The polluters pay — including us: a programme for getting to Net Zero

Dieter Helm’s latest energy transition manifesto puts a carbon tax at the centre of a programme for navigating the path to a carbon-neutral economy

Reading too many climate crisis books, as your reviewer is prone to do, isn’t good for your mental health. A grim opening chapter presenting the scale of the challenge before us is usually followed by a detailed blueprint for action, which one reads with a sinking feeling as its political unviability becomes apparent.

Dieter Helm, an economics professor at Oxford University, is as well qualified as anyone to try squaring the circle of offering a programme both commensurate to the task at hand and attuned to political reality.

Helm’s prolific publications over the past decade have covered every aspect of the energy transition. The Carbon Crunch and Burn Out considered how we might move beyond reliance on fossil fuels without indulging in wishful thinking that we have reached ‘peak oil’. Natural Capital and Green and Prosperous Land suggested how the often overlooked contribution our wasteful agricultural system makes to carbon buildup might be addressed. And in 2017 he found time to oversee the government’s Cost of Energy review, a major study of how energy market pricing might be rebalanced to favour renewables.

Helm is as well known for his blunt style as his grasp of the issues, ever ready to prescribe policies that pay no regard to orthodox political boundaries. His latest book, Net Zero: How We Stop Causing Climate Change, draws on the full range of his expertise to present a programme for achieving the target for net zero carbon emissions by 2050 that has been adopted by the UK and other governments. It bears all of Helm’s hallmarks, dense with prescriptions for action set out in matter-of-fact prose, edged with caustic observations on the failures of existing policy that, here, are somewhat more acidic than usual.

Failure, then and now

Net Zero opens with a biting critique of the chronic failure of international climate change initiatives over the past 30 years. The series of UN climate conferences set in motion by the 1992 Rio de Janeiro Earth Summit — Kyoto, Copenhagen, Paris et al — have continue to fall woefully short of their objectives.

There have been important advances. As renewables technology has improved the cost of wind and solar has fallen. Coal is falling sharply as a proportion of the world’s energy. And the climate emergency is now firmly established as a major political issue.

But fossil fuels still provide some 80 per cent of world’s energy, and as global GDP rises their absolute use will continue to rise even as their relative share of the mix falls. Nature’s capacity to sequester carbon is being eroded with the clearing of the great rainforests of South America and Southeast Asia, and the draining of major wetlands such as the Congo basin. And plastic and e-waste has accumulated exponentially, polluting the oceans and turning vast tracts of developing countries into giant rubbish tips.

For Helm climate mitigation policy has been ‘looking down the wrong end of the telescope’, focusing on reducing carbon-intensive production rather than the consumption that drives it. There’s no way of getting round it: we quite simply have to make do with less. And he argues that the task of reducing consumption is a matter for national policy, not international agreements.

The climate change framework developed by successive UN conferences is — in essence — a carbon cartel forever seeking to limit global emissions by carving up emissions allowances between nations. It suffers the fundamental problem of all cartels: participants will cheat if it is in their interests to do so, catching free rides on the back of the sacrifices made by others. The hope that the great power blocs will cede their sovereignty has always been a fantasy. Helm fears it can never be ‘UN First, but rather … China First, India First, Russia First and America First, as it always has been and probably always will be.’

Even the efforts made by the one region that has attempted to decarbonise, the EU, have not been selfless, or particularly effective. Most EU member nations have indeed pared back their own carbon-intensive production, and invested heavily in renewables. But they have now import what they once made. Europe is now much more reliant on energy produced in countries with less stringent carbon regulations, and much of its new green infrastructure was made overseas: most of the wind turbines that shimmer on North Sea horizons and the shining solar panels that stretch across the fields of Germany were built by energy-intensive manufacturers in China.

For all the controversy surrounding shale gas the irony is that US energy policy is arguably cleaner than Europe’s: fracking has allowed the US to transition from coal to gas, and has reshored energy-intensive businesses from China and elsewhere.

