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The IMF revised its forecasts for world growth down for next year at its annual meeting. It now expects Germany and Italy to show negative growth next year, with the UK up by just 0.3% and the USA by 1%. The IMF revised UK growth for the current year  up to 3.6%, ahead of USA, China, Japan and Germany. It reflected many other forecasts in expecting inflation to fall throughout the advanced world next year including the UK.

The IMF expects the UK’ central government net debt to be at 68.5% of GDP next year, and down to 56.5% by 2027, well below the levels forecast in the USA, France, Italy and Japan but above Germany. Those who value external independent forecasts might like to take this into account when commenting on the UK economy.

The IMF thinks one third of the world economy will be in recession  between today and the end of next year. The IMF does warn countries against wide ranging schemes of price controls and subsidies, worrying that these stop price acting as a signal to put in more capacity to increase supply, and blunting the impact of price on demand. They warn that long periods of price control and subsidy lead to shortages of supply, refusal to invest in new capacity, and black market activity.

They also rightly warn Central Banks both against too law a money policy to fuel the inflation, and against too tight a policy to produce a recession.

There have been various studies to try to gauge the different impact on CO2 output of electric versus petrol or diesel vehicles.

There is general agreement that making large  car batteries for the electric vehicle greatly adds to the amount of CO2 during the manufacturing of the new vehicle. The electric car may produce twice as much CO2 in its manufacture than the petrol or diesel similar  vehicle. The amount required to make the rest of the  vehicle apart from the battery is very similar for a comparable   vehicle with a different power system.

There is also general agreement that if collectively we scrapped diesel and petrol  cars early before the end of their working lives to replace with electric vehicles, that would generate more CO2 as a result of all the extra manufacture.

The degree of saving on running the  vehicles is also not a straightforward win for the electric vehicle. Clearly if the electric  vehicle is owned and used in a country that does generate all or most of its power from renewable sources there is a a considerable saving on CO2 from use. In practice most of the large vehicle using countries like China, the USA, Germany, UK still depend  heavily on gas and coal for generating substantial amounts of power, so there is much less of a CO2 saving from using an electric vehicle. If an electric vehicle is recharged from coal based electricity there could  be an increase in CO2 compared to a diesel of petrol machine.

It requires a driver to use the electric vehicle for above average miles each year in a country with a reasonable amount of renewable electricity in the mix for there to be a decent saving of CO2 from electric car purchase and use. When it comes time to get rid of the old battery of an electric vehicle that also generates more CO2 in its disposal. There are also  environmental issues about mining the minerals needed for battery production.

Some people argue that the UK has a duty to cut its CO2 output more than others because we generate a high level per head. The latest figures available on the Worldometer show that some countries do indeed generate far more per head than the average, but these do not include the UK. The highest figures  naturally come from the world’s leading exporters of oil and gas, but they also include large manufacturing nations like Germany and China, as well as some countries with high incomes per head like Luxembourg and the USA.

 

 

The figures provided on Worldometer below show that there are 19 countries with more than double the UK’s output per head, and there are many more above the UK including large economies like Germany, Japan and China.

Per capita emissions in tons   USA 15.5, Russia 11.44,Canada 18.58. South Korea 11.85, Saudi Arabia 15.94, Australia 17.1, Taiwan 11.72, Kazakhstan 13.01, UAE  23.37,  Kuwait 25.65, Qatar 37.29,Oman 19.61, Turkmenistan 14, Trinidad 25.38, Estonia 17, Montenegro 25, Luxembourg 17.5, Brunei  18, Bahamas 11,

UK 5.5 tons per capita.

Is it right that all countries with high output per head, say over 10 tons each, should be made to cut more than others? How do we allow for the need for the export of oil and gas from some producers to other countries who need these fuels pending the roll out of the renewables based electrical revolution?

Most forecasts believe the world will still be burning 100m b/d of oil in 2030, given the growth in fossil fuel based activities in the major developing countries.

