• Solutions to existential threats don’t need a cost-benefit analysis… right?
  • The costs of net zero are no longer just assumptions
  • A very different sort of consensus on climate change

It’s difficult to do a cost-benefit analysis when you’re trying to save the planet. Well, if you claim to be trying to save the planet, then a cost-benefit analysis is conveniently obsolete…

We learned this lesson the hard way during the pandemic. Subsequent calculations of whether pandemic policies made any sense have been a bit critical of what went on. Once you consider the costs as well as the estimated benefits, things look a bit different than in 2020.

One Australian economist estimated that the cost of Australia’s lockdown was 68 times greater than the benefits. That’s 68 times, not 68%…

A UK estimate that considered the worst-case scenario for Covid estimated that the costs of lockdown would be 40% higher than the benefits.

And yet, we pursued these policies because the decision-makers and experts forgot to consider the costs and focused purely on the benefits instead. Quite a few decisions make sense if you do that sort of analysis…

At the time of the pandemic, it probably seemed like any price was worth paying to avoid the horror scenario being painted by “the models”.

But what if someone had done such a cost-benefit analysis in order to ponder whether pandemic policies really were a good idea? Our prime minister claims to have worried out loud that the costs might outweigh the benefits. So why not do the maths?

It would’ve, at least, forced people to expose the assumptions they were making about the pandemic’s risks and the policies’ benefits. Publishing such assumptions might’ve radically changed how the pandemic unfolded. It would also have provided governments with a less embarrassing way to admit that their past policies had been misguided because of mistaken assumptions. We could’ve avoided subsequent mistakes that were motivated by doubling down to avoid admitting that they were wrong.

It has become popular to say that we shouldn’t try to lay blame on decision-makers for past mistakes, given the heat of the moment. How that applies to lockdown parties, extramarital affairs and other transgressions, I don’t know.

The polite argument against a “forgive and forget” attitude is that we need to establish what happened in order to avoid repeating past mistakes. But it’s unlikely that we’ll face another pandemic before those lessons are forgotten.

It’s not like we learned the lessons of 1920 in 2020. There’s a good reason that lockdowns, masks and the two-metre rule weren’t on the pandemic agenda going into the crisis, after all. They don’t work as a public policy tool.

The thing is, we can apply the same lesson about cost-benefit analyses to other equally vast public policy programmes instead. What if we’re making the same mistake on climate change? The same lack of a cost-benefit analysis for pandemic lockdowns seems to be lacking for climate lockdowns, and for the same reasons.

Climate change is posed as an existential threat. So, what’s the point of doing a cost-benefit analysis? We must do whatever it takes to get to net zero.

Heck, even mentioning that climate change has benefits can get you into big trouble, which is an inconvenient fact that is going to upend geopolitical alliances in the coming years.

That’s the theme of Neal Stephenson’s book, Termination Shock. It discusses how those nations harmed by climate change and those that benefit will suddenly rejig the geopolitical alliances we’re used to, making for some very strange bedfellows.

But perhaps the world is already waking up to the lack of a cost-benefit analysis on climate change. Because, just as with our pandemic response, the costs and benefits of climate change policies are beginning to emerge too.

Those never-attempted cost-benefit analyses for climate change policies are now more than just vague guestimates. Ever more assumptions about the costs and the benefits are being filled in with real numbers. Who bears the costs of climate change policies is increasingly being revealed. And it’s not pretty…

Even the wind industry, which should be absolutely booming right now, is instead imploding. The latest example comes from the US and Bloomberg:

Eversource Energy is in advanced talks to unload its share in three offshore wind projects that it planned to build with Orsted A/S, and will take a fourth-quarter charge of as much as $1.6 billion.

The US firm is in exclusive negotiations to sell its 50% stakes in the developments to a “global private infrastructure investor,” it said Monday in a statement. The move follows writedowns by Orsted across its American portfolio in 2023, which helped send the company’s shares to the lowest level in years.

The way capitalism works is that it allocates capital to profitable purposes. It is profitable because people want it and are, therefore, willing to pay for it.

When capital is allocated to unprofitable purposes, we don’t just end up with bad assets and losses for investors. We also waste vast amounts of resources that would’ve been used to meet genuine demands.

Capitalism’s enforcement mechanism is that capital-wasters eventually go bust. They simply can’t afford to continue to make such mistakes.

