Author: Richard Tol

Klimapolitik

Germany has been one of the main drivers of international and EU policy on climate change, and hence one of the key drivers of Irish climate policy.

Until recently, there was political disagreement about whether draconian greenhouse gas emissions where needed, or drastic cuts would be enough.

In the last few months, two documents have appeared that suggest that this is changing. Both are available in German only.

The first paper, by a relatively junior researcher at think tank close to the Chancellery, suggest that (whisper it) the sacred two degrees target is perhaps infeasible, that (a few odd but not entirely crazy people have argued that) there is nothing special about two degrees anyway, and that we should perhaps keep in the back of our minds that one day we may need to consider whether a Plan B might be required. The extremely cautious tone of the paper is indicative of the scale of the heresy.

The second paper does not mince words. It is by the Scientific Advisory Council of the Federal Ministry for Finance, a body of 29 professors. The Council argues that climate change is not as big a problem it is made out to be, but that it can be solved at a relatively low cost with clever policy intervention. It further argues that the first-mover advantage in technological progress is a myth (the second mover is often better off) and that Germany should stop taking the lead as nobody else is prepared to follow.

Harbingers of change to come? Time will tell.

Bulgarian CO2 permits

The UN will suspend Bulgaria as of June 30 from trading emission permits under the Kyoto Protocol, and hence in the EU ETS. The reason is that its accounts are intransparent and untrustworthy. See here and here.

This is good news and bad.

The good news is that the problem seems to be incompetence rather than dishonesty. If organized crime had taken over Bulgaria permit accounts, I would expect that they would not be caught out by maternity leave.

The bad news is that the suspension is not immediate. In the EU ETS, permits trade under “seller beware” liability. That is, if an Irish company buys a dodgy permit from Bulgaria, that is Bulgaria’s problem. Bulgarian companies have thus been given six weeks to sell permits, knowing that their government will not be able to verify their accounts.

Wave power, the sequel

I previously argued that wave power would, if anywhere, be commercialised first in Ireland — because our waves are second to none (in the populated world) — but that there is no reason to assume that it would be an Irish company that does the commercialisation.

Indeed, Ocean Power Technologies of Pennington, New Jersey, has kindly offered to accept the generous subsidies for wave power offered by the Irish government (see Irish Times).

As is customary these days, OPT promised to create “ten of thousands” of jobs. The jobs are in construction and therefore temporary.

OPT also called for a streamlined approval process.

A Carbon Windfall Levy

Minister Ryan will shortly introduce a carbon windfall levy.

Generally, windfall taxes should be avoided as they are arbitrary expropriation of private property. In this case, however, I fully agree with the minister. Property rights on carbon dioxide emissions were created a few years ago. Although these rights used to belong to we the people, the European Union decided to give the permits, for free, to selected companies. This is tantamount to a subsidy worth billions of euros per year. Minister Ryan has now decided, rightly, to claw back this subsidy.

Obviously, it is a bit silly to tax a subsidy. However, the subsidy is cast in stone (an EU directive). So, I even forgive the minister the administrative inefficiency.

Note that a windfall levy on grandparented permits would also remove the legal objections that were raised against the carbon tax in France. Recall that the proposed carbon tax in France was very similar to the actual carbon tax in the Republic of Ireland.

UPDATE:

An attentive reader pointed me to the final sentence: “This levy is essential, if we are to reduce Ireland’s overall energy bill. Having discussed it with those in the industry, I am satisfied that it will function effectively.”

Ireland’s overall energy bill will increase because of this tax, because one of its key inputs (capital) has become more expensive.

Phase 2 of the carbon tax

Harry McGee reminds us that as of today a carbon tax will be levied on selected home heating fuels. Transport fuels were carbon-taxed already, and the remaining home heating fuels (the ones that contribute most to climate change) will follow at an unspecified later date. There are no plans to tax greenhouse gas emissions other than carbon dioxide (e.g., by imposing a methane levy on beef consumption).

The report also gives voice to the opposition. If my predictions are correct, they will now discover that a carbon tax does not really hurt.

McGee also quotes a spokesman of Minister Gormley saying that other taxes were reduced. I had missed that.