If China cut her CO2 output to UK per head levels total world CO 2 output would fall by 7.5% or by 7.5 times total UK CO2 output. CO2 campaigners should turn their attention to China.  Those who want the UK to produce less CO 2 than current levels should support stopping more migrants coming here, as more people generate more CO2.

I receive a number of enquiries, often from students and schoolchildren, about net zero issues.  I am going to publish a few background pieces so these exchanges can be better informed.

The answer to the common demand that the UK leads the world in carbon dioxide reductions is that we are doing just that. The figures for the thirty years from 1990 reveal that of the major economies the UK has cut its emissions by far more than the rest of them.

 

Increase or decrease in output of CO2 1990-2020

China    +381%

India    +302%

South Korea  +129%

Brazil  +97.9%

Mexico   +40%

South Africa  +38%

Australia +38%

Canada +19%

Spain  – 7%

Japan  -8%

USA  -10%

France -27%

Russia  -30%

Germany – 37%

UK  -46%

These numbers should lead to some questions about the huge variation in achievement between differing countries.

China produces 30 times as much CO2 as the UK each year. If China’s CO2 output goes up 3.3% next year on the previous year  the increase in China’s CO2 is the same as the whole amount of CO2 generated by the UK. China plans to carry on increasing her CO2 until the end of this decade. Those who want to bring world CO2 down should as these figures show direct far more attention to China and India, the main sources of growth in the gas.

If the UK carries on cutting its CO2 by stopping producing its own oil and gas, and ending the manufacture of steel, glass, ceramics, aluminium, petrochemicals and other energy intensive products it loses us well paid jobs and tax revenues but it does not cut the world’s CO2 output. We import these items instead, usually increasing the amount of CO2 generated, at least by the extra transport requirement.

We also make ourselves dangerously dependent on imports of important items, which can be disrupted by wars, shipping problems or disease patterns as recent years have shown. It also widens the balance of payments deficit which requires us to borrow more or sell more assets to afford the extra imports.

All the time China and India carry on expanding their CO2 output it is difficult to see the world progressing to net zero.

This government was right to express concern about Treasury orthodoxy and should have added Bank of England error. Together these terrible twins visited on us the European Exchange Rate mechanism which gave us boom/ bust 1988-92, gave us the boom/ bust of the banking crash of 2006-9, and now threatens to give us the Quantitative easing boom/recession of 2020-23.  The government did need to cushion the blow of the energy crunch, and did need to offset the recessionary forces that have been unleashed by the surges in energy bills.

The Bank of England should take more of the blame for the slump in government bond prices from the Thursday of their rate rising statement through to the collapse the following Wednesday. Their decision to raise the official interest rate, to point to more rises to come and  their decision to sell bonds to drive longer interest rates higher was the main cause of the bond sell off. To avoid spooking the markets again when they end their temporary prop to the markets they should announce they will not sell any bonds at these depressed prices to reassure markets.

Meanwhile the Treasury has resumed its belief that economic policy has to be steered by a commitment to get debt as a percentage  of GDP down. In recent years pursuing this policy they have cajoled Chancellors to put in tax rises to do this. Instead a poorly performing economy has ended up with rises in state debt. The tax rises do not offset the extra spending all the time growth stays low. Last year when growth accelerated the deficit tumbled way below OBR forecasts.

The government should switch economic control to their growth target and the 2% inflation target. That  way we should allow lower tax rates as part of a growth strategy, and a counter inflation discipline that was sadly lacking in 2020-21.

I am reissuing this given todays news

 

This article was published yesterday on ConservativeHome. I thought readers of my blog might also find it interesting:

We are living with a desperate shortage of energy. Successive governments and Ministers have ignored the need to ensure adequate supplies of electricity and primary fuels in their passion to close down and move out of coal, oil and gas as quickly as possible. Now we are caught up in a worldwide gas shortage, with fertiliser factories closed – and a Business Secretary summoning a meeting to ask what can be done to limit the spreading damage.

The Business Secretary knows enough economics to understand that, if gas is in short supply, the last thing that would help the UK procure more of it would be a series of price controls over those who dare to buy it on the world market and could sell it here.

