Bacon Butty

Environment and conflict in Sudan

2007-12-20T18:10:00.000Z

I've moved to the Sudan... and I'm sitting under a fan in Khartoum writing this... I've now been here a couple of weeks and am no longer totally lost. I've a new job as the UN Environment Programme (UNEP) Representative for Sudan. We hail from UNEP's Post-Conflict and Disaster Management Branch, which addresses the links between environment (or more specifically, 'natural resources') and conflict.

The Sudan programme has had a fantastic start through a two-year project to create a Post-Conflict Environmental Assessment for Sudan, which was published this year and is one of the best surveys of the challenges of a developing country environment you will find anywhere - a tribute to the energy and drive of Andrew Morton, who led the effort. The assessment develops some 85 recommendations, and our job here is to make as much of that happen as we can.

The 'post' in 'post-conflict' refers to the end of the long-running North-South civil war and the signing of a Comprehensive Peace Agreement in 2005. Darfur is another matter and is now moving towards banditry and lawlessness. I recommend Alex DeWaal's blog: Making Sense of Darfur, for insights into that tragedy and the intricate politics behind it.

The environmental pressures are extraordinary - and nowhere more so than in Darfur. The chart above was compiled by my new colleague Brendan Bromwich as part of his work for the charity Tearfund. His work over three years in Sudan has spawned two excellent reports on the environmental pressures in Darfur: Relief in in Vulnerable Environment and Water Supply in a Vulnerable Environment (summary) and much wider understanding of the Darfur environmental challenge. As the chart shows, rainfall in Northern Darfur has decreased since the 1950s and most of the driest years on record are in the last 20 years - we don't know if that is climate change caused by greenhouse gases, local environmental changes (eg. due to deforestation), or some natural variability or a combination of each, but it is real nevertheless. Add to that 6-fold population growth since the 1950s and steady southwards creep of the Sahara desert and it is easy to see how the pressures would overwhelm relatively informal and traditional systems of tenure over natural resources. The key natural resources of trees, fertile land, and water are heavily contested. The UN Secretary General summarised as follows in a speech in September:

But when it comes to providing root solutions to the country's problems, it begins with a core issue facing so many people in Sudan and elsewhere in this region. You all know that the conflict in Darfur began, long ago, in part because of drought. When the rains failed, farmers and herders fell into competition for an increasingly scarce resource. The decisions of man to wage war over these precious natural resources further compounded other factors and challenges. But the fact remains. Lack of water, and a scarcity of resources in general, has contributed to a steady worsening of Sudan's troubles. As part of the solution, the Government with international assistance will have to ensure that the people of Darfur have access to vital natural resources – water being chief among them. The UN stands ready to assist in this effort.

The link between natural resources and conflict is probably felt most strongly through the pressures on and opportunities for viable livelihoods. For the poorest in rural areas, their assets and 'wealth' are environmental (or in the case of livestock, dependent on the environment). One of the best expositions of this idea is the 2005 report of World Resources Institute, The Wealth of the Poor.

For Sudan and Darfur, brilliant work on livelihoods has been done by researchers from Tufts University Feinstein International Center, see Livelihoods Under Seige (2005), Sharpening the startegic focus of livelihoods programming in the Darfur region (2007): report of workshops held in Darfur, and Strategies for economic recovery and peace in Darfur (2007). These provide great insights into the ways out of the Darfur conflicts - to the extent that you can be optimistic at all about Darfur, it is through thinking about how livelihoods might develop or re-establish.

The UNEP programme, in a only a modest way, will aim to move this mighty agenda forward, through a series of projects that are underway or under construction...

Darfur Integrated Water Resources Management - how much water can be abstracted and how should scarce water resources be managed and shared between competing uses and users - and what is the right model of governance?
Darfur Timber and Energy - plant millions of trees in Darfur and find ways to reduce demand for wood, for example through fuel efficient stoves and use of stabilised soil blocks for construction instead of timber
Darfur aid and environment - how can the massive international operation (the UN, donor nations and NGOs) in Darfur operate coherently within environmental and natural resource constraints?
Capacity building - for the Government of National Unity and Government of Southern Sudan.
Mainstreaming - how do we deliver on the recommendations of UNEP's environmental assessment? An almost unlimited opportunity to improve the lot of people all over Sudan.

It will be very challenging but the one thing I've understood since being here is that most people involved 'get it' at a fundamental level, and mainly need to work out what needs to be done and how to do it. There certainly no shortage of commitment from high levels in the UN, willingness from donors and a lot of enthusiasm amongst the government officials and Sudanese people I have so far met.

I'm not sure I'll have much opportunity for blogging - I'm in a diplomatic job, and that means being, er, diplomatic. But I hope to post occasionally on interesting policy issues in Sudan and to keep an eye on the international environmental agenda, mainly from a technocratic rather than political perspective. I won't be doing a travelogue, personal diary or expressing wonder at the new experiences I am bound to have - I'll spare you that!

Asking the wrong question - biofuels

2007-11-14T23:35:00.000Z

I don't want to do a full scale critique of biofuels - not least because that would be to enter an already crowded field [see Biofuelwatch and Global Subsidies Initiative, for example]. But it's worth looking at how narrowly-focussed, bottom-up policy-making now means we have somehow put the most financial support into the worst ideas...

Instead of asking how to reduce transport emissions from road fuel substitution, we should be asking how to make use of land to tackle climate change in the most effective way possible. In coming up with the biofuels targets, policy-makers have asked, and answered, the wrong question. It's not hard to see why... transport policy-makers have to find transport policies. The results: waste, damage and lost opportunities to do better...

There are two main problems with biofuels:
(1) they are a very expensive way of saving carbon, compared to the alternatives (at least 10x the going rate in the EU ETS)- see chart and click to view in detail;
(2) there are substantial negative 'sustainability' impacts, arising from changes in land use for biofuel production - for example deforestation, water impacts or land shortages. Beyond rhetoric, we appear almost indifferent to these.

Despite these weaknesses, we now have extremely powerful and expensive policy instruments devoted to promoting biofuels. These are ambitious targets set at EU level (EurActiv and appendix below) and the Renewable Transport Fuel Obligation introduced in the UK to meet the EU targets (DfT RTFO pages).

Expensive emissions reductions. I've drawn the chart above from data from the government's UK Biomass Strategy [Working Paper 1 - Economic analysis of biomass technologies, Table 30 /spreadsheet /XLS]. It shows that the RTFO is focussed at the most expensive end of the range of biomass options. In fact, these are at the expensive end of all carbon abatement technologies - perhaps 10 times the going rate in the EU Emission Trading Scheme. But the RTFO is supposed to save 3.6 million tonnes of CO2 (1 MtC - see Energy White Paper 7.31) by displacing 5% of petrol and diesel sales... that's about 2.5 billion litres of fuel.

