Marian Tupy: John Constable is a British energy analyst and the Global Warming Policy Foundation’s energy editor. Amongst his many energy-related publications are: The Green Mirage, Why The Low Carbon Economy May Be Further Off Than We Think, Energy Policy and Consumer Hardship, and Shortfall, Rebound and Backfire. Can we rely on energy efficiency to offset climate policy costs? John, welcome to the The Human Progress Podcast.
John Constable: Thank you very much.
Marian Tupy: So in recent days, I’ve seen a lot of news stories pertaining to the spiking energy prices in Europe in general, and UK in particular. In fact, this very morning, I saw in The Spectator, wholesale gas prices have risen six fold, that’s in the UK. Winter heating bills are set to be the highest on record. Millions of people across the country are wondering what they might have to forgo to pay for that. So I would like to start by talking about the situation in your country specifically, then look at what’s happening in Europe and consider what lessons, if any, should other countries, especially the United States, learn from the European experience. So let’s start in the UK. What’s going on?
John Constable: In essence, what we’re seeing is the reaping of the whirlwind of two decades of climate policies. And obviously, there are some events which are only very likely or not particularly closely connected to the climate policies, those are very significant. And in the moment, we have big queues outside petrol stations, gasoline stations, in the UK. That’s not directly the result of climate policies, but the gas price increases that you see are the outcome of a lack of fuel diversity in the UK system, and that affects Europe too, though to a lesser degree. The UK is much further ahead on the climate policy agenda than much of Europe. We’ve rushed ahead rather foolishly, in my view, and consequently, we are much more exposed to gas than other parts of the world.
John Constable: So this has been… The exposure to gas was very obvious from very early on in this particular policy track in the early 2000s. I can remember quite a number of the fossil fuel analysts at the time saying that the renewables policy is in essence, a gas policy, UK will end up very dependent on gas, and that may not be wise. And older figures in the industry were saying that to spread all different fuels, 30% coal, 30% gas, 30% nuclear, and a certain amount of renewables on the edge, would be much more prudent. And we’re now beginning to see that that advice was right. Many of those people are not around to tell us that they told us so, nevertheless, they were to linger on in my memory and in the print editions of their publications, and you can see they’ve been correct. So we’re heavily dependent on gas.
Marian Tupy: Could you give me the breakdown of the energy supply in the UK, currently, energy sources, before we move on?
John Constable: Well, the electricity industry is perhaps the key location for this. At present, about 50% of our electricity is being generated by gas, and just under 20% from nuclear, very small trace from coal, a couple of percentage points only, in coal. Now, that’s curious because it compares quite strongly with the rest of Europe, where coal is still a very important fuel. Germany particularly, still uses a great deal of coal in electricity, and indeed, a great deal of coal in it’s overall economy, it’s still just under 20% of total primary energy level, dependent on coal.
John Constable: So the UK is really much more exposed to gas, and that’s why it looks so much worse here. But of course, this renewables plus gas policy is coming to other countries too, because it’s the only way in which you can make some kind of pretense of aiming for Net Zero. Gas is flexible, gas generators are flexible, and therefore they make a plausible backup, as people casually say, to the uncontrollable non-dispatchable renewable generators. Those are… Have been selected by policy as a route towards Net Zero.
Marian Tupy: Right, so obviously, the UK has done a great deal in terms of subsidizing and building renewable sources of energy, but gas was supposed to be the back-up. Now, what happened that the gas prices have gone up so much?
John Constable: Well, there’s several factors involved here, of course. There has been a post-covid recovery, rising international demand for gas, particularly in Asia. These are all relevant considerations, but it is not irrelevant that wind power output in the UK and across Europe this year has been extremely low.
Marian Tupy: Oh, I see.
John Constable: So it’s something like 20% lower than it would otherwise have been, and that has been a contributory factor, a very significant contributory factor, as it happens. So as I said, electricity generation in the UK is roughly 50% gas in the UK present, and that is an increase from around about 40% in previous years, so this is the lowest wind year for approximately five to six years.
Marian Tupy: And…
John Constable: In spite of… So the lowest wind output, I should say, for five to six years, in spite of a huge increase in capacity.
Marian Tupy: Okay, so UK was relying on renewables as… Including wind, then wind stopped blowing and you needed more gas generation and obviously, when the prices are higher globally, then so will be the cost of electricity generation in the UK. But of course, you are sitting on a lot of gas that goes on being unexplored, correct?
John Constable: Well, there is the Shell gas opportunity in the UK, and there is a… At the moment, a political consensus that we shouldn’t do it although there is consistent interest from the general public. And I suspect that will come back. It’s a viable resource and it may not be nearly as problematic environmentally as the Green lobby has argued. And if it indeed is suitable to support renewables, we have them now, anyway, then we may have to use that gas in order to facilitate the use of renewable energy in the future. And as I said, this was… It was well recognized in the early 2000s that the renewables policy was in essence, a gas policy. And at some point, the Green lobby will have to recognize that.
