Picking Losers

Rather brilliantly, Mayor Ken Livingstone has come out and publicly said that the London-based LIVE agency that made the 2012 logo film that has been causing epileptic fits should not be paid. It is rumoured that he hates the logo and stated "I wouldn't pay them a penny... Who would go to a firm like that again to ask them to do that work? I mean, this is a pretty basic thing." (Urmm, London 2012?) There have been 22 reports of epileptic fits so far and the film was withdrawn on Tuesday.

As predicted, yesterday was a bad day for Patricia Hewitt - admittedly it didn't take Mystic Meg to predict that one, though!  However, it is hard to have any sympathy with her; she is heading a department that is spinning a genuinely bad news story in to something which doesn't sound so bad.  The headline "NHS saves £510m" is not only misleading it is actually bad news for all of us.  In an effort to hit targets and not go in to the red yet again, Hewitt has effectively taken away funding

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Shock tactics to get your attention. I know it sounds unlikely. But really, he is.

He is calling for a "new framework" to replace the Kyoto Treaty (which comes to an end in 2012). David Miliband helpfully clarified on Radio 4's The World Tonight, that he didn't really mean it in the sense of a replacement for Kyoto, because he had acknowledged that the new framework would also be under the auspices of the UN. I'm sorry David - you might want to look for signs of continuity, but in no sense does this imply the continuation of Kyoto, any more than your second wife would imply continuation of your first marriage, just because you are still living in the same house.

What Bush means, in particular, is that any replacement for Kyoto must not be based on the failed cap-and-trade approach, as embodied in the European Union Emissions Trading Scheme (EU-ETS). And it is this that he is right about. Cap-and-trade is the wrong approach, in principle and in practice. What follows is a long and technical paper I have prepared (PDF version here) explaining why it is wrong, but let me first summarise it for those of you who have got better things to do with your time.

1. The reasons why Phase 1 failed have not gone away. The EU-ETS is failing to deliver sufficient savings from the sectors and countries covered by it to make their contribution to a target which, if achieved, might reduce temperatures by 0.06°C relative to what it would otherwise have been in 2050.
2. Is it anyway possible to devise a rational basis for allocating emissions-rights? Looking at the current allocations, there is (presumably) method to these allocations, but not logic. This is a central-planner's wet-dream, and a libertarian's worst nightmare.
3. One of the problems with the EU-ETS is its failure to deliver long-term price signals. It is typical hubris of politicians to imagine that they can reduce this uncertainty by declaring their intentions for a time when they will almost certainly not be in power, and for a market over which they have only partial control. It is likely that not even increased federalism would be sufficient to deliver greater certainty, and only a Napoleonic solution would suffice.
4. Even if the EU-ETS could be made to work efficiently, fairly and on a long-term basis, it would disadvantage European nations for as long as other nations did not impose similar costs of carbon on themselves. We will be suckers in a rigged global market for hot air.
5. The allocation of emissions rights to existing players rewards dirty incumbents and disadvantages their cleaner and newer competitors. The role of government, almost the only real role in the anti-trust/competition area, should be to prevent incumbents from erecting barriers to entry, not to institute those barriers for them.
6. All carbon emissions have an equal impact and should be valued accordingly. Our incentives are upside down, and they are largely so because there is not a single carbon-price applying equally to large and small installations and to the fuelling of electricity, heat and transport. And the reason that we do not have such a simple, integrated pricing mechanism is largely because we fetishize a discredited cap-and-trade system that is not only wrong in principle and practice, but cannot practically be expanded to cover all sectors.
7. Even if cap-and-trade mechanisms like the EU-ETS could be broadened to cover all emissions sources from all locations and tightened to provide meaningful savings through tight and strongly-enforced targets, they would be the wrong approach:
   
   1. Cap-and-trade produces an irrational, discontinuous demand curve.
   2. All current cap-and-trade schemes focus only on gross emissions, and usually only from particular sources.
   3. They apply a positive price to non-carbon rather than a negative cost to carbon, which has unavoidable ramifications for the misvaluation of the contribution of various solutions.
   4. Cap-and-trade assumes that there is any rationale for an arbitrary cap. The balance between investing in adaptation and mitigation should not be decided for us by scientists, but discovered in markets that establish people's preferences and perceptions of the balance of risks.

There is no way of adapting cap-and-trade mechanisms to satisfy these objections. We should carry through with Phase 2 of the EU-ETS, because the market had a reasonable expectation that it would be implemented. But we should agree now to put it out of its misery after that, and to use the period before 2012 to negotiate an alternative system to replace Kyoto – one that provides a more rational price, reflecting all sources and sinks, and taking account of adaptation as well as mitigation, and that is agreeable to all nations, or at least all major emitters. There are alternatives, if Europeans are prepared to open their minds.

Anyway, the full paper follows below. You might want to make yourself a cup of tea before you set to work on this.

It looks like the government have been caught out over plans for a third runway at Heathrow airport.  Incredibly, the Times is reporting that The Department for Transport has secretly passed key information supporting the expansion of Heathrow to BBA six months before it is due to be published in a consultation document. Not only does this prove that a government consultation is merely a closed decision dressed up in democracy clothes, but it also stinks collusion and corruption. 

"Political meddling has brought the NHS to its knees." So says Jonathan Fielden, chairman of the British Medical Association's consultants committee. "We are angry with the government for a woeful dereliction of duty - towards patients, towards the profession and towards the future. We have lost all confidence that the government can solve the problems it has created." Pretty damning stuff.

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What better reason could there be to top up your glass (and make it a big one), than that the Government and the BMA want to "crackdown on middle class wine drinkers". Some people damage their health by drinking too much, so of course it is necessary for the Government to try to control the drinking habits of all of us. And while we're at it, I hope the Government will be cracking down on the prevalence of STDs amongst certain groups by promoting abstinence for us all.

More trouble for the extraordinarily expensive Olympic marketing efforts. The promotional video, jazzed up (or barfed over, depending on your point of view) with animated figures based on our fantastic logo, has been causing epileptic seizures. A 20-second section, showing "a diver diving into a pool which had multi-colour ripple effects", has had to be cut. So we can show our concern for those with disabilities by integrating the Paralympic logo with the Olympic logo, but checking the video for impacts on epileptics is beyond us.

Traditional media continues to carry its fight to the blogosphere. BBC Newsnight have added to their Book Club The Cult of the Amateur by Andrew Keen. It was "debated" on tonight's programme.

Government 

The result of last week poll deemed, not surprisingly, that the NHS online recruitment system was the biggest loser of the post-Blair, pre-Brown era. Expect Patricia Hewitt to be shown the door when Brown announces his first cabinet; she has been the latest in a long line of disasters at the Department of Health. However, you have to ask - is it fair or more to the point sensible to put someone in charge of the third largest organisation of the world who has absolutely no experience or expertise in the industry they are leading?

The Commons public accounts select committee has published a damning report on the state of the Government's IT projects stating that the government is losing its grip on them. Rather worryingly, one in five has been rated "mission critical and high-risk" computer schemes, yet senior officials had not even met the minister responsible. It also criticised the many projects that had gone billions of pounds over budget and were many years behind schedule.

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... though if they really wanted to appeal to today's youth, maybe they should have gone with this one? (hat tip B3ta)

Not sure which is more unpleasant, this one or the original?