Huge subsidies. Normally with these obligations, you would expect the consumer to pay any premium cost associated with meeting the obligation as the supplier just passes higher costs through. The subsidy system that underpins the RTFO will cost about 30p/litre in 2010-11... of which 20p is carried by the taxpayer (does the polluter pay? Er... no) through a discount of fuel duty and the rest will be passed on to consumers (see Transport FAQ]. 30p subsidy on 2.5 billion litres is a lot: £750 million per year - £500m from the taxpayer. No wonder the farmers like it.

Ludicrous carbon costs. The implied carbon price in the RTFO is over £200/tonne CO2 (higher than the figure in the chart above). That same £750m/year spent through the EU ETS at a future price of £20/tonne CO2 would realise savings of about 10 times as great as the RTFO. Also, as the chart shows, you would also get much better value for money from almost any other biomass investment. So our biggest instrument is pointing in the wrong direction - and it is extremely inefficient and wasteful.

How has this happened? Why, you might well ask, is the government acting so irrationally? Forcing very large sums into inefficient policy instruments for little environmental gain. I think this illustrates an important failing of climate policy. Obviously this has its origins in the EU (in which the UK is an accessory to poor decisions taken by the Council), where the biofuel targets have been set at arbitrarily high levels. I suspect the idea of biofuels targets have come from policy-makers asking the question: “how do we reduce the emissions from transport?”. They conclude that fuel substitution is one of the best options they have then designed a mechanism to make that work - but by indiscriminately subsidising a change of land-use in Europe and beyond. Perhaps they feel an implicit sectoral burden sharing regime at work... that transport must somehow take its "fair share" of the reductions compared to power station, chemical plant and homes. Of course, the climate is indifferent to burden sharing... it doesn't care where the reductions come from. Reading the Energy White Paper [Transport section], you can feel the implicit burden sharing in the text:

For transport to reduce its climate change impacts we need to enable smarter, more energy efficient use of transport and we need to reduce carbon emissions by bringing about changes in the types of vehicles and fuels we use.

The biomass strategy goes further [UK Biomass Strategy p7]- it recognises that transport biofuels sit at the expensive end of a hierarchy of biomass options, but then concludes it would be simplistic to think about it like that...

... despite their higher cost of carbon, transport biofuels are essential to carbon savings in the transport sector for which there are few other options in the short to medium term.

But this is the simplistic thinking... we should get the emissions reductions where lowest cost and least damaging overall. The issue is that no-one has the policy brief to optimise these resources: but there is plenty of muscular transport policy-making going on - trying to do the wrong thing well, and establishing a meaningless policy priority.

Land grab. The effect of this is that transport-related climate policy lays claim to a big expanse of agricultural land, in Europe and beyond, to grow the necessary crops supported by huge subsidies passed through to grateful/greedy farmers. This brings about land-use changes and the various forms of collateral damage that flow from that. But this is completely the wrong way to determine this sort of policy: the real question should be how do you get the best climate change result from the land use policy? Because the current policy starts from the silo of meaningless transport priorities, it ends up doing the wrong thing with land. Start from land-use and you may do much better for the climate overall, even if that means lower emissions reductions from transport. But what is the aim...? It's the climate!

Using land in a way that reduces carbon dioxide emissions more cost effectively would either reduce the land-take and agricultural impacts for a given result, or it would allow for a greater beneficial impact on the climate for the same land take. Not only is it an important economic objective to to get the economics of climate change right, it is important for the environment.

Grow forests instead...? An excellent articulation of this idea appeared in August in the journal ‘Science’ [article][bootleg PDF] discussing alternative uses for land and challenging biofuels subsidies. They argue that using land for forestry can be far more effective than growing biofuels in carbon terms over 30 years.

It points out: “As land is the limiting resource, the appropriate basis for comparison is a function of land area (Mg C ha^-1 year^-1)” and concludes that growing or protecting forests on the same land would give a much better climate change result over 30 years:

In all cases, forestation of an equivalent area of land would sequester two to nine times more carbon over a 30-year period than the emissions avoided by the use of the biofuel. Taking this opportunity cost into account, the emissions cost of liquid biofuels exceeds that of fossil fuels.

But could they get cheaper if we invest now...? the stand-by excuse of technology-promoting scoundrels everywhere is that we need big subsidies now to prepare for the brave new dawn tomorrow. I agree you need an innovation system - but it's not obvious that you get to cheap second-generation biofuels via lavish subsidies for a very large uptake of expensive dead-end first generation biofuels. For now, the best transport responses are fuel efficiency and changes in driver behaviour. Longer term it's about mobility demand and the physical layout of our lives.

Conclusion
It is probably better to grow or regrow forests and ensure that they aren't cut down than rush into biofuels. It is better to use land for almost any other biomass technology than biofuels. More generally, we should see land as one of the resources available to address climate change and build the optimum approach from land-use policy, not let imaginary imperatives in transport policy cause arbitrary and inefficient land grabs. We do not have an adequate system for asking the right questions about biomass, biofuels and land-related carbon policy - and that needs to change.

Appendix ... Related posts...
Escaping the reckless RU renewables targets - Aug 2007
Renewable energy targets - why is the EU involved? - Feb 2007

Related graphic...

Heads you win, tails I lose - the City explained

2007-11-04T11:55:00.000Z

Imagine your job is taking huge gambles with other people's savings and pensions. Imagine also that the bets are arranged so that you are paid a fortune when things turn out well, but you don't lose anything much when they go wrong. How would you behave...?

I think you might rapidly develop a hog's appetite for wild risk taking. And that is, in essence, what is wrong about the financial markets - the incentives of individual traders and managers are not aligned with the interests of those whose money they manage. The pay system based on big bonuses creates a sharp asymmetry in rewards for success and penalties for loss. There are no negative bonuses that penalise big losses. The worst that can happen is a few months gardening and a pay-off that would dwarf most people's regular pay. The institution, its shareholder or investors take the pain - not the trader or manager.

It is this view of individual incentives that I think has been missing from the commentary on recent turmoil in the financial markets. People are asking why the companies took such risks... just look inside the companies at the personal risks taken by the people making the decisions and it is clear.

The most egregious example of this in recent weeks has been the precipitous fall of Merrill Lynch, and the departure of its top gun, Stan O'Neal. What happened tells us something about how the industry works...

