According to the European Photovoltaic Industry Association, convergence will occur in southern Italy by 2010, Spain will follow two years later, and by 2015 Germany will see convergence.

There is another point here that gets missed. The cost of renewable energy is falling all the time. Imagine it does indeed fall to the same level as energy from fossil fuels by the midpoint of this decade. If it then continues to fall in price, by 2020 it will be a lot cheaper. Take into account the work from geneticist Craig Venter, who is trying to create an artificial life form that can suck carbon dioxide from the air, and convert it into a means for storing energy – and in related research is looking at creating a new form of algae that can be used as fuel. Strictly speaking, the energy forms Venter is trying to create will be forms of fossil fuel, but remember they will also suck up carbon dioxide, so these forms of energy may prove to be carbon neutral.

According to Bloomberg, the leader in the production of solar panels is China. And as demand rises, the cost of production falls. The Bloomberg report suggests China could do to the solar power industry what Japan did to consumer electronics. (Back in the mid 1970s, the author recalls his parents splashing out £176 on a new hi-fi. Imagine that, £176 back then was a lot of money. But the hi-fi was nothing special – even then. Today you get something far superior, for less money – after allowing for inflation, today’s products are a fraction of their cost 40 years ago.) See Bloomberg: Rutgers’ Chinese Solar Panels Show Clean-Energy Shift

The truth is, the production of solar power and the developments in genetics are progressing at a rate that is similar to what we see in the computer business, and is defined by Moore’s Law.

An argument against nuclear power that is not widely understood relates to this point. It can take up to 20 years from planning to completion of a nuclear power plant; changes in technology are therefore shut out. The reason why viruses are so hard to combat lies in their reproduction rate. The time frame from one generation of the virus to the next can be measured in minutes. So the virus evolves at an extraordinary pace. The general rule of thumb, the shorter each generation the faster evolution can work. Moore’s Law has worked in the computer industry thanks to the combination of soaring demand, and the way chips are made in such huge quantities. Chips effectively mutate rapidly, because the generational gap is so small. It is like that with solar power, too. It is not like that with nuclear. The danger is, if we throw resources at nuclear, demand for renewables will fall, and technological progress will slow.

China is a massive consumer of fossil fuels. The IEA reckons China’s imports of oil will quadruple from the 2006 level by 2030.

The IEA is probably wrong. It is not taking into account the potential for new forms of energy to make oil obsolete as a means for providing energy.

And that is why the growth cynics, who say all growth is down to our burning of fossil fuels, and why it will soon come to a shuddering halt, are wrong.

And that is why this column predicts the price of oil will fall over the next year or so as the global economy slows; it will shoot up come the recovery, and will fall again once renewables fall in cost to the levels we anticipate.

Yesterday, a report from a committee of MPs looking into the so called climate change cover up, backed the good Professor Phil Jones. It wasn’t an unequivocal backing, and one of the MPs who produced the report didn’t consent to its findings, but the professor was backed in the way that matters.

“Whilst we are concerned that the disclosed e-mails suggest a blunt refusal to share scientific data and methodologies with others,” said the report from the MPs, “we can sympathise with Professor Jones, who must have found it frustrating to handle requests for data that he knew – or perceived – were motivated by a desire simply to undermine his work.”

The report went on to say: “Critics of CRU have suggested that Professor Jones’s use of the words ‘hide the decline’ is evidence that he was part of a conspiracy to hide evidence that did not fit his view that recent global warming is predominantly caused by human activity. That he has published papers – including a paper in Nature – dealing with this aspect of the science clearly refutes this allegation. In our view, it was shorthand for the practice of discarding data known to be erroneous. We expect that this is a matter the Scientific Appraisal Panel will address.”

The chairman of the committee, Phil Willis MP, said: “The focus on Professor Jones was misplaced. His actions were in line with common practices and those practices need to be changed…There is no evidence that Jones’s work has been undermined in any way… Jones has in many ways been scapegoated… people were asking him for information purely to undermine his research, but that was no excuse [not to release it].”

Now the report did criticise the professor, and did call the culture of secrecy unacceptable.

So how does the Daily Mail portray the findings of the committee? Its headline declared “Climategate university condemned for ‘unacceptable culture of secrecy’.”

