Tuesday 20 October 2015

Energy Policy: You Can't Keep a Good Paradox Down

A lot of lobbying against government decisions just now, notably over the tax credit cuts.  Has Osborne screwed up?  Search me (- perhaps one of our expert commentators knows?)  It's the energy-related items that have caught my eye.

First up was the significant reduction (87% !) in subsidies for solar power, which is part of a general post-election thrust I welcomed when it first became apparent, and still do.  Not many friends of subsidies hereabouts.  But, set alongside news that DECC has been reduced to an administrative rump with all energy policy now emanating from the Treasury, I start to wonder whether in detailed terms it isn't part of a mini omni-shambles, perhaps brought about by the Treasury not actually being quite in a position to discharge this new responsibility.   Or it could just be that Amber Rudd is stupid, which to be fair is getting more empirically plausible as the weeks go by.

In terms of immediate job losses, the precipitous solar-industry collapse is set fair to beat anything boasted for the job creation potential of the would-be nuclear revival and/or shale gas revolution.  Since the nuke thing is (at best) every bit as much a Keynsian boondoggle as the solar thing, it's fair to put them side-by-side in that way.  And of course solar is cheaper! - per job created, much cheaper.  Much lobbying in evidence; and maybe a leedle U-turn just around the corner?

The other one is steelTimmy reckons no-one needs those old blast furnaces at all, but in any case the lobby is out again.  China is one of the bad guys this time - perhaps Corbyn will berate Xi for steel-dumping as well as human rights at the Buckingham Palace banquet - but the Grauniad fingers another issue
Another of the complaints is soaring, and uncompetitively high, energy costs, that are an important part of the strategy for greening the economy. Yet if they drive up the cost of the domestic product, only for it to be replaced by imported steel with a bigger carbon footprint, more is lost than gained.
Carbon leakage! - now there's a thing.  Who could have anticipated that?  Would the Guardian care to extrapolate that subtle conclusion to, errr, the whole European economy?

Probably not.



dearieme said...

Much about the Tox Dadger's policies can be explained just by assuming that the people who write for it are exceedingly thick. Unless you prefer to think that they are "The Worse, the better" sort of revolutionaries. Could be, but the evidence suggests their problem is, above all, being mutton-headed. Not too thick to dodge taxes, mind.

Anonymous said...

Nary a one of them, those idiots we name 'our leaders' the political claque in Westminster comprehend what it is which actually made Britain, steel manufacture is part of the fabric of industrial Britain. Every last one of the whole administration doesn't understand that the only thing which makes Britain tick - is our industrial base and manufacturing - ie selling stuff to other people but you've gotta make it - first.
Buggering about with energy policy added to the insane idea = the carbon floor price - is the short route to industrial suicide - yeah our treasury might believe that the 'City of London' can save us and by selling financial services - see where that got us in 2007/8.

Dominic Lawson, makes some astute observations:

//Over and above that self-imposition, the UK has, uniquely, set a ‘carbon price floor’. This — a means of meeting the targets of the Climate Change Act implemented under Gordon Brown and supported with a three-line whip on Tory MPs by the then opposition leader David ‘Green’ Cameron — means that even if the cost of carbon-based energy falls, our big industrial users are not allowed to get full benefit.

I wrote about all this in 2009, and the consequences it would have for the steel industries of England and Wales: ‘It may well be that they will soon become unable to compete globally, even at current domestic energy prices; but deliberately to make them uncompetitive is industrial vandalism.’

I spoke back then to Jeremy Nicholson, the director of the Energy Intensive Users Group, which represents industries employing 200,000 people in the UK — and an estimated 800,000 indirectly through the supply chain.

He was especially exasperated by the fact that resulting closures of British industrial plants would not even have the effect of reducing global CO2 emissions: ‘A future administration will have to say in public what ministers and their officials already admit in private, that their renewables target is neither practical nor affordable.// /quote.


Daily Mail here.

Raedwald said...

The Graun is actually latching onto something I have been banging on about for years in the construction industry - the way in which we count Carbon. Steel and concrete are about the biggest CO2 producer processes going - with about 2 and 1.4 tonnes respectively of CO2 per tonne of product. But because we conveniently don't count embedded CO2 as part of BREEAM etc, just CO2 in use, it's quite possible to score top environmental marks for new structure (eg office building) with 20,000 tonnes of embedded CO2 - which will take 700 years of PV panels and pellet boilers to 'pay off'. Modern structures typically have an economic life of less than 60 years.

The biggest idiot (and perhaps the cleverest salesman) I ever met was the GLA's Energy Tsar in the period before Boris. He tried to bully me into installing lamp columns he has helped design, each with a little helical windmill on the top that would feed a little trickle of 12v lecky into the grid when the wind blew. With LED lamps, he had the figures to prove it was a 'zero energy' option. Except of course for the 800kg of steel in each one - creating a CO2 deficit that would never be paid back.

The system of international 'accounting' for CO2 means that the CO2 output of producer nations is counted - but the failure to count embedded CO2 means that the consumption of embedding nations is ignored. Thus new UK construction programmes using Chinese steel and Indian Portland cement don't increase our national CO2 figures by a single gram - and still allow us to lecture India and China on their unsustainable carbon figures.

The UK's position on carbon is a complete and utter con. The government really couldn't care less about cutting carbon - but seem to appreciate all the opportunities the 'green' options allow for their business chums.

Anonymous said...

A very pertinent point and well made Raedwald.

But what is not said often enough - the whole shebang - the nebulous notion that somehow mankind is poisoning the world through emissions of CO2 is preposterous claptrap in itself.

Hogwash, bollox indeed but the supposition that man made CO2 will cause warming and catastrophic warming at that - is sheer lunacy.

