Here is an exchange between Peter Lilley MP, and other members of the House of Commons on Tuesday’s reading of the Climate Change Bill.
Notice how Elliot Morley cites Stern and Lord Turner as authorities.
It is as if Stern had no critics. The entire house of commons appears to be in his thrall. One man, who now is Vice Chairman of a group of companies with a commercial interest in climate change legislation, is being cited in lieu of democratic debate.
Lord Turner, who is also cited, has written no more than a letter to Ed Milliband. And Lord Turner, as a former Trustee of the World Wildlife Fund, and a former member of the board of advisors at Climate Change Capital, cannot be said to be politically impatial, nor without financial interests.
The house voted hugely in favour of the ammendments to the Bill, which means that shipping and aviation will now be included in the 80% target. If the bill is passed, then it will mean big fat profits for Stern, Turner, and their associates as shipping and aviation companies seek their services.
Meanwhile, people in the UK will be unable to afford to travel, facing rising costs, and face job losses.
Mr. Lilley: I draw the House’s attention to my declaration in the Register of Members’ Interests.
In the speeches of a number of hon. Members, it has been assumed that the whole House is unanimous on the measures before us, and on the Bill that they amend or add to. Historically, the House has made its worst mistakes not when it is divided, but when it is virtually unanimous; not when it is adversarial, but when MPs switch off their critical faculties in a spasm of moral self-congratulation. My concern is that, in considering these measures, we are displaying that tendency. It is vital that we bring the House back down to earth by considering the hard costs and benefits of, and alternatives to, what is proposed and what we are doing. We have not done that very much so far in the debates in the House. Only once in Committee was mention made of the costs and benefits of what we are proposing.
Mr. Morley: The right hon. Gentleman will find that, apart from the Stern report, which addressed the issue of costs and benefits, the report by Lord Turner specifically identified some of the projected costs for his recommendations, which are now being incorporated in the Bill. They were relatively modest.
Mr. Lilley: I am not in any way disputing what the hon. Gentleman says, but no hon. Members, in either the House or Committee, have addressed the question of costs and benefits. They could have done so, as the Government have produced an impact assessment spelling out their estimate of the costs and benefits involved. Those figures are all we have when it comes to trying to assess the costs and benefits of the specific clauses and amendments before us.
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The Government’s impact assessment has three very important implications. The first is that the costs of the Bill as a whole are potentially huge, and they will be even more onerous if these proposals are accepted. The impact assessment puts the transitional costs at between 1.3 and 2 per cent. of gross domestic product up to 2020. In addition, there will be competitive costs to this country as a result of industry being driven overseas, even though that will not reduce the level of carbon emissions. Ignoring both those costs and making the heroic assumption that British industry can instantly and perfectly implement the latest and most cost-effective technology to meet the targets, means that the estimated cost of the Bill as a whole—even before the target for emission reductions is increased from 60 per cent. to 80 per cent.—comes to £205 billion.
That is a lot of money. We have to ask whether we are prepared to increase it by including aviation and shipping, as the measures before us propose. I do not know whether hon. Members have consulted their constituents, but £205 billion would equal over £10,000 from every family in every constituency.
People are used to hearing about the large sums of money being used to rescue the banks, but that has been in the form of loans that one hopes ultimately will be repaid. The costs that we are incurring through the amendments—and by the Bill even if it remains unamended—are real money. Our constituents will cough up that £10,000 in taxes and lost incomes, and never see it again. Before we add even more onerous burdens by including aviation and shipping in the Bill, we must be very sure that we are happy with the costs that we are already incurring.
Secondly, we need to look at the benefits, which the impact assessment also considers. Although it shows that the maximum costs, even excluding all the things proposed in the measures before us, are potentially £205 billion, the striking thing is that it puts the maximum benefits of the actions proposed in the Bill at £110 billion, or just over half that total. Do the authors of the new proposals believe that their costs will eventually exceed their benefits, as is the case with the Bill as a whole, or can they reassure us that the benefits will be greater than the costs?
I have reservations about the certainty with which some people adopt the scientific case behind global alarmism, but I am equally uncertain that it is necessarily wrong, so I am quite prepared to take out an insurance policy against the possibility that we will face global warming, just as I insure my house against the possibility of fire. However, I ask the House whether it is sensible to buy into an insurance policy whose premiums could be twice the value of one’s house—
Mr. Deputy Speaker: Order. The right hon. Gentleman is an experienced and skilful debater in this House, but I think that he must realise himself that he is building a
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broad case on a narrow foundation. The remarks that he is making are, in terms of good order and debate, more strictly applicable to later parts of the Bill, and particularly to Third Reading. Therefore, I really must direct him to the specific matter covered in this group of new clauses and amendments.
We have to remember the normal laws of declining marginal benefit and increasing marginal cost. If we tighten the Bill by adding more rigorous burdens regarding aviation and shipping, we must expect the costs to be higher than the costs of meeting the 60 per cent. target, let alone the 80 per cent. target, and we must expect the benefits to be less than the marginal benefits that were to be accrued.
David Howarth: The right hon. Gentleman will of course be aware of the work that Professor Barker did with Pan, Köhler, Warren and Winne, published in 2006 in The Energy Journal, which showed that as the targets become stricter, the world growth rate increases because of induced technological change. Economics has moved on slightly since he was at Cambridge.
Mr. Deputy Speaker: Order. Oh dear. The hon. Gentleman is enticing the right hon. Member for Hitchin and Harpenden (Mr. Lilley) towards the wider aspects of the Bill again. I must remind the House that we want to make progress on to other matters, and we should therefore stick strictly to the terms of the amendments before us.
