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19 Nov 2008 : Column 73WH—continued

Mr. Lilley: It is sensible to take out an insurance policy against global warming. We do not know how much of it there will be, but there will be some. We do not know how damaging the consequences will be, but beyond a certain point they will be negative. We do not
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know whether the consequences will be catastrophic, but a theoretical case suggests that, in certain circumstances, there could be major damage. However, that must be balanced against the costs. The route that we are offered might cost this generation more than it will save future generations. If we stop helping poor people to raise their living standards to our level, by concentrating on people who, in any case, have benefited from a century of growth, and try to achieve a yet bigger multiple of living standards higher than our own, that is not a sensible thing to do.

The Ackerman analysis that I mentioned is critical of Lord Stern’s attempts to try to find and cost large future damages and catastrophes. He cites a range of recent disasters and assumes that instead of being rare and random events, they will almost become the norm in the centuries ahead. However, the costs are hard to assess. For example, he puts the costs of Hurricane Katrina at £135 billion, but that loss of lives and property could have been prevented for a small amount, regardless of climate change—if indeed that had anything to do with Hurricane Katrina.

Our path is determined by an assessment of the costs and benefits. Although it is sensible to take out an insurance policy against future damage caused by global warming, it is foolish to take out such a policy if the premiums are greater than the value of what we seek to protect. The Government analysis says that the £205 billion premium that we could be required to pay to mitigate climate change is greater than the £110 billion of benefits which they assess will flow from that. We must answer these questions sensibly rather than sidestepping them. It is not enough to say that, because the facts are inconvenient and the questions difficult, so much the worse for the facts, we will not bother to answer the questions.

10.3 am

Mr. David Heathcoat-Amory (Wells) (Con): It has been fascinating listening to my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley). He is a voice of reason in a debate that increasingly has become an article of faith. The evidence in the Stern review relied heavily on the intergovernmental panel on climate change. I have read the bulk of both reports and I am aware of being in the presence of something similar to a secular religion with its articles of faith and its heretics. I do not classify myself as a heretic, but like my right hon. Friend I am always alerted by the absence of something in a report.

I am an amateur astronomer and chairman of the all-party group on astronomy. In a strictly amateur way, some of us have studied the phenomenon of climate change and global warming from a slightly different perspective. Some professional astronomers advance a theory that links fluctuations in terrestrial temperatures to variations in the sun’s magnetic field. That has nothing to do with sun spots as is sometimes thought—it is due to the influence of that magnetic fluctuation in the incidence of cosmic rays on the earth’s atmosphere, which in turn affects cloud cover. There is a correlation—which does not necessarily imply causation—between the fluctuations of the sun’s magnetic field and terrestrial temperatures in the past. I do not claim that as an explanation, but it is a theory that should at least have been addressed by the IPCC, rather than being entirely excluded.

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All scientific theories are provisional, and as my right hon. Friend eloquently demonstrated, they must adapt in the presence of new facts. Alternative theories must be examined rationally. I do not find that approach in the IPCC’s report or in the Stern review that is based on it. Nevertheless, I believe that precautionary measures are appropriate, provided that they are proportionate and founded on reason.

I, too, have misgivings about the discount rate used by Stern. That has been well described by my right hon. Friend and I will not repeat his arguments. However, it is odd to use a discount rate of 0.1 per cent., which to my knowledge has never been used before by the Treasury. That figure is distorting against the use of higher and more normal discount rates, and it tips the argument in favour of present pain to try to ensure future benefits. In practice, it means that we would impose very high costs on poor people today in order to make rich people even richer in the future. That needs explanation.

Stern’s whole approach is market-based, and in that I do not disagree with him. However, it is puzzling because measures flowing from that type of argument do not seem to do the same thing. On 13 October, I attended a meeting of European Committee A, at which the Government brought forward European Union proposals for additional measures affecting passenger vehicles and manufacturers in the European Union. That was accompanied by an impact assessment—a cost-benefit analysis. The impact assessment asserted that the cost and benefits of the proposal could range from an estimated £2.5 billion benefit to an £11.1 billion loss at the other end of the spectrum. That is after taking account of the benefits of carbon dioxide reductions if the measures are implemented. There is an acknowledged mean cost of between £6 billion to £7 billion and yet the Government were advocating that we went ahead and accepted and enforced the regulations, which at that time were in draft form.

Even more puzzling is the fact that the Conservative party appeared to accept the EU regulations. Subsequent negotiations have taken place and the regulations have been slightly relaxed—at least, the time period to introduce them has been extended. That is no thanks to the British Government who took a much harder approach.

