Posts Tagged ‘European Commission’

Excuse me for being just a slightly bit amused by this article from the Telegraph headlined “EU to ban cars from cities by 2050” and the ensuing comments.  Although the article plainly quotes Siim Kallas (Vice-President of the European Commission and responsible for transport, but who is amusingly referred to in the Telegraph article as the EU transport commission – we hope the commission consists of more than Kallas!) as saying “That means no more conventionally fuelled cars in our city centres” (emphasis added by Betsy) – the rest of the article and its commentators continue on the same vein of the EU will ban all cars completely from European city centres.  I don’t recommend you read the comments because after initial amusement, it might make you lose faith in humanity; sadly, together with the usual spoutings about socialism, elites, etc., the commentators have reacted as you’d expect them to – wondering how people would move around without their cars. And UPS without their trucks. And emergency services without ambulances.

All hilarity aside, while we haven’t actually looked in-depth into the EU Transport 2050 Strategy we have read a quick summary.

The objectives seem fine, although the goalposts are set perhaps a bit too far away in time for our liking. But perhaps our old friend the hand of the market will sort that out for us.  The Transport Strategy aims to have a 50% shift away from conventionally fuelled cars by 2030, phasing them completely out of cities by 2050. The way fuel prices are rising perhaps these targets won’t be so hard to achieve. It’s basic economics that – as the price of a type of fuel increase, demand shifts to cheaper alternatives – perhaps into public transport, or cars that are less reliant or even aren’t reliant at all on these fuels. It all depends how much the price increase is and how available (convenient and cheap) the alternatives are.  As the demand shifts, alternatives will become more available – vehicle manufacturers will be more encouraged to innovate, producing more fuel (of any type) efficient cars.

What will raise fuel prices? Increasing cost of exploration and processing could be one reason but so is political instability and, as we are seeing today, conflict in regions that produce oil. Policy intervention can also increase fuel prices. The Transport Strategy talks about moving towards a full application of “user or polluter pays” principle.

This principle takes the idea that the price for the fuel – no matter how high – pays only to cover the cost of exploration, processing, distribution and so on, but not the cost of environmental damage during the finding and preparation of oil or its use. But users of fuel (the polluters) should pay for these costs too and this can be through taxes on carbon for example and other policy intervention. Taxes, in turn, increase the fuel price encouraging demand to shift to alternatives, reducing the fuel use and emission of carbon and other environmental impacts.

Why should we do that? We know Telegraph readers probably believe that climate change is all a big plot by some world socialist government, but whether they believe the science or not, they will be affected, just as all of us will. Without cuts to greenhouse gas emissions the science tells us that it is possible that rather than worrying about the government stealing their cars by 2050, in 2100 Londoners on their daily row to work may be cursing the government for allowing this climate change business to happen…

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The European Commission has recently introduced a draft communication recommending the most ambitious greenhouse gas emission reduction targets in the world. The paper says “The extra economic effort needed to reach 30 per cent — while still substantial — has fallen”. The cost of emission cuts is made up of purchasing carbon credits (for affected industries) and/or switching to alternative sources of fuel or activity that emit less and/or reducing the scale of the economic activity that leads to emissions. The carbon credit price has fallen, greener alternatives are being supported more and economic activity has declined due to down turn.

The paper urges to take advantage of these falling costs and increase the target from its current level at 20 per cent to a target of 30 per cent reduction from 1990 levels [1].

Some news coverage of the announcement does not agree and focuses on the potential financial costs of such targets [2]. There are a couple of things wrong with this focus on financial costs alone:

1. Policy actions cannot be judged on their costs alone.

Policy actions should be judged on the balance of their costs AND benefits AND compared to the costs and benefits of inaction. Appropriate economic assessment provides information on what the costs and benefits of an action and inaction are, whom they affect and how they can be compared.

Indeed this is how everyone makes decisions…we never consider just the costs of our actions…For example, I could be extending my lunch break enjoying the sun, or working on a project and get paid for it right now instead of writing this post. But then writing the post gives me the opportunity to learn more and share my knowledge with some benefits to others too hopefully. And here I am writing away as I believe that the net benefit (benefit minus cost) of writing this post is greater than what I have to forgo.

Businesses, from whose point of view the Times Online article [2] is written, are not expected to consider environmental benefits of their actions. But this is precisely why public sector environmental policy is made: to take account not only costs to businesses but also benefits to current and future generations.

In fact, the Commission paper shows that the additional investment needed for increasing the target from 20 per cent to 30 per cent could be offset by air quality improvements alone, which would save the EU some €6.5-€10bn in healthcare bills and reduce the need to control other pollutants [1].

2. The key supporting argument those who focus on financial costs make is that climate change does not exist and/or emissions from human activities are not the cause.

I am not qualified to discuss the science. I work within the current policy which accepts that climate change is happening and emissions related to human activities are a major cause which the world economy has to deal with.

More importantly, most activities that will reduce greenhouse gas emissions will have other benefits like the above mentioned example of improving ambient air quality for our enjoyment and protection of biodiversity – so that the beauties in the nature photography slide show which is (perhaps ironically) placed next to the Times Online article referred to above live beyond the archives in future.

The failure of Copenhagen Summit in December showed once more how important international cooperation really is [3]. But someone has to take the lead and the European Commission deserves congratulations for their action.

[1] Euractiv.com – Brussels to argue for 30% CO2 reduction target

[2] The Times – EU sets toughest targets to fight global warming

[3] See Wagyū’s commentary on the video footage from the Summit.

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