement and maintenance, overtime, etc. and subsidise footwear, rainwear, more rats in the trap, safer place for law abiders, tourists, keep the Greens happy etc. Net savings of a few million perhaps? Could be a runner? @ Paul Hunt, Some interesting and worthwhile points made above. I got a chance to read over the above some more today and found it very interesting. I would like to repond more to the post above. I will make a concluding summary about consultants in environmental matters first though. Because I want to express it in economic terms – terms that will help you economists see further how human resources are organised at the moment in the green movement, and see how we could organise people in groups, more productively somehow, to provide some green end-to-end products or services, these famous green jobs that everyone hears about today. We can go about the green jobs in a ham-fisted and amateur way also of course, and in that case, green jobs will not be nearly as good or as numerous as everyone hopes for. Bear with therefore, I have one more post to add below, to tie together my earlier posts above and to clarify for the sake of the economics debate. @Brian O’Hanlon, Reading through your posts I find things I have been afraid to say myself! You are right, Brian, there is to all intents and purposes a ‘golden circle’ of sorts within the environmental lobby in Ireland and an ‘internal trade’ that draws endorsement – and funding – from right across the political spectrum, not just the Greens in Government. The net result is a self-reinforcing political consensus that whatever appears to ‘green’ is good. After all it is hard to argue against ‘saving the planet’ even if the policies proposed to achieve such a laudable objective emanate from a tiny network of individuals whose actual credentials have more to do with rhetoric, and the amount of media space they may command at a particular point in time, than qualifications or expertise in any recognised discipline. In Ireland, or so it seems to me, there is the additional ingredient of national hubris that compounds the pursuit of policies that in the end may turn out to be at best wasteful of scarce public resources. We, or at least our poltiical class, appear obesseed in always becoming, or demonstrating, ourselves as prospective ‘world leaders’ in something or other. Reading back over some Dail Committee reports a couple of years ago on biofuels, for example, Ireland was apparently set to become a ‘world leader’ in that area; and the government was urged to devote hundreds of millions of subsidy support to the emergence of a biofuels industry here. I’m open to correction, but I think something of the order of €250m was set aside for that purpose in the 2006 Budget? But that was prior to the exposure of the environmental and economic perils of large scale turnover of crop land for biofuels production being internationally exposed. I look forward to reading the new Programme for Government. Perhaps the ‘green economy’ elements of it may be worth a new thread? If Minister John Gormley is really interested in moving Ireland up to the next level in terms of a vibrant, thriving and smart green economy, then many of the greens have to join the real economy, to become actual entrepreneus. To date, there has been a growing industry around the edges in producing reports, advice and analysis to the real economy. That can be done at a low cost-base, with very little committment or involvement by green activists in the centre of our economy. Some serious decisions will have to be made by all in the green movement in the coming years if they want to move from the pheriphery to the centre. There is an opportunity to do that presently and unless we are careful it could be squandered. Talk to anyone in agriculture for instance. Years ago there were decisions made regarding farming, that set parameters for development in that economy for years afterwards. For instance, a deal was struck with Europe whereby quotas for produce were set by output by an individual farm business at a certain date in time. Not on what the future productive output of the said farm business might be with improvements etc. It is a bit like, when Russia I think decided to give private ownership of land and food production rose. In Irish agriculture, a system was set up which favoured certain larger farmers who could buy up ‘capacity’ as they needed it from other farmers. I don’t understand the sequence of events fully. But it was a policy decision which had side effects on the farming economy. I only insert it as an example, of how directions taken today can have far reached consequences, in the ‘structure’ of a future green industry in Ireland. At the moment the green movement in Ireland is under-nourished and doesn’t support much more than a network of consultants who interact by buying and selling information between one another. But what is the big problem with that? I want to look at the problems briefly if I may. I will divide my analysis three ways. They are the main characteristics of consultant participants in any industry. – Differentiation – Communication overheads – Project overload Differentiation Because the green economy in Ireland is divided up into such small fine grains, each little fine grain has to work really hard to try and distinguish itself from the rest. That is why you see one small company selling ‘sustainable green tech’ with green paint and yellow stripes. Another selling the same range of items with brown paint and white stripes. Someone else paints themselves all yellow. Someone else is blue with purple