Volkswagen scandal: Unintended Consequence from Climate Change Politics

Prolific science author Matt Ridley explains why the Volkswagen scandal represents the unintended consequence from the politicization of Europe's auto industry due to climate change politics. [bold mine]

The Volkswagen testing scandal exposes rotten corruption at the core of regulation. Far from ushering in a brave new world of cleaner air, the technologies adopted by European car makers, driven by policy makers in Brussels, have been killing thousands of people a year through an obsession with lowering emissions of harmless carbon dioxide, at the expense of creating higher emissions of harmful nitrogen oxides. 

There is a lesson here that goes much wider than the car industry, the clean-air debate and even the regulation of business. The scandal is a symptom of the political world’s obsession with directing and commanding change, rather than encouraging it to evolve.

The great European switch to diesel engines was a top-down decision as a direct result of exaggerated fears about climate change. Convinced that the climate was about to warm rapidly, and extreme weather was about to get much worse, European governments signed the Kyoto protocol in 1997 and committed to reducing emissions of carbon dioxide in the hope that this would help. In the event, the global temperature stopped rising for 18 years, while droughts, floods and storms also showed no increase.

But in 1998, urged on by EU transport commissioner Neil Kinnock, welcomed by environment secretary John Prescott and acted on by chancellor Gordon Brown, Britain happily signed up to an EU agreement with car makers that they would cut carbon dioxide emissions by 25% over ten years. This suited German car makers, specialists in Rudolf Diesel’s engine design, because diesel engines have 15% lower CO2 emissions than petrol engines.

The EU agreement was “practically an order to switch to diesel”, says one clean-air campaigner. As subjects of Brussels, Britain obediently lowered tax on diesel cars, despite knowing that they produce four times as much nitrogen oxides as petrol, and 20 times as many particulates, both bad for human lungs.

The story is almost a textbook case of why top-down regulation can be so dangerous. It lets single-issue pressure groups set targets with no thought to collateral damage, and imposes regulation that inevitably gets captured by those with a vested interest. Regulation also often stifles innovation. We may never know just how much innovation in cleaner petrol engines was prevented.

Pls read the rest here

I can't resist a good quote when I see one...more from Mr. Ridley 

Dirigisme often does real harm. Telling people to eat less fat, based on a few dodgy studies in the 1950s that purported to find a link to heart disease, has probably worsened obesity by encouraging high-carbohydrate food. Discouraging electronic cigarettes, in the demonstrably wrong belief that they increased rather the decreased smoking, is slowing progress in the fight against smoking. Deliberately mandating that banks and government-sponsored enterprises (Fannie Mae and Freddie Mac) make or purchase sub-prime loans, as Bill Clinton and George Bush both did as a way of trying to raise home ownership among ethnic minorities, was a major contributor to the crash of 2008.

Equating order with control retains a powerful intuitive appeal, as the American social theorist Brink Lindsey has pointed out: ‘Despite the obvious successes of unplanned markets, despite the spectacular rise of the Internet’s decentralized order, and despite the well-publicized new science of “complexity” and its study of self-organizing systems, it is still widely assumed that the only alternative to central authority is chaos.’

That's because economic and political myths are popularized by media, political agents and their cronies.

Global Cooling: Artic Ice Cap Grows 60% in One Year

The Daily Mail twits at the errors of BBC’s environmental scare mongering

The highlights:  

-Almost a million more square miles of ocean covered with ice than in 2012

-BBC reported in 2007 global warming would leave Arctic ice-free in summer by 2013

-Publication of UN climate change report suggesting global warming caused by humans pushed back to later this month

From the Daily Mail

A chilly Arctic summer has left nearly a million more square miles of ocean covered with ice than at the same time last year – an increase of 60 per cent.

The rebound from 2012’s record low comes six years after the BBC reported that global warming would leave the Arctic ice-free in summer by 2013.

Instead, days before the annual autumn re-freeze is due to begin, an unbroken ice sheet more than half the size of Europe already stretches from the Canadian islands to Russia’s northern shores.

Scare mongering based on flawed models

The pause – which has now been accepted as real by every major climate research centre – is important, because the models’ predictions of ever-increasing global temperatures have made many of the world’s economies divert billions of pounds into ‘green’ measures to counter  climate change.

Those predictions now appear gravely flawed.

The religion of environmental politics is being exposed for what they truly are.

Video: The great global warming swindle

Watch why environmentalism (the religion of misanthropists) is a huge swindle  (hat tip EPJ)

Former Climate Change Alarmist James Lovelock Blasts the Green “Religion”

James Lovelock, a famed godfather of global warming and a former “alarmist” whom has recanted his position turns the table to lambast the Green “religion”

The Toronto Sun does a synopsis of a Lovelock interview…

(1) A long-time supporter of nuclear power as a way to lower greenhouse gas emissions, which has made him unpopular with environmentalists, Lovelock has now come out in favour of natural gas fracking (which environmentalists also oppose), as a low-polluting alternative to coal.

As Lovelock observes, “Gas is almost a give-away in the U.S. at the moment. They’ve gone for fracking in a big way. This is what makes me very cross with the greens for trying to knock it … Let’s be pragmatic and sensible and get Britain to switch everything to methane. We should be going mad on it.” (Kandeh Yumkella, co-head of a major United Nations program on sustainable energy, made similar arguments last week at a UN environmental conference in Rio de Janeiro, advocating the development of conventional and unconventional natural gas resources as a way to reduce deforestation and save millions of lives in the Third World.)

(2) Lovelock blasted greens for treating global warming like a religion.

“It just so happens that the green religion is now taking over from the Christian religion,” Lovelock observed. “I don’t think people have noticed that, but it’s got all the sort of terms that religions use … The greens use guilt. That just shows how religious greens are. You can’t win people round by saying they are guilty for putting (carbon dioxide) in the air.”

(3) Lovelock mocks the idea modern economies can be powered by wind turbines.

As he puts it, “so-called ‘sustainable development’ … is meaningless drivel … We rushed into renewable energy without any thought. The schemes are largely hopelessly inefficient and unpleasant. I personally can’t stand windmills at any price.”

(4) Finally, about claims “the science is settled” on global warming: “One thing that being a scientist has taught me is that you can never be certain about anything. You never know the truth. You can only approach it and hope to get a bit nearer to it each time. You iterate towards the truth. You don’t know it.”

It's nice to hear people humbly admit the fact that we can't know everything, especially not from the false assumptions of math 'models'.

Yet the politics of climate change is like inflationism, they are surreptitiously designed to promote the stakeholdings of special interest groups, through fascist or socialist policies in the guise, and mantra, of saving “earth”.

Lies that have been said so often and believed by many is still a lie.

As the father of modern psychology William James warned,

There's nothing so absurd that if you repeat it often enough, people will believe it

The Unraveling Global ‘Earth Hour’ Energy Industry Bubble

Like the welfare state, the supposedly politically correct environmental position represented by green energy projects are being exposed for what they truly are—delusions of grandeur.

Political support for green ‘renewable’ energy has been diminishing in Western nations.

From the Wall Street Journal, (bold emphasis mine)

The green economy strikes again, or shall we say strikes out. Oakland-based Solar Trust of America filed for bankruptcy this week, leaving its planned multibillion-dollar plant in California on ice. The company declared itself insolvent after its parent—Germany's Solar Millennium—filed for bankruptcy in December, and Solar Trust realized it wouldn't be able to pay a $1 million rent check due April 1.

Solar Millennium, in turn, had been hoping to sell a controlling stake in Solar Trust to the German company, solarhybrid, until solarhybrid also filed for bankruptcy in March. Then there's Q-Cells, another German solar company, which also filed for bankruptcy this week, sharing that fate with Solon, the Berlin-headquartered photovoltaic firm that went bust in December.

This cascade of insolvencies comes after Germany decided last year to slash the above-market prices it forces utilities to pay for renewable energy sources and to cut the subsidies that have locked German taxpayers into €100 billion in handouts to the solar industry. Even before the subsidy cut, German solar manufacturers were struggling under price pressure from China, which has responded to Western subsidies by ramping up its own production, undercutting higher-cost European and American producers in the process.

Greens in Germany and beyond are protesting that if only governments would continue soaking taxpayers to prop up solar, wind and other low-carbon favorites, these technologies would be viable. But even that is far from clear. Q-Cells and others had responded to Chinese competition by outsourcing some of their own production to Asia to cut costs. That wasn't enough to save them.

The real story is that green manufacturing, which was supposed to be the planet's salvation and Europe's new industrial base, proved to be as vulnerable to low-cost competition as many other industries. Far from creating a sustainable comparative advantage, German subsidies sparked the very rivalry now putting its home-grown industry out of business.

The Italian government appears to have taken note of these economic realities and last weekend said it would slash "excessive" subsidies for solar and wind power. Industry Minister Corrado Passera uttered the obligatory promise that Rome remains committed to generating a carbon-free, wind- and sun-powered economy, but that "we need to do so without overreliance on taxpayer resources."

So economic reality has been prevailing over mass hysteria.

Aside from gross mismanagement, mainly due to the moral hazard of political support which has been wasting taxpayers money, competition from Asia has added to the industry’s woes.

Of course, the most important factor is that there is no such thing as a free lunch, or the Santa Claus Principle, as most political zealots believe.

And considering the tremendous financial pressures to survive the welfare state, politicians see the latter as more of a priority than sustaining the economically unviable green industry, which ironically, has been contributing to the welfare state’s financial burden.

Under fiscal pressure from the ongoing debt crisis ordeal, Spain has also cut subsidies to unfeasible political pet projects.

From Bloomberg, (bold emphasis mine)

Spain halted subsidies for renewable energy projects to help curb its budget deficit and rein in power-system borrowings backed by the state that reached 24 billion euros ($31 billion) at the end of 2011.

“What is today an energy problem could become a financial problem,” Industry Minister Jose Manuel Soria said in Madrid. The government passed a decree today stopping subsidies for new wind, solar, co-generation or waste incineration plants.

The system’s debts were racked up as revenue from state- controlled prices failed to cover the cost of delivering power. Costs have swollen in the past five years because of an increase in regulated payments for the power grid, support for Spanish coal mines and subsidies for renewable energy plants…

Spain’s decision is a “first step” to rein in debts, and officials are working on a broader package of measures, Soria said. The nation isn’t planning a levy on hydropower or nuclear plants, nor will it take on power-system liabilities, he said.

The Spanish action follows Germany’s announcement last week that it would phase out support for solar panels by 2017 and the U.K.’s legal battle to reduce its subsidies for the industry.

Spain was an early mover in developing renewables plants, and support for wind energy helped Iberdrola become the world’s biggest producer of clean power, with plants in the U.S. and Brazil. The industry sustains about 110,000 Spanish jobs, according to the Renewable Energy Producers Association.

The government is wrestling with competing priorities as it struggles to convince investors it can meet a target to cut the budget deficit to 4.4 percent of gross domestic product this year, from 8 percent last year, while trying to create jobs in a country where 23 percent of workers are unemployed.

Oooooh that ought to hurt.

A relevant quote from Warren Buffett on bubbles,

Only when the tide goes out do you discover who's been swimming naked.

Apparently green energy has been caught swimming naked and whose bubble seems to have been pricked.

Yet those proposing to promote green energy in the Philippines through the same political route of subsidies (whether consumer or supplier based) ought to open their eyes and see what has been happening abroad.

Any industry that cannot survive on its own [because the consumers don’t want them] and which requires political fiat to thrive extrapolates to a redistribution of resources from the economy to the political privileged groups. This is rank crony capitalism.

And crony capitalism results to huge wastages, economic inefficiency, discoordination of the economy and corruption among the many other nasty side effects. And this accounts for as the reverse Robin Hood where the poor and the middle class subsidizes the rich cronies (through taxes and inflation).

Worst is that the underlying (feel good) dogma of such environmental political religion has been founded on supposed infallibility and omniscience of computer based models.

As the great H.L. Mencken wrote,

Civilization, in fact, grows more and more maudlin and hysterical; especially under democracy it tends to degenerate into a mere combat of crazes; the whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins, most of them imaginary.

How Philippine Renewable Energy Policies Sow The Seeds To The Next People Power Revolt

Friend and libertarian colleague Nonoy Oplas has a wonderful article on renewable energy cronyism, as a result of climate change hysteria, here in the Philippines.

Politicos along with the media have successfully drummed up fear based frenzy on the public that has led to the justification of political interventionism in the local energy sector.

And like parasites, vested interest groups (associated with the political class) jump in to profit from such politically mandated economic concessions-all manifesting symptoms of crony capitalism.

Mr. Oplas’ article can be summarized into the imposition of the arbitrary law, the Renewable Energy Act or RA 9513 that has the following features:

-punishes non renewable energy with taxation and regulation while exempting clean and renewable energy

-guarantees profits (despite the inefficiency) of the politically privileged industry

-a deluge of other unilateral incentives:

a) Income Tax Holiday for 7 years, (b) Duty-free importation of RE machinery, equipment and materials within the first 10 years, (c) Special realty tax rates, (d) Net Operating Loss Carry-over (to be carried for the next 7 consecutive years), (e) 10% Corporate tax rate, (f) Tax Exemption of Carbon Credits, and (g) Tax Credit

-and an expansion of the bureaucracy:

the National RE Board (NREB) to be composed of different government agencies to some private sector players. The other is a technical secretariat, the RE Management Bureau (REMB)

You can read the rest of Mr. Oplas article here

However, the unintended consequences of Renewable Energy Act or RA 9513:

-the redistribution from traditional energy suppliers to politically endowed renewable energy suppliers is a form of political economic discrimination which means forthcoming shortages in conventional “cheaper” energy supplies.

-political economic discrimination spawns more illegitimate activities such as envy based violence and corruption

Why? Because, as the great libertarian Frank Chodorov explained,

State does not grant privileges without a quid pro quo. Every privilege involves the getting of something for nothing; it is never an honorable exchange, and therefore has to be enforced. The coercive power of the political establishment is involved. The State, far from being an impersonal fiction, consists of men who are called politicians but whose inclinations are not unlike those of other men. The only difference between the politician and the rest of mankind is that he is invested with the power to compel other men to do what they do not want to do, or to refrain from doing what they want to do. (bold highlights mine)

-Mr. Oplas further notes that renewable energy are pricier where the “current RE costs per kwh are high, between 2x to 5x the prevailing rates, and even if RE supply is unstable and unreliable. Us energy consumers will be forced to pay for their more expensive energy output”

So essentially the public will be faced with a perfect storm: rampant energy and eventually food price inflation!

Shortages in conventional energy equates to higher prices, while high costs of renewable energy means higher prices to the consumers too!

So along with the transmission channels from energy prices to food production and distribution, such policies we are likely to sow the seeds of the next “People Power” revolution here.

The Philippines is the most prone or vulnerable to food-energy inflation in Asia, as shown by the chart above by Soc-Gen and Businessinsider.

So even if prices from renewable energy are to be subsidized to the public, since there is no such thing as a “free lunch”, then the nation’s fiscal conditions will eventually bear the brunt in the substance of ballooning fiscal deficits.

Remember, the government has been tinkering here with the most politically sensitive commodities.

-in providing state guarantees where profits are privatized and losses are socialized this also means redistribution from the consumers to the cronies (robbing the poor to give to the rich).

As people pay for higher energy prices, the cronies of the ruling class will get wealthier.

And people, likely to be led astray by media, will blame 'greed' on free markets or laissez faire capitalism for what essentially is a state capitalism based on social democracy or political greed.

And when public uproar translates to the end of the system, cronies remain insured (flee the country) while fiscal situation as above worsens--public pays for the sins of the political class.

In other words, we should expect higher taxes, lower economic growth and more unemployment, if these laws remain enforced.

-the usual cycle: every new law means more bureaucracy and government spending.

All these along with the above only entails the ruling class, government employees and the cronies benefit while the society suffers.

The problem is that people or the public have been allured to the pessimism bias, which makes them all too vulnerable to the manipulation or propaganda of political-economic (ruling) elite classes.