The chronic failure of climate policy tempts us to fall back on the hope that technology will save us. As solar, wind and battery storage solutions improve, the argument goes, the price of renewable energy will undercut that of fossil fuels, facilitating a relatively painless transition to a new green economy.

But that rosy scenario overlooks the hard fact that fossil fuel technology is advancing every bit as rapidly. New seismic, drilling and machine learning processes facilitate the discovery of new hydrocarbon resources that can be extracted ever more cheaply. The cost of renewables not only has to continue to fall rapidly, but to do so considerably faster than that of fossil fuels.

Increasing political, consumer and investor pressure is being placed on western oil and gas corporations, and some have engaged in a slow process of realignment, but Helm points out that 90 per cent of fossil fuels are produced by state-owned companies in — often authoritarian — nations whose economies depend on them. ‘Climate activists attack European and US politicians and company executives,’ he writes. ‘They don’t dare take on Vladimir Putin, Xi Jinping and Mohammad bin Salman. Gluing yourself to the HQ of Shell or BP is easy: doing it in Moscow, Beijing or Riyadh is much tougher.’

Taxing consumption

So what would Helm do? His programme starts with the introduction of a carbon tax on all carbon-intensive goods and services, a levy that would make the environmental cost of producing them explicit. Crucially, it would apply not just to imports as well as domestic production. If the cost of goods produced at home rises relative to imports we will simply offshore our pollution, as the EU has done.

Setting a price on carbon allows the market rather than the state to take the strain of identifying which carbon-intensive products should wither away, and which green alternatives should flourish. A carbon tax assumes ‘pervasive uncertainty about the opportunities and costs of the various options and … seeks out the lowest-cost options.’ Governments that try to micromanage the energy transition, retiring certain industries and investing in others, leave themselves open to lobbying by vested interests.

A carbon tax would ensure ‘the costs of our pollution confront us every day’, making it clear to us just how dependent we have become on fossil fuels. It isn’t just the obvious things: the petrol we put into cars, the flights we take, the plastic we throw away. It’s also the synthetic fibres we wear, the detergents we use to clean our homes the processed food we eat, the steel and cement that make our houses and offices.

A tax on carbon consumption would offer the strongest incentive possible for a mass shift to green alternatives such as organic food, and discourage carbon-intensive luxury items. The environmental cost of travel would become especially clear. The prospect of planes and ships powered by solar, batteries and hydrogen may tantalise, but for quite some time to come air and sea transport will remain highly carbon intensive. Carbon pricing would also highlight the mixed blessing of a new age of electric vehicles. Ambitions to replace the internal combustion engine with fleets of gleaming Teslas overlook their dependence on cobalt, lithium, nickel and other materials: the construction of an electric car is twice as energy intensive as a diesel.

The tax could be introduced by simply adding a price increment to products roughly indicative of their carbon footprint. It could be dialled up or down as governments close in on their net zero emissions target. Aware of the dangers of hammering economies with a post-Soviet Bloc style price shock, Helm suggests the tax should be introduced gradually, starting at a relatively low level with the credible expectation that it will rise over time, thereby allowing consumers and companies to prepare for price rises, rather in the way that governors of central banks provide forward guidance on the setting of interest rates. Taxes on carbon-heavy imports would be set according to estimates of carbon input by country of origin: steel from China or palm oil from Malaysia, for example, might be taxed particularly heavily.

Helm argues a carbon border tax would be consistent with WTO rules, which allow for environmental adjustments, and that it offers robust built-in safeguards against a trade war. A tax on imported goods goes to the importing country’s exchequer. But if the exporting country has already set their own domestic carbon tax the import would qualify for an exemption, since the polluter is already paying. The imposition of a carbon tax on imports by one country, therefore, would encourage others to introduce their own taxes: better the money go to their own government than the importer’s. Helm suggests that if ‘enough countries opt for the border tax approach then there will be a critical mass and these powerful incentives will cascade through the global economies as every trading country now has an interest in putting a domestic carbon tax in place.’

