Contributed by Robert Lyman © 2019
Robert Lyman is a former public servant of 27 years and prior to that was a diplomat for 10 years.
Remy Prud’homme, a celebrated French economist now teaching at the Massachusetts Institute of Technology, recently wrote a paper that described the “energy transition” that the government of France was seeking to achieve in order to “decarbonize” the French economy. It was published by the Global Warming Policy Foundation under the title, The Energy Transition – Useless, costly, unfair.
In a short 15 pages, Prud’homme dissects the reasoning behind the French policy and shows how flawed it is. His analysis offers many useful lessons for those concerned about climate-related policies in Canada.
This article will provide a summary of the highlights of Prud’homme’s paper. You can find the complete text here:
The objective of the French government’s policy is to reduce annual carbon dioxide equivalent emissions from the current level of 340 million tonnes (Mt) to 170 Mt by 2050 and subsequently to zero. Unlike historic energy transitions, which were driven by market demands and technological innovation, this transition is entirely politically motivated. It is based on acceptance of the theory of anthropogenic global warming, i.e. that greenhouse gases emitted as a result of human activities are the drivers of increases in the average global temperature. Prud’homme call this theory “more political than scientific”. However, rather than challenging the theory on its scientific basis, he treats it as though it were scientifically validated, and shows how the policies based on it are pointless and damaging.
Impact of Potential OECD Policies on Temperatures
To do this, he describes the differences between two scenarios. In the reference scenario, without energy transition policies, yearly global emissions stay at their 2017 level. He regards this as “realistic”, given that over the last 33 years, global emissions have increased by 80 per cent, so assuming they would decrease in the 33 years from 2017 to 2050 seems unrealistic.
He compares this to a “policy scenario”, in which between 2017 and 2050 OECD countries reduce their carbon dioxide emissions by 50 per cent and the rest of the world (i.e. the “developing countries”) do not increase their yearly emissions.
As a parenthetical comment, I would argue that both scenarios are very “optimistic” in terms of the prospects for reducing emissions; the absolute levels of emissions, however, are less important for his case that the differences between the scenarios.
In the reference scenario, the average world temperature would increase, according to the Intergovernmental Panel on Climate Change (IPCC) analysis, by 0.53 degrees C. The strong measures adopted under the policy scenario would bring this temperature increase down to 0.48 degrees C. The difference between the scenarios is thus 0.05 degrees C., or 5/100ths of a degree. The difference is small and, in practice, negligible.
He then examined the impact of policies by France. France’s emissions represent one per cent of global emissions, which themselves are just one per cent of the stock of carbon dioxide in the atmosphere. So, if by some miracle France were to instantly stop emitting carbon dioxide, the growth in the atmospheric stock would be reduced by 1/10,000, and the effect on global warming would be “entirely insignificant”.
A great deal is being made in France of the importance of closing the four remaining coal-fired power plants (with a capacity of 3 GW, accounting for 1.8 Per cent of electricity output). This will be done over the next four or five years. In contrast, China will soon open about 560 thermal power plants with a capacity of 259 GW.
The Costs of the Policy
France’s carbon dioxide equivalent emissions by economic sector are quite different from those of Canada. Transportation produces 39 per cent, residential and services 24 per cent, manufacturing 21 per cent, energy 14 per cent, and other sources 3 per cent.
Strangely, French policy is to reduce nuclear power generation and replace it with wind and solar; that is, to replace one low emission source for another. Prud’homme shows how, considering the energy required to build wind and solar plants and the effects of having to build backup plants, the results of this will almost certainly be to increase emissions. EdF, the main electrical utility, is obligated to buy wind and solar under feed-in-tariffs that guarantee above-market rates for wind and solar suppliers for 15 year periods. The cost of this practice is about five billion euros (roughly $7.5 billion Canadian) per year and increasing regularly. The regulator has estimated that, with conservative assumptions, the cumulative cost will be 57 billion euros ($85.5 billion Canadian) over the period 2014-25. Moreover, the combined effect of the 20% value-added tax and the tax on electricity consumption adds another one billion euros per year to ratepayers’ bills.
To this can be added many indirect costs, including:
- The destruction of rural landscapes
- The loss in value to neighbouring real estate, estimated at 20 billion euros ($30 billion Canadian) so far
- The deaths of thousands of birds and bats
- The significant cost of the electricity gathering and transmission systems, estimated to add one billion euros per year to transport costs
- The costs of back-up generation and of curtailment due to the frequent periods when the generation does not match demand and renewable energy is given “first-to-the-grid” rights.
Experience to date in Europe and elsewhere shows that, as the share of wind and solar energy in a country’s electricity generation system rises, the rates for consumers rise. While France is not yet one of the European countries most heavily affected by this, the developments planned for the French “energy transition” imply a doubling of electricity rates.