John Constable: But at the moment, they’re trying to persuade themselves that the backup functions can be provided with batteries. Whether that’s safe is an open question. Lithium-ion batteries are interesting objects and thermal runaway is well-documented around the world, and we’ve had a serious problem with lithium-ion battery here in Britain already. With thermal runaway, it’s not a conventional fire, you can’t simply extinguish it. And the only way of dealing with it is to irrigate, so cooling down. And they produce considerable quantities of hydrogen fluoride during thermal runaway. So there are real concerns about batteries which are not being addressed. I can see that at some point in the future, critics will say, “We really can’t risk this kind of over-dependence on batteries. They’re too expensive, they’re too troublesome. We should use fossil fuels or hydrogen, a conceivable possibility, as a support generator.” But the hydrogen would have to come almost certainly from natural gas, so it’ll have to come from steam methane reforming of natural gas.
Marian Tupy: Which requires… Production of which, also requires energy.
John Constable: Indeed, it’s not a very efficient way of doing it. The hydrogen economy is an interesting, technically very interesting subject. But you wouldn’t do it unless there were climate policy imperative. It would be foolish to waste the energy in natural gas to make hydrogen, or indeed waste the energy in the electricity to make it through electrolysis, you would use the methane or use the electrons directly. But all the climate policies are dependent on some form of low-carbon stored energy, and hydrogen would be an option for it. And it’s a large part of the UK’s plans for 2050. So the projections of our committee on climate change are for around about 270 Terawatt hours of hydrogen a year, of which about 220 would come from natural gas. Though of course, that implies that there’s carbon capture and sequestration, which is another gamble on this. It’s difficult to understate the degree to which the entire Net Zero agenda is based on speculation and wishful thinking.
Marian Tupy: Just for our American listeners, Net Zero means that by 2050, UK will…
John Constable: Will have Net Zero emissions, whatever Net Zero really means. [chuckle] In the bizarre world of green policy, all sorts of things are swept under the carpet. Whether we truly are a low-emission economy, is very dubious. I doubt it on the grounds that at present, we are boasting to the world that our emissions in the UK have fallen very significantly since 1990. While on paper that might look true, that our production emissions in the UK have fallen, but our consumption emissions have not fallen by anything like as much. Essentially, what we’ve done is to export our carbon dioxide production to Asia, you could say, is one of the British economy’s most successful exports in recent years. It’s nothing to boast about. And that trend continues, of course. Essentially, what we’re doing is borrowing money to buy Asian goods, and that doesn’t strike me as a sustainable low-carbon economy in the future.
Marian Tupy: Not to mention, of course, that building and disposing of batteries, and building of all of that renewable infrastructure like windmills and whatever, that too requires a lot of mining and processing of ores and energy inputs. Is that taken into account when the British government is estimating the CO2 output of the UK economy, or is that swept under the carpet?
John Constable: It’s swept under the carpet, of course.
Marian Tupy: Wow.
John Constable: The low productivity of the green economy implies very heavy resources utilization, but unproductively. So it’ll be an awful lot of equipment around, and much of it has to be, of course, recycled, or at least, retired quite early, so these equipment doesn’t last very long. And the disposal of wind turbine blades is a big problem in Europe, actually. Some of them have been burnt in power stations and some of them are now going to landfill, and people are suggesting all sorts of ingenious ways of making relatively low-value products out of these materials. So the low productivity, in a general sense, the big picture point is that you’re talking about a low productivity energy generation center.
John Constable: There’s an awful lot of capital required to make it even remotely plausible. And that material has to be repaired, and indeed, then replaced. So the waste stream coming out of it is going to be considerable. I’m more interested in the cost, actually. When we look at economic history in Europe and in Britain in particular, we think of the big growth from the 1400s up to the present day or until quite recently, ’cause I think we’re not growing as fast now, or at all. What is the cause of all that? And the underlying cause is the addition of highly productive energy sources.
John Constable: That’s really what has made us rich, and we’re proposing reversing that and using low productivity energy sources. That’s going to be very problematic for the population when they realize that much of the available wealth is being driven into the energy sector. And so we’re seeing the beginnings of that here in the UK. So at the moment, people are seeing spiking gas prices, but in fact, this is the outcome of enlarging the energy sector, again, as compared to the rest of the economy.