Read the article and, yes, it said that, actually, the Prof was exonerated, but by then it was too late. You just know that sceptics will read the headline and pay scant regard to what the committee really said.

According to Greenpeace, the oil company Koch Industries donated no less than $73 million to climate change opposition groups. It reckons that 20 congressmen and senators received money from the company.

Critics of the man-made hypothesis say that it is just a money-making scam, but this criticism is surely too rich for words. The money-making scam is on the other side.

It is all too easy to examine a massive weight of evidence and find flaws in a tiny proportion of it.

James Lovelock, the author of the Gaia Earth idea and one of the first to warn of the dangers of man-made climate change, has said humans are too stupid to do anything about it. In the Guardian he was quoted as saying: “I don’t think we’re yet evolved to the point where we’re clever enough to handle as complex a situation as climate change.” He added: “The inertia of humans is so huge that you can’t really do anything meaningful.”

Given the way some of the media have portrayed this debate, and the enthusiasm by which cynics seize upon the most dubious evidence with such enthusiasm, it is hard to disagree with Mr Lovelock. Although, in truth, the backlash against climate change may have more to do with the madness of crowds rather than the stupidity of humans – or is that the same thing?

 There is a snag, however, sceptics on climate change can be summarised by two words:

There is a problem with us humans, and it’s a problem scientists are all too familiar with.  It is called the conformation bias. Once we make up our mind about something we look for evidence to support that view.  It can be anything. We may decide we don’t like such and such a person, and from that moment on we ignore every good thing that person does, and see overwhelming evidence we are right.

The confirmation bias is everywhere.  And we are all guilty. That’s every one of us.

But nowhere is this bias more obvious than in the debate over climate change.

Take as an example the latest furore over some of the science behind melting glaciers in the world’s mountains.  It seems some of the science was wrong.  Therefore, conclude sceptics, climate change is wrong.

The truth is, the scientific evidence to support climate change is enormous, simply enormous. Inevitably, some of it is wrong, or based on false assumptions. The latest furore is over a scientific claim from 1990. The data behind that claim was wrong.  And the cynics jump on this. They ignore the wealth of research since which has made far more serious findings: Their confirmation bias tells them to ignore everything that contradicts their belief, and just home in on the odd bit of evidence that supports their view.

Take as another example, a claim climate change cynics make much of; that global temperatures stopped going up after the year 2000.  This claim is actually both false, and misleading. Firstly it is false because if you take average global temperate including sea temperature, instead of just average air temperate, then actually temperates were rising after 2000.

More to the point, the data the cynics are so fond of quoting was influenced by the El Nino of 1998.  This had the effect of increasing air temperate that year, but not sea temperatures. If we were to remove 1998 from the equation, then actually even global air temperate have been steadily rising since the millennium (And by the way, some take the cold winter we have been experiencing as proof climate change is wrong. They ignore that fact that Down Under this summer was especially hot.)

It is possible there is an explanation for rising temperatures that has nothing to do with the burning of fossil fuels, but the fact is the world’s temperatures have being steadily rising since the Industrial Revolution, and this trend appears to be continuing.

Take as another example, the argument that there are vested interests among the climate change lobby. This argument is too rich for words. The value of proven oil reserves is around $60 trillion dollars. If you want to see where the vested interests lie, look at the other side of the debate.

Some cynics claim that the debate is one sided. The problem here is that the number of scientists who believe in man made climate change so grossly outnumber the cynics that it is difficult to air both sides.  And indeed, by airing both sides you create the false impression that scientific opinion is split down the middle.

The real problem with the climate change cynics, however, lies with two words.

These words are: ‘wishful thinking.’ No sensible person wants the man made climate change hypothesis to be right. But, alas, that is not a good enough reason to reject it. Wishful thinking, has fed our confirmation bias. Battling that is a hugely difficult task, and that is why scientists who express the cynical side are treated with such scorn. |

 PS For more on the Confirmation Bias see this extract, taken from Bubbles and Wisdom, a new book co-written by the Investment and Business new editor and founder Michael Baxter:

We have a tendency to look for evidence which supports a view we already hold, but, more importantly, tend to dismiss evidence which contradicts our view. And we all do it. The confirmation bias can explain why different crowds operating in relative isolation from each other take on such opposite views. So, the US sees Iran as part of the axis of evil, Iran sees the US as the Big Satan. People in both cultures see ample evidence to support their view. The conformation bias is the stuff wars are often made from. It is the material that makes up bigotry and prejudice

One set of arguments say the job creation elements is being exaggerated, and most of the jobs will come from abroad.