To reduce emissions caused by road transport, French governments have used several measures. Notably, they have heavily taxed vehicles and subsidized alternatives. Taxes on road transport that do not apply to other goods and services amounted to 45 billion euros ($67.5 billion Canadian) in 2017. After tobacco, road fuels (gasoline and diesel) are the most taxed goods in France. The government’s plan to increase road taxes even more led to the Yellow Vests protest movement.
Prud’homme comments on the French use of carbon taxes, noting that in theory they could replace all other anti-carbon policies, but in fact are used as an addition, not a substitute. He argues that implementing a carbon tax in only one country or one group of countries (e.g. the OECD) rather than globally merely serves to displace economic activity from the taxing countries to the others, but he also notes that a single world carbon tax is “socially and politically unthinkable”.
Non-automobile transport modes are subsidized as much or more than other European countries. SNCF, the French national rail monopoly, receives about 14 billion euros ($21 billion Canadian) per year in subsidies. Urban transit receives about 9 billion euros ($13.5 billion Canadian) per year, financed by a special tax levied on businesses. A purchaser of an electric vehicle receives a subsidy of 6,000 euros ($9,000 Canadian). If the government reaches its goal of one million EVs purchased in one year (very unlikely), the taxpayer’s bill would be 6 billion euros ($9 billion Canadian) per year.
All these taxes and subsidies have had a limited effect on energy demand or emissions. The share of rail in freight transport has stagnated; it represents only 10 per cent of total freight and 2 per cent of freight shippers’ expenditures. Cars represent 89 per cent of passenger transport expenditures. Bicycles, highly touted and subsidized, account for 0.5 per cent of passenger travel. In these circumstances, the main effect of road taxes is to increase general transport costs and to reduce mobility. Lower mobility reduces the effective size of labour markets, and hence their efficiency (workers cannot access the jobs they want, and enterprises cannot access the workers they need).
The French Road Safety Agency is reducing the speed limit on secondary roads from 90 km/h to 80 km/h, claiming that this would lower carbon dioxide emissions by 30 per cent. In fact, it will reduce average speeds by 2-5 km/h, fuel consumption by 1 or 2 per cent, and carbon dioxide emissions by a similar percentage.
Regressive Effects in France
The share of energy expenditures in electricity, road transport, and housing is larger in poor households than in rich ones, so fuel taxes fall disproportionately on the poor.
There are also regressive subsidies. The very large subsidies to electric vehicles, for example, go for the purchase of cars costing far more than the average family can afford, and usually go for the purchase of a second or third car.
The National French Statistics Agency keeps track of “energy vulnerability”, a condition that exists when a household spends more than 8 per cent of its income on home heating and/or more than 4.5 per cent on transport. Twenty-two per cent of French households are in a position of energy vulnerability, and the number is rising, with the problem especially acute for senior citizens.
The costs of energy differ by regions. To illustrate, in 2011, the household expenditures on electricity averaged 630 euros ($945 Canadian) in large cities and 850 euros ($1,275 Canadian) in rural areas. In the same year, household expenditures on car fuels averaged 1,083 euros ($1,632 Canadian) in large cities and 1769 euros ($2,654 Canadian) in rural areas.
Regressive Effects Internationally
The greatest “regressivity” is the impact of climate policies on developing countries. which simply cannot afford the cost of using wind and solar energy for electricity generation when cheaper coal is available. Through what Prud’homme refers to as “environmental imperialism”, rich countries, their aid agencies and the development banks they control have decided not to finance coal-fired power plants, even through reimbursable loans. NGOs have successfully lobbied private banks to adopt the same policy. China, however, has stepped in and financed coal-fired plants (at interest rates higher than World Bank rates, and with fewer environmental constraints). This may have long-term strategic consequences.
At COP15 in Copenhagen in 2009, rich countries promised to pay poor countries a hundred billion dollars per year starting in 2020 if the poor countries agreed to commit to huge emissions reductions. Nine conferences later, no progress has been made. “There is absolutely no agreement as to who exactly will pay what, to whom, according to what criteria, and with what controls.”
“Transition” vs Pollution
Prud’homme expresses his strong objection to real environmental degradation of air, land and water. He describes how in France the fight against carbon dioxide has pushed aside the fight against pollution. The former Ministry of the Environment has even been renamed “The Ministry of Ecological Transition and Solidarity”.
“This transition is neither ecological, nor solidary, much less economic. The transition stands beyond the realm of rationality, in a world of fantasy. As Goya puts it in one of his etchings: ‘the sleep of reason produces monsters’.”