O'Neal's payment for failure. Mr O'Neal was paid $22 million in 2006, as the company's fortune soared - $14m of that was his bonus. In fact the company put on a nearly $20 billion in shareholder value in 2006 and you might argue that was a good return (see chart / share price data)Much of this value was illusory, as it was stacking up investments in securitised sub-prime mortgages, much of which went very sour indeed in October 2007 - causing an embarrassing $7.9 billion write down in the third quarter results. The market value of the firm has fallen by over $30 billion since the beginning of the year, with who knows what misery still to come as all these dodgy positions unwind. O'Neal had to go, but he will walk with a $160m package. And in the name of a quiet life for all involved (except the shareholders) he has been allowed to retire rather than being given the boot, so his package is $90m more than it otherwise would be [FT report]. So much for the down-side risks....

A negative bonus? In a more reasonable world, there would be symmetry in his reward system - and you might expect him to have a negative bonus, or 'malus'. O'Neal did well in 2006, but so did many at Merrill: from 2005 to 2006, the pay bill increased by $4.6 billion from $12.4 to $17.0 billion, a 37% increase. If we were to pretend this increase was a reward for creating shareholder value (which increased from $61bn to $80bn) we can derive a return to value-creation of 24 cents extra pay for every dollar of extra shareholder value created. But if Merrill Lynch staff had to pay back at the same rate when they have destroyed shareholder value in 2007 so far, there would be a $7.4 billion negative bonus (a 'malus') payable by now. I don't suppose they'll be paying back anything like that much, or anything. [Merrill Lynch 2006 Annual Report]

They're all at it. I don't particularly want to pick on Merrill Lynch. It just illustrates the incentive structure that works in financial markets and it is far from alone: see Biggest City bonuses ever [Evening Standard in 2006] and troubles at other investment banks like Citigroup and Barclays. The Northern Rock crisis was driven by a management determined to make aggressive use of a risky business model, placing all their investors at risk. In the end, they were bailed out with £30 billion of public sector loans [BBC]. It's the same basic model - profit from exuberant risk taking while times are good: let others take the pain when it all goes wrong. That's why it's no good asking Northern Rock why they didn't see the credit crunch coming - the individual managers (as opposed to the institution) had no incentive to look or to act differently. Quite the opposite.

Could anything be done?
Annoyingly, it is very hard to see how this could be fixed. It would require an incentive structure that was multi-year, transferable between employers, and stuck with traders and managers even if they left the industry. No manager would accept it, and given the pursuit of talent, no employer would offer it. Any market that required it through regulation would find its institutions moving offshore. It is easier for the fund manager and institution to let the ultimate investor take the pain - as long as all institutions do it together. Which they do. The only sensible approach is caveat emptor or 'buyer beware' and distrust of promised big returns.

A Lex comment in the Financial Times puts it rather well:

Senior Wall Street executives can enjoy eye-watering pay packages by taking excessive risks during good times – something that only becomes clear when risk management is tested and is found wanting.[...] A radical shift on Wall Street is unlikely. But heads you win, tails I lose is no way to pay anyone.

Note: Market capitalisation is calculated here as share price at the end of year multiplied by shares outstanding at the end of year as listed in the annual report for 2005 and 2006.

Buddy can you spare a trillion? The EU budget review

2007-11-01T17:30:00.000Z

Way past bedtime on 17th December 2005, frazzled European leaders decided how to spend just under one trillion Euro. They set the EU's budget framework from 2007 to 2013 - and committed €947 billion or just over 1% of EU GDP over the period. The chart shows the breakdown of the 2007 budget by major theme - dominated as ever by agricultural subsidies and 'regional' policy or what is now known as 'cohesion' policy (spending in poorer regions of the EU, supposedly to bring them closer to the EU average).

The full budget from 2007-13 is in this spreadsheet [XLS] [source data]. You can also look at the 2007 Budget at a glance or expenditure by programme to see how the Commission describes it, and at an even more detailed material in the EU Official Journal if you want to risk insanity and blindness. Probably the best guide to how the budget is intended to be used is still the Commission's 2004 proposal, Building our common future.

Review of the budget. During that endless December night, the leaders also agreed to have a thorough review of the budget, in plenty of time before the grim physics of bureaucratic inertia and the momentum of the status quo settle the budget for 2014-20, once again with only modest tinkering. The resulting 2008-9 Budget Review is now under way and we are invited to respond to a short consultation paper by April 2008 and participate in a discussion forum [see my comment]. The Commission has declared there should be 'no taboos'. My overall view is that very little of what is currently spent through the EU budget can be justified. But there is one big strategic change to make: shifting from inward-looking and unjustifiable spending within the EU to outward-looking strategic spending as the EU plays a bigger role globally. This is the big challenge for the review.

I thought it might be an idea to set out some facts and arguments to back this point of view and address the question: what should be done with the EU budget?

Reprioritisation in the new financial framework - tinkering
Let's start by looking at what has been done so far. The chart to the left shows how the new 7-year framework will shift priorities within the near €1 trillion 7-year budget - based on how the share of this budget allocated to each theme changes over the 7 years. There is a reduction in the share taken by agricultural subsidies and rural policy and a sharp increase in spending on 'competitiveness', which includes R&D, energy & transport, skills and innovation. This is supposed to support the Lisbon Strategy [EU description], which aims to make the EU the top knowledge-based economy in the world, though there is little hope of that. Disappointingly there is only a small increase in the funding for the EU's role as global player - and from a small base.

The total reprioritisation (budget share shifted between themes) is just 8% over the seven years. I think that reflects the way the budget is settled at the last minute in a bureaucracy - incrementalism rather than a first principles approach is always likely to prevail. This is an improvement - but not enough of an improvement over seven years, and the focus on 'competitiveness' through government funded R&D is misplaced - as we will discuss later.

A few cautionary things to bear in mind about spending at EU level
I think there are good reasons to start from a sceptical perspective on EU budget spending. Three reasons for caution:

1. The EU doesn't really have any money of its own - most of its money comes from contributions by member states, plus some from VAT and some from import tariffs (see chart to the left). When money is spent by the EU, it isn't 'additional', it is money no longer available to spend by member states. Obvious, but it means the question is not whether money should be spent, but at what level.

2. Accountability is poor: when money is spent at EU level, the link between the original taxpayer / voter and the body through which the spending is done is weak and diffuse. To a citizen in a member state, money coming from the EU looks additional - like a grant of extra money. There is a danger that member states will seek EU funds where they wouldn't spend the money themselves - for example in subsidising rich land-owners.

3. The EU is prone to a 'juste retour' (fair return) approach to spending... you get out what you put in (this is especially true in R&D). Add to this the tendency for member states to fight hard to get the budget spent in their country no matter how compelling the case for it to be spent elsewhere. A layer of messy and inefficient 'political economy', or 'pork-barrelling' must be factored in. Some say that this dynamic means the member states are less likely to tackle fraud in EU spending as the money is coming from somewhere else.