Marian Tupy: Yeah. I went to school in Scotland, and whenever I go back to Scotland, I stay with some friends, and I have noticed that in winter months, their apartments are generally under-heated and quite cold to be honest, and people are very careful about heating their homes because their energy costs are so high. So especially in a world where our economies are quite anemic, I mean, our growth rates, as you pointed out, are very low and if you’re thinking about having a real wage growth of 1% or 2% a year, above inflation, and then suddenly you realize that the cost of food, because that needs energy to be produced, and heating and transport is increasing well above that 1% or 2%, that actually is eating into the European standards of living, and I could see why people would actually feel that they are becoming poorer year on year, because so much of that extra income, due to productivity growth in their own lives, is consumed by unproductive or low productivity energy sources.
John Constable: Yes, so the energy sector is growing relative to the rest of the economy, it’s the only area which is really expanding. But we’re returning a balance to the pre-coal era, when the energy sector which was land, farming, at that time, dominated the economy. Practically all the available capital in the pre-coal economy was wrapped up in land, and landowners employed three quarters of the workforce, hence the enormous power and prestige of the gentry and aristocracy in Northern Europe, they were the dominant influence in society, and they were that because of their control of the energy sector, which was a low productivity one. And we’re seeing something very similar.
John Constable: So we’re expanding the energy sector and it will come to dominate it, it’s coming to dominate it as we speak, in fact. And that, I think, will be politically controversial. People have got used to the idea that the energy sector is highly productive and there’s a lot of energy to do lots of other things. In the future, it won’t be like that. The non-energy sector will be smaller, the energy sector much larger, we’ll all be employed in the energy sector as people in the past were, on relatively low wages. Are we going to like that? When I give public talks about this, somebody always stands up in the audience and says, “You’re saying, John, that we can’t have a green economy?” And I say, “No, no, I’m not saying that at all. You can have it, you just won’t like it when you’ve got it.”
Marian Tupy: Right. Not to mention that… In a quite literal sense, those solar panels need to be put on land, and windmills need to be put on land, so whoever owns the land will have the rents from those renewable sources. John, we haven’t talked about nuclear, what’s going on? Why aren’t you pushing for nuclear in the UK? Can that solve all of your problems?
John Constable: Well, it will certainly help, and it won’t solve all of them. Our problems are too big even for nuclear to deal with. There is renewed interest in nuclear in the UK, and I think some parts, both of government and certainly the general public… General public is usually ahead of government on these sorts of common sense issues. I recognized that nuclear power is necessary for security reasons if nothing else, and certainly is promising as a low cost energy source. Thinking about it physically, nuclear is intrinsically very promising. The fuel is of a very low entropy as compared to renewables which are very high entropy input. So yes, nuclear is enjoying something of a resurgence, at least in public discussion in the UK. We have some interest in small modular reactors, and Rolls Royce has a proposition for what are not actually very small machines, they’re 400 megawatts-plus electrical, so they’re medium sized.
Marian Tupy: How many households can a 400 megawatts structure power?
John Constable: Well, instantaneously, quite some thousands, of course. But we’d be looking at something like seven gigawatts, in total, of these Rolls Royce machines. Peak load in the UK is between 50 and 60 gigawatts. So it will be a relatively small fraction of instantaneous load of peak, say, in the winter but a very valuable contribution in terms of inertia, and also a dispatchable, controllable energy. And they wouldn’t wish to ramp them, but they would be able to do so, some kind of load following would be possible. They wouldn’t wish to do it economically. Whether any of this nuclear rebuild is actually going to happen is really an open question. The markets in the UK are so distorted in favor of renewables that it’s difficult to see how anybody building a nuclear power station can act as a pure merchant. So at the moment, we’re paying just over 10 billion a year in subsidies to the renewable energy sector, and that’s a huge fraction of the total value of the electricity market.
Marian Tupy: Goodness, you can build a lot of power stations for that.
John Constable: We can build a lot of power stations for that and indeed we have built a lot of low productivity renewables with that annual subsidy as it were, and we’re giving very good rates of return to investors in these solar and wind farms which would never have been built without the subsidy and never would have been contemplated at all. But that distorts the market so very badly that it’s impossible to build anything else. And I can’t see myself any likelihood of fundamentally viable generators actually being constructed unless there is a counter subsidy to those generators to offset the distortions implicit in the support for renewables, which will make them look expensive and then the green movement would say, “Look, you can see that nuclear is actually very expensive, it needs a subsidy.” Well, it needs a subsidy to operate in this particular distorted market is the correct answer. So, one wonders whether this will happen. I’m more interested…
Marian Tupy: Sorry, please carry on, yeah, carry on.
John Constable: I think the real promise for nuclear actually is in relation to heat. So there’s more genuinely small modular reactors, sub-50 megawatts thermal producing industrial heat, probably a very important consideration, and this… You can bring this point out by thinking in terms of where does our primary energy go? Major industrial economies such as Germany still uses a lot of coal, roughly 20% of its total primary energy input is from coal, why? Because it needs heat, it’s not just electricity, although they’ve burned quite a lot of it for electricity, about 17% of German electricity is still from coal, as opposed to I’d say to 1% or 2% in the UK.
