TV4 (Swedish)

This morning I was interviewed by TV4 about the op-ed in Dagens Nyheter (see below). The clip can be viewed here:

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How to use 100bn climate change euros

Today I and Martin Ådahl publishes an on-ed in prominent Swedish newspaper Dagens Nyheter. The article discusses tax shifting, fiscal vs. corrective taxes and how governments can sensibly use the billions in new income that will soon start to flow in from the auctioning of emission permits in the European Emissions Trading Scheme.

We argue that corrective green taxes are to their nature temporary and that governments should therefore not treat the income as permanent income fit to fund permanent reforms, but rather use it for temporary tax breaks and subsidies for making the transition away from environmental pollution less costly.

If a government is able to set the corrective tax at it’s “Pigovian” level and by doing so internalize the full social cost in products and services, the income should be used where it could yield the most benefit in a first best scenario. If, however, the tax for different reasons (e.g. industry lobbying or other political pressures) can’t be set at this level, the revenue recycling (the use of the tax income) should be made in such a way that it further encourages emission reductions beyond what the tax itself can produce. For example by giving tax breaks for investments in clean technology, energy efficiency programs in buildings and for purchases of clean vehicles.

Today it rather looks like the income from emission allowance auctions across the EU will be used as a way  fill fiscal gaps in national budgets and for recycling back to industry with no strings attached. This is bad policy and it’s important to now put pressure on policymakers to declare what they intend to use these funds for, some €20bn in total in the EU in 2013 and then quickly growing up towards €40-100bn.

If we are to take global warming seriously, emissions will be almost phased out by 2050 and the funds discussed above will decrease in size rapidly after 2020. Governments should therefore not view this as “free money” but rather shift it intelligently and in order to support the transition to a low-carbon economy.

SolarLease

An amazing new business model from the company SolarCity, the SolarLease, enables homeowners to get a state of the art solar energy system installed for $0 down payment. As a customer you rent the solar power system and only pay a monthly fee.

The best thing? SolarCity help their customers save more on the electricity bill than the monthly rent of the system. Save money and produce you own green energy, can it get any better? You also get free monitoring and repair service and you can follow your own “power plant” on your smartphone. The future is bright, green and great!

For a typical 3-bedroom home with a current electricity bill of $200 per month, we might recommend a medium sized 4 kW solar system.

Your new solar system will generate enough electricity to offset what you are currently paying to the utility company from $200 down to $60 per month.

Your SolarLease payment would be $0 down and $110 per month. So you could actually save $30 per month from day one.

Real-time monitoring on your smartphone.

Climate science in crisis?

Yet another review of the quality of top climate change science institutions have been released in the wake of the Climategate “scandal” with the InterAcademy Council review of the IPCC. As expected, the review suggests important improvements to the process (this was a review of the process and not the science) but doesn’t reveal a green conspiracy to ruin the global economy.

The IPCC was founded in 1988 and has largely retained the same structure over the years. But as the importance and attention of climate change science have increased exponentially over the years, improvements can and should of course be made to the institutions. Most the proposed changes to the IPCC are suggestions for how to beef-up the institution and employ more people so that the review process, comment consideration and coordination functions can handle the huge task of coordinating thousands of scientists and tens of thousands (probably over 100,000 for the next report) comments.

The review also suggests the IPCC to increase it’s communication capacities, something I strongly support and actually something I and FORES suggested at a seminar about the IPCC earlier this year.

The strongest criticism regarding content concerns the way the second working group has labeled statistical uncertainty. The mission of the second working group, it should be mentioned, is to review science relating to “Impacts, Adaptation and Vulnerability” and not the scientific basis itself (that’s working group one).

All different reviews undertaken this year has time after time proven that the consensus science is solid and justify strong action to reduce emissions radically. The costs of doing this is dwarfed by the potential massive costs of out-of-control global warming.

By the way, in this great post by Josh Dorfman he reminds us that the public global warming debate is today not so much a scientific challenge as a communication challenge.

Even if you’re Al Gore (and maybe especially if you’re Al Gore), I caution you against arguing the science of climate change. You cannot change the mind of a global warming skeptic by citing scientific facts. The reason is simple; resistance isn’t grounded in facts. Instead, it’s grounded in emotion, political ideology and perceived financial self-interest.