Investing in the green economy

Though Helm believes the play of market forces, filtered through a carbon tax, can pick out the winners and losers in the emergent green economy, he still envisages a critical role for the state. Only public planning and investment can deliver the infrastructure on which a net zero economy will depend. Governments should use the revenue accumulated through a carbon tax to deliver the low-carbon communications, energy and transport networks that the market will not provide of its own accord.

Helm’s model is not quite that of a Green New Deal, most versions of which propose an economic stimulus package that increases both investment and consumption. He has in mind something more like a wartime economy, in which the state engineers a shift from consumption to investment. During wars states suppress consumer spending through taxation and rationing and redirect resources to military infrastructure. During the energy transition governments should reduce consumption to sustainable levels through a carbon tax and spend the proceeds on green infrastructure.

In Helm’s plan the state’s responsibilities would include the conversion of road and rail systems for electric- and hydrogen-powered vehicles, smart energy networks able to optimise power supply and incorporate storage, and construction of the fibre and broadband infrastructure necessary to support these and other decarbonising networks. All of this will require public investment in research and development into the next generation of renewables technology: rechargeable flow storage batteries, floating wind turbine platforms, solar panels able to use more of the light spectrum, green hydrogen.

The state would also lead the development of the infrastructure necessary to drawdown and sequestrate carbon emissions: even a net zero economy will need to produce some carbon for essentials such as chemicals, plastics and backup energy supplies. This will include the building of a robust carbon capture and storage (CCS) framework, which in Britain’s case might be centred in the North Sea, which already has an abundance of old wells and an extensive pipeline system.

But the greater task would be the restoration of the land’s natural capacity to absorb carbon through reforestation, the recarbonisation of soils, and the regeneration of peat bogs and coastal marshes. This will require investment in new farming techniques that make full use of digitalisation, robotics and AI that would allow, for example, crops to be cultivated indoors through smart monitoring systems, cutting reliance on fertilisers that erode soil and biodiversity. For Helm the prevailing notion that polluters should offset their own emissions is hopelessly inefficient: far better to let the state coordinate a nation-wide sequestration and land regeneration programme using funds from the carbon tax.

Some questions

With Net Zero Dieter Helm gives us another powerfully-argued climate manifesto that evades ready categorisation. He is sceptical about capacity of the state to manage the fine detail of the energy transition. But the emphasis he places on the urgent need to cut consumption aligns him with concepts of degrowth more usually associated with radical economists and ecosocialists.

Some important questions go unanswered. The harsh impact a carbon tax will have on very many consumers already struggling to make ends meet is barely mentioned. Helm is surely right to highlight our mutual responsibility for managing the demands we place on our planet. But he overstates the agency many of us have to significantly change our consumption patterns, entangled as we are in an economic machine premised on constant accumulation. And we might ask whether the carbon tax is quite as bulletproof as Helm suggests. Wouldn’t the setting of the carbon price be just as vulnerable to lobbyists as the auctioning of permits or the allocation of state subsidies to favoured industries?

Helm is aware of the profound political challenge of introducing a significant tax on consumption. But he doesn’t do his case any favours by presenting the prospect of reduced consumption almost wholly in terms of sacrifice. He suggests that the capacity of our political processes to ‘deliver an enlightened self-interest which involves quite a lot of pain is the issue upon which the future of our climate, and planet, depends.’

Yes: but if the case for lower consumption is ever to win public acceptance it must highlight the benefits it would offer, not just warn of its costs. There is much to be said about the advantages lifestyles less centred on consumption might offer in terms of health, increased opportunities for leisure, the convenience of remote working, and so on, as has often been noted during the current pandemic.

Like all energy transition programmes Helm’s is incomplete, and freighted with political challenges. But this is a manifesto to take seriously, navigating an immensely complex debate with intelligence, formidable learning and due regard to climate realpolitik.

Net Zero: How We Stop Causing Climate Change by Dieter Helm is published by HarperCollins.