John Constable: But then industrial processed heat is one of the most difficult areas to decarbonize. Always you can use natural gas but coal is much more effective and cheaper for many areas and necessary in some of them such as steel, steel by far and away is the most desirable way of achieving processed heat. And nuclear on the other hand, nuclear could contribute in those areas and if we remain determined to decarbonize, then small modular reactors and nuclear reactors for heat generation, rather than electricity on the distorted electricity grids may become very important for us.
Marian Tupy: When you talk about subsidies and cross-subsidies, it almost sounds like the British energy sector has been centrally planned and centrally controlled. Now, when you say that in Britain, this has happened over the last two decades, that means that both the Labor Party governments and Conservative governments have been responsible for that. And what I find so interesting is that, of course the Conservative Party, which is currently in charge is the inheritor of the Thatcher legacy who was big on why central planning and price controls and micromanagement of different sectors of the economy cannot work, she won that argument in the 1980s saying that prices need to be a result of the supply and demand equilibrium rather than something that is thought up in Whitehall, has that legacy been completely lost in the Conservative Party? Is it now a party of central planning?
John Constable: Yes, the economically liberal conservatism is a fast fading memory I’m afraid. The Conservative party has very little interest apparently, and there are individuals, remarkable individuals but as a party overall, it’s essentially rather statist and it is quite intent actually to regulate markets in very intrusive and cohesive ways, and the electricity sector is a very good example of that. The turning point is the early 2000s and I would… That isn’t… Simultaneously, it’s the high tide of market liberalism in the energy sector but it’s also the moment of which climate policies were introduced. So it’s the introduction of climate policies which marks the end of increasing liberalization and it’s in the interest of delivering climate policies that the Conservative Party has largely abandoned its interest in a wholly liberal energy sector, and after all if you left people to make their own choices on the basis of good priced, people would not choose low carbon sources, they’re much more expensive.
Marian Tupy: So in that sense it is not crazy or conspiratorial to say that people like me, but I’m sure you as well, who’ve been wondering 20 years ago if the green extremism is really a Trojan horse through which capitalism is going to be undermined and eventually strangled, that doesn’t sound like a crazy idea now that the notion of a watermelon green on the outside, red on the inside, the replacement theory for socialism is just green economy. It is through these policies that liberal markets can be eliminated.
John Constable: Well, are being eliminated certainly, and whether it’s the intention or not, we need not presume. Who knows what people actually intend to do or mean to do. The fact of the matter is that we are observing the end of liberal markets, certainly in energy and gradually, I suspect we’ll see erosion of them in many other areas of life. After all, again reverting to the history, wealth from the energy addition of coal to British energy supply in the 1400s, 1500s, 1600s and particularly in the 1600s and 1700s, it became very significant, created a relatively liberal society. Wealth precedes freedom and then the freedom has a strong auto-catalytic effect on wealth creation and I think we’ll see a reversal of that. As we reduce the productivity in the energy sector, people will necessarily become less free, and I suspect that’s when the political push back will come, because it will happen quite quickly and people will be able to remember the liberties that they enjoyed.
John Constable: So I don’t think the green policies are politically stable. I also think they have dire economic and engineering aspects which will make them extremely fragile in the future, but it’s the loss of human freedom which I think will actually become quite critically important, people will begin to resent it deeply and they will be right to resent it.
Marian Tupy: Interestingly enough, there are of course, academics emerging from, or rather scholars, emerging from academia who are now loudly, clearly and without any shame, advocating for de-growth essentially for reduction of the economic output and for consumption limits. Presumably, 20 years ago, they would have been laughed out of the classroom, but now I see increasingly, people are arguing this in print, both in the United States and in the UK. Now, I don’t want to spend too much time focusing on the UK or creating an image that things are worse in the UK than elsewhere, but I have to ask, what is your take on where this environmental extremism came from? The Extinction Rebellion, the people that we are seeing in the UK sitting on highways or scaling the Big Ben or whatever, weirdly dressed. Is there something specific about the British culture of the early 2020s that has allowed this extremism to flourish?
John Constable: Is it specifically a British problem? I doubt that. And the limits to growth agenda from the 1970s, mention climate change hardly at all. It’s only later that climate change was added to it. And I think the concept of limiting growth has always been present in this particular movement. Climate change in a sense is almost a convenience, it’s a convenient way of persuading people to accept, as you say, a de-growth agenda. Why has it become so particularly interesting in the UK? Well, there’s a strong Puritan stand here. Puritanism is a very long-standing integral part of British sociological attitude, sociology. After all we did have a rebellion in the 17th century and we killed our king. And at the heart of puritanism is the concept that virtue is self-denial. So you refuse to consume and therefore claim moral standing, elevated standing. So I think a lot of this is simply moral exhibitionism or virtuism as the Americans like to call it. And whether it explains the widespread apparent sympathy with many of the green protesters is unclear.