dots or something. All trying to chrome plate themselves and avoid the fact they are mostly working in the same area, working towards the same goals. Communication overheads Because the consultant forms a small tiny node on a huge network, the amount of resources in the organisation – which may only be one or two principals – who hire in other services from the network. You can end up in a situation where more time is spent maintaining the legal framework and coordination, than actually doing some work. Project overload These small consultants, or node points in the network – it is like the saying, beggars cannot be choosers. We you are a small point in the network, you are subject to all kinds of swings and changes within that network. You don’t know when your existing funding stream is going to dry up all of a sudden. So the thing that consultants do, is to overload themselves with alternative funding streams, so that they build redundancy in, for their own welfare. This has the peverse impact, of making the communication overheat even worse. Because, instead of working on one or two projects, the same two people running the consultancy are probably working on ten jobs – any of which could prove to be the job that pays. But you cannot discard any, or run the risk of losing the main pay cheque at the end of it. The project overload also has an impact on the first point – differentiation – because of you spread your attention across so many different projects, you are not really differentiated or distinct in any way at all. The branding for the sake of standing out from the rest of the crowd is only an illusion. It also leads to consultants taking on things they know nothing about. They disguise this by saying, it was an opportunity to do something we don’t normally do. Which is a polite way of saying, we are over-stretching our capacity, over extending the communication overhead problem and basically chancing our arm at something we no nothing about. But heh, this is the way consultants operate. All I am saying is that Minister John Gormley comes from that culture prevalent in the green movement in Ireland, and superimposes this understanding of ‘how to do business’ on everything else – including the National Asset Management Agency. Without understanding that NAMA is government funded, and doesn’t have to operate like some ‘seat of the pants’ consultant out in the real world. I know I said I wouldn’t name any names here, but since there was an RTE TV documentary and public enquiry into it, lets look at the Laura Magahy example. Three sucessive projects for the Irish state, possibly over extended in terms of competency in some areas. But at the same time, Magahy has huge contributions to make in terms of project management and ‘getting things done’. But Magahy led the way and became a sort of hero for the new eco-sustainable movement, who saw much money to be made, high turnover, for little capital outlay in consultancy working. I like to boast because I worked for Zoe developments, and we liked to think of ourselves as having real vested interests in the projects we were doing. We weren’t like consultants we told ourselves, who simply ‘get involved’ on the behest of some state client or other patron. As it turns out though, Zoe didn’t have too much of their own ‘skin in the game’ in the end. A whole pile of it was leverage, and the last few months has taught me some very big lessons about my own company. The point I want to reinforce, is you can work out to the very extreme limit in terms of being a consultant – lean workforce, huge fees, little involvement in jobs, simply spouting out the nice parts you like to hear yourself. You can take that to an extreme limit. But I have described above, the main three mechanisms that conspire to punish the consultant and destroy their otherwise good name. Namely, they become unable to manage to the communication interfaces, they become unable to differentiate themselves so they throw more work into individual branding to compensate and they take on away more projects than they are really able to cope with. That is the faith of all consultants and they last at it for a brief and profitable time and then die. In fairness to Laura Magahy, she is still in the game, has turned a corner and looks to be finding the right balance. The balance can be found, it must be found. But it means pulling back from the extreme extent of what is possible as a consultant in the game. Many friends of mine, who adopted Laura Magahy as their hero were delighted that she managed to cut such profitable deals in terms of percentages in government commissions etc. That is the lure of the gold where consultants are concerned. But all too often it ends up destroying them. Pity too, because there is some great talent out there. Brian, Thanks for your candour.Your experience is obviously in construction and development projects and it seems to me that there is far too little coming from that sector at this moment in time – perhaps they have been frightened off because the prevailing mob (and political) culture is to demonise them? The point you make about how all of this policy development has long term implications is so self-evident. Also, that in the ‘green ‘ economy area, much of the policy is being defined by people to whom the private sector is anathema; the devil in all his works. What happens when ‘green economics’ becomes grafted onto the worn out ideas of socialist economics? I don’t know if the following fits into any kind of economic theory model or whatever, but here goes nothing. At Zoe developments, when we would sit