These 'principal-agent' problems are intrinsic to the relationship between the EU and its member states. They are a reason to be cautious about pushing money through the EU budget unless there is a really strong case for it.

Some principles for deciding what should be spent through the EU budget
What are the things for which can we justify spending from an EU budget? There are three dimensions to this: (1) should government or the public sector be involved at all? (2) is spending the right way to meet the objectives compared to other interventions? If there is a case for public spending, (3) is the European Union the right administrative level to do the spending, compared to say national or local government?

1. Public versus private? Should government be involved at all? I think a reasonable rationale for government intervention is that used by the British government: government intervenes to address market failures (eg. externalities, public goods, information asymmetries, collective action failures etc) and to meet equity or distributional objectives (eg. through providing universal schooling, health care). These ideas are discussed in the UK Treasury's Green Book section on rationale for government action.

2. Spending versus other instruments? The EU has several instruments available to promote its objectives: regulation, economic instruments, development loans, standard-setting, policy co-ordination (eg. the state aids regime) and softer options like establishing good practice or developing comparative indicators.

3. Spending through the EU versus spending through member states or more locally? The guiding principles of the EU are that responsibility ('competence') should at the lowest administrative level, and only at EU level if there is no alternative or the benefits are substantially worthwhile and if the EU member states agree. The formal principles that codify this into the treaties are: subsidiarity; proportionality and conferral.

A word about politics... This is perhaps an ideal 'analytical' framework for considering what should and shouldn't be spent through the EU budget. But the EU is a political settlement and political bargains, including spending commitments, will hold it together. So while I think we should strive to apply the criteria above, we should expect it to deviate where politics dictates otherwise. But political determination of the budget is likely to be a cause of waste or inefficiency and, given the poor accountability of EU spending, a reason to keep the budget down.

Where might EU budget spending be justified?
For spending to be justified through the EU, it should meet the three tests above: that there is a case for government intervention; that spending is the right thing to do, and that the European Union is the appropriate administrative level to do the spending. I think there are two main areas where these criteria could be met, and a third where regulation is preferable and a fourth where spending is justified, but only on a transition basis...

1. Funding genuinely Europe-scale activities or the provision of non-market goods at EU scale - but there are surprisingly few of these. Perhaps border security, policing and anti-terrorism; some research or science projects (space, particle physics, transboundary pollution monitoring and research etc). There are very few nature reserves that could be considered 'pan-European' (perhaps Slovenia?). But by far the most important pan-European activity will be when the EU acts collectively as a global player - for example promoting a response to climate change in developing countries; responding to humanitarian crises; intervening in conflicts or genocide or acting on the 'responsibility to protect'; contributing to meeting the millennium development goals.

2. Transfers between from rich states to help poorer states improve welfare? This is the 'cohesion' theme in the budget. However, for every case for a transfer within the EU, I think there is always a more compelling case to transfer from the relatively affluent EU to much poorer developing countries or to countries on the periphery of the EU where the EU has wants peace and stability and future accession states. The members of the EU and potential accession states are middle income countries. I would expect their development to be funded through hard loans from development banks, rather than grants. The EU has the European Investment Bank for exactly this purpose.

3. Where member states wish to co-ordinate their spending or act in concert. The most charitable view of this is that member states wish to establish norms throughout Europe that go beyond what they would each be prepared to do unilaterally. The less charitable view is that member states like to hide difficult decisions or unpopular spending within the EU's opacity, and take advantage of its democratic deficit. In either case, I think the better approach is to agree standards or outcomes, or define common policies, and do the spending locally - so that it can be managed with local accountability and scrutiny. Almost all environmental spending works this way - EU directive impose high compliance costs on members states and their industries and consumers.

4. Legacy and transition. The EU is not starting with a blank canvass - it intervenes heavily in agriculture markets and agricultural production systems and livelihoods are configured around this massive intervention. It should stop intervening, but not overnight. Other areas, such a regional 'cohesion' funding could be unwound more rapidly, but they may be part of the political deal underpinning enlargement and we will have to taper these expenditures more rapidly.

What does this mean for particular budget lines...?

1. Cohesion ('regional') policy
The case for providing grants for infrastructure or social spending for poor areas within the EU, especially through an EU mechanism, is very weak. If the investment creates economic growth (as the Commission argues it does in its 'Fourth Cohesion Report') then the investments should be paid for from the proceeds of growth - this is how development finance works! If it doesn't create growth, then why have it? All the member states are at least middle income countries and would not qualify for grant finance from international financial institutions. For example, grant finance is available to the 80 poorest countries in the world through International Development Association of the World Bank, but everyone else develops through loans The European Investment Bank exists for this purpose in the EU and all EU member states can access the capital markets - and that is what they should do. There may be a case for public spending in poor areas of the EU - but I think think this should be a matter settled at the member state level. In other words, governments should take direct responsibility for the extent of redistribution and inequality within their countries. If the EU has grant funding available for 'cohesion', in every case it would be better used outside the EU with poorer countries or where Europe has important political objectives.

So I don't think transfers within the EU and between member states are justified at all - there is always a stronger case to redistribute externally. But a further point is whether the cohesion funding actually serves its intended purpose - this short Oct 2007 article Back to Basics with the EU Budget from the Bruegel think tank, points out that there are no credible systems to assess effectiveness of cohesion policy and:

At the end of the day, EU funds do not fall from the sky. The relevant question is whether cohesion funds are the most efficient redistribution instrument available. Nobody can really answer this question today

Verdict: renationalise regional 'cohesion' policy, use loans rather than grants for development within the EU and create a 'global cohesion fund' for grant spending outside the EU (or add to existing development instruments).

2. Agricultural subsidies
There is no real justification for these and they should be wound down at the fastest rate that does not cause serious dislocation - that would streamline EU farming, land policy and help us in trade talks. The EU still subsidises to the tune of one third of gross farm receipts, and about half of that comes through budget payments (OECD). A worthwhile aim would be to have direct payments through the EU (effectively subsidies to land) reduced to zero by the end of the next financial perspective in 2020. I don't have any evidence that this is the optimum speed of taper, but I think a seven year adjustment, signalled three years before it starts, is a long time for an activity that isn't highly capital intensive.

There may be a case to allow member states to subsidise particular types of agriculture for social or cultural reasons: the EU role could be to set maximum allowable level of subsidies and to ensure these are minimally trade distorting (ie. the EU would be a co-ordinator of allowable state-aids, which would be welfare payments to farmers engaged in particular activities deemed culturally important). If France wanted to fund its foie gras sector, fine by me - as long as its the French taxpayer and French politicians that are accountable. I can always go there on holiday or purchase it from La Fromagerie.