John Constable: And I’m not quite certain how sympathetic the general public is with green protesters, actually, it seems to me that many professionals might be unwilling to express criticism of it, for various reasons. And besides, they don’t have to travel, they need not travel at the moment, a lot of them are still working from home. But many people on lower incomes are now going back to work and having to move around as much as they did, and the blockages on the M25, The Ring Road around London is a crucial road system, a part of their road system. I think that’s pretty unpopular, but we don’t know, it’s very hard to find out what the public really thinks about this because the press is so reluctant to offer a strong criticism of the green agenda overall. I think there’s a silenced voice there.
John Constable: We don’t know what actually what the bottom half of the income distribution really thinks about these sorts of protests. It does appear to me that many of the protesters seem to come from educated backgrounds. And when they’re interviewed, they do not appear to be regular men in the street. They tend to be graduates, and they tend to be in their 30s, 40s and 50s, and there’s quite a few older than that as well, of course.
Marian Tupy: Yeah. So you have the people at the bottom of the income ladder who then blow up in protest like they did in, with the yellow vest protests in France, and that is quite a bit of a puzzle because the French have been so good at creating their nuclear-powered electricity supply decades ago, I think something like 75% or 80% of the French energy is actually supplied by nuclear power. Do you know what compelled the French to do that? And also how does that square with the yellow vest protests? Obviously, perhaps is it gas prices or petrol prices, which you know, are not related to electricity.
John Constable: The French protests were largely about transport.
Marian Tupy: Okay.
John Constable: And taxation.
Marian Tupy: So that would be taxes on petrol or gas rather than…
John Constable: And mobility, I think is a key weakness in the green agenda, and they haven’t thought it through clearly. The yellow vest protests should be very wary to those advocating electric vehicles, ’cause electric transport is likely to be more expensive, and if particularly if the electricity has to be derived from renewable sources.
Marian Tupy: Right. And very few people actually contemplate when they see an electric car, where does the electricity come from? They think it’s magic.
John Constable: Yes. If it comes from coal, then yes, maybe you guys have quite a number of electric vehicles on the road to relatively be competitive with internal combustion engines or some urban use, thinking long distance journeys. But if the electricity is to come predominantly from high cost renewable sources, then the story changes completely, and the vehicles themselves, as we know, are very expensive. And we’ve just had an extraordinary event here in the UK that one of my colleagues managed to achieve the almost impossible, which is to get our committee on climate change to release their fundamental spreadsheets underlining their calculations of the costs for our Net Zero emission targets in 2050.
John Constable: This was a legal matter, we’re entitled to have information, the committee refused to release it. My colleague had to go through a tribunal and get a legal instruction that they should release this material. We opened them up, what do we find? They were assuming dramatic reductions in the cost of electric vehicles and which haven’t materialized and seem very unlikely to materialize in the future and these are expensive objects and they’re going to remain so for quite a while.
John Constable: And if the fuel, the energy, the electricity is also very expensive, then mobility will be limited for the vast majority of the population, that’s going to be unpopular. Margaret Thatcher renowned, famously said that the internal combustion engine was the noblest instrument of human freedom. Anybody standing next to a busy road may have some doubts about that, I mean well, obviously it’s… Sometimes it’s a problem, but the fact of the matter remains that moving around is a very important aspect of freedom for people and if the green policies place a break on that, it will be deeply unpopular. People have accepted lockdown here in the UK and other countries too but as soon as we lift it, people will have gone back to moving around freely as they wished to before.
Marian Tupy: Let’s move to Europe, and just spend a little time talking there, what are the dangers emanating in different European countries, let’s just focus on the big ones like France and Germany, so what I find so interesting is that the French are obviously relying on nuclear and, whereas Merkel is shutting down nuclear power stations in Germany, then relying on coal and importation of electricity from Poland, which is also produced by coal and yet somehow Merkel has this extraordinary reputation as being the green warrior, what’s going on? Does the press just see things that they want to see?
John Constable: Yeah, so Germany seems to be determined to remain a major industrial power and they’ve retained a relatively diverse energy portfolio actually and they have quite a lot of renewables of course, and they talk a lot about it, but in fact they have a lot of coal and a lot of gas. All the world’s major economies are still overwhelmingly dependent on fossil fuels, I mean that’s a matter of fact, and it’s gonna be very hard to get away from it. Merkel’s rejection of nuclear in the wake of the Fukushima tsunami may not be a lasting effect for Germany. Will there be an increase in industrial pressure for a return to nuclear power, one could’ve imagined that they still have their nuclear power stations, the decision could be reversed, and obviously they could build some more, it’s a rich country, very capable. They could obviously do that if they wished to.
