Why are climate and nature getting the short straw with government spending?

6. Further reading

Banks really are magic money trees – an article by Positive Money

TED talk by Stephanie Kelton – on deficits not being a problem under MMT

Power of the Pound – a video explaining the concept of MMT for the UK

Government debt and Covid 19 – an article by Positive Money

Chair of the US House Budget Committee – promoting MMT for the $6tn budget proposals 

50 years without gold backed money – a talk by Richard Murphy

Money & QE – a talk by Richard Murphy

Hyperinflation in Germany and Zimbabwe – an article by Positive Money

Bank of England video – on money creation and QE

Guardian article – The US considering minting a trillion dollar coin to enable the government to keep spending (no it’s not April 1st)

An economy for climate & nature

More often than not, when discussing what needs to be done about the climate-nature emergency, thoughts turn to practical issues around reducing greenhouse gas emissions and other impacts we have on the natural world.

If we are lucky, and we don’t get distracted by promises of future technical solutions to solve the problems, maintaining business as usual, we’ll pick up on advice over what and how we buy and consume goods, materials and resources. 

Pretty much everything we buy, or use, both in goods and services, comes with a carbon cost and/or another impact on the environment. By looking at this in detail, we may be able to chose to buy an alternative, less damaging, item or one that is more long lasting and capable of repair, we may even be able to share the item or service with others and then, if we buy correctly, the items used may be easy to recycle or even reused elsewhere.

The whole object of this regenerative and circular system is to make stuff and activities sustainable and resilient with no more waste than the environment can reasonably handle.

What is not appreciated however, or perhaps is seen as a side issue that makes political sense but is somehow disengaged from the above model, is the economic aspects of these decisions and how they can actually follow the same path.

Take for example a brand of smartphone.  Each year, despite having built perhaps hundreds of thousands of last year’s model, that are now destined to sit on shelves or be recycled or relegated to a second hand market, the company has already got a million of this year’s model in production with millions of $s being spent on marketing to convince consumers that the model they bought last year, or maybe the year before, is now all but obsolete and that, they “must” have the latest model.

This whole process is a perfect example of a wholly non-regenerative system, with wasted materials,  carbon and chemicals, in which natural and precious resources are used for a short time, then thrown away or left to rot. 

This process is mimicked by the company’s financial incentive to constantly create new goods, for ever increasing prices that often rely on cheap labour but, despite large material and marketing costs, wasteful premises and other services, will create not just the profits the company needs to sustain the business but also excess profits to be syphoned out by shareholders whose only interest in the business is the financial return on their investment, an investment that, unless it was at the inception of the business, went to the previous disengaged shareholder when she sold her shares to you. What then happens to those excess profits? 

Most of them end up propping up a financial market, for a tiny % of corporations, that was originally designed to “oil the wheels” of businesses, by providing new finance, but which has now morphed into a separate and self-interested industry creating vast wealth for a tiny minority. 

So, do the millionaire/billionaire owners and other shareholders recycle the money back into the economy in the trickle-down manner originally anticipated by this 20th century economic model? How many yachts, cars or houses do they need, how many household staff or chauffeurs can they pay? In reality the majority of the wealth is just churned to grow the financial markets or is sent away to offshore investments somewhere doing nothing other than gaining interest or saving tax for their owners.

I say the economic aspects mimic the physical product aspects but, when you think about it, it’s the hope of, and desire for, the financial incentives that actually drives the whole thing, not the other way around. In that process, not only does the business generate and perpetuate increasing inequality in wealth and influence, between its shareholder/owners and their lowest paid people, customers and suppliers, but it continues to grow, increasing the waste, environmental and social damage year on year.

That is one business and one product, now multiply that up and you have an economy that is dependent on continuous growth, regardless of its impacts on the wellbeing of the humans and environment. The mantra of growth for growth’s sake has been the norm for nearly a century, and you’ll hear many say “yes it’s not perfect, you have to accept the inequality in society, but look at what it’s done for us in a hundred years”. To which you might reply “But at what cost to them?”

To what use could the wasted and stagnated wealth, as well as the wasteful processes in making it, have been put or, better still, what if the money and processes had been designed to favour just the purpose and wellbeing of the business and its stakeholders, without the obsession for bigger profits and more stuff, how about planning for enough? 