Another set of arguments says wind energy is no good anyway, it is unpredictable, and therefore not efficient.

Yet a third set of arguments looks at the impracticability of building the farms, the time it will take and the huge engineering challenge.

The critics are wrong. The third arguments contradicts the first argument, and those who say wind energy is not practical miss the point

Plans to build a £100bn wind farm in the North Sea are ambitious alright. And right now, there is a lack of people with the necessary skills, and lack of manufacturing capability in the UK. So inevitably much of the money will go abroad.

But on the other hand, this project has got years to run. The government is hoping the farm will be complete in 2020.

So that’s ten years away. It is a massive error to look at the UK’s infrastructure now, at the beginning of the project, and say we can’t do it. We have got ten years to create the infrastructure and ten years to train workers.

The skills and expertise the UK is set to gain will work to our benefit for years afterwards.

Remember the cheap pound. Things don’t happen over night. The pound crashed less than two years ago, making the case for UK based manufacturing stronger, but it takes time to adjust, to build up domestic capacity, but adjust it will.

Of course much of the money being spent will go overseas.

The error critics make is to forget about specialisation. The more one specialises, the better one gets at doing something. The City’s strength is that it is a network of specialists. The UK could build up a similar network but in wind power within the next few years.

There is another point. Wind is one of the few natural resources Britain is rich in. The UK is apparently, the windiest country in Europe. The wind farm project provides us with an opportunity to work with this natural resource, a resource by the way which will never run out. Over time, we can develop expertise. This was harder to achieve when the pound was expensive, but now it is different.

Then there is the argument that wind power is no use anyway.

According to a report produced for the Centre of Policy Studies – Wind Chill: why wind energy will not fill the UK’s energy gap, by Tony Lodge – wind power is expensive, very expensive. In fact, the report argues, in Denmark, which leads the world in wind-generated electricity, wind farms have been a disaster. ‘The Danish grid used 50 per cent more coal-generated electricity in 2006 than in 2005 to cover wind’s failings. The increase in the demand for coal, needed to plug the gap left by underperforming wind farms, meant that Danish carbon emissions rose by 36 per cent in 2006,’ says the report.23

Critics of wind power miss the point.

Firstly, wind power is more effective if the turbines are spread over a large area. Denmark is a small country. One assumes the weather does not vary much across the land at any one time. In the UK, and even more so in the US, it is possible for there to be no wind at all in some areas, but for it to be blowing a gale in others.
Secondly, they forget about specialization. We have had over a century to hone our skill in exploiting oil and other carbon fuels. The quest to exploit renewables has only just begun.

Wind power is not the entire solution to Britain’s energy needs. When the wind stops blowing the power stops. This is why alternative forms of energy generation are required. The key to making wind power work in the long run lies in energy storage, which will enable the surplus power generated when it is windy to be saved and used when the weather is calm. In the long run, the energy crisis can be met via a combination of wind power, innovation in how we can store energy, other forms of renewables, and with traditional carbon based forms of energy generation there as back up.
But without the initial investment, this solution will simply remain elusive.

Answer…Well wait and see.

It is surely only a matter of time before the press start saying the cold spell we are experiencing at the moment disproves global warming. After all, during the summer, every time we have a hot day, someone says: “I rather like this global warming.”

The truth, as you probably know, is that there’s an awful lot of randomness out there. And the laws of randomness say we occasionally get what appear to be patterns. Toss a coin in the air 100 times, chances are you will get the same side, either heads or tails, several times in a row, but this does not mean the coin is weighted. In fact, if you do toss a coin 100 times it will be a big surprise if you get 50 heads and 50 tails. The ratio could be 70/30, and it would prove nothing. The only times things start looking odd, are if you correctly predict the result in advance, over and over again.