We will not like it, but these now unruly global gas markets are controlled by Russia, the USA, and various Middle Eastern countries that have a surplus to export. They do not currently have a big enough surplus to need to take low bids.

The EU is already complaining that Russia is driving prices higher by restricting her large export supply. Why, then, did Germany make the world gas position worse by deciding to centre their energy policy on a further major addition to their pipeline capacity to import gas from Russia, ensuring their reliance on this source? They were warned by both Presidents Donald Trump and Joe Biden, as well as other allies not to make this obvious mistake.

The UK, too, has made itself far too dependent on energy imports. I have been warning government for years that we need to do more to generate additional power and extract more primary energy at home, endowed as we are with liberal reserves of oil, gas and coal and with access to water power and biomass.

The Business Secretary could do more than pose as concerned at his meeting if he puts in train work to find longer-term solutions to our chronic dependence on unreliable overseas sources of energy. He could ask why the Rough Field gas store was closed down, greatly reducing our stocks of gas which we now need. He should bring in more gas storage. He could review North Sea oil and gas policy, and see how the industry can be encouraged to tap more reserves from our own fields. He should keep the remaining coal power stations available with secure coal supplies for them, until there is sufficient greener power available to replace them on a reliable basis.

He should know that, at exactly the same time as we hit a world gas shortage, the UK electricity supply is under extreme stress. The remaining three coal power stations have been fired up, because there has been a marked shortage of wind for some weeks.

In recent years I have been wearing my keyboard out raising with Ministers and the wider public the issue of our need for more reliable electrical power to keep the lights on. The overriding preference for wind power was bound to leave us vulnerable to periods of calm weather.

If these coincide with cold winter days, the consequences could be disastrous. A modern sophisticated economy needs electrical power for most things. How would food factories keep working, vulnerable people stay warm at home, hospitals look after patients without sufficient power? It is particularly worrying that the current shortage takes place against a background of limited demand thanks to mild weather. The cool summer in the south did not help, as heating thermostats were triggering as late as May and even in August, needing more gas-fired power even then.

The UK’s passion for imported electricity has further weakened our position. The French interconnector in Kent was badly burned this week, taking out a potential imported supply of top up power which we rely too much on. We may discover soon that, if the shortages worsen, overseas suppliers will see exporting to us as an easy cut to make to husband their own limited supplies for domestic use.

When electricity was first privatised, we made security of supply the prime issue in the new system. There was a substantial margin of extra domestic capacity available to bring on stream if one or more of the baseload generating plants had problems. We did not need imports.  We made price the second important issue, with a system which always ensured the next cheapest power was brought on stream as demand picked up. In the early years of privatisation we both had plenty of capacity at home, and experienced falling prices. The dash for gas, with many new combined cycle gas plants going in, took feedstock from a healthy UK North Sea and replaced some older less fuel efficient and dirtier coal capacity, so the policy was also green.

Today, the Business Secretary needs to review the complex mesh of subsidies, regulations, penalty taxes and import arrangements that passes for an energy policy. It is delivering a shortage of power. It is holding up a good industrial strategy, as industrial expansion needs access to plenty of reliable competitively priced energy. It is now threatening consumers with much higher electricity and gas prices.

He should order changes that will open up more UK primary energy for us to use. He should want an electricity system that has more reliable renewable power which may take the form of hydro, pump storage and battery, but which also has enough back up capacity from biomass or gas, so we can be sure to keep the factories powered up.

Elimination of our dependence on imported electricity and a substantial reduction in our dependence on imported gas should be a minimum objective. The market would do this if it were allowed to function but, because of the comprehensive muddle of government-inspired past interventions, it now needs dramatic government action to put it right for the future.

In the meantime, we rely on the goodwill of the gas and electricity exporters and will have to pay up to secure supplies. It is the perfect storm, with both gas and electricity scarce. At home, an absence of wind leaves us short, and abroad Hurricane Ida closed down some important US gas capacity. Relying on the wind is a dangerous way of living.