down to figure out how to best ‘organise human resources’ for a certain project, we would be aware of consultants as being ‘weak points’ in the project organisation. You had to add in an extra bit of slack, to accomodate the weak-link consultants into the overall project organisation. You could depend on consultants when brought in, to be weak for the 3 no. reasons I described above. This would be proven out in practice too, in nearly every single case. There is something in the way that consultants work to provide excellence in a specific area, that leads to them becoming weak links. Here is the thing though – you can adopt a sensible approach of building a major overall vehicle first, then augmenting that vehicle with a minimal couple of ‘centres of excellence’ in specific areas, which you control careful, because they are fragile. How do we build this overall vehicle? So that the vehicle doesn’t become a whole mess of tiny separate components, which are all brittle in the same way? What did the Irish State do when it started up? Where did these companies such as Aer Lingus, Eircom, ESB, Bord Gais, Bord na Mona, Greencore. . . . these were set up at some stage for a reason. Notice how many of them were involved in communications, transport and energy production. These are the areas where the green revolutionary is happening today. I would humbly suggest, that when you have the larger robust, well resourced and housed vehicles, like those early Irish State vehicles, then you can carefully add the smaller, weaker, external consultants into it to provide excellence in very defined areas. I know we tend to think of our state institutions as huge, slow and conservative. But they could be a useful resource too, to serve as a counter balance in the system, to all of the lightweight, dodgy and un-predictable units that make up the rest of the green movement in Ireland. The smaller units could in essence be made stronger and more reliable by good interaction with the larger units. That is how I would try to organise the workforce anyhow. You always need the smaller light weight crafts. Because some contain the ‘gad flies’ who might never integrate properly into a larger organisation. I hate being in the little boats myself for some reason. I liked to drive in the big vehicles, if I had a choice. But most friends of mine, are fierce and sucessful individuals. We are completely different in that sense, even though we agree on so many other things. I heard a scientist by the name of William Powrie talk in Trinity college earlier in the year. He is concerned with the science of land fills and how to manage them sustainably over many decades. Powrie notes that in the beginning, the major composition of land fills was matter like old bricks, masonry, soil and other debris. It wasn’t too difficult to manage. But over the decades, the composition has changed. What hasn’t changed though is our attitudes towards landfills. That is, we still do things out of habit as we have always done in the past. Now there is a wonderful person who has developed all kinds of equations and geometries, and soil mechanics analysis to understand land fills better. You couldn’t imagine that person working in a large company, that is responsible for menial day to day activities like gathering dust bins and transporting the stuff to the land fill. Yet the timely and efficient operation of the garbage service is something that all cities depend a great deal on to sustain themselves. My point being, in terms of rubbish, about 95% of it is probably logistics and day-to-day tasks. There is a portion though which involves the cutting edge of physics and investigation to learn more. The only question now I guess, is how the research and the practice integrate in some way. Powrie was very quick to point out, that only a small portion of land fills sites in the UK are managed properly. Anyone going to hear Peter Clinch and others talking/debating on Wednesday? I noticed he has co-authored some papers with Frank Convery, so I am quite interested in what these guys all have to say. While at the same time feeling quite frustrated at this stage of my life, not to be active in creating the ‘smart economy’ rather than commentating on it from the sidelines. I was thinking a bit further about what I said above today. I would use the analogy of ‘ballast in a vessel at sea’. The larger civil servant organisations being the ballast. You only have to look at that chaos that ensued over the last decade, when a segment of the private economy went wild with development to see how dangerous it can be, to work without any ballast. The ship went all over the place. It started on the Quays in Dublin building shoeboxes apartments and finished up stranded in Leitrim somewhere having built ghost towns that will never be inhabited. Imagine if the civil service in Ireland wasn’t as large as it is, relative to our size? Imagine if some of the people in the civil service were unleashed, along with the other players in the private sector economy over the past ten years! What sort of a mess could we have created then? Has anyone looked at the question, it might have been a good thing we had so many safely ensnared in public service positions over the last ten years. I.e. Less likely to venture out in some daft excusion to build property and sell it. Or am I reading it wrong? Was it public servants like teachers and guards who went into over drive and leveraged themselves to become landlords and squires overnight? I.e. Was the private economy merely selling over-priced rubbish to the public employees? Comments are closed.