John Constable: I would think probably they have not made a final decision on that and the German people have not yet been confronted with the consequences of their renewable energy policies and their rejection of nuclear, largely because they are relying on coal and indeed on natural gas.
Marian Tupy: Although I think that the first time I encountered the concept of energy poverty was an article in Der Spiegel talking about how Germans were complaining about high energy prices, so I guess they are high but they could be much higher if they actually pursued the green agenda with more vigor.
John Constable: The German policy has been to load the subsidy costs onto households and to protect industry and…
Marian Tupy: Oh, I see.
John Constable: With renewable subsidies. So in effect, the deal was done with the German people to say, “Yes, you’re gonna have high household electricity bills, high and so on, but you will have a job, your company will survive,” and that has proved to be an acceptable compromise for the people, but of course gradually, the very high energy costs in the German economy will feed through as the costs to industry, at which point German industries will become uncompetitive internationally and indeed we already see some evidence of that, already for example in the renewables industry, the German PV industry has been destroyed by Asian competition.
John Constable: So that’s the deal that was done with the German people to reconcile them to the global climate policies may break down as German industry feels the pinch so we’ll see, now time will tell. My guess is that ultimately pressure on wages because of high costs in domestic households will be a strong determining factor, it’s not simply inputs to industry, but it will be the overall costs of living with very high cost of labor in Germany will come to be a crucial factor.
Marian Tupy: Let me ask you about carbon tax, so one of the arguments I hear here in the United States is right now, we are basically doing a light version of what the Brits are doing. We are doing a lot of subsidization, we are doing a lot of regulation and it’s complicated, it’s expensive, and why not simply drop all of the green agenda, meaning don’t subsidize anything, get rid of all of these regulations, let it rip in terms of energy supply and consumption, but impose a carbon tax that will internalize the CO2 externalities, how do you feel about that argument, and maybe it’s not the best solution, but isn’t it like a better of the two?
John Constable: Economists have long said that if you must have a climate policy, a single price of carbon through a carbonization system is the correct route. It’s flexible, if the evidence suggest the changes then you can change the tax, so if the evidence about climate change suggest the problem is worse than you thought it was, then increase the tax. If on the other hand, you seem to find you have more time, you can reduce the tax. Taxation would be far and away the best way of decarbonizing an the economy, if you wish to do that. It leaves people free to choose and according to their own circumstances and to find the cheapest way of reducing emissions. Of course, it might not actually deliver the carbon savings that the targets say that we require, that has always been the concern about it, so you get some degree of security about the cost of the policies but you don’t know how much you’re actually going to save.
John Constable: And from a governmental perspective, that’s always been the down side, they much prefer to try to cap emissions and gain security about the emissions saving, but to lose control of the cost, and that’s the situation we’re currently in, so our cost control over emission saving has failed, we have extravagantly expensive policies, and in comparison with that situation, yes, I agree with you, carbon taxation would be infinitely preferable, not least, because it would mean that we could ensure that our policies are not more expensive than the climate change that they are designed to address, and this strikes me as one of the great weaknesses throughout the West actually in our discussion of planet policy.
John Constable: That we are very reluctant to look at the cost of abating a ton of carbon dioxide and then compare that with the estimate of the harm done by that ton of carbon dioxide, the social cost of carbon, as the economists like to call it. Social cost of carbon estimates vary, and some people think it’s not harmful at all, some people think it’s quite harmful, a couple hundred dollars a ton perhaps, most economists think somewhere in the region of $50 a ton carbon dioxide. The abatement cost of our policies in the UK, well, for offshore wind, several hundred dollars, for solar nearly $1,000 a ton, and we…
Marian Tupy: Goodness me!
John Constable: Yeah, so the abatement costs in the UK, and I would suspect in parts of the United States too, and it varies from place to place, but the abatement cost will be in excess of most rational estimates of the social cost of carbon. Now that particular kind of absurdity, and it is absurd, could be addressed by carbon taxation, and I think that at some point, serious-minded greens have to say to themselves, “We need to keep the public on board about this agenda, and these excessive abatement costs are simply not sustainable, even in the medium term, and that they need to revert to a carbon taxation system.” The difficulty is that in order for the carbon taxation system to work, all the existing policies have to go, we’ve got to cancel them. You can only have one price of carbon in the economy for it to work correctly.
John Constable: Now, we’ve tried this in Europe. The European example is extremely instructive to American economists on this point, that we’ve introduced multiple policies with different prices of carbon. And for example, the European Union Emissions Trading Scheme, which is not quite a carbon tax but it’s similar to it, might have worked, it might just have worked if it had been the sole policy instrument in Europe, but of course we introduced multiple subsidies for other technologies, all with an implicit price of carbon, carbon costs as well. And consequently, the ETS simply became a game for industrial interests, and it’s delivered nothing of any real significance except additional cost alongside all the other policies, but it might have worked if it had been left to function on its own.
