Archive for January, 2010

Some time ago Betsy, Elsea, and Daisy went for a little walk between Grosvenor square and Parliament square.  Along this walk we saw many wonderful and amazing things,

It was good to see cousin Fred here, although we don’t necessarily agree with his views

however surely the most amazing of all to us economist cows was the following sign:

Taking a train from London to Aberdeen would take you 7 hours.  Taking a plane from London to Aberdeen would take you 1.75 hours.  I don’t know about you, but I would hate to see this clearly quicker option disappear completely.

I do not disagree that the amount of domestic aviation should be decreased, but calling for a complete ban on domestic flights seems like a boneheaded idea because it takes away the consumer’s choice of a faster mode of travel.  It would be like saying we should ban cars and trains and go back to the good old days of the slower, but emissionless, horse and carriage  – in fact even these are not emissionless (like cows, horses have emissions too!).

So how do we propose to lower the amount of domestic flights without enacting a command and control type ban on them?  It is quite simple really.  Let’s pretend that you had to travel from London to Aberdeen and you had, for simplicity’s sake, just two choices: the plane or the train.  How would you decide which mode of transport to take?

Obviously the first factor you would look at, apart from the time, is the monetary cost of each mode of transport.  Then you would go into the comfort, the accessibility of each mode of transport, oh, and if you care about the environment, the carbon footprint.

Obviously there are many people out there who value their time over their carbon footprint and the difference in costs of the two modes of transport.  However, what if we made that difference in the costs of the two modes of transport much more?  The more expensive a particular mode of transport is, the less the demand for it will be and vice versa… hence the shift from train to plane once cheaper domestic flights were introduced.

But how can we make flying more expensive than going with train and by how much?  An extra tax, say on aviation fuel, could be one option, where tax would be equal to the cost of the carbon footprint.  Environmental economists see such a tax as a way for the price of flying to reflect all of its cost and making the passengers pay for the environmental damage as well as other costs.  This is a way of ensuring that passengers factor in their carbon footprint into the decision on which mode of transport they wanted to take in case they had not already taken it into account.

There are of course other ways of reflecting the carbon cost of flying in airway bills. Including aviation in carbon trading is another – which incorporates the environmental costs through a different mechanism. For more information on including aviation in carbon trading, see the Committee on Climate Change’s advice to the UK government on reducing global aviation emissions.

Either way, the aim is to make flying a much more expensive choice, hence while it would still be available, only people who value their time a lot more would decide to take the plane.

Oh, and much further along the route we came across these people:

We like this option too!

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I joined a flock that battled through the weather to hear our Minister for Energy and Climate Change, Ed Milliband, talk about Copenhagen, and the continuing global negotiations in 2010. The Minister is confident, intelligent, a good speaker, and has clearly learnt the detail of the climate change debate during his time in the job. That all helps, but doesn’t ensure he will make good decisions. Actually his job is not about big decisions (policy in the UK and EU is already defined), but about influencing the rest of the world. While the agreement in Copenhagen was disappointing, Ed rightly points to significant progress over the year in 2009. Copenhagen broke down barriers (like the developed – developing coutry groupings, and criteria on monitoring) so progress can continue in 2010.

This Aldersgate Group event was aiming to inform business about commercial implications of Copenhagen. ‘Good prospects’ for progress do not help business much, as they are left guessing about future policy. However, the CEOs of two companies, Johnson Matthey and Eurostar, reiterated their commitment to the climate change agenda. They admit this is easy for them at present, as pursuing emissions reductions brings lower energy bills and net cost savings. However, such opportunities will soon run out, and to justify further investments in emissions reductions by the middle of this decade, they need a reliable carbon price. Maybe this should be the economic test of global climate negotiations in 2010: will they provide a basis for a carbon price that means something to business?

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As you may have followed from the media and as Jodiraw reported for this blog, December saw a lot of cows chewing cud in Copenhagen. And, there are still those who are arguing about whether there climate change actually exists and if so, whether we are the cause of it, let alone discussing solutions.

The philosopher Arthur Schopenhauer said:

All truth passes through three stages:
First, it is ridiculed.
Second, it is violently opposed.
Third, it is accepted as being self-evident.

We neither have the time nor the need to wait until politicians and their big gatherings like the one in Copenhagen reach the third stage.

Ours and other herds from all breeds have been doing good work for years. Our search for both economically and environmentally beneficial solutions to the problems we face, whether they are of our own making or not, will continue.

And these solutions do not always need great big leaps of technology or politics. Sometimes we just need to have a fresh look at what has been known for centuries. There are two particularly interesting examples of this:

The first is biochar – essentially a new use for charcoal to increase carbon sequestration in soils and improve crop fertility. Betsy will be writing on this more in the coming months.

The second is production of hydrogen through electrolysis – which is a revolutionary use of age old physics even Daisy remembers from school. When installed in a car, the hydrogen produced improves the performance of the combustion, prolonging engine life and saving fuel. More on this later too.

For now, Happy New Year and Happy Working to the pasture!

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