This post was written, along with a previous post, in the context of the University of Western Australia’s decision to accept $4 million of federal funding for an Australian Consensus Centre built around the work of the controversial public intellectual Bjorn Lomborg. Since I completed the initial draft, UWA has decided to rescind the centre and return the funds, citing the widespread opposition to the centre among staff at the University.
Given this decision, I had initially thought not to publish this post. I have decided, however, to do so after all. My main reason for this is that in certain sections of the Australian media and the wider public debate, opposition to the Centre has been portrayed as the ideological hysteria of a closed club of humanities academics who ostracise and demonise anyone who fails to follows their left-wing orthodoxy. I hope that these posts go some way towards demonstrating that concern over Lomborg’s credentials is not mere ideology but the outcome of serious engagement with his output, on his own terms.
That being said, is it reasonable take such a fine-toothed comb to Lomborg’s opinion pieces like this, given they are primarily for public rather than academic consumption and (it could be argued) necessarily simplify issues in order to communicate them in an effective way?
I would argue that not only is it reasonable, it is necessary. Much of the disquiet over the Australian Consensus Centre at UWA has been over Lomborg’s paltry track record in the metrics that are often used to judge academic output, notably attempts to calculate his h-index score. The Australian has come to Lomborg’s defence on this, suggesting that Lomborg does not score well on the h-index because the peer review process for academic journals, from which the h-index is derived, ‘is a process regulated by humanities academics whose careers are built on toeing the leftist party line’. Whether or not the humanities in general are a hotbed of ‘hysterical’ leftists, the same could certainly not be said of economics journals – where Lomborg would presumably be seeking publication, given the defence of his approach is based on economics-inspired methodology.
But I nonetheless agree that Lomborg’s h-index is not the issue. This is because he is not himself an active academic researcher, and no-one is really claiming that he is. He is, in essence, a public intellectual; indeed, this is exactly how Project Syndicate – which distributed the article I discuss in this post – describes him.
I would also defend, however, the principle of appointing such figures to positions in publically-funded Universities. Universities and their academics are, generally speaking, bad at communicating often highly technical and specialist research to both policy and public audiences. Public intellectuals, who refine and communicate academic research to wider audiences, play a vital role in this respect and should be a welcome addition to a university’s profile.
But that does not mean that such public intellectuals should not be held to account. Rather, they should be held to account precisely on the basis of their public engagement, whether in newspapers, blogs, or on the Letterman Show. Indeed, in some senses, their role as mediators between research and public debate places an even greater burden of accountability on them. Hence, carefully reading and critically engaging with their public arguments is an important part of the research-public nexus.
Put simply, the kind of role that Lomborg sought to fill at the Australian Consensus Centre is one that is, in my view, both justifiable and desirable. Indeed, although I do not deal with it in this post, I would go further and state that the questions under consideration in the putative ACC were likewise legitimate (although the ‘consensus centre’ approach is one I have methodological concerns about).
But people who fill this kind of role need to be accountable for the claims they make in the public domain, all the more so because of the vital role they play. This is the approach I have taken in these postings. And, in each case, it seems to me that Lomborg presents arguments and reads evidence in a way that is highly skewed and misrepresentative of the sources he cites, sometimes in ways that stretch even sympathetic credulity. This, it seems to me, was at the heart of the opposition to the ACC at UWA.
In my previous post I looked at the way in which Bjorn Lomborg constructed an argument against electric cars in an op-ed in USA Today, and found that the data he used was highly selective, the construction of the cost-benefit calculation was highly skewed, and that his arguments were based on fanciful counterfactuals.
In this post, I am looking at another opinion piece by Lomborg on the ‘poverty of renewables’, in which Lomborg attacks subsidies for wind and solar electricity generation. In this case, the piece has been published through Project Syndicate, a content distribution website for opinion pieces that include a number of high-profile names including the economist Jeffrey Sachs and the ethicist Peter Singer.
As with his attack on electric cars, Lomborg’s main point is that subsidising renewables costs more than it benefits; it is not an effective use of public money. The headline figures he claims in this contribution are a global subsidy cost of $60 billion for solar and wind against a benefit of $1.4 billion.