Following on from the Stern review, we are imposing on our economy and manufacturers acknowledged costs that outweigh the environmental benefits, and we are doing that in the middle of a recession. I am alarmed about the effect of that on fuel poverty and about the incentive for businesses in this country to migrate to other countries. We may meet our international carbon dioxide reduction target, but only by making the recession worse.

On top of that, we—that includes the Conservative party—have now accepted a new target for an 80 per cent. reduction in CO2 emissions by 2050, rather than 60 per cent. That will now include aviation and shipping. There is no way on earth that we will meet that target. I return again to the point that we must found our policy on reason and what is realistic and practicable, otherwise we will simply disillusion the public.

Mr. Chope: Does my right hon. Friend accept that one of the big flaws in the Stern report is that it does not engage with reality. On 23 October, in an article in The Guardian, Professor Stern wrote:

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but he did not say how that would be possible. Does not that same flaw run through the whole report?

Mr. Heathcoat-Amory: I agree with my hon. Friend. It is an abuse of the political system to mandate impossible targets and policies. Instead of convincing the public, it will disillusion them.

The claim is sometimes made that a switch to green technologies and regulation as I have described will create enough jobs to replace those lost in the economy. Of course, any regulatory system that requires technology will produce visible jobs in research and technology as well as administration and enforcement, but if that process puts up prices elsewhere, jobs will be lost. Those might not be so visible, but they will be real nevertheless. Perhaps a good, simple example is the carbon capture and storage technology, which many believe—the Conservative party is mandating it—should be used for any new coal-fired generating stations. I accept that the technology, which is wholly untried, will create jobs. Scientists and technologists inventing the technology will receive grants, and building the plants, which will be more expensive, will involve higher costs and therefore require higher employment. However, because the plants will be more expensive, the electricity produced will cost more, which will put up prices, creating fuel poverty as well as higher costs for the whole of British industry.

A less visible, but still real loss of jobs will result elsewhere from rendering our economy less competitive. The argument, therefore, that we need not worry because we will create a new stream of employment is flawed. If we distort our economy in that way, we will move away from a market-based approach to wealth generation. Furthermore, by tying up capital expenditure, research grants and employment in one sector of the economy chosen by the Government, we will obviously produce less wealth and research and technology implementation in other areas, such as health, which might—in my view, probably would—create greater human welfare.

In all those ways, I urge the Government to revisit, at the very least, the underlying arguments brought forward by Stern and others and to found our future policies more on reason than faith. With those few words, I endorse the argument that my right hon. Friend has so ably enhanced in this short debate.

10.14 am

Mr. Andrew Tyrie (Chichester) (Con): I am grateful, Mr. Atkinson, for the opportunity to speak in this debate, which I am pleased that my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) managed to secure.

I would like to say a word or two about my involvement in, and position on, the matter before us, which I have been looking into, on and off, for about 20 years. In 1989, I was asked to provide advice to the then Chancellor of the Exchequer on an interdepartmental report prepared by the then deputy chief economist, John Odling-Smee. That is what first alerted me, and I have followed the issue, particularly the economics of it, ever since.

The basic science is not in dispute, but there are two questions in that science. First, what temperature increase will result from any given increase in carbon concentrations?
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The scientists are not unanimous, and dispute is widespread in the scientific community. A Hamburg institute study of opinions, prepared by Professor Storch, is decisive on that point. Furthermore, Professor Lindzen—arguably the father of modern climate science—of the Massachusetts Institute of Technology, was asked to be the lead author of the 2001 science part of the report by the intergovernmental panel on climate change and has argued vigorously against the so-called consensus.

The second controversial question is about impacts, to which my right hon. Friend alluded. Throughout the area of science dealing with impacts, hot disputes are raging. For example, is it true, as is widely asserted, that a given increase in temperature will lead to an increase in malaria? That view can be found in many documents purporting to make the case for urgent cuts in carbon emissions, but most of the world’s leading malaria experts refute it. The same can be found on glaciation and the alleged increase in tropical storms. The world’s leading expert on the latter resigned in disgust from the IPCC process, I think because he felt that his science was being tampered with.

Recently, Professor Lindzen himself wrote a very interesting, thoughtful and accessible paper—I hope that this sort of material is getting to the Minister—entitled something like “Is Climate Change Any Longer About Science?”. He is worried that scientific method is being set aside in favour of what constitutes a campaign. My own tentative view is that some warming is happening and that—to put it in the language of climate scientists—there is probably an anthropogenic signal in the temperature record. The effects of further increases could be large. I hold that view very tentatively on the basis of what I have read. The key counter-argument was put by the right hon. Member for Oxford, East (Mr. Smith), who said that even if that is only a tentative view, what about catastrophic risk and the chance that we might shortly pass a tipping point? Was that his point?