Marian Tupy: Yeah, I sort of tend to agree with you that if these incredibly expensive and inefficient policies are going to be pursued in the medium to long run, the state will have to rely on brainwashing on ever increasing appeals to the looming apocalypse, because these sorts of policies cannot be sustained in the long run, and that’s why we are seeing so much of our education system embracing the green agenda and brainwashing kids into feeling guilty about their standards of living, about their consumption. There was a recent paper that came out, was it in The Lancet? Possibly. About the growing anxiety amongst children and how they feel about their future, it’s all very sad. I don’t suppose you follow what’s happening in the United States, and because you mentioned Puritanism, and of course, here the green obsession tends to be also a feature of the Northeastern descendants of puritanical immigrants.
John Constable: There’s some connections there, yeah, it’s interesting. Going back to the children for a moment, and I’m sure this applies in the US too, and I do follow US affairs quite closely, I mean it’s highly relevant. And I think I’m a little bit more optimistic about children, I have three sons and the eldest of them now left university, when he was younger, he was receiving a lot of climate classes, and on the receiving end of quite a lot of climate propaganda, and I remember him bringing a piece of work that he had to do, home from school and showing his responses to it, and I looked down the questions and his answers, and I said, that they were like comparing solar power around the costs in the city, and I said to him, “Well, some of these answers you’ve given here are not strictly true.” And he said, “Oh, yes dad, we all know that, but those are the correct answers.”
Marian Tupy: Oh, I see what you mean. This is like growing up and being in Eastern Europe again…
John Constable: Yes, basically.
Marian Tupy: Under communism.
John Constable: People are very hard to govern, thank goodness, very hard to govern. And people…
Marian Tupy: Kids are supplying the wrong answers, knowing they’re wrong answers, but knowing also that that’s what the teacher expects.
John Constable: Yes, that’s right, they’re surviving.
Marian Tupy: That surprise you?
John Constable: They’re surviving. Always, human beings are ingenious. That’s what we have to do. You have to get by, and I think much of this will wash off, the in-people know, they’re paying lip service to it, they understand the issues much better than one might imagine. I have broad faith in the general public’s sense on this, they may not be technically very well-informed, but their intuitions are frequently excellent, and they can smell a rat and they know when things don’t really add up. And so they’re biding their time and they will run their lives, make their own choices based on matters quite other than the propaganda that they’ve been given at school. It doesn’t mean to say they’re not concerned about environmentalism, and indeed they may be much more rational about environmental matters and indeed more genuinely environmentally concerned than many of the agitators who’ve succeeded in getting these sorts of courses set up in schools.
Marian Tupy: How does hypocrisy play into this? So Megan and Harry were in New York for a photo op session and then flew back to California on a private jet. We have people like… Who is that British actress who lives in LA, but came for a protest in London, environmental protest in London, flying first class to get to London and then back to LA first class. I can’t remember her name, but…
John Constable: I can’t either, I don’t pay attention to those things. [chuckle]
Marian Tupy: A very famous British actress. Even Prince Charles, his consumption obviously, is very high, in spite of his constant fear-mongering, so how does hypocrisy play into this? Have they become a butt of jokes, yet?
John Constable: Yes, and the news coverage is not very sympathetic to them.
Marian Tupy: Emma Thompson, Emma Thompson that’s her name.
John Constable: Emma Thompson, is quite nice, yes indeed, very famous. I shouldn’t have forgotten that one, there are more important things to think about, than that.
Marian Tupy: That’s true.
John Constable: The hypocrisy does seem to bother people. I’m inclined to be more sympathetic about it actually, in the sense that what their flights show is that there isn’t yet actually a successful green alternative, since I’m rather grateful that they do these things because it reveals just how difficult it is actually to decarbonize human activities. It’s a very constructive piece of demonstration, that even the people who are most committed apparently to the green agenda, even those who have high incomes and should be able to do this, find it very, very difficult actually to decarbonize their travel and their lifestyles. And that’s true, even if they’re buying electric vehicles, as you’ve said the life-cycle emissions from the EV sector are probably quite high, we don’t yet know for sure, but they’re almost certainly that high. So we can look at their example and if our eyes are open, we can learn something about the truth from it. If they can’t do it, well, it’s going to be very, very difficult for us to do it.
Marian Tupy: I love that angle. I think that’s a great way of looking at it. Okay, so in conclusion, let’s spend a few minutes on our crazy country over here in the United States, you said that you follow what’s happening, what do you make of it?