CAP reform deserves a longer treatment, but the UK's Vision for the Common Agricultural Policy, is a reasonable starting point - basically arguing that public money should be restricted to securing public goods. I think it ducks the question of what are the public goods for which provision can be justified at European level. I also, think that in the interim before a full phase out, more of the CAP spending should be met from national budgets - reducing the unjustified transfers between member states engineered through agricultural support. The argument for localising the support of farming was eloquently made in the 2003 Sapir report (section 12.2.1 - p162) for the European Commission, which concludes there is a:

...solid argument for decentralising to Member States the distributive function of the Common Agricultural Policy, as is already the case for all other individual distributive policies.

I completely agree with this. To reach this conclusion Sapir and colleagues drew on the 1987 Padoa Schioppa report, which made a pervasive case for decentralisation (so it's been around a while now) and argued that the EC:

... is not well suited to executing distributive policies at the level of individual persons or small enterprises. Efficient income distribution requires detailed administration at the level of the individual, and coherence with features of income tax and social security systems, and the Community cannot assure this. The Community has thus switched role with the Member States, counter to the basic principles of subsidiarity and comparative advantage. (page 133)

However, despite the Commission's 'no taboos' line on the budget review, the agriculture DG, led by Mariann Fisher-Boel, is having a CAP "Health Check" (which doesn't sound much like 'major surgery') and through a series of speeches Mrs Fisher is arguing that: The central purpose of the health check is not to change the essential direction of the CAP [speech 20 Oct 2006] and:

This "health check" was never and is not meant to be about further fundamental reform. The main objective will essentially be to ensure that the CAP is working as it should. It will be an opportunity to fine tune our tool box [speech 12 Oct 2006]

This is annoying: who is Mrs Fischer Boel, an unelected official, to restrict reform to a 'health check'? If the health check is as feeble as it sounds, then the Budget Review should do the job properly. In fact there is a good argument that the CAP will never be reformed from within the agriculture parts of the Commission and national ministries - they are just in it too deep and are, in any case, not properly positioned to see potential benefits by redirecting the budget elsewhere. Has Mrs Fischer Boel somehow decided farmers have a better claim on the budget than the EU's global role? [For more: see excellent report, Towards the CAP health check and European budget review by IEEP]

Verdict: abolish direct farm subsidies by tapering out by 2020 and in the interim have more of the cost of subsidising farmers carried at national rather than EU level, especially if it is going to take longer than 2020. Create some flexibilities for member states to subsidise particular groups for cultural reasons, but at national not EU level and subject to state aids rules.

3. Rural development
A lot of this is just more imaginative (and to be fair, more worthwhile) schemes for funding farmers. But hardly any of it can be justified at EU level. There is something annoying about the UK reports to the Commission on the England Rural Development Programme and now the Rural Development Programme for England - the prime vehicles for spending EU rural money. This is money paid by the UK taxpayer, sent to Brussels, then returned to the UK with strings and reporting requirements. What is needed here is more careful assessment of the case for European action.

Pillar 1 to pillar 2...? We should be wary of the expedient arguments of the environmental lobby which has a "convert Pillar 1 to Pillar 2" approach. Pillar 1 is the vast majority of spending - pure wasteful subsidy. Pillar 2 is payments for rural development and environment. But I think much of Pillar 2, whilst important, fails the subsidiarity test, and should be funded at national level - with the EU setting standards and imposing fines for non-compliance where a co-ordinated approach is needed. This is the dominant model for EU environmental policy - co-ordination, regulation and enforcement, not spending. There may be some true European public goods - things we all value that would be under-protected if left to member states, or areas where there is a particularly high demand (eg. Slovenia has a very high proportion of its land area designated for nature protection). We should also note that payment from the EU rather than from national budgets creates an incentive to engage in nature protection, for example by designating conservation sites, simply to claw back money from the EU. I'm nervous about this motivation because of what it means for democracy and accountability. Perhaps it would be better if there were some way of civil society groups or other independent bodies determining what ecology should have conservation status.

Verdict: renationalise most of EU rural policy, except where pan-European legitimacy can be justified. Continue to base EU environmental policy on co-ordinated standard setting with member states responsible for ensuring compliance and spending as appropriate.

4. Competitiveness (R&D)
This theme has seen the largest increase and reflects the EU's focus on what it calls 'competitiveness' - or the Lisbon strategy.

The spending is spread over several headings (Education and training, Research, Innovation, Energy and transport networks, and Social policy). The lion's share is funding for the 7th Framework Programme for Research and Technological Development and you can view the budget allocation summary here (see chart) This is the EU's main R&D spending and includes initiatives to support research, institutions and scientific careers.

A beefing up of R&D spend is surely a good thing, isn't it? Well, there are many arguments over this... first, I don't think R&D spend (an input) translates easily to innovation, which is more about culture. Nor do I think competitiveness derives much from R&D, which is more about skills, labour market flexibility, competitive pressure etc. In the services economy, traditional R&D counts for little.

If one accepts that science does a have an important role, do we think the EU is the right place to organise science spending? If it is about 'competitiveness' and much competition is within Europe, how would the EU justify supporting one company not another? How does publicly funded intellectual property become exclusively owned by a company that can then use it to compete? And what about the EU co-operative research model...? Researchers and their institutions are ferociously competitive to publish papers, secure patents and win Nobel prizes. Does Europe force its universities into unproductive bureaucratic collaborations just to get their hands on the money?

In theory, widening the number of institutions and researchers that can bid for a pot of money should ensure that allocation goes to the best of a larger bunch - and so is spent better overall. That sounds okay, but a meritocracy in spending would tend to drive money towards Northern Europe's big players - UK, Germany, France and the Scandinavians - and their 'Ivy league' institutions. Essentially redistributing from poorer to richer. Hmmm... that doesn't sound right. Alternatively, the money could be spent on a 'juste retour' basis (each getting back what they put in), but that loses the main advantage of pooling money.

My own take is that we should carefully identify where the EU has a legitimate niche. These are:

Very large scale: eg. space, particle physics, nuclear fusion
European or global coverage: eg. acid rain monitoring, studies about the EU, standard setting to inform EU legislation.
Public purpose: avoiding too much wheel re-invention through EU level co-ordination where the research doesn't necessarily lead to a product or is aimed at producing 'public goods' - security, some health research, major climate change technologies (carbon capture and storage).

In addition, I think there is scope to strengthen institutions and provide open support for talented scientists or researchers - these are good ideas in the 'ideas' 'people' and 'capabilities' components of the framework programme.