Perhaps working hours could have been cut, with previously unemployed people being given jobs, and all with decent salaries.

Perhaps, rather than seeing other organisations as competitors, to be out competed and even asset stripped as they go out of business, they could be seen as collaborators, sharing resources, cross fertilising ideas and, together, being more resilient and happy than as two competing entities. 

To paraphrase Kate Raworth of Doughnut Economics fame: We currently have economies that have to grow, whether or not we and the planet thrive, whereas what we need are economies that make us and the planet thrive, whether or not they grow.

The best example of how this actually works in practice is in social enterprises or cooperatives, where products and services follow a regenerative route and where profits are still be made but where negative material and social impacts are kept to a minimum or even turned into a positive and where all those with a stake in each enterprise, be they customers, suppliers, employees, partners, owners etc, all share a fair distribution of the fruits of the enterprise’s efforts and where any remaining profits are kept within the enterprise to help it develop and be more sustainable, or invested in other fledgling enterprises with similar purposes.

This is not a political attack on capitalism, rather it’s an acknowledgement, beyond politics, that the capitalism we practiced has outlived its purpose and is now doing more harm than good. Given the threats we face from climate and nature breakdowns only a type of 21st century economics described above will be fit for purpose and will remove the infinite growth obsessions that drove the 20th century economies and helped create the mess we are in. 

Other reading & links:

Nature and the economy: how can we prosper within planetary limits?
Wellbeing Economy Alliance
A healthy economy should be designed to thrive not grow – Kate Raworth
Nature & The Economy – who speaks for the trees? The Lorax at 50

Government releases its Hydrogen Strategy

Number 2 of the Government’s 10 Point Plan:

“Working with industry aiming to generate 5GW of low carbon hydrogen production capacity by 2030 for industry, transport, power and homes, and aiming to develop the first town heated entirely by hydrogen by the end of the decade”

On 17 August 2021 the department for Business, Energy and Industrial Strategy (BEIS) released its Hydrogen Strategy announcing, in the press release:

  • A ‘twin track’ approach to supporting multiple technologies including ‘green’ electrolytic and ‘blue’ carbon capture-enabled hydrogen production.
  • A UK hydrogen economy could be worth £900 million and create over 9,000 high-quality jobs by 2030, potentially rising to 100,000 jobs and worth up to £13 billion by 2050
  • Hydrogen could play an important role in decarbonising polluting, energy-intensive industries like chemicals, oil refineries, power and heavy transport like shipping, HGV lorries and trains
  • By 2050 20-35% of the UK’s energy consumption could be hydrogen-based.
  • A consultation to be launched, based on offshore wind, to look at ways to overcome the cost gap between low carbon hydrogen and fossil fuels, plus a consultation on a £240 million Net Zero Hydrogen Fund, to support the commercial deployment of new low carbon hydrogen production plants.
  • Working with industry to assess the safety, technical feasibility, and cost effectiveness of mixing 20% hydrogen into the existing gas supply.
  • £105 million in UK government funding provided to support polluting industries to significantly slash their emissions

In the original press release, and elsewhere, it was mentioned that 3 million homes would be powered by hydrogen by 2030 but BEIS have now amended the press release and confirmed that this was an equivalent illustration and that hydrogen will predominantly be used in heavy industry.

As stated in the strategy, with currently almost no low carbon production of hydrogen in the UK or globally, meeting the 2030 target will require rapid and significant scale up over coming years. It then describes where Hydrogen comes from:

“There are almost no abundant natural sources of pure hydrogen, which means that it has to be manufactured. The most common production route is steam methane reformation (SMR), where natural gas is reacted with steam to form hydrogen. This is a carbon-intensive process, but one which can be made low carbon through the addition of carbon capture, usage and storage (CCUS) – to produce a gas often called ‘blue hydrogen’. Hydrogen can also be produced through electrolysis, where electricity is used to split water into hydrogen and oxygen – gas from this process is often referred to as ‘green hydrogen’ or zero carbon hydrogen when the electricity comes from renewable sources. Today most hydrogen produced and used in the UK and globally is high carbon, coming from fossil fuels with no carbon capture; less than 1% can be called low carbon. For hydrogen to play a part in our journey to net zero, all current and future production will need to be low carbon.”