How are these figures derived? Lomborg’s source for the $60 billion subsidy claim is the World Energy Outlook 2013, produced by the International Energy Agency. This is, indeed, their estimate; specifically $35 billion for solar, $26 billion for wind. This is certainly a sizeable sum on its own, but needs to be put in perspective. As the WEO itself notes, ‘the level of renewables subsidies is less than one-fifth of the fossil-fuel consumption subsidies in the same year’. In fairness to Lomborg, he has also advocated eliminating these subsidies and, indeed, has in his own words ‘done my best to call out subsidy silliness whatever fuel it supports’.
But, following Lomborg’s own preferred methodology, we are not so much concerned with the absolute cost of subsidies as their cost relative to benefit. It is here that his claim that the benefit from these subsidies is a ‘paltry’ $1.4 billion becomes vital.
So what is the source for this claim? Remarkably, in an otherwise very well-linked piece, Lomborg provides no source whatsoever for this figure, whether in the form of an explicit statement of the source or a hyperlink to a putative source. I have searched in vain for possible sources, including a carefully reading of the World Energy Outlook document that Lomborg uses for his subsidy estimate and the various working papers and publication of Lomborg’s Copenhagen Consensus Centre, as well as generic searches of official and academic publication for possible sources. I cannot find any figures or estimates that would correspond to such a claim.
A Tale of Three Countries
Lomborg goes on to discuss three country examples where, in his analysis, subsidies for renewables have driven huge increases in household energy expenditure, specifically: the UK, Germany, and Greece. Clearly, these are only particular examples, selected to make a point, but let’s look at them anyway.
Firstly, in the UK, Lomborg has the following to say: “environmentalists boast that households in the United Kingdom have reduced their electricity consumption by almost 10% since 2005. But they neglect to mention that this reflects a 50% increase in electricity prices, mostly to pay for an increase in the share of renewables from 1.8% to 4.6%”.
The critical questions are:
- How far are price increases the sole driver of reduced consumption; and,
- How far are price increases driven by renewable subsidies?
The answer to (A) is clearly difficult to estimate. We can note that the UK Government Annual Report on Fuel Poverty for 2012, which Lomborg sources, attributes the decline in consumption primarily to environmental regulation, including new efficiency measures (e.g. on fridges) and improved (and sometimes subsidized) household insulation. Even the market-oriented Policy Exchange think tank postulated that price was only one of a range of factors leading to declining consumption, with insulation and regulation again being significant factors. The UK Government Energy Efficiency Strategy Statistical Summary for 2012 also places a heavy emphasis on energy efficiency measures in accounting for declining domestic energy usage, including cavity wall insulation, appliance regulation, and behaviour change. Indeed, they estimate a ‘theoretical’ energy saving of 20% from domestic energy efficiency measures.
Now, what about (B)? Ofgem, the UK energy regulator, provides a breakdown of the average ‘dual fuel’ (electricity and gas) bill. The Environmental and Social Obligation costs to the average bill in 2013 was £111 out of £1,316, or 8.4% of the bill. Separately, the equivalent percentage was 12.7% for electricity and 5.2% for gas.
Lomborg is concerned with the increase in bills these costs purportedly drive. Lomborg states that electricity bill had increased by 50%, citing the UK Quarterly Energy Prices publication from June 2013. He does not cite which specific indicator he uses; I am presuming he is using Table 2.1.2 which gives a GDP deflated index of fuel costs. With a 2005=100 base (roughly ten years), the electricity index was 156.2; gas was higher at 199.6. Let us assume that there were no environmental and social obligation costs at all in 2005. Hence, the £74 environmental cost on 2013 electricity bills accounts 37% of the increase in electricity prices. For gas, the equivalent figure is 10%. For the two combined – electricity and gas – environmental and social obligation costs account for at most 19.5% of the increase in bills since 2005.
Where are we? We started with Lomborg’s claim that the 10% fall in electricity consumption is (without qualifier) because of the 50% increase in prices and that this was ‘mostly’ to pay for renewables subsidies. We have seen that the causes of declining consumption are complex but, certainly in the government statistical analysis, largely related to energy efficiency measures rather than price. Moreover, we have been able, with relative ease, to put a absolute upper bound estimate on Lomborg’s claim that increased electricity prices are mostly driven by renewable subsidies. 20% of the increase, or 10% of bills.
