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Easier Carbon Accounting ?
Coal-fired factory in China manufacturing steel

Preoccupation with Covid-19, exam results and the impending doom that is called Brexit can easily marginalise the biggest threat we have in the foreseeable future which is climate change.  It is not enough to recycle more plastics or to encourage people to buy overpriced electric vehicles.  The only thing that works is to make everybody pay properly every time they consume any goods with a significant carbon input.  Fortunately we already have a very simple system that we know and works to account for VAT.  That can be easily duplicated to account for carbon consumption.

Efforts to reduce worldwide carbon consumption has been at best patchy.  Carbon dioxide emission continues to rise at ever faster rates.  Attempts to persuade people to cut down their consumption have simply not worked even in Western countries.  For many, there is a high-level of engagement with the problems of climate change and the essential need to do something about it.  Many of the current procedures such as carbon trading are completely out of date and essentially ineffective at making any significant difference. 

Begging people to use less carbon when so much of what we consume is hidden will simply not work.  What is needed is a simple and radical approach to carbon accounting that covers every aspect of carbon consumption.  It must also allow a hard cash value to be attributed to every use of any non-renewable energy source.  Sadly the reality is that only by making people pay for their use of carbon can be reduced.  It is one of the few advantages of our capitalist system!

There is an urgent need for an effective and efficient carbon accounting system.  We already have a very efficient system for accounting for Value-Added Tax (VAT).  Every organisation has inputs and outputs, each of which may or may not have VAT attributed to them.  Every organisation is perfectly familiar with that system.  Equivalent systems are used in almost every country of the world.  A very elementary approach to carbon accounting is simply by doing the same thing but for carbon.

We can use a standard unit of carbon such as the equivalent of burning 1 kg of methane.  Every input must have the amount of carbon used in generating that input stated, and every output similarly labelled.  Input sources that do not currently account for carbon might have an attributed amount equivalent to the current industry standard +50%.  Every account passed by auditors must have a statement affirming that carbon has been properly accounted for and that all carbon inputs are balanced by carbon outputs.  Ultimately the end user or consumer of the output has visibility of the carbon that went into it. 

Getting the system going can be done relatively quickly.  Eventually governments can attribute a cost to the carbon which has to be paid for by the end user or, if an organisation decides to pay for part or all of the carbon it consumes this will add to the output cost of the goods.  This might apply to goods sent overseas to an environment where carbon is not properly accounted for.  Such exports would lead to an export carbon tariff.

Power generators would produce renewable energy that would be accounted for with a negative carbon content.  Governments can also decide that goods which can lead to excessive carbon consumption (such as gas guzzling ultra expensive vehicles where the owners are unlikely to be bothered about their carbon consumption) should be heavily taxed by using a higher rate for charging carbon very much like a luxury rate might be imposed for VAT on such goods. 

The advantage of this approach is it is highly compatible with current worldwide accounting procedures and doesn’t require anything new to be created.  All carbon coming into an organisation is accounted for in exactly the same way as is the cash and the VAT.  Similarly everything leaving an organisation is accounted in familiar ways.  As with VAT rates, the cash equivalent of carbon would be set nationally although within a narrow range by international agreement.  Naturally, we have to deal with it carbon equivalent of managing tax havens to ensure that there are substantial limits on the transfer of carbon debt outside any legislative area.  This is being addressed, albeit very slowly, with multinational internal transfers between regions and it must be addressed in exactly the same way with carbon burdens.

No overt attempt needs to be made to reduce carbon usage but simply rely on the fact that it can be made very expensive for the consumer when excess carbon as required to generate a product.  This would lead to improvements in manufacturing methods and efficiencies, choice and quantity of packaging and every other aspect of the goods output from an organisation.  In organisations where the outputs are, for example, consultancy then each output invoice would have attributed to it a proportion of the input carbon used by the organisation.

We have a lot of experience with managing all the details of accounting for VAT.  Surely it must be sensible to build on that experience to create an efficient carbon accounting tax.

Learn to love the deficit!
Lots of Lovely Money from the Bank of England.

It is widely believed that the substantial deficit incurred to keep the economy running must eventually be repaid.  It wasn’t repaid after the financial crisis in 2008 when £500 billion were given to the banks.  It doesn’t need repaying either once we get through the coronavirus pandemic to the tune of at least £300 billion.  It keeps the economy going and we must learn to love it dearly!