It's hard to see why there should be EU spending on information technology, nano-technology, biotechnology, or any technologies that can be commercialised.

Verdict: don't accept the that the EU's R&D spend has much to do with 'competitiveness' or the Lisbon strategy. However, there are legitimate reasons to organise some funding at the EU level where scale, coverage or co-ordination in developing public goods justifies EU action. Support for people and institutions will also strengthen Europe's overall system for innovation.

5. Security and citizenship
"Freedom, security, justice and European citizenship" to give the full title, does a number of worthwhile things and doesn't cost much - managing migration, preparing accession states, some security, public health etc. But there are some areas where you would want to know something worthwhile was being achieved - for example 'media', and 'culture & diversity'. One fears that these might be budgets that support 'make-work' activity needed to justify having 27 Commissioners.

Verdict: scrutinise expenditure for value for money and check for overlap with other institutions.

6. EU as a Global Player
This is the area where I think much more could be done. But this gets back to a deeper and prior question... what do we want the EU for? See my earlier posting, The Eurovision Vision Contest, on the E3G pamphlet, Europe in the World]. So I don't think we can be clear on spending on EU as a global player until there is more political assent for the EU acting globally on the member states' behalf - and this must be considered in the Budget Review. The scope for EU budget spending is virtually unlimited:

International development assistance. Pooling member state resources to reduce the number of donors that host countries have to deal with and to improve coherence. Member states are supposed to spend 0.7% of GDP in development assistance, though we are currently well below that (see data). In May 2005, EU ministers agreed to a new collective target of 0.56% for 2010, which would result in an additional €20 billion of aid by that time. They also set 2015 as the date for reaching 0.7%and could agree to spend part of this through the EU through the European Development Fund. Smaller states could ask the EU to manage their remaining bilateral resources to reduce overheads and programme costs. [more on EU aid / more on EU external co-operation]
Contribution to securing global public goods (Q&A). Transfers to developing countries to underpin international environmental treaties (like UNFCC, Kyoto, biodiversity) - in particular adaptation to climate change and protection of forests for both carbon and biodiversity reasons. A relatively small budget is devoted to international environmental protection focussed onintegrating environmental concerns in development strategies; tackling climate change, biodiversity loss and desertification; promoting the sound management of chemicals and wastes; as well as providing access to affordable and sustainable energy services [more]
Common foreign and security policy (CFSP) and its security dimension, the European Security and Defence Policy (ESDP). This function of the EU is potentially extremely important in the future, though currently still heavily constrained by political nervousness. The role could including acting on the UN's 'responsibility to protect' principle and the UN genocide convention. The EU is beginning to intervene collectively - in Bosnia (through EUFOR), policing in Afghanistan and missions to Southern Lebanon and DR Congo [more].
Humanitarian assistance for emergencies (earthquakes) or crises (Darfur, DRC) combined with standing response capacity. The EU spends about €600m annually through ECHO - the DG for Humanitarian Aid [more].
Promoting stability on the EU's periphery - North Africa, Middle East, Eastern Europe and Central Asian Republics - for example, by investing in institutions, environmental protection, support for democracy, and creating an acquis-lite to establish associate member status with access to the single market. The EU has the European Neighbourhood Policy, which aims to strengthen links with Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, the Palestinian Authority, Syria, Tunisia and Ukraine. Relations with Russia are managed through an increasingly fraught 'Strategic partnership'.
Promotion of EU membership to the East and South and getting candidate countries up to the requisite legislative and institutional standards - a good use of transfers. Croatia and Turkey are beginning the process, but Macedonia, Bosnia, Serbia and Albania must be encouraged. [more on enlargement]
Promoting a European model of democracy and human rights. The EU could do far more to champion the cause of human rights and a broader definition of democracy (ie. broader than the American view). The EU's external relations portfolio has strong rhetoric on human rights and it could become a major global role for the EU [see activities here]. The key funding stream is the European Initiative for Democracy and Human Rights [EIDHR] and this will spend €1.1 billion 2007-13.

The point is that these are all excellent things for the EU to be doing on behalf of the 27 member states. In none of these areas could anyone claim that the potential to do good has been exhausted. So I see this as an area where very substantial additional funding could and should be absorbed - though an increase should be phased at a rate that allows the administrative and political capacity to develop proportionately.

Verdict: this is where the EU should be doing much more, and where more of the budget should be spent. The critical requirement is a strong political mandate.

7. Administration
Like all bureaucracies the EU is guarded and apologetic about the amount it spends running itself. It shouldn't be. Nor should it be measured by what proportion of the budget it takes, with the presumption that the smaller proportion the better. The key understanding is that the European Commission and other institutions are not there to spend a budget but to administer the European Union jurisdiction - proposing directives, supervising the single market, negotiating at WTO meetings (ie. important things that have little to do with the budget). With a strong dose of subsidiarity, the EU budget could be cut by two-thirds. But the administration costs would fall by nothing like so much, and the percentage of the budget devoted to 'administration' would rise sharply. But that would be a good thing. It's a slightly cheap comparison, but it is worth bearing in mind the EU has about 30,000 civil servants, compared to about 540,000 in the UK [stats].

I'm not for one moment suggesting that the EU institutions are free of waste and incompetence. Goodness no. Just arguing that lower administration spending is not a sensible objective in its own right.

Verdict: a well functioning administration has great leverage on the effective of the spend of the whole budget and the entire EU programme - improving allocative efficiency. Spend generously on administrative resources, but push hard for improved managerial efficiency - avoid waste, avoid over-paying, have a good performance framework, move the under-achievers out.

EU budget expenditure - summary
Overall verdict: apply rigorous tests for rationale for government intervention, spending rather than other instruments and spending at the EU level. On that basis phase out agricultural subsidies and 'cohesion money', remain sceptical and discerning about spend on R&D but be far more bullish about funding the role of the EU as a global player.

Tony Blair made a powerful case for reform in his speech to the European Parliament in June 2005, but by then it was to late to deliver meaningful reform through the European Council. The Budget Review was a commitment to have another go, but with enough time to create strategic reform for the next financial perspective. I hope the UK government still sees it that way.

EU budget sources of revenue
There's more to be said about where the EU raises it's revenue and the UK 'rebate' - but this posting has already gone on too long!

Don't ditch the Kyoto Protocol

2007-10-25T17:12:00.000+01:00

My otherwise peaceful morning slumber was disturbed by a radio interview announcing that social scientists Steve Rayner and Gwin Prins want to 'ditch the Kyoto Protocol'. In a Nature commentary, Time to ditch the Kyoto Protocol, they have a go at the Kyoto Protocol and claim that 'political correctness' is inhibiting proper criticism and unnamed Kyoto supporters insist that Kyoto must remain the only game in town, sternly admonishing any dissenters to this orthodoxy. Luckily for us these fearless academics are ready to speak out. The trouble is, they have nothing much to say!