The debate over global warming does occasionally descend into silly territory. Global temperatures have been rising for the last 200 years, a period which coincides with the onset of the Industrial Revolution. It is possible that carbon dioxide emissions from industrialisation led to rising temperatures, but it is equally possible this is a coincidence. We can’t be sure of either. Some say global temperatures peaked ten years ago, disproving the man made global warming thesis. This is equally meaningless. In fact, the temperate chart has been skewed by the El Nino in the late ‘90s which led to an abnormally warm surface temperature. Besides, if you include sea as well as air temperatures in your reading, then actually the evidence suggests that the climate continued to warm during the first few years of the 21st century.

But these arguments are just a side show. The real point is that we don’t have anywhere near enough data to say one way or the other.

Then there’s inflation. According to the BRC, shop price inflation surged to 2.2 per cent in December, and food prices inflation went from 2.8 per cent the month before to 3.7 per cent. How many times do you read that the deflation scare is a myth, that there is no evidence to support this theory? The truth is that the recent swings in inflation prove nothing, and are largely explained by changing commodity prices. The graph showing the price of oil over the last few years seems to follow the trajectory of a roller coaster, other commodities have followed a similar course. In the long run inflation is caused by the relationship between demand and supply and by changes in the money supply versus changes in capacity. The day to day readings mean very little.

House prices, measured in real terms, went up for decades from the 1930s onwards. Therefore, goes the argument, house prices will go up forever. The truth is there are lots of reasons why house prices may have gone up during this period, and there is no reason to believe these factors will be repeated.

If you take a wide enough sample, autism will develop in some members of this sample. There may even be pockets within this sample when several people living either near each other, or with something else in common, develop autism at the same time. This neither proves nor disproves some kind of relationship. So when some kids developed autism after taking the MMR jab, this did not prove one caused the other.

Take another example, our tendency to think we have witnessed a miracle. In an article for Scientific American (September 2008) Michael Shermer wrote: “Let us define a miracle as an event with million-to-one odds of occurring (intuitively, that seems rare enough to earn the moniker). Let us also assign a number of one bit per second to the data that flow into our senses as we go about our day and assume that we are awake for 12 hours a day. We get 43,200 bits of data a day, or 1.296 million a month. Even assuming that 99.999 percent of these bits are totally meaningless (and so we filter them out or forget them entirely), that still leaves 1.3 ‘miracles’ a month, or 15.5 miracles a year.”

Take as another example an anecdote from the book Freakonomics. Folklore tells the story of a kingdom where disease broke out across the land. The king noticed that in the areas where disease was especially rife there were a high number of doctors. So he had the doctors executed.

So what can we conclude? Be very careful when you are looking at numbers, and the best conclusion you can draw, more often than not, is: “I really can’t tell from this data.” It is, by the way, a lesson investors should learn, too.

The ideas in this article are also described in more depth in a new book, written by Michael Baxter, the author of this article and to be published shortly. See www.bubblesandwisdom.com

Ed Miliband was so outspoken on the Copenhagen debacle that the Guardian was moved to paraphrase him with the headline: “China tried to hijack Copenhagen climate deal.”

Muhammed Chowdhury, a negotiator representing the so called G77, which is made up of most of the word’s poorest countries said: “The hopes of millions of people from Fiji to Grenada, Bangladesh to Barbados, Sudan to Somalia have been buried.”

Nnimmo Bassey, chair of Friends of the Earth International, said: “Those most responsible for putting the planet in this mess have not shown the guts required to fix it and have instead acted to protect short-term political interests.”

The Independent headlined: “Historic failure that will live in infamy.”

Venezuelan President Hugo Chavez said: “If the climate was a bank, they would have bailed it out already,” to which he got a standing ovation.

No doubt the chorus of global warming sceptics, led by Nigel Lawson, are cheering the failure.

It was never going to be easy. Barack Obama might be a nice man, but whatever he agrees to he has to get it ratified by Congress.

The Chinese think it is just wrong. The authorities there agree that global warming is real, but think carbon caps should be based on population size, and they argue that, contrary to China being one the world’s worst polluters, it is in fact one of the best – if measured on a per capita basis.

Others in China see global warming as a Western scam designed to keep China down.

As for the rest of the developed world, they just can’t believe the hypocrisy. The West created global warming, or so they say, over two centuries of industrialisation, and now the poorer countries are ready to industrialise they are told they can’t.

Here are a few observations.

