Matt Ridley: If Hinkley Point C nuclear power station goes ahead, the cost for consumers of subsidising it could be £30 billion, according to the National Audit Office — five times what was originally estimated. The increase comes largely from the fact that fossil fuels are cheaper than even the lowest possibility envisaged by the late and unlamented Department of Energy and Climate Change. The purpose of this subsidy is to ensure that we have very-low-carbon electricity to replace ageing coal and nuclear plants, the better to mitigate global warming. Since Hinkley would emit half a billion fewer tonnes of CO2 during its 35-year life than comparable gas-fired projects, that implies a cost per tonne of carbon dioxide avoided of £60. How does this compare with the cost of the damage that global warming will do in the entire future, per tonne of CO2, a number known as the “social cost of carbon”? The US government uses a figure of $37 per tonne (£28), so we are being asked to pay more than twice as much. Even that probably overstates the cost of carbon. Taking into account more than ten recent studies of climate sensitivity using real-world data, assuming a normal 3 per cent discount rate, and employing two widely used models of climate change, Professor Ross McKitrick of the University of Guelph in Ontario and two colleagues at the Heritage Foundation in Washington DC found that a realistic social cost of carbon was somewhere between $3 (£2) and $30 (£22) per tonne of CO2.
Times 1st August 2016 read more »