Yes, it is true that current efforts to control greenhouse gases are inadequate and that emissions are still rising and accelerating when they need to be slowing and falling - see chart [data from CAIT] - see also BBC item. So we do have prima facie evidence of failure. Or more optimistically, it's too early to see success in a multi-decade effort. But any failure so far is a reflection of insufficient political will and its wicked uncle, human short-termism, rather than the design of the Kyoto Protocol.

The authors "believe that a radical rethink of climate policy should possess at least five central elements":
1. Focus mitigation efforts on the big emitters
2. Allow genuine emissions markets to evolve from the bottom up
3. Put public investment in energy R&D on a wartime footing
4. Increase spending on adaptation
5. Work the problem at appropriate scales

Their supposedly radical alternative proposals aren't radical or even alternative. But they would, if taken seriously, dissipate what political commitment already exists. Let's examine what they describe as this 'silver buckshot' approach in more detail...

Overall... I think they just don't quite get what Kyoto does
The authors say that Kyoto is based on the models used for tackling ozone, depletion, acid rain and nuclear arms, and that: in practice, Kyoto depends on the top-down creation of a global market in carbon dioxide by allowing countries to buy and sell their agreed allowances of emissions.

Overall, they have mis-characterised the Kyoto protocol (it isn't a single policy instrument designed to create a global trading system). Furthermore, they've not recognised the critical problem at the heart of climate change - it is an international, intergenerational collective action problem to be faced in conditions of uncertainty, distrust and short-termism. The Kyoto Protocol attempts to create a framework for negotiating a solution given that conceptualisation of the problem. The authors' emphasis on local, bottom and piecemeal approaches overlooks the problems of free-riding and the difficulty of getting anything much done, when people fear that others are not doing anything (ie. the collective action issue). The authors appear to take swipes at the Kyoto Protocol without realising that its function is limited to establishing major commitments between parties and organising co-operation. It does not specify policies, but what must be achieved. the choice of policies and the appropriate jurisdictional scale for action is up to the parties.

Let's look at the five specific proposals....

1. Focus on the big emitters
The idea is that the top 20 emitters account for 80% of emissions. Do a deal between them and hey presto!

But a 'C-20' is effectively happening in parallel with Kyoto, through the G8 and other fora, and is actually what happens in negotiations anyway - through a 'contact group' or other such negotiating device. There is lots of scope to find consensus amongst big players outside the UN meetings, but to imagine this can replace a broader forum is wrong. Where this goes wrong is to ignore the value of a global agreement and how the agreement might change shape in the future: for example through global sectoral agreements (eg. for aluminium or aviation) or if the approach moves on to a 'policies and measures' agenda - eg. setting global product standards. It should also seek to involve all countries in cap and trade or harmonised carbon tax regimes. There is also the financing (CDM) and adaptation aspects of Kyoto. The other reason to have all countries involved is the moral pressure of those states that have most to lose (and gain). Note that the per capita emissions are very different. Note that

2. Allow genuine emissions markets to evolve from the bottom up
They want emissions trading markets to begin with small coverage as local initiatives, like all 'genuine markets'.

First of all, there isn't a global market - the emissions trading systems that do exist have been created to help particular parties, like the EU, meet their Kyoto commitments or by jurisdictions or groups of companies wishing to take action outside Kyoto (eg. in the US). So what does this supposedly radical proposal actually mean? A cap and trade system is only as good as its cap - the trading bit improves efficiency, not the environmental outcomes (unless you allow that trading facilitates agreement to tougher caps). Where do meaningful caps come? Certainly not from the free play of perceived corporate or national self-interest if the EU system is anything to go by. Does bottom up mean 'voluntary participation'? If so, who will join the system if they are a loser and have to buy emissions rights? If it not is not voluntary, some legislative body needs to compel the participants to join and to allocate or auction caps. Has anyone ever suggested that environmental taxes should evolve from the bottom up? Well emissions trading markets have much the same effect - they impose scarcity and force a price on carbon.

3. Put public investment in energy R&D on a wartime footing
The authors think that massive public sector R&D will increase the stock of low carbon technologies and point out that government R&D spend has fallen by 40% since 1980.

First, let me propose a thought experiment... if we only ever had the technology available today, 25 October 2007, could we address the climate change challenge? I think we could go a long way... I think the real deficit is in policy innovation and political will - ie. that which causes the available low carbon technologies to be widely applied. You only have to look at the state of the existing building stock to realise that new technology is the least of the problems. The sort of wartime effort we need is not a Manhattan Project or dambusters development ending in new gee-whiz technologies, but more like the distribution of gas masks or Morrison shelters - effective bomb retardants based on the old-tech plasticity of metal.

Secondly, if the problem is cost, the answer is unlikely to be R&D but more likely to involve increasing scale through market support in some way (for example like the Renewable Obligation or feed-in tariffs). For technologies that are more distant, other mechanisms like prizes (as done for carbon capture and storage) might be the way ahead.

Thirdly, where is their evidence that government R&D spend will have the effect they hope for? Military R&D during total war is very different to civil innovation in an energy market. Actually, private sector R&D with carefully designed incentives from government will do the job better than thousands of men in white coats in government labs. But where do governments get the motivation to act provide market support or other incentives... from meeting targets, or from seeking to induce first-mover advantages in low-carbon markets that will be created by policies originating in the Kyoto Protocol.

4. Increase spending on adaptation
Yes, it is a good idea to spend more on adaptation. Mitigation at the very best will slow the warming trend and it won't start doing that noticeably until 2040. The interesting thing that has escaped many commentators is that adaptation is not a choice really - the impacts and risks will arise whether you expect and prepare for them or not. Mitigation is a choice, albeit an irresponsible one to duck. Governments will face the risks whatever they do, and so will have strong incentives to fund adaptation to deal with floods, sea level rise, droughts, super-storms, urban heat waves, exotic diseases etc. Most of this should be spending at national or local level - but there is scope for international co-operation.

So although more focus on adaptation is worthwhile, and in my view will inevitably be driven by impacts, why does this justify 'ditching Kyoto'? Adaptation and mitigation are not mutually exclusive - they are just different risk management strategies which work over different time horizons. In fact, both the UNFCCC and Kyoto Protocol have adaptation provisions within them (see UNFCCC & Kyoto Art 10 and 12.8). Other than the fact that they are under-used, I don't see what is wrong with these. And they are an important part of the 'bargain' that encourgaes developing countries to participate in mitigation.