Firstly on a downbeat note, the human track record for these things is not good. Tonight on Channel 4 there’s a programme called “Man on Earth”, presented by Tony Robinson. It looks at the story of 2,000 years of climate change and its effect on civilization. No doubt Mr Robinson will conclude that civilization is simply hopeless at realising that its own activities are leading to its inevitable collapse.

The most notorious example of civilization destroying itself is the account of Easter Island. In this land the local population engaged in an orgy of deforestation as trees were felled to use the wood as means of transporting rock to build massive statues. The legacy of this was a society so poor that the author Erik Von Daniken suggested that no such impoverished society could possibly have built the Easter Island statues, proving that the island was visited by men from outer space. In fact he missed the point. The real lesson of Easter Island is that we seem to find it nigh on impossible to change collective behaviours no matter how dangerous that behaviour is.

The next observation is that cynics of global warming miss an important point. The alternative to burning fossil fuels is really not that bad. The reason why fossil fuels seem more efficient than renewables at generating energy is simply that we have two centuries and trillions of dollars of specialisation behind carbon based energy. If the world’s leaders were to collectively agree to channel some big money into renewables (but small in relation to spending on energy), then within a few years we would see cheaper and cleaner fuels available to all.

Nigel Lawson’s great error is that in his book “An Appeal to Reason” he focuses on the cost of fighting global warming, without looking at the economic benefits.

But the real error of Copenhagen, and for that matter of Kyoto, is carbon caps and carbon trading.

An economically more efficient system, and one that is fairer, would be a carbon tax that redistributes the money raised to everyone in equal proportions.

Such a tax would have the support of economic theory which concedes that taxes can correct errors in the free market when producers do not bear the full cost of production – because costs such as pollution are external.

But by redistributing the money raised to everyone the system would be fair, and in one swoop negate the argument that global warming is a Western scam designed to keep the Third World poor.

Such a tax would redistribute wealth from polluters to non-polluters. And it would be incredibly transparent.

But its transparency is why it is not being proposed. No one wants to see a tax that spells out the advantages and disadvantages so that they are obvious to everyone, including the head in the sand, latter day Easter Islanders of US Congress.

The list of climate change sceptics is getting longer. One of the most vocal members of this list is the former Chancellor Nigel Lawson who, in his book “An Appeal to Reason”, argued that the solutions being advocated to fight climate change will cost far more than the climate change itself.

Here is a quick look at some of the arguments used for and against:

Argument one: there is no evidence the climate is warming up.

The climate changes all the time, there is no doubt about this. During the 17^th century there was a mini ice age, for example. Up until a few years ago the Earth had gone through a period in which temperatures had been rising, but this appeared to come to a halt at the turn of the millennium. Reports suggest that the models produced by climate change scientists can not account for this cessation in rising temperatures. On the other hand, the polar ice caps seem to be melting. For centuries sailors lost their lives in search of the north-west passage, a sea route across the north of Canada. In 2000 a number of ships successfully managed to complete this crossing

One of the more irritating comments spotted on one blog, was the suggestion that Greenland was named Greenland for a reason. In other words, the island was once covered in greenery.  In fact this is not true. The land was named by the Viking explorer Erik the Red who so named the island so as to make it appear more attractive. In other words, Greenland was named by a spin doctor.

There is a lesson in this. Both sides in the debate use spurious arguments to back up their claims.

Argument two: climate change has causes that are not man made

 The truth is that the causes of climate change are complex. Anyone who says they know, without a doubt, what the causes are is either lying, or deluded.

We do know, however, that the climate is heavily determined by both life on Earth and the proportion of carbon dioxide in the air. When the process known as photosynthesis first evolved, the world’s climate changed rapidly. Photosynthesis occurs when plants or other organisms break carbon dioxide down into oxygen and carbon. The evolution of photosynthesis changed the makeup of the atmosphere, boosted the amount of oxygen and forced life to adapt. (Before this oxygen was poisonous to life.) The carbon created by this process is the bedrock of life. Life on Earth is carbon based.

Some organisms, such as cows, are like machines for generating carbon dioxide and methane. The cows process the carbon taken from the grass they eat, and release methane via a certain process that humans are not supposed to duplicate in polite company. This does not mean, however, that cows create global warming. The grass grows back, and re-absorbs carbon dioxide. The process involved is, in-effect, cyclical.