The government injected large sums of money into the economy to reduce substantially the effect of the pandemic on our economy.  So far it has been successful but it may well be necessary to do more, particularly if we have a secondary peak in infections with the winter approaching.  Current estimates suggest that it is likely to be at least £300 billion.

That money was basically provided by the Bank of England.  Many are worried that it will have to be repaid but that is not, in fact, true.  The Bank of England don’t particularly need it back because they’re not short of it anyway as they can print more should they need it, which they don’t and never will.  The consequence is that the total debt to the Bank of England will increase by about £300 billion to a total of around £800 billion.  That is a very large sum of money but you may have noticed that these numbers show a pre-existing debt of about £500 billion.  That was the quantitative easing (QE) that was deemed necessary to save the banks from collapse during the financial crisis in 2008.

That £500 billion sum has not been repaid and no one is suggesting it needs to be repaid by the banks who received it.  Not repaying this sum has not caused the sky to fall.  Similarly not repaying the latest £300 billion will not cause the sky to fall either.  For example should the Bank of England decide that all the loans it gave should be repaid in 50 or 100 years, and the interest rate should be very low indefinitely then no one needs to worry about it.  After the Second World War the vast debt incurred was basically left and has since evaporated because of general inflation since then.

That is not to say that the austerity/taxation question is dead.  We still need to balance the economy from day-to-day.  The likelihood is that taxation will be increased on investment/capital gains income which is currently taxed at about half the rate of hard-earned income, but that is another discussion for the future.

In short, we need to learn that this kind of deficit, caused by emergency funding to keep our economy going, does not require urgent repayment at all.  It has been of critical benefit for our economy and has been undoubtedly an important and the right thing to do.

An excellent book that explains this in much more detail is by Stephanie Kelton entitled “The Deficit Myth”. Strongly recommended, and just published.

The Greenest Economic Revival
A typical air source heat pump unit mounted outside with clear air access.

Summary: We must create large numbers of jobs quickly if we are to recover rapidly from the pandemic recession already underway.  Ideally these jobs should contribute substantially to our efforts to achieve zero carbon.  One very promising and highly practical approach is to upgrade homes from gas or oil powered heating to highly efficient electrical heating using air source heat pumps.  Such a move is essential if we are ever to achieve zero carbon.  The number of jobs that would be created to carry out such a program will be several hundred thousand, spread throughout the country.  With the prospect of 6 million unemployed in the near future in the UK such a program could help substantially to speed our recovery.

The British economy, like so many worldwide, has been greatly affected by the Covid-19 pandemic.  Projections for job losses in the UK are frighteningly high.  At present we have 9.3 million workers on furlough, 2.5 million self-employed on income support and just under 3 million unemployed and receiving benefits.  The total of around 15 million represents about 50% of our working population.  Many businesses will come back to life gradually over the next few months and hopefully by the end of the year things will be looking up.  However most projections suggest between 5 and 7 million as an unemployed baseline, in the region of 20% unemployment rate.

Not only is there a massive problem to face but we must not forget our other problem, climate change.  The UK is committed towards achieving net zero carbon consumption by 2050 and there are many pressures to achieve that even earlier.  The great part of our carbon consumption is from transport and from heating, both domestic and industrial.  Other PCs on this website have already looked at what we need to do to move away from fossil fuel transport to electric systems.  There needs to be an emphasis on reducing the weight and power demands of vehicles as we transition to all electric (non-hybrid) transport.  You can read more about that here: http://outsidethebubble.net/2020/02/25/electric-vehicles-too-much-hype/ and here: http://outsidethebubble.net/2019/10/04/small-really-is-beautiful/.  We will look here at what we might do to increase employment substantially as well as improving and reducing our carbon consumption.

Very often greening advocates emphasise home insulation as a highly desirable and straightforward way of improving domestic energy consumption.  Although attractive in some ways, I believe there are major issues here, firstly because it does not eliminate fossil fuel consumption, simply reduces it.  The houses that need most work are often occupied by less well-off families, and the work is typically some combination of cavity wall insulation, double glazing, roof insulation, boiler replacement etc. In many cases the cost of such work can be quite substantial, up to £20,000 per household.  The big problem with that sort of programme is that it can be a massive inconvenience and upheaval for the family.  It usually leaves the householder with a significant amount of remedial work such as redecoration to pay for.  Better off households are much more able to cope with this.  In practice a great deal will be achieved as buildings are replaced by modern better insulated designs using industrialised technologies.  You can read more about how we might do that here: http://outsidethebubble.net/2017/06/22/solving-the-housing-crisis-a-fairer-deal-for-all/.