5. Work the problem at appropriate scales
The authors point out that policy innovation happens at more local levels.

Another misunderstanding... Kyoto provides the elements that are needed at the global and national levels - namely targets and commitments to co-operate between nations. Which localities are going to set demanding targets if they believe others will not? The whole point of the protocol is that targets are agreed and the parties work out how to meet the targets themselves - and they may devolve responsibility to a lower administrative level, for example to local government or cities. The authors' recommendation as framed is, of course, a banality - of course things should be done appropriate scales! But some things do need to be agreed at the top level - mainly targets and a system for co-operation and transfers between states. And that is exactly what is done in the Kyoto Protocol. There would be a problem if the Kyoto Protocol was all there is.... but it does only the job that is needed at global level.

And what is truly local, bearing in mind the industry lobbyists' dislike of local differences or, as they would have it, 'distortions'? Could you imagine the cap-setting trouble we would have if each EU member state set its own cap or carbon tax? What if each US state set different vehicle emissions standards etc. I think things like renewables policy, building rehabilitation, local transportation, spatial planning might be a good local thing. But its less obvious with economic instruments, large scale energy supply, product standards etc.

The silver buckshot approach - media-savvy academics rename something ordinary to gain extra publicity
This seems to mean having lots of different policy approaches and doing what works. I agree. It's how most countries are trying to meet their Kyoto commitments. I don't think they've added anything new or interesting with this commentary, but they will have made some American climate sceptics and Kyoto detractors very happy.

Could the response to climate change be improved?
Most definitely.... but not by ditching Kyoto. Here's six ideas for starters...

Global sectoral agreements (steel, aluminium, cement, oil, aviation, shipping) aiming to limit emissions worldwide

Global product minimum standards built into WTO rules - this would be like globalising the approach taken in the EU single market, or for food safety

Focus commitments on realising 'no-regrets' measures, especially in developing countries. This aims to get over the idea that commitments are always harmful - who can object to committing only to do those things that are otherwise beneficial?

Very large North-South transfers to buy-out carbon intensive development - these should be big enough to completely offset developed country emissions.

Demand-side measures aimed at tackling deforestation and promoting reforestation by reducing unsustainable dependence on forest products. We can't tackle deforestation simply by protecting particular areas... it just means other areas are cut

The strategic use of time - policies that build up gradually to give a large effect - eg. a $200 /tCO2 globally co-ordinated tax introduced over 40 years. I think we could do really huge things if we give them time and act with credibility and consistency. Trying to do big things quickly usually fails and a series of small piecemeal initiatives rarely achieves much.

Note - some of this first published on Caspar Henderson's Grains of Sand blog in response to a posting by him.

Have a referendum... on EU membership, not the treaty

2007-10-19T19:30:00.000+01:00

Am I alone in finding the phoney war over the EU treaty unbelievably annoying? I feel as though I'm caught in the midst of an Olympic synchronised lying event, where just about everyone is saying the opposite of what they think for reasons different to those they give. The government doesn't want a referendum because it will probably lose, so it is saying the treaty is very different to the constitution and therefore its earlier promise of a referendum no longer applies. The opponents say the treaty is the same as the constitution so the promise of a referendum must apply. But they want that because they think people will over-react to any vote on Europe and this will help to sink the EU or, amongst the most deranged, lead to our withdrawal. They are hoping to make political capital (or plain mischief) from Britain's deep Euroscepticism - see chart [YouGov polling data]. No side is bothering to make a thoughtful case for the treaty, or against it.

The real situation, at least as I see it, is as follows:

1. Main purpose: the treaty provides some much needed administrative streamlining and better 'machinery of government'. This should improve the quality of EU decision-making and accountability (a bit).It also does a few things that will help Europe in a globalising world. [see text / documentation / BBC guide / Guardian Q&A]

2. Transfer of power to EU; the treaty does pool some sovereignty (or transfer power) in some issues (many trivial, some important)... this happens because we give up some vetoes (unanimous voting) for majority voting. But the sceptics always think of loss of vetoes as a loss of power, and vetoes as 'surrendered'. This is wrong - often a move to majority voting means other countries can't block what we want to achieve through the EU. People think the power goes to 'Brussels', but it largely remains with the Council of Ministers. When we need to express power collectively (eg. in international relations or development) the removal of vetoes can give us more power.

3. It's the same. The amending treaty is little different to the constitution in its effect, though its form is completely different. The amending treaty is tediously defined as a series of textual amendments to the existing treaties (Rome, Maastricht, Nice etc), whereas one of the great benefits of the constitution was a consolidation into a single text, albeit a long and complicated text. In claiming it is different, the government is focussing on its form, not its function, and is being very disingenuous. The main difference is the dropping of a few symbols like the anthem etc. See European scrutiny committee report, especially Annex 1 (p.25) and BBC reporting of this for comparison.

4. Some of it is stupid and unnecessary. The Charter of Fundamental Rights is ridiculous and counter-productive (and UK has an opt-out of dubious resilience). The danger of defining too many rights that are not profound or deeply supported in society, is that the currency of rights becomes devalued. There is something troubling about a document that includes the rights to 'access to free placement services', 'right to social security' and 'family protection' in the same charter than protects the right to life and freedom from torture. It even seems to ban school kids having a Saturday job. We should stick with the European Convention on Human Rights, which deals with the rights that really matter, and make sure that really works.

5. There is no case for a referendum on the treaty (and there wasn't on the constitution). We are, rightly, sparing in what we ask people to vote on - we leave scrutiny of difficult legislation to elected representatives, and only bother people when the changes are fundamental - ie. in/out of EU, devolution, regional assemblies etc. The issues at stake here are no more significant than those considered in domestic bills and trusted to parliament. And many domestic bills shift more powers around than this treaty - eg. the recent terrorism legislation. We know people are hugely confused or wilfully ignorant about the EU and this treaty - see for example polling for the Sunday Times, from 2004 - which shows people believe that the EU has more power than it has and would take more than it will, and so it is unclear on what understanding people would base their answers to the simple question about whether you support the treaty. One might argue that a referendum will force politicians to explain the treaty properly. I strongly believe that any referendum should present people with strong clear choices that they can understand. The difference between 'yes' and 'no' for this treaty is very obtuse - to the point where few involved can actually explain it.

6. EU is an elite programme that needs a new mandate. The development of the European Union has long been a programme of the political and business elites - and current treaty is no exception. Ordinary folk have usually misread it from one extreme or another - either as a happy-clappy fellowship of nations with liberal values or as a sinister plot by power-crazed bureaucrats. It is neither. the EU