When living things die and rot into the ground, they are passing the carbon they contain back into the soil. Over millions of years, the carbon deposited in the earth when living things die is, after it is subjected to enormous physical pressures and a very long timeline, converted into oil or coal, which we use as fuel. When we burn these fuels we are re-releasing into the atmosphere carbon deposits that had been stored for millions of years. The gradual build up of these carbon deposits over time changed the climate. By releasing them so rapidly, we are reversing a process that was millions of years in the making in just a fraction of that time.

Global warming sceptics claim that their point of view is being silenced

There is probably truth in this argument. Sceptics on global warming are often dismissed as ‘flat Earthers.’  By dismissing this alternative point of view in this way, supporters of the theory of man made climate change do their cause no favour. 

Global warming is a scam, designed to wrangle money out of us

Conversely, it could be argued that much of the science which opposes the idea of man made global warming was supported by companies and countries which have the most to lose from the cap on using fossil fuels. The value of oil currently sitting in proven reserves is after all worth trillions of dollars.

What is clear is that as the population rises, our reserves of fossil fuels may prove inadequate to meet global demand.  It is essential that we rapidly learn how to harness energy from renewable sources. Solar power may ultimately prove a more efficient means of providing energy than do fossil fuels.

According to an article in Scientific American, in May 2008 “the energy in sunlight striking the earth for 40 minutes is equivalent to global energy consumption of a year.”

According to the Trans-Mediterranean Renewable Energy Cooperation: “Every year, each square kilometre of desert receives the solar energy equivalent to 1.5 million barrels of oil.” They claim that the energy which is beamed down on the world’s deserts is 1,000 times greater than the entire global energy consumption. In other words if we were to cover an area of the desert roughly the same size as the South East of England with solar panels, we would generate enough energy for the entire human population. Right now, solar power remains expensive, but the more we invest into exploiting this resource the better we get at it.

Net discount value

If someone was to offer you the choice of receiving £100 now, or £150 in ten years’ time, chances are you would choose the here and now.  The truth is, future wealth is worth less than present wealth, and to adjust the value of future wealth we apply a rate of interest.

Global warming sceptics, with Nigel Lawson at the fore, argue that if we were to discount the future cost of global warming, then the cost of dealing with it today would in fact be much, much greater.

If there was no scope to improve our ability to extract energy from renewables, this may be a legitimate criticism.  But this argument overlooks the fact we have spent trillions of dollars over several hundred years honing our ability to extract the maximum amount of energy from fossil fuels. The equation between traditional and renewable energy is therefore distorted.

The last thing the oil industry wants is for us to enhance our ability to extract energy from alternative and ultimately cheaper sources

Leaked emails

The leaked emails from the University of East Anglia have seriously undermined the credibility of the global warming argument. However, this does not in itself disprove global warming. It has been suggested in today’s Telegraph that the leaking of these emails was in fact a Russian plot, because Russia, with its huge oil reserves has more to lose from a carbon cap than most countries. However, this argument does seem to smack somewhat of fiction, and should perhaps be kept to books and films starring James Bond.

It is easy to find faults and manipulated data on both sides of the argument. It is important we do not let our own biases influence the interpretation of data. 

The danger that global warming poses a worse threat than commonly recognised

It seems to be human nature to understate how serious a threat can be. The credit crunch is a classic example, with economic forecasters such as the IMF and OECD continuously underplaying the seriousness of the crisis. Equally, it is possible that they have underestimated the strength of future recovery.

There is a danger that the methane lurking in the polar ice caps is such that as temperatures rise and the ice caps melt, methane will be released in massive volume.   This could spark off a positive feedback loop, in which global warming accelerates, leading to more rapid melting of the ice caps, leading to the release of even more methane, leading to another acceleration in global warming. At this point it may be too late to solve the problem. 

Conclusion

Climate change is a complex process, and the science of climate change is still in its infancy. Warnings of man made global warming may be wrong, but equally they may understate the danger.

But, whether we suffer climate change or not, it is clear that the world needs more sources of energy.

Providing we are willing to invest the required amount of money, there are potential solutions to our need for fuel that in the long term may not only remove the danger of man made climate change, they may also prove cheaper than fossil fuels.

While these technological opportunities could ultimately benefit most people, the energy companies may actually lose out.

It is important to understand that there are groups with vested interests who simply do not want us to find a cheaper and more efficient alternative to oil.

As you know, it does seem there is a somewhat intractable problem. The share of global carbon emissions taken up by China and India is growing all the time. Some countries, especially the US, have said they won’t cut back on their carbon emissions unless China et al do the same.

But China argues that this argument is just too rich. They say that it was the industrial revolution that was responsible for much of the pressures leading to the apparent danger of climate change. They say it is just unfair that their own development should be held back, when the West polluted the world with such gusto for nigh on 200 years.

But the executive secretary of the UN Framework Convention on Climate Change, Yvo de Boer, has come up with a cunning plan to crack the problem. But, as will be revealed further on, there is another even simpler solution.

Mr de Boer’s idea is rather clever – it seems even Edmund Blackadder would have been impressed by this cunning plan. It goes like this. The system of carbon caps and trading is maintained, but that different sectors carry different criteria.

So some sectors that are perhaps more specific to developing economies, and analogous to activities carried out in the West during the industrial revolution, will have more generous carbon limits.

It is called “global sectoral crediting mechanism”.

It is an interesting idea, but you just know that the vested interest groups will pick holes in it.

For some time now, China has been arguing that the system of dealing with carbon emissions is back to front. It says, rather than making producers pay, you should make the consumers of carbon pay via taxation.

Actually, China’s idea does fit in quite nicely with economic theory. Economic theory says the best way to allocate resources is via the price mechanism. If there is a cost which is external to the producer’s own costs, then a system of direct taxation should be introduced so that consumers are taxed on what they buy. They thus pay a higher price, making other greener products look more attractive.

In this way, price reflects the true cost of production and the price mechanism can be used to determine how consumers split their spending between green and carbon polluting products.

The trouble is, of course, any form of taxation is unpopular. A carbon tax, forcing consumers to pay the true cost of carbon polluting products, would be deeply unpopular. Just recall the protests over fuel tax seen in the UK a few years ago.

The solution is simple, however, and actually, the solution is precisely what economic theory says you should do.

All the money raised via a carbon tax should be given back to people. So if the UK raises around £6bn a year in carbon tax, every man, woman and child across the land would receive a cheque from the government of around £100 a year. It will mean, of course, a transfer of wealth from heavy users of carbon to not so heavy users, but that is precisely how it should be.

Such a scheme would overcome most consumer objections to a carbon tax.

A scheme of this type is not perfect. For one thing, how do you determine the precise level of taxation? But it would surely be the fairest, most electorally popular, and economically efficient means of dealing with the problem.

But, here is another piece of madness for you.

You may have heard, there is this thing called a credit crunch, and to deal with it governments everywhere, and in particular in London, have come up with this idea of spending.

Spend, spend, spend. This is the mantra of today’s world. Before the credit crunch it was us, you and me, and the bloke next door. We spent too much, and saved too little. And now we have run out of puff, the government has taken on the baton.

And yet, while all around sparkling new money is being spent by the government, the one area where such spending can be justified is being starved of the cash it needs.

It beggars belief . But it is true, nonetheless.

When there is underutilized capacity and businesses are not spending, then government spending can make sense if the money being spent is used for future gain. If we blow a few billion on a VAT cut, so what. That’s money down the drain faster than you can say effluence.

If we blow money on bailing out banks, well at least we have stopped the financial system from caving in, but even so it amounts to little more than a patch on the sewage system that is our banks.

But if, instead, we spend the money on building a new infrastructure that will save the UK billions in the future, and help improve the UK’s capacity at the time the baby boomers retire, then isn’t that a good thing?

That is why the news that the world’s biggest ever offshore wind farm project is on the ropes, is a scandal to rank in order of magnitude with the errors made at Lehman, Northern Rock and the rest put together.

The FT put it this way: “Eon UK, the British arm of the German energy group, said the viability of its London Array project, a planned 1,000MW wind farm in the Thames estuary, had been called into question by the falling prices of oil, gas and carbon dioxide emissions permits.”

Those who criticise the government’s spending say we are building up inflationary forces. That our kids will be burdened with a massive tax bill, which will take a generation to pay. And, by the way, this tax bill will need paying just as the baby boomers retire, and the ratio of people retired to those working hits an all-time high.