Incentives matter!

As an economist I know how much incentives matter and that a thorough analysis of incentives is paramount for understanding why and how people will react in different situations. Perhaps this innovative idea by the “Angry Green Girl” is something to consider for governments trying to stimulate the market for low-emission cars?!

The true cost of oil

Just found a great and thought provoking article in Foreign Policy about the true cost of oil. Read it here.

… An innovative approach comes from Roger Stern, an economic geographer at Princeton University who in April published a peer-reviewed study on the cost of keeping aircraft carriers in the Persian Gulf from 1976 to 2007. Because carriers patrol the gulf for the explicit mission of securing oil shipments, Stern was on solid ground in attributing that cost to oil. He had found an excellent metric. He combed through the Defense Department’s data — which is not easy to do because the Pentagon does not disaggregate its expenditures by region or mission — and came up with a total, over three decades, of $7.3 trillion. Yes, trillion. …

After the financial crisis: Green Growth?

ELF

On June 20 I’m speaking at an event in London organized by the European Liberal Forum. I’ll present alongside some very prominent speakers, as a matter of fact I’m replacing the UK Secretary of State for Energy and Climate Change (Rt Hon Chris Huhne) who had to cancel. Big shoes to fill indeed!

The other speakers are; Tom Burke, E3G, James Cameron, Climate Change Capital and Dimitri Zengelis, Chatham House.

We’ll speak to an audience of politicians about the prospects of achieving “Green Growth” in the EU. This is an outspoken aim of the union, but is it practically possible and does the ambition carry any substance as “Green Growth” is an ill-defined concept? I’m looking forward to the event since FORES is working on these very issues and there is a lot to be said (and done!).

If you are in London next week, drop me an e-mail and I’ll invite you to the seminar.

Almedalsveckan

At the 2010 edition of the prime political event in Sweden-Almedalsveckan-no less than 1396 events are registered during the debate-packed week. The top five topics this election year is:

Health and welfare (180 events)
Climate/environment (159)
Jobs/Unemployment (156)
International issues (144)
Enterprise/Business (135)

I’m taking the ferry to Gotland tonight and will arrive Monday morning. FORES has a packed schedule of events (see program [Swedish]) and I’ll speak on Monday between 16-17 at “Energispektrum” (more info [Swedish]) and on Tuesday between 15:30-16:30 at an event about green taxation (more info [Swedish]).

A Bretton Woods for the Climate

A Bretton Woods for the Climate

I can now call myself a published author!

At a recent World Bank conference in Stockholm FORES published the book “A Bretton Woods for the Climate” co-authored by me and two colleagues. In two parts and just over 200 pages we go through the key issues of the global negotiations on climate change; Institutions, governance, targets and timetables, burden sharing, financing, cap and trade, adaptation and mitigation and non-compliance mechanisms.

We try to sketch up a model for how to solve these issues and how to, in a cost effective and credible way, build a global framework that ensures countries take on strong commitments and follow though on them.

The book is a result of a thought process started at the Copenhagen climate summit when we (as well as the rest of the world) disappointedly watched world leaders fail to agree on how to solve the greatest problem facing the planet today. Perhaps, we thought, it’s not political will that’s lacking, but rather institutions fit for the tasks? Perhaps a different model than the 194 country, consensus based, setup of the UNFCCC should be explored?

This book suggests so and can be downloaded free of cost at: http://fores.se/assets/144/FORES_A_Bretton_Woods_for_the_Climate.pdf

Remember the cold winter?

During this past winter climate change skeptics in Europe and the US had the time of their life as temperatures dropped deep and the general public started to ask themselves where global warming was. When global data for the winter has been compiled and analyzed, it turned out however that the rest of the world wasn’t really freezing as much as we did. Below are data on temperature anomalies during the winter from NOAA (National Oceanic and Atmospheric Administration).

Data highlights for the whole year of 2009:

• Global land and ocean annual surface temperatures through December tied with 2006 as the fifth warmest on record.

• The 2000-2009 decade is the warmest on record, with an average global surface temperature of 0.54°C (0.96°F) above the 20th century average.

• Ocean surface temperatures (through December) tied with 2002 and 2004 as the fourth warmest on record.

• Land surface temperatures through December tied with 2003 as the seventh warmest on record.

Data highlights for January-April 2010: