Dieter Helm's new thriller separates climate fiction from fact

Dieter Helm's new book "The Carbon Crunch" reads a bit like a detective novel. It is about "who killed climate policy". And how we can revive the corpse.

Helm is of course one of the most famous energy economists in Europe - a professor of energy policy at the University of Oxford and a fellow in Economics at New College, Oxford. He has also served as special advisor to the UK government and to the European Commission. Yet Helm is not afraid to take on the powers that be - any powers. He challenges policymakers, many of his fellow academics, green NGO's and industry, all with sensible arguments, but without pulling any punches.

He starts his story with the stark observation that international climate policy, led by the EU as self-styled climate frontrunner, is an outright failure. The endless UN climate conferences and the famous Kyoto treaty are not delivering the goods. Neither is the EU Emission Trading Scheme. Moreover, what is worse, climate as a public concern is sliding down the political agenda. Clearly, something must be done - and done quickly - to stave off disaster.

Well, disaster? Is climate change really the threat that many people say it is? Helm notes that the public has become more sceptical in this regard - or more fatalistic, with the same effect. To his credit, he does not blame the "climate sceptics" or ExxonMobil for this. On the contrary, "green" NGO's and climate scientists deserve a lot of the blame, as they are frequently guilty of alarmist predictions and pretending to be certain about inherently uncertain things. Helm candidly acknowledges that climate predictions are uncertain. Global warming could still turn out to be limited to the low end of the predictions, he says, in which case it would not really be such a big problem. But, he says, we simply cannot take this risk. Substantial warming would spell ruin to the human race.

The solution, Helm writes, has to start with identifying the real causes of the problem. The "prime villain of the piece", according to Helm is: coal, coal and coal. After that it's of course oil and gas, but climate change cannot be addressed without addressing the emissions caused by burning coal in power plants. Coal-burning is (and has been) done all over the world of course, but the astounding growth of coal-fired power production in China and India is the major threat to the planet at this moment. This growth, in turn, is caused by economic growth and population growth.

Not really a surprising observation, one might say, but the point is, says Helm, that our current climate policies are not addressing those causes at all. "Kyoto", for example, does not do anything in this respect. Neither does covering the European seas with wind turbines or rooftops with solar panels. This is so much money wasted. These policies allow European politicians to grandstand about how brilliantly Europe is limiting its emissions, but they do not have any significant effect on the climate.

And Helm has another telling point to make in this context: the EU may be limiting its emissions from carbon production, but this is because European industrial production has shifted to a considerable extent to Asia - and the EU does of course import Asian products for its consumption. So what really counts is not so much carbon production, but carbon consumption. In the UK, for example, notes Helm, carbon production went down 15% between 1990 and 2005, but carbon consumption went up 19%!

So what should be done? Three things, according to Helm. First of all, a carbon price should be set, in the form of a tax on carbon consumption rather than in the form of an emission trading scheme. How this should be done, he does not explain in detail, but part of the plan is to tax the carbon content of products, including imports. This last is unavoidable, because if - say - the EU were to only tax its domestic goods, production would shift to regions without a tax.

Helm hopes that if the EU were to start with "border carbon taxes", other economic powers, such as China and the US would follow. They would have a powerful incentive to do so, he writes, because by setting their own border taxes, they would keep the revenue from them rather than seeing this paid to their trading partners.

The second part of Helm's policy plan is to ensure that coal-fired power plants are massively replaced by gas-fired power. The shale gas revolution, which is spreading from the US to China now, makes this possible. For Europe this means it should develop its own shale gas resources and break its dependence on oil-indexed long-term contracts with Russia. Helm does not deny that shale gas has environmental issues to cope with, but the transition from coal to gas is by far the most cost-effective short-term measure that can be taken to limit emissions. Current renewables, he argues, are, for various reasons, just not up to the task.

The third step is, simply, to put a lot of money into R&D. In particular, Helm argues that the huge amounts of money spent on subsidizing current forms of renewable energy, such as offshore wind power, are largely wasted and should instead be directed towards research and development of what he calls "future renewables".

As with most detective stories, the murder and the search for the murderer are more convincing, perhaps, than the solution to the crime, which is always a bit unsatisfactory. One wonders, for example, whether China and India (and the US) will go along with Helm's plan for carbon taxes and coal-to-gas substitution, but then again, no one can force these countries to take part in any kind of climate policy if they refuse to do so.

Helm is at least honest enough not to pretend that climate policy is somehow going to be effective without economic sacrifices. Any solution will hurt, no matter how much politicians prattle about "green growth". He notes that "the current industrial structures of all developed and most developing countries are overwhelmingly carbon-based … Decarbonizing requires the coordinated replacement of almost all of the capital stock - of the world."

Whether political leaders will be able to persuade people to shed "blood, sweat and tears" in this cause, is the big question. They could at least start by reading this book. It is written with enough suspense to read it under the Christmas tree.