At the crux, when all said and done - carbon taxes, renewable energy and the boondoggles it constructs - money and control is what the "GREAT SCAM" is all about and the corporate world, the bankers and the worlds' political clique - the UN and the Internationalists - know a good screw when they see one.

Men lie, powerful men tell bigger lies - the corporate world is run by tax dodging conmen and the world elite are more than happy with the status quo.

Here endeth the lesson.

Anonymous said...

Cover the blast furnace area in [Chinese] Solar panels - claim the subsidy. Problem solved.

Dick the Prick said...

I used to work for HMRC on tax credits - it's been designed to be complex and Osborne's gonna defo put transitionary arrangements in. Not so much in the broad brush but perhaps shift it through a devolved fund - it's semi-crazy politics using thresholds as mandatory and we are genuinely dealing with nuts & bolts subsistence issues. I foresee 'greater localism' - he could use as boon and gain political capital out of it - that's what i'd do.

I sometimes, not often, but I sometimes think that maybe Osborne's hired some decent staff and is starting to play poker a bit better - shoot for the stars and you may hit the moon and Hinkley and Tax Credits may just be bread and circuses.

I really did have some phone calls at HMRC where I googled their local Tory and gave them their telephone number - I may be a bit of a bastard but when you're on suicide watch, rules & regs kinda get blown out of the water - good, honest people getting shafted because some SPaD or Chancellor can't count.

ivan said...

Regarding solar panels, Spain has the right idea in making those with them pay the actual cost of their grid backup. The greens are squealing like stuck pigs and calling it a tax like they do for everything that forces the green blob to pay realistic costs.


Nick Drew said...

handy links, Ivan - thanks

DtP - we must watch that space. I note even Polly Toynbee doesn't think this is another omnishambles, still less a Poll Tax

Electro-Kevin said...


The Government wants us to have human rights and low carbon industy (who can disagree ?)... then we go buy produce from high carbon, low human rights countries anyway.

- The planet is not saved.

- Human ethics are trampled on.

- We end up with 3000 unemployed.

So... we can't subsidise our own steel industry - but we can subsidise China's. How ? Well there's the proposed £80m aid package to Redcar for starters - then the lifelong benefits and in-work top-ups that will be needed when our workers go into lower paid jobs and unemployment.

Wouldn't this money be better spent propping up our steel ? Shouldn't this money be devoted to keeping our low carbon and human friendly industry going instead of favouring an abusive and polluting foreign one ?

Has there ever been a country like this one ? So keen to subsidise the undercutting and redundancy of its own workforce ?

rwendland said...

The MSM seem to have covered the Tax Credit issue very poorly. For many families the reduction will be over £2k, and when the letter drops on the mat they will be very shocked. The formula to calculate the drop is very easy for people at work, and is a simple function of Joint Income, so why has no MSM seemingly printed the table of reductions:

Joint_Income Tax_Credit_Reduction

£12,000 £1,624
£14,000 £1,764
£16,000 £1,904
£18,000 £2,044
£20,000 £2,184
£22,000 £2,324
£24,000 £2,464

Obviously the reduction is limited to the total amount of the Tax Credit the family gets, so not all working low-income families will see the full fall given in the table, but I think most 2+ families will see the fall given if their joint income (post pension contributions) is in the table above.

NMW for 37.5 hours a week gives an annual pre-tax income of £13,065, less any pension contributions - so if a 5% pension contribution that is £12,411. The classic "hard-working parents" on near-NMW could easily earn a joint income of £20k from one full and one part time job, giving them a £2,184 tax credit cut. I think they will notice that.

The explanation for the average £1,300 fall given in the MSM is that there are a large tail of higher income families where the withdrawal taper has reduced tax credits to a small amount - they will lose all the small amount, but they make the average reduction repeated in the MSM smaller. But lower income families will be hit much harder than that average suggests.

The simple formula is: If a family's joint income is above £6420, the drop is roughly £1233 plus 7% of income over £6420 (obviously only up to the amount of the Tax Credit the family gets). Why hasn't the MSM told us that clearly? I wonder if all politicians actually know that formula, and have seen the implications? Did Osborne and his SPADs even understand it?

The 7% is from the increase in withdrawal rate from 41% to 48%. The £1233 reduction is from the reduction of the deduction free threshold from £6420 to £3850 - 48% of that reduction is £1233.

Letters hitting mats time will be a shock to many, and I guess many of those once voted Tory, but perhaps not next time.

estwdjhn said...

Trouble with the UK steel industry isn't just with the energy costs - it's also got big productivity problems caused by a mixture of institutional staff laziness and health and safety requirements taken to unbelievable levels of excess.

I work for a contractor that does quite a bit of work at Scunthorpe. I turned up there recently with some components we had made loaded on a transit pickup. Before the forklift driver would unload me, he insisted on taking possession of my van keys, I had to stand in a marked and barriered area, he then had to put out half a dozen road cones round the area before lifting the pallet off.

Needless to say, it all probably took ten times as long as it would in our yard at work where I'd have just jumped on a FLT and done the deed (without running over anyone!) and

Anonymous said...

"he insisted on taking possession of my van keys, I had to stand in a marked and barriered area, he then had to put out half a dozen road cones round the area before lifting the pallet off"

Seems a tad silly if no one's actually in the van. In a long ago life I witnessed an HGV driver pulling away from the loading ramp just as the forklift driver was exiting his trailer. We all screamed at the HGV driver and he stopped - with the electric forklift just held in mid-air, forks on the loading bay, centre of the curved back end just - by a few inches - on the back of the trailer, terrified forklift driver. I think we got him down with another forklift, as we were worried the thing would flip over if he climbed down the side.