It was refreshing to hear the PM’s speech yesterday. The world does not owe us a living. The heroes and heroines are all those who get up early and go to work to make sure we have water, power, broadband, food and other supplies. The anti growth coalition opposes practically everything that can keep the lights on, keep us warm, and keep us fed. They are the importers friend and the person on low incomes  nightmare. They stand in the way of doing and producing more for ourselves.

For too many years a combination of EU membership, EU rules and UK political bias against UK manufacture, UK fishing and farming and above all against UK produced energy has made us increasingly import dependent. Foolish CO2 accounting has forced companies and individuals into producing less here to  get our C2 count down, only to import things that have a higher carbon count in their place to prove we have reduced our CO2! We have been retiring our gas fields, failing to renew our gas generators, closing our coalmines  and blowing up our  coalfired power stations, in order to import manufactures from China and Germany that rely much more on coal.

Every time there is a proposal to extract more of our own gas, especially onshore, our own coal, or produce more of our own energy intensive goods there are protesters. Any road scheme to cut congestion which would reduce fuel use for each journey is likely to meet an army of protesters who do not seem to understand it is lorries and vans that keep them in food and Amazon parcels. Lix Truss was right to champion the producers, the workers, the strivers over the protesters, the strikers and the job refusers.

I look forward to a fight back for freedom and commonsense.

The Regulator’s announcement that they are seeking more gas supplies for the winter seems late when it has been obvious for a long time that we could be short of energy . There was a similar delay in coming to the late conclusion we needed to keep some coal fired power stations instead of demolishing them all, given the need for back up power for cold days with no wind. As it has turned out they have been running coal stations on and off throughout the summer on low wind days as well.

The best answer is still to get more UK gas out of the ground. The government changed policy some time ago to urge more UK production. The Chancellor’s Financial Statement included some energy projects without time frames or details of how much extra production they could release. There were several potential prospects that we know about missing from the list. The Energy Ministers need to push hard to get the licencing authorities to expedite additional production on fields already producing, and speed the link in of fields discovered close to existing production capacity and pipelines to be tied into those facilities. None of this need take too long, and the sooner we have more domestic production the better.

This should not be contentious. Home production means the big tax revenues on such activities goes to the UK Treasury, not to a foreign government. It means more better paid jobs here in the the UK rather than abroad. It means less CO2 is generated than if we imported LNG, which creates more than twice as much CO2 as domestic pipelines gas. It takes a lot of energy to compress, cool, transport and convert the gas back which you do not need to do with gas flowing down a domestic pipe. It means more gas delivered to home customers with secure supply.

Yesterday  we heard the Chancellor defend his tax cuts and explain the need for more supply side measures.
He is right to want  to boost the growth rate, and right to fight the recession the Bank is  forecasting. He needs to make numerous changes in a wide range of sectors to boost the growth rate to his target and keep it there.
During  our years in the single market we accepted a major decline in home grown food, home energy production, home produced energy intensive manufactures from steel and glass to building materials and aluminium. Reversing  these trends has to start with supplying more energy,more affordable domestic gas, oil and electricity. Grant  regimes for farming, fishing, green energy and much else need reviewing to see what works and what is necessary.

I would be interested in your views on the Chancellors speech and economic  plan.

As government ministers are talking about some spending reductions let me repeat some of my proposals talked about on this blog. A fuller version of this should be the Daily Telegraph today.

1. Stop the small boat people trade which will save the big hotel costs and the need to build more social houses to house them

2. Stop funding Councils to put in aggressive anti vehicle traffic mismanagement measures on our main local roads

3. Stop making grants to farmers to turn farmland into wilderness

4. Tell the railways the government will not pay increasing subsidy levels for those little used train services that are not wanted by the travelling public. railways should concentrate on increasing use of more popular services.

5.Tell the Bank of England it must not for the next year sell bonds at a loss triggering Treasury/taxpayer reimbursement for their realised losses.

6. Refuse more borrowing to Councils wanting to acquire a property portfolio

7. Remove from the overseas aid list all governments with space programmes, nuclear weapon development or ownership, and abusers of human rights

8.Remove tv licence fee cases from the criminal courts to ease pressure on the justice system.