Saturday, December 22, 2007

"We are creating a new currency."

There will be dancing in the streets of the parallel universe for sure.

Ministers ordered to assess climate cost of all decisions

Coal-fired power stations, airport expansions and new road schemes could all be put on hold following a decision by (British Prime Minister ed.) Gordon Brown that ministers must in future take account of the true economic cost of climate change damage.

Ministers have been instructed to factor into their calculations a notional "carbon price" when making all policy and investment decisions covering transport, construction, housing, planning and energy.

That price - which will increase annually - is intended to frame all day-to-day policy and investment decisions for the next 30 years.

As a result carbon-free or clean technologies, including nuclear power, have been given a significant boost as they will now become relatively less expensive than polluting technologies.

The "shadow price for carbon", representing the cost to society of the environmental damage, has already been agreed for every year up to 2050 by government economists. It will be set at £25.50 (£1=US$0.50 ed.) a carbon tonne for 2007, rising annually to £59.60 a tonne by 2050.

The climate change minister, Phil Woolas, said: "This will have huge implications for [the] government. If for instance a new power station is due to cost £1bn, but it will add £200m worth of carbon emissions, we will decide that the cost of the power station is £1.2bn, even though its cash price is £1bn. We are creating a new currency."

In theory the carbon price will create a bias against roads and carbon-emitting coal stations and make new "zero carbon" building regulations appear more economic.
In other words, they won't.
Decisions about investments in new nuclear power stations will be made exclusively by the private sector, but the social carbon price is likely to affect the role of regulators and make them more willing to back nuclear as opposed to other more carbon emitting energy technologies.

It has also been agreed that every major Whitehall policy and investment decision will be monitored over the next year to check that policymakers are actually incorporating the shadow price of carbon.

Woolas said: "This is far bigger than people realise. It is intellectually thought-through and very tough. Gordon Brown may not ride a bike, but by god he is showing a lead."
My ass. Comrade Brown and his commissars have done nothing but create a cash cow for the government.
Tony Juniper, the head of Friends of the Earth, said the "carbon price" could change economic calculations around issues such as a third runway at Heathrow. He added: "At the moment there are gaping holes in government policy with them professing concern for climate change on one hand, and rushing to expand airports and widen roads on the other. If this helps to fill in that gap then it has to be a step in the right direction. Whether it works or not will depend on whether they have set the carbon price high enough."

The price has been set at a level calculated to ensure the government can meet its major policy target of stabilising carbon emissions at between 450 and 550 parts per million carbon, the figure recommended by the review conducted for the Treasury by Sir Nicholas Stern.

The review found that the costs of addressing climate change now will be cheaper than the costs of doing so later.

The shadow price is partly drawn from new modelling on the scale of the threat posed by climate change and partly by economic work undertaken by McKinseys and the Stern review on behalf of the Treasury on the economic costs of failing to address climate change.

The price is intended to take into account the full global costs of the damage carbon causes over the whole of its time in the atmosphere.

Equivalent values will be used for other greenhouse gases.

A note setting out the government's thinking prepared in part by the chief economist at the Department for Environment Food and Rural Affairs, Richard Price, says ministers must refer to the shadow price. It states: "It is important that the shadow price for carbon is applied consistently and universally across decisions in government with significant implications for emissions of carbon and other greenhouse gases."
Via the The Guardian

Also at A Tangled Web

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