So in following its “twin track” approach the government assumes that blue hydrogen will initially start the strategy going with green hydrogen becoming more abundant (and cheap) in later decades. Without specifying proportions however, it seems that in both mix and, as shown below, use, the government is relying on the market to find the best combination.

Some key points:

Here is a graph from the report showing the estimated hydrogen demand in various sectors, in Terawatt Hours (TWh) (one Trillion Kilowatt hours), in 2030 & 2035.

Note in particular the 0-45 estimate for heating, this reflects the uncertainty about the lesser priority of hydrogen for domestic use and the availability today of alternatives, eg Heat Pumps. To put this into perspective the anticipated <1 TWh in 2030 and up to 45 TWh in 2035 represents about 0.2% and 10% respectively of the UK’s current energy demand for space and water heating.

It’s likely therefore that, as mentioned in the Climate Change Committee’s (CCC’s) balanced pathway to Net Zero, hydrogen may play a part in heating where the housing is near to the hydrogen production and electrification is not possible or where there is stored hydrogen created from surplus renewable energy.

Unless using this stored hydrogen however, it makes little sense to use green hydrogen for heating when the renewable energy used to create it would be better used to provide the heating directly and so save the wasted energy from conversion.

It’s often quoted that “the only waste from using hydrogen is water”.  This is true when hydrogen is used in “fuel cells”, where a chemical reaction takes place, or where hydrogen is burned in pure oxygen but it is not true when, as would be the case with heating, it is burned in air. Air’s main constituent is Nitrogen and burning hydrogen in it produces other pollutants, known as NOx. The strategy considers these and how industry must ensure they are kept within emission limits, opponents however consider that, along with the infrastructure changes needed, it’s unacceptable to plan for any such emissions.

As explained in an Annex, with an established battery electric vehicle industry now well established, cars and vans do not feature in transport assumptions, leaving the use of hydrogen for haulage, busses, rail, shipping and aviation however, given the rapid development in battery technology, the annex casts doubt over the likelihood of the first three. Consequently, as mentioned above, it seems the government will wait and see what the markets come up with.

In 2050 the strategy estimates somewhere between 20% to 35% of the UK’s total energy demand being provided by hydrogen.  In the CCC’s 6th Carbon Budget report last year, its balanced pathway relied upon a maximum of about 20%. Until the government releases its own energy pathway it’s not possible to reconcile the two.

As blue hydrogen relies on a supply of natural gas there’s suspicion outside government over its promotion as an energy source by the fossil fuel industry and studies, including this one in the USA, indicate that current production methods, including carbon capture and storage, result in significant CO2 and Methane (CH4) emissions, both in the extraction of the gas in the first place and then leakage in the capture and storage processes. 

This view was reinforced by reports that Chris Jackson, the chair of the UK Hydrogen and Fuel Cell Association resigned in advance of the government’s strategy saying he could no longer lead an industry association that included oil companies backing blue hydrogen projects, because the schemes were “not sustainable” and “make no sense at all”.

As mentioned above, in its twin track approach, the government sees blue hydrogen as useful in creating a path to green hydrogen but, with BEIS talking about up to 15 year contracts, concern has been voiced among climate groups that over-reliance on blue could lock the UK into decades of North Sea gas production, fossil-fuel imports and millions of tonnes of carbon emissions. 

ACT’s view is that there will be a place for hydrogen in providing energy where electrification is not possible and in some industrial and chemical processes. With the uncertainties over the impacts of its production however and without scaled-up and effective capture and storage, blue hydrogen is wholly inappropriate as a solution and so efforts are better directed towards immediate reductions in the use of fossil fuels with any hydrogen pathway being primarily towards green hydrogen.

Other relevant links:

ACT’s Technologies to support Net Zero Section 3 Hydrogen

The Telegraph Billions to be funnelled into hydrogen subsidies as UK races to hit net zero

The Guardian Government reveals plans for £4bn hydrogen investment by 2030 

BBC News Hydrogen power offers jobs boost, says government

UKERC Pathway to net zero heating in the UK

The Climate Change Committee Hydrogen in a low-carbon economy

Six Months to COP26

In the lead up to COP26 debates are intensifying over some key issues, some of which have rumbled on for over a decade, passing through and beyond COP21 in Paris more than five years ago.