A rather different approach is to address directly the consumption of fossil fuel for heating.  The best technology for achieving this is the use of air source heat pumps.  These are driven by electricity and work rather like an air-conditioning unit in reverse, and indeed many can be driven in reverse to provide cooling in summer.  The pump uses cold external air.  A compressor then generates heat for the water/central heating supply.  Gas consumption is eliminated, and the electrical power needed is about one third of the power otherwise needed to heat the house with gas.  A number of manufacturers already offer such units but they can be expensive.  The total cost including installation (which is pretty simple) can be around £10,000 per property.  In principle they produce a significant saving in power costs although the current factor of 5 by which UK electricity costs exceed UK gas costs has to be resolved particularly as the wholesale price of electricity is now around £0.03/kwh.  Most UK customers are charged today at four or five times that price.

The number of properties that need updating from gas or oil to electricity in total is about 30 million.  If we allow ourselves to achieve that we are looking at replacing about 40,000 units per week every week throughout those 15 years.  If we are to reach zero net carbon this work is not optional.  It must be done.  However there is no doubt it can be done much more cheaply than at £10,000 per property in volume.

We have learned that engineers in companies and universities throughout the UK were able to entirely redesign the traditional ventilators used widely in intensive care units to treat most acutely ill.  This allowed the units to be produced much more efficiently and much more cheaply.  A similar effort working on the design of air source heat pumps could undoubtedly bring the price right down.  Domestic air-conditioning units are made in vast numbers and even quite substantial ones delivering 5 kW of cooling power are well under £1000.  A major re-engineering effort on air source heat pumps combined with a manufacturing facility to produce them in volume could give a great reduction in the unit cost, just has already been achieved with PV solar panels.

The effect of such a programme on employment will be very great.  Installation will require full-time jobs to be created throughout the country, not at all concentrated in the wealthier parts.  Engineers will be required to carry out this work and may be trained relatively easily to carry out the work.  These will not require lengthy training programs.  There will also be a requirement for maintenance engineers although these units are very reliable.  Prior to installation surveyors will be needed to discuss with the household where the units should be located (always on the outside of the house).  There will also be significant new jobs involved in manufacturing 2 million of these units per annum, including the creation of major manufacturing plants which could well be located anywhere in the country.  By emphasising installation in the poorer parts of the country first it will be clearer that it is everyone in the country who will benefit.

The net effect is that the programme to replace fossil fuel heating systems throughout the country would have a substantial effect on the carbon consumption in the UK.  Such a program would place the UK in a strong position to export air source heat pumps widely particularly once manufactured to a good low price.  The overall cost of such a program will be considerable but it is a straightforward investment in the UK infrastructure for the long-term benefit of the UK.  It is likely to cost a further £150-£200 billion paid for with deficit funding directly as was done after the great financial crash of 2008.  You can read more about why that is the right approach here: http://outsidethebubble.net/2017/11/02/you-need-to-balance-your-own-budget-but-the-government-doesnt-and-shouldnt/.

Government Decision-Making: Often Badly Flawed.
Could this be us before long? From Huffington Post, 29 June 2020

Summary: it is difficult to exaggerate the malign influence that Dominic Cummings has had on this government.  The lack of intellectual firepower in the Cabinet has led to a range of bad decisions being made throughout the pandemic.  We have paid already through an enormous death toll and are continuing to pay.  The economic damage will take years to repair with projections of over 6 million unemployed by the end of this year.  If the Prime Minister cannot develop a more coherent plan he should move to let another takeover.

Running the country is not easy.  Everything is interconnected and government procurement programs often go badly wrong.  Examples are MoD procurement and the multiple computer systems contracts for the health service.

Problems start with the decision process in government.  Committees are formed to decide policy and then passed to more junior civil servants to implement the decision, an implementation which may not have been thought about much at all.  Committees love to be fully representative of all the stakeholders but tend not to have those with experience of delivering successful programs.  A Tory government is convinced that everything is better handled by a commercial contractor even if they have no relevant experience.