Lomborg goes on to supplement his account of UK fuel bills with a range of anecdotal references to the drastic extents British pensioners have gone to so that they can keep warm during winter. These are indeed tragic stories, which speak to the harsh impact of high fuel prices. As we have seen, however, the extent to which renewables subsidies drive these costs is rather less than Lomborg would have us believe. Moreover, there is some irony in the fact that most of the stories Lomborg sources here are from December 2010, one of the coldest months on record in the UK. The human impact of individual extreme weather events disappears in Lomborg’s typical cost-benefit approach, but he seems happy here to draw selectively on one such event to provide emotional support for his statistically tenuous claims about renewable subsidies in the UK.
Lomborg deals with Germany and Greece much more briefly, as can we. In the case of Germany, he notes that green subsidies cost €23.6 billion, while household electricity prices have increased 80%. The implication, clearly, is that these subsidies are the main cause of increasing prices. But the figures are rather different: the renewables surcharge through which the green subsidy is levied accounted in 2014 for 18% of household electric bills. Certainly, this is a sizeable surcharge and, indeed, Germany has since moved to revise the subsidy system in order to limit its further expansion. There are two issues in Lomborg’s presentation of this situation, however. Firstly, despite his faith in a cost-benefit approach, he has made no attempt in either the UK or German case (or, for that matter, Greece) to quantify the extent to which renewable subsidies account for increasing fuel costs. As we have seen, quantification presents a much more nuanced picture that his account implies. Secondly, while it does appear that the German subsidies were, at least from a political perspective, unsustainably high, this is clearly not an argument against all subsidies.
Lomborg’s final, brief, case is Greece. In this case, Lomborg simply asserts that ‘tax hikes on oil have driven up heating costs by 48%, more and more Athenians are cutting down park trees, causing air pollution from wood burning to triple’. This is indeed a case where it seems clear that a massive tax hike led to increased fuel poverty, as well as reportedly being fiscally counterproductive as the total revenue from the tax has fallen as people stopped buying heating oil. But, in the context of Lomborg’s article, it is not clear what relevance this case has: this appears to be a poorly thought out and implemented tax on oil, which has nothing directly to do with renewable subsidies. There is no mention of renewables – solar, wind, or otherwise – in Lomborg’s account.
Fuel Poverty and Renewables
Of course, where the Greek case is of relevance is to broader debates about rising fuel costs and their distributional impact. One of the main thrusts of Lomborg’s piece that we haven’t yet discussed is that increasing fuel costs hit the poor harder than the rich. This is undoubtedly true – energy consumption for the poor is much more inelastic than for the rich.
But the important question this raises, from the perspectives of renewables, is how far renewables account for increasing energy prices. There is clearly a huge range of factors accounting for energy prices. Market prices for crude oil and natural gas are one important driver. When Lomborg wrote his article, the crude oil price was over $100 per barrel, having broken the $50 mark for the first time since 1985 in July 2004 (excluding a brief spike during the First Gulf War).
Lack of effective competition in the energy supply market can also contribute to high prices. Indeed, the source that Lomborg uses for his account of Greece cites an explanation for the country’s high prices in a monopolistic law that protect the country’s two refining companies from competition. A recent study from Cambridge University’s Energy Policy Research Group found that an Ofgem initiative to reduce regional price discrimination had the counterproductive effect of reducing competition at a cost of £1 billion to consumers. These are both cases of apparently poor policies that are negatively affecting fuel prices. But they have nothing to do with renewables.
None of these issues get mentioned in Lomborg’s account. The clear implication instead is that fuel prices are driven primarily by renewables subsidies.
To conclude, energy prices have been rising in the developed world, and this has had a severe deleterious effect, particularly on the poor. This is indisputable. But to lay the blame at the feet of subsidies for renewables, as Lomborg does, is unjustifiable. In order to even begin to justify such a claim, one would at least need to quantify the contribution of renewable subsidies to increasing prices. This is something Lomborg consistently refuses to do in this piece. My own attempts have suggested a relatively small proportion of increasing costs can be blamed on renewable subsidies.
Critics of Lomborg stand accused of ‘ideological hysteria’. It seems to me on the basis of this analysis that this accusation, if anything, should be pointed in the other direction.
 If any readers can provide a source for this claim, I will happily update this post.