Mr. Andrew Smith indicated assent.

Mr. Tyrie: However, the tipping point view is not supported by the IPCC, nor the lion’s share of experts in this field. That catastrophic risk needs to be set against other risks, such as the risk of nuclear proliferation, of being hit by an asteroid or of pandemics, all of which have their adherents, including some of the world’s leading scientists who argue that they are greater risks than climate change. From what I can tell, the Copenhagen group has concluded that climate change is not even high on the list of those catastrophic risks, but relatively low down.

Mr. Lilley: Is my hon. Friend aware of remarks by Mike Hulme, the director of the Tyndall Centre for Climate Change Research in the United Kingdom, who said:

No more authoritative voice need be listened to.

Mr. Tyrie: I will not add to that. I have not read those comments, so I should like to take a look at them.

Martin Horwood (Cheltenham) (LD): I have sat patiently and listened to some of this stuff, but misrepresenting the Tyndall Centre as climate change sceptics really takes the biscuit. When the IPCC does not include things such as the tipping points resulting from the melting of the Greenland and Antarctic ice sheet, the hon. Gentleman must be aware that that is because it has been conservatively trying to preserve consensus among the entire population of global scientists who are involved in the matter. It is not rejecting such a view; if anything it is more likely to include it at a later stage and then upgrade its projections.

Mr. Tyrie: A moment ago, I pointed out that a number of the world’s leading sceptics about the science—people considered to be the world leaders in their field—have resigned in disgust from the IPCC process. The hon. Gentleman is shaking his head in dissent, but those are facts. The IPCC has a team of officials who are trying to translate science into policy. There has been very widespread criticism of their attempts to do that. Many argue that they are hyping up the threats. Such a view can be found in the work of David Henderson. Ian Byatt has also done something on the matter. A good number of other top international people, including Professor Lindzen and a number of top climate scientists, have also come to the same conclusion.

Let me turn to the Stern report itself. Lord Stern came to the issue afresh in 2005. He told us that himself; he knew very little about it until then. His main conclusions—it must be borne in mind that he was never an environmental economist—contradict the lion’s share of the world’s finest minds who have considered the subject over the past quarter of a century. They have concluded that his work is “preposterous”, “incompetent” and “neither balanced nor credible”, and that it cannot be described as economic analysis and so on.

There is a wonderful passage in the Yale symposium in which Professor Mendelsohn addresses the issue directly in front of Lord Stern. Stern and his team of experts went out to Yale to a very interesting symposium, which provides essential reading for those who are interested in the economics of the issue.

Professor Mendelsohn is saying that in front of Lord Stern, and the wizard is Nick himself—

over the past 25 years—

So he said “smoke and mirrors”. That speech was made in front of the world’s leading experts in the field. Yet to my amazement and disappointment, the Government still cling to the Stern review as almost the sole justification
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for their policy. It is as if it has magical justificatory properties. They do that even if it means flatly contradicting themselves on discount rates, as my right hon. Friend pointed out. I have tabled a number of parliamentary questions myself to try to get answers about the discount rates that are being used. I have discovered that the Government are using different discount rates all over the shop, for projects that are justified on the grounds of climate change policy.

Far from bringing coherence to Government policy, the Stern review seems to have generated something bordering on chaos, a disorder that any cost-benefit analyst would abhor. What if the Stern review is wrong and what if Lord Stern is mistaken about any one of his highly tendentious assumptions and projections, the most important of which is the discount rate itself? Who will pay the price? The price will be paid by the poorest in the world who will be denied access to rescue from absolute poverty, and by the poorest in our society who will pay the most—as a proportion of their total income—for the higher energy prices that will result. The damage will be colossal if he is wrong.

Should we rely on a recondite economic theory radically to restructure global economic activity and put at risk the long-run economic growth—although we have a problem at the moment—that we have seen over the last quarter of a century as a result of globalisation and the prosperity that has come with it? That is what the Government seem to be bent on doing, and it is based on a theory that informs every aspect of policy. It is not just future policy that will be affected; we are paying the price right now. The TaxPayers Alliance suggests that something like 14 to 20 per cent. of current electricity prices reflect climate change policy. We have had the scandal of the emissions trading scheme, which has been a very expensive disaster.

In a previous debate, I have discussed, in some detail, the flaws in Lord Stern’s discounting theory. If a more plausible discount rate is used, Stern’s conclusions go into reverse. He would then need to argue for much more moderate early cuts in emissions than the crash programme of early cuts that he proposes. My own tentative view is that a more moderate programme, which is supported by the overwhelming majority of environmental economists around the world, is probably the right precautionary approach to take.

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