Thursday, 15 November 2018

BAU is not an option. Plus indirect subsidies for indirect benefits.

Last week I went to Low Carbon Britain  and the bit that has stuck in my head all week has been a comment from Patrick Allcorn from the Department for Business, Energy and Industrial Strategy. He said (with a bit of paraphrase from me) we should never compare costs of carbon saving policies with business as usual (BAU) because BAU is not an option. We should be comparing costs of one carbon saving scheme with another to see which is most cost-effective.

In many ways this is spot on. We have to reduce our carbon emissions so we should only consider options that meet this requirement. It isn't a question of electric cars versus fossil fuel cars, it is electric cars (with clean electricity) versus fuel cells (with hydrogen) or other clean vehicles. However, its a bit more complicated than that because how you measure the costs depends on who you are.

The Climate Change Act puts a legal requirement on government to meet targets.
At Low Carbon Britain the audience has a large proportion from local government and public sector organisations, which means they have a slightly different position from you and me. When government evaluates a policy they consider all the benefits, not just the direct financial ones. As an example, the indirect benefits of electric cars include reduced noise and air pollution in our cities as well as lower carbon emissions (see Counting the benefits of Electric Cars). Also, since the Climate Change Act (now 10 years old!) the government has a legal responsibility to meet its agreed emissions targets. (At least central government does. Local government has no statutory requirement to reduce emissions but there are a few councils going ahead anyway. For example Bristol just announced they will aim to be carbon neutral by 2030. )

As individuals we have no legal requirement.
For a cash strapped household or a struggling business, indirect benefits don't always fit on the balance sheet and there is no legal requirement for individuals to reduce emissions. If there was it would be unfair because some of us are less able to pay than others, while the benefits are broadly equal.

Indirect subsidies for indirect benefits - like tokens for cycle hire or public transport.
Low carbon choices could be subsidised indirectly to take into account the indirect benefits and there were several ideas at Low Carbon Britain for how this could be done. For example subsiding cycling scheme costs using grants from the NHS (e.g. cycling for health on prescription) or for improving air quality. Also support could be obtained as part of a sustainable transport package for local housing infrastructure. Residents could get tokens for cycle hire (or car clubs or public transport) instead of parking places. These ideas fit very well with recommendations from Antonia Jennings, from the UK Health Alliance on Climate Change. Their recent report 'Moving beyond the Air Quality Crisis' recommends a national Active Travel Scheme offering incentives to use car clubs and bikes.

Active travel infrastructure for new developments.
Jennings (and the report) had another excellent suggestion - that 'no new road scheme or housing development should be permitted without additional infrastructure for active travel.' Given there are already energy efficiency requirements for buildings, it is not too much of a stretch to demand safe cycle lanes and footpaths as well. Retrofitting them is so much more expensive.

Taxes are more efficient than subsidies and do give preferences to particular solutions.
You might argue that taxes or cap-and-trade schemes are more efficient than subsidies at motivating the 'right' sort of carbon saving measures. This is because it is (relatively) easy to estimate the cost of bad impacts like air pollution from cars and hence tax them, but much harder to estimate indirect benefits like how many cycle hire transactions actually reduce car use. If you can define bad outcomes you can usually define a tax scheme for them in a way that does not give preferences to particular solutions (e.g. cycle or public transport as an alternative to a car). However, local government and public bodies have few powers for taxation. Even when they do (such as a congestion charge), taxes are always very unpopular. In practice it is much easier to subsidise particular solutions.

There is some encouraging news on carbon taxes in Canada. It would be great if something similar happened here.

Transport is the next sector to tackle, not low carbon heat.
You may have noticed all my examples today are from the transport sector; this is because Chris Stark from the Committee on Climate Change suggested that transport is the next sector we need to address - having made a very good start with reducing emission in the power sector and waste handling. Going for transport next makes sense because although low carbon heat is also very important the options for that are less clear at the moment. There are at least three strategies which are estimated to have roughly equal costs: electric heat pumps, hybrid heat pumps/gas boilers and converting the gas grid to hydrogen (see Cleaning up the UK's Heating Systems). If you have a gas supply it is not clear which of these is the best option in the long term. There is more research underway to explore these options. (If you know that a heat pump is suitable for you, it is fine to go ahead.)

Three conclusions
There are three conclusions from all this for how we discuss and criticise government policy.
  • Do not ask how much carbon reduction measures cost compared to business as usual. Ask instead how they compare to other carbon reductions. Otherwise you are asking your government to break its own law!
  • At a local level you can ask for subsidies for schemes to account for indirect benefits (like health and productivity). This is a reasonably fair mechanism that local governments have the power to deploy. They also have some powers in planning policy that can be useful.
  • Just for the moment, you should let up a bit on the issue of low carbon heat because it is not clear what is the best solution - but keep up the pressure for low carbon transport.


  1. Really like this post. Very clear set of conclusions. Thank you.

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