Well, if you are sufficiently focused on the longer-term to worry about that future tax bill, then presumably you also know that the underlying problem of peak oil has not gone away. Once the economic recovery gets going again, and hundreds of millions of former peasants join the developed world, we will once again find oil is short in supply, and price is up among the clouds.

For that matter, the issue of climate change has not gone away, either.

Some argue that wind power is expensive and unreliable. But that misses the point. The more we do, the better we get at doing it. The cost of wind power will fall, as we become more practised in how to harness Zephyrus himself.

And while wind power is unreliable, we can, through the application of technology, ensure energy generated from the wind is used to power appliances that do not require a steady flow of energy. So, things that require electricity in a more flexible way could draw their energy from the wind. Storage heaters that heat up using electricity, then store the heat, releasing it gradually, are one example. Another might be air conditioning. If you go to bed and leave your mobile phone battery on charge, then all you really care about is that it is charged up when you wake up. You don’t care if it charges in intermittent bursts throughout the night. The big one, though, is the electric car. If you leave your car in your garage overnight, charging, it doesn’t matter when it is charged, as long as it is charged.

In his speech last week, Barack Obama talked about harnessing the power of the sun and the wind. It is a shame that we can not see similar visions in the UK government’s energy policy.

The thing about wind is that the cost of supplying wind power is all upfront. The cost of building the turbines, and, in the case of offshore wind farms, erecting them in the sea, is what costs the money. The payback is gradual and takes years.

So, if the government is going to boost the economy via spending, as Keynes said it should, then it is hard, very hard, to envisage a more ideal recipient of the government’s money than the wind industry. Jobs will be created and new skills that will be tradable abroad in the future will be developed. The UK is apparently the windiest country in Europe – if you like, our rotten weather is a potential asset. So, we can build on this asset, and develop new skills that create a new export sector. Above all, by following Keynes’ advice and investing now, we can provide a source of cheap energy for the future, when the baby boomers are retired.

So why even delay? Well, it just goes to show that the madness of short termism has not gone away.

It is bad timing of course. Who cares about saving the world for the next generation, when the world needs saving for this one? (If only it was as simple as just saving the cheerleader.)

It is just that while climate change may not be topic of the moment, it seems some people do still care. But there is a problem. We are looking at the wrong cure. While the world focuses on the credit crunch, there is a risk that as our eyes turn away from the ball, we will all get hoodwinked into the wrong move.

The cap-and-trade system of carbon trading is not good. It sets arbitrary limits on the amount of carbon that a country can produce. If they miss targets, well, they can just lower them for the following year. And the incentive scheme is just back-to-front.

It is not fashionable to talk about the markets at the moment – right now it seems there is a growing feeling that governments know best. Don’t you believe it. Just because the banks messed up, it doesn’t mean we should ditch markets altogether – if we did, the result would be chaos.

If you believe that price should be determined by supply and demand, with demand reflecting what people think something is worth, and supply what it costs, then carbon trading is all wrong.

Economic theory – even economic theory put forward by Adam Smith, the father of free markets – says if there are external costs, meaning the supplier does not pay the full cost of producing the goods it supplies, then it should be taxed. Smith even singled out pollution as an example of an external cost that justified taxing producers.

There should be a global tax on carbon. That way, price reflects the true cost of consuming it.

But that will hurt too much, and will create massive resentment – goes the anti argument.

Well, no, that is not true. The money raised from a carbon tax should be given back, to everyone, and in equal amounts. That way, those who consume more carbon than average will pay more out more, low consumers will pay less, and the mean-average person will be neither worse off nor better off.

Of course, if you drill into the argument it gets complex. Should the tax and rebate system be calculated on a world-wide basis or country by country? Should the tax and rebate be the same across the world or, for example, should the money raised by a US carbon tax only be repaid to US citizens?

Should some of the money – say, 10 per cent, be reinvested into renewable energy schemes?

But to an extent this is just detail. If we pay the true cost of consuming carbon, alternative sources of energy will become more viable. This will mean investment into these areas will automatically increase anyway.

It won’t do any harm if some of the money raised by carbon tax is reinvested, but it is not necessary. Let prices reflect the match of demand and the true cost of supply, and the market will do the rest.