Explored in part in our website post Know your Net Zero from your NETs and BECCS, there is growing tension between two groups. In one are those who promote the importance of doing all we can today to reduce emissions and decarbonise the economy, thus keeping us from exceeding carbon budgets. In the other are those who believe we can rely on current and future technologies to provide both cleaner and more efficient energy and remove, use or store carbon in the decades ahead.

At the heart of the latter approach is a belief that we can, and should, live our lives relatively unchanged, taking up new technology like electric cars and relying on the markets and technological innovation to provide sufficient clean energy and cope with other mitigation paths.

Those who follow the former approach, however, worry that with carbon budgets and related emission reduction pathways only giving us perhaps a 50:50 chance of keeping the temperature increase to 1.5℃, we should concentrate on reducing demand and consumption today and using technologies available today, which will not only accelerate emission reductions but will also give cleaner energy (such as wind and solar) a better chance of catching up with current demand and that from newly electrified areas such as transport. The changes in lifestyle necessary for this route are seen by some as unnecessary sacrifices and by others as common sense.

What clouds the issue is that many fossil fuel companies are promoting the technological route, raising the suspicion that they do so because it delays the inevitable demise of their industries and, in say the case of gas, prolongs its use for the production of hydrogen.

There are other related and intertwined considerations within these debates:

Equity – All official emission reduction pathways, from the Paris Agreement to the recent International Energy Agency report, call for fairness in tackling climate change. To recognise historic emissions this calls for developed countries – the “Global North” – to take a proportionately smaller cut of the remaining carbon budget than the poorer countries – the “Global South” – and also requires the Global North to reduce emissions faster than, and to provide support to, the Global South. It also extends to reducing the burden we place on future generations in mitigating climate change.

The few – Following the above, it’s been the case for many years that the richest 10% of the global population are responsible for perhaps 50% of global emissions and that if they reduced their emissions to say the level of the average European, global emissions would immediately drop by 30%, with everyone else doing nothing. This brings the national and global debate above to a personal level.

Triaging solutions – As technologies develop there will be several areas in which they can be used. For example, as Hydrogen production is developed there is a choice between its use in heating, transport, steel or even as energy storage, in place of batteries. Decisions will have to be made as to where the most benefit (environmental rather than economic) can be gained from its use. Similarly with biofuels,

Economic Growth – The same pathways also assume continued economic growth of typically 2-3% pa, perhaps doubling economies in the next thirty years. Whilst some countries, like the UK, have managed to achieve growth, whilst reducing emissions, this is partly as a result of a shift away from manufacturing to service industries thus, effectively, exporting their emissions to other countries. Globally therefore the graph of increasing emissions follows very closely the graph of economic growth and there remains little evidence that the two can be “decoupled” any time soon. Consequently many are now promoting ways to reduce or even reverse growth or to disregard it altogether in favour of more human and nature-based measures of Wellbeing.

Carbon financials – there are a plethora of money led incentives and penalties designed to decarbonise our economies, from carbon trading to taxation. One that is gaining favour is known as “Carbon Fee & Dividend” which imposes a tax at the point of production or import of fossil fuels which is then distributed to the population of the country consuming the fuel as a dividend on a per capita basis. The tax will add to the cost of the fuel in the consumer’s hand and so consumers who use the least will gain the most when they receive their share of the dividend and the highest users will suffer the most in a net cost.

Further reading and watching to get you in the mood:

Dr. Hugh Hunt & Professor Kevin Anderson discussing Climate Change realities at COP21 Paris (30 minute video)
An entertaining and easy to follow chat in December 2015, by a couple of scientists following the COP picking out on the key points above.

John Kerry: US climate envoy criticised for optimism on clean tech
Reaction to the interview with Andrew Marr and the quote “I’m told by scientists that 50% of the reductions we have to make (to get to near zero emissions) by 2050 or 2045 are going to come from technologies we don’t yet have.”

Climate scientists: concept of net zero is a dangerous trap
Three scientists speaking out against the increasing reliance on Net Zero.

In defence of net zero
The editor of Business Green responding to the doubts over Net Zero

Sir David Attenborough Presents: Breaking Boundaries (10 min video)
Discussing the potential for humanity to destabilise planetary systems.

No new oil, gas or coal development if world is to reach net zero by 2050, says world energy body
A Guardian article on the recent International Energy Agency Report on the 2050 Net Zero roadmap for the energy sector.