John Constable: Well, the enthusiasm for offshore wind in the States is a really interesting phenomenon. The president seems to be fully committed to it, and the British example and the European example, more generally is of real deep significance for the American people on this point. And we know quite a lot about offshore wind in Europe, and we know how expensive it is, and how difficult to do. And in the US, it’s going to be even more difficult and more costly. Essentially, you have two windy areas off your coasts, and one of them is in stormy but not such deep water. The other is in very deep water on the Pacific side. Most of the wind on the Pacific side will have to be floating, presumably it will be extraordinarily expensive.
John Constable: The wind on the East Coast on the other hand, relatively shallow waters, still difficult, will be comparable to European offshore wind projects. And at the moment, the American administration is taking comfort in the claim that European offshore wind costs are falling. We’ve done empirical work on wind farm companies in Europe which suggest that their costs are not falling dramatically. Indeed, they’ve been rising moderately since about 2014, they’re stagnant at best. And their operational costs are actually rising quite fast. We think that will be true for the United States. And you asked me, “What do I think about the American situation?” What concerns me is that you’re not spending enough time combing through the empirical data that’s been generated in Europe to find out whether any of this makes sense for the American people.
Marian Tupy: Because the agenda is driven by Twitter and rich university… The university graduates, and rather than the empirical work, why…
John Constable: Yes. There’s no need for you to re-discover all this matter, and this experience painfully, we’ve experienced it for you, now you can have a look here and see whether it makes sense. Also…
Marian Tupy: Unfortunately, our debate here is very parochial. The US thinks about it as the world. We never look to other countries to learn from other people’s experiences, unfortunately, we have to sort of learn mistakes on our own because we are special and exceptional. Why did you say that operational cost of wind are increasing, is it because the equipment is getting old?
John Constable: The operational costs are increasing partly because of wind turbines age, of course they do. In the first few years they are relatively cheap, when they’re under warranty, we all experience that of course on a daily basis, the machine breaks the day after a warranty expires, that means the engineers have done their job properly. Wind, yes, wind cost increase over time, but in fact what we’re seeing is that as they move into deeper water, the OPEX simply becomes more difficult, and this seems to be a general problem throughout the industry, it’s true also for onshore wind actually, I mean yeah, the costs have not fallen dramatically.
John Constable: And objectively, it’s very odd that people should have accepted the claims that costs have fallen so much, so fast, why would you believe it? And why would you say that an area which is basically heavy engineering should see dramatic costs, 50%, 75% falls in costs over a matter of say, five to seven years? No other sector in engineering or indeed any part of human economy has ever seen cost reductions on such a scale in manufacturing. Electronics is a bit misleading, actually, indeed electronics seem to get smaller. We’re talking about wind turbines that are now 200, 250 meters in overall height, these are dramatically large machines, they are going to be expensive to engineer. Now, we should be much more suspicious about claims of cost reductions offshore overall, but the OPEX, well, we think the OPEX is actually the crucial consideration for offshore wind, and we think it would be absolutely crucial in the United States.
Marian Tupy: Can you explain on that?
John Constable: Well, the deep water Pacific sites will be very expensive to maintain, we suspect, based on the European experience.
Marian Tupy: So, here in the States, we are rushing toward the green goal without taking empirical experience of Europe and elsewhere into account, we are experiencing the same amount of brainwashing and biased media coverage, is there any hope for us? [chuckle]
John Constable: I’m sure there’s hope, this is a… US is a large and very inventive economy, I’m sure you could do it better than we have, it would be reassuring to see a nuclear renaissance in the US. I think for all sorts of reasons, it would be good to see the US building new nuclear power stations. You might be able to reduce your emissions at reasonable cost with new nuclear, and of course there are good reasons for wanting United States to retain some interest in the nuclear industry globally, rather than ceding it completely to China and Russia. It’d be a loss of independence, which would be very regrettable for the democratic world.
Marian Tupy: Let’s finish with my favorite subject since you mentioned nuclear, and let’s move from fission to fusion, what’s going on there?
John Constable: Well, there’s a lot of talk about fusion here in the UK, we have some very good fusion research scientists, and there’s a great deal of excitement about it. I still think it’s rather a long way off and I think most people expect it to be quite some time before the fusion reactions are controllable, after all, this is difficult work and the materials problems are considerable. And so in order to get there, I think we have to remain a very sophisticated society, and fission will be necessary as a way of bootstrapping fusion in the medium and longer term, but yes, I’m very open-minded about fusion, and I think if we don’t crack that one, well, we may not get around for worrying about any other problems.
Marian Tupy: So, here is to fusion.
John Constable: Yes, indeed.
Marian Tupy: Alright, John, thank you very much for spending time with me this morning…
John Constable: Pleasure.
Marian Tupy: Talking about all of this important stuff, I’ve been following you for years. Fantastic research that your foundation is putting out, best of luck and let’s hope for a prosperous as well as green future.
John Constable: Indeed, both of those.
Marian Tupy: Thank you.
John Constable: Thank you.