Mr. Lilley: I will do just that and avoid discussing with the hon. Member for Cambridge (David Howarth) my experience of Cambridge, which was splendid. I instead return to the measure before us, which asks the Committee on Climate Change to assess the cost of including aviation and shipping in the Bill. However, the new clause does not say how those assessments are to be made. We must assume that they are to be made on the basis that Lord Stern used to assess the costs and benefits in the report to which the right hon. Member for Scunthorpe (Mr. Morley) referred, or on the basis used in the impact assessment that the Government put before the House, although that assessment refuses to give us any costings specifically on aviation and shipping.
It is interesting that the impact assessment totally contradicts Lord Stern, who said that the costs of the measure, including aviation, would be far short of the benefits. Of course, he only reached that conclusion by discounting the future at such a low rate that the benefits exceeded the costs. According to Nordhaus, the leading valuator of this sort of methodology, half the benefits that Sir Nicholas Stern takes into account will not occur until after the year 2800, but so low is his discount rate that they outweigh the costs that we will incur in this century.
More sensibly, the Government rejected that. I asked them what interest rate they think should be used, and presumably want to use, in the assessments that they require in new clause 15. They say that they are using the traditional, conventional discount rate required by the Treasury of 3.5 per cent. in real terms. That is why
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their calculations show that the costs are not necessarily much lower than the benefits, and could well be twice as great as the benefits. Presumably, if the Committee follows the Government’s methodology, it could reach the same conclusion for aviation and shipping.
Rob Marris: I am grateful to the right hon. Gentleman. Like other industries, aviation and shipping are, of course, susceptible to technological change. On the £205 billion cost—that is the upper end; the lower end is £30 billion—may I point out that the impact assessment said:
“Upper end of the range assumes no technological change”?
“Benefits are therefore likely to be higher.”
Mr. Lilley: I may be wrong, of course, but I am using the Government’s figures. Throughout the debate no one else has bothered even to mention the Government’s figures, and they were mentioned only once in Committee. It is only sensible that we should do so, and if we do, and if in particular we reach the conclusion that they should use the methodology implied in the impact assessment and not the absurd methods used by Sir Nicholas Stern, now Lord Stern—he received his reward—they would reach a conclusion very similar to that advocated by the hon. Gentleman on Second Reading: that we should put far more emphasis on adaptation to helping poor countries cope with climate change, rather than on crippling our industries—aviation, shipping and all the other industries—to little avail.
The question at issue has been whether technology in aviation and shipping can proceed at a pace to enable the costs to be kept reasonably low and therefore to allow us to pick up the benefits of a low carbon technology without extra cost. Is my right hon. Friend aware that the leading estimates of the improvement needed in carbon productivity are that it needs to increase fourfold over the next 40 years—that is, that the average of the past 15 years, which is 1.5 per cent. per annum, needs to increase to about 6 per cent. per annum if we are to get anywhere near meeting the 80 per cent. target? Will he speculate on whether it is plausible that a fourfold increase can be achieved?
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Mr. Lilley: That would be extremely demanding, but the implications of the Government’s impact assessment both for aviation and shipping and for industries more generally is that we must find more effective ways of reducing costs and carbon utilisation than they themselves think are available or would result from the measures in the Bill.
Either that, or we must adopt the route proposed by the hon. Member for Wolverhampton, South-West (Rob Marris) and devote more effort to adaptation to climate change rather than mitigation, which would remove the burden—the almost impossible task—of bringing aviation and shipping into the scheme. It would also mean that, if global warming continues but turns out not to be predominantly the result of human activity, we would still be able to help the people in poor countries who would suffer from it, whereas we would not help them if we relied only on mitigation efforts.
The implications of the clauses before us are extremely serious. We are potentially asking our constituents to bear a burden of £10,000 for every household, should we increase it. We are potentially producing benefits that may be only half the costs that we are incurring. We have been using a method to assess future costs and benefits that has been surreptitiously abandoned by the Government, but they have told us nothing about it. These issues ought to be discussed more fully before the Bill becomes law, and it is a sad day when Parliament refuses to face up to these hard facts.
Alan Simpson (Nottingham, South) (Lab): There is a real danger of the House misleading itself into debates which, although important, are not the debates that should be taking place on the amendments. There are issues to be addressed concerning the methodology of impact assessments, but at this stage the House is being asked to address the principle of the inclusion of the Government’s assessment of carbon impacts in the way in which we set our carbon budgets. It is important to bring the debate back to that.
It is also important not to allow ourselves to conduct a caricature debate about the choices that we face. The choices are not between unilateralism or multilateralism, or between mitigation or adaptation. We will have to do both. When the ship is sinking, the last thing we want to hear is someone running round the decks saying, “No action until there is a global refit.” If the ship is sinking, we want action taken on the threat that we face at that time.
What we need to recognise from the scientific reports, which have been coming to us in their own tsunamis, is that the climate and the planet are the part of the equation that is in the process of taking the most enormous unilateral action. We will have to address huge upheavals in the whole framework of how we consider societies and economies capable of working viably throughout the whole of this century.
I had hoped that the hon. Member for Birmingham, Yardley (John Hemming) would be here for his customary intervention on this issue. The answer to the question about oil is that by the time we come out of the current global financial crisis, two things will be queuing up. The first will be the climate crises already in the pipeline. Secondly, by that time we will probably have passed the peak oil level anyway, and we will have to move to a post-oil economy if we want a viable economy of any sort.