Here’s an example of how that works well in practice: car rental company Hertz has announced that it will dump its vast electric vehicle (EV) fleet and pivot back to combustion engines. The company gives three reasons: consumer demand, the vast costs of maintaining EVs and the terrifying losses from selling used EVs.

What we have in the government’s world of green energy projects is rather different from Hertz’s experience. The Telegraph reports that the UK is plagued with phantom green energy projects that the government is unable to unmask:

A crackdown on ‘phantom’ energy projects meant to cut the decade-long wait for grid connections has stalled after a surge in applications from speculators made the queue even longer.


Wind farms, solar farms and other developments totalling 15 extra gigawatts have joined the queue since October – roughly equivalent to the output of 12 nuclear power stations.

Developers’ attempts to game the system have infuriated Jonathan Brearley, chief executive of Ofgem. This week he declared the system “no longer fit for purpose” and announced a second crackdown.

He is to announce plans to block all future attempts to join the grid connection queue unless energy developers can prove their projects are financially viable and have gained the appropriate consents.

So, in response to the debacle it has created, the government is going to decide what’s viable and what’s not. What could possibly go wrong?

Such a bizarre situation simply wouldn’t happen in a free market – not that they aren’t entertaining. Even phantom energy projects have rights if they’re green enough on paper:

Ofgem and ESO have also struggled to remove projects. Many developers have threatened legal action, meaning it will take until at least the autumn for the first removals.

It reminds me of the privatisation of rail in the UK. By privatising the trains but not the track, we get the worst of both worlds.

Some of Europe’s most important industries are failing or under threat thanks to climate change policies. European car manufacturers can’t meet the EV demand imposed by policies designed to phase out combustion engine vehicles, for example. The sales could go to Chinese companies instead, cracking open the European car market in a way that European car companies might not be able to compete with.

In Germany, which is experiencing outright deindustrialisation under its Greens coalition government, house prices have begun to reflect the environmental mania. With house prices plunging, economists have helpfully highlighted how a good chunk of the damage is being done by energy efficiency rules.

The cost of upgrading and then running the existing German housing stock at an energy efficiency demanded by new regulations is eye-watering enough to show up in the market prices, to put it mildly. The link between environmental rules and plunging house prices is a certain way to put the public off green policies. It impoverishes them by slamming house prices and then raises the costs of bringing those houses up to scratch… if they can be.

Another option, if you want to kick up a ruckus against climate change policies, is to make farmers dependent on subsidies and then pull those subsidies in the name of the environment. Hell hath no fury like a subsidised industry scorned. And so German farmers, perhaps the most mellow bunch of individuals I’ve ever come across, have taken to the Autobahn on their tractors to clog up traffic. This is like Britain boycotting tea – a sign that hell has frozen over instead of global warming.

Back in the UK, the government has calculated that its planned threefold increase in electricity pylons will impact hundreds of thousands of households. Renewable energy can’t just be placed where it makes economic sense, after all. But what will happen to the value of all those homes and the land they sit on?

Even central banks have been caught out on the cost side of the cost-benefit analysis of going green. “Bank of England’s net zero focus ‘jeopardises’ inflation fight,” reported the Telegraph of the House of Lords’ Economic Affairs Committee. That won’t be popular after the last two years of inflation…

The good news is that, in the wake of the inflationary outburst, many people are already having to make the many lifestyle changes that the government is planning for us anyway under climate change policies: eating less meat and dairy, rarely leaving our walkable cities and avoiding holidays.

Strangely enough, even the rollout of green energy projects doesn’t escape the lack of a cost-benefit calculation entirely. They remain subject to environmental regulations designed to protect the environment, which green energy is trying to save. And, given green energy’s rather humongous environmental footprint, that’s proving a bit of a problem.

Australia has rejected a vast new “wind port” over the impact on wildlife. Bizarrely enough, we’re talking about an offshore wind farm…

In Panama, a crucial copper mine that was set to fuel the vast green energy transition has been cancelled by the government over environmental concerns.

I suppose if you cancel wind farms, then you might as well cancel copper mines too. But it seems a bit hypocritical given the existential threat we face… right?

All of this makes me wonder whether the consensus that emerged on lockdowns and other pandemic policies is going to emerge on climate change policies next, in much the same way. The public will increasingly realise that it was conned by the absence of a cost-benefit analysis on the whole effort.

And, once we do such an analysis, the result could be startling.

The reckoning could be ugly, whether you choose to try to profit from it or not.

Until next time,

Nick Hubble
Editor, Fortune & Freedom