The present government is widely agreed to be rather third division made up of those blindingly devoted to Brexit, particularly Brexit with no deal.  A wider range of backgrounds and experience is sorely missing in the present cabinet.  This makes them even more likely to be affected by special advisers who happen present at critical meetings.  If a special adviser is notoriously difficult to deal with, argumentative and hectoring as well as being very certain that he is right then the committee will make bad decisions. 

Unfortunately our Prime Minister has got his own gollum hidden away in a deep sub-basement of number 10.  Because of his Rasputin -like grip on the mind of our nominal Prime Minister, and as all are certain that to cross him is to court an early departure from the corridors of power, his power is immense yet nobody really knows what is policies might be.  No one is given a chance to discuss it and policies appear and disappear without much explanation.  This is not helped by Dominic the Mad being well established on the autistic spectrum.  He is generally confident that you are not capable of understanding such matters and therefore can be safely ignored.

People like him are quite common in Cambridge where I have spent many years as a science researcher.  Like Dominic the Mad, they have an intellect the size of the planet yet are fundamentally quite stupid.  They will make decisions thinking that they are conscious of all the ramifications when they are not.  Loose ends are ignored and left to others to tidy up.

We don’t know, of course, where in particular this gollum has had an influence because although minutes of meetings may be published, attendance by “special advisers” is often conveniently omitted.  We can, however, be confident that he was present at many of the critical meetings throughout the management or at least mismanagement of the Covid-19 pandemic still currently raging around.

The initial decision was to preserve the Tory party at all costs by ensuring that whatever happened, the NHS survived.  This produced several fairly damaging policies.  By ignoring what was happening all around the world are government was very slow to regain consciousness after the excitement of BREXIT, the Prime Minister having a couple of weeks in Mustique and generally not wanting to stop any of the fun (the Tories had lots of funding from the racing fraternity so Cheltenham continued in full, and cancelling an international football match) meant that everything was left to slide.

One early decision they are now finding difficult was choosing a social distance of 2 m and not using facemasks when the world health organisation recommended 1 m and facemasks.  Other countries that went for 1 m have found it much easier coming out of lockdown.  This decision ensured facemasks were available for the NHS since of course nothing much had been ordered in advance despite important reviews by key committees months and years in advance drawing attention to our total lack of preparedness.  Not to mention waking up and realising what was going on around the world in the beginning of January.

And then there was the quite unbelievable decision to empty our hospitals of the elderly into care homes without any attempt at testing them.  It was known from the beginning that the elderly were particularly at risk from Covid 19 and to dump 25,000 untested elderly people into care homes without any attempt to provide tests for the refugees or their carers was tantamount to mass murder.

From the beginning it was accepted that testing was critical.  However despite many offers of existing testing and tracing operations in the UK, and from hospitals and laboratories throughout the country all of whom could have contributed to a serious programme of testing as they did in Germany meant that when we went into lockdown we were testing 1/20 of the number being tested in Germany at that time.  Not only did we not use our existing expertise we then gave massive contracts to companies with no experience in this such as Deloitte.  These mega testing centres are still barely working as they should, often taking 72 hours minimum for completing the test and often as long as a week by which time the patient has either recovered or died.  The performance of these centres and the way Public Health England dealt with them and they in turn dealt with the testing procedure is still not being handled properly and these failures will continue and worsen until they are sorted out properly.

Many of these decisions were made by committees with Dominic The Mad present.  We have no idea what his influence might have been but it is unlikely to have been helpful.

Boris Johnson’s government has succeeded in three months killing and injuring many more people than the Luftwaffe managed to kill and injure in five years of bombing.  Poor management and an indifference have delivered suffering on an extraordinary scale.  And now we have many years in which to manage the worst economic outcome of any Western economy all because of our own incompetence.

The only way out is to hope that the backbenchers of the Tory party realise that their legacy is becoming more toxic by the day and do something to change the leadership as well as getting rid of the gollum.

Otherwise, the challenges of these same individuals making key decisions about Brexit is pretty scary particularly when many more voters would now choose to Remain rather than to Leave.  And we also hear that Dominic the Mad is trying to pressurise the government into rolling back on its green new deal promises.  What is he trying to do and can he not explain it to us all?  If the Prime Minister cannot develop a programme for the government without his involvement he should move to one side unless another takeover.  It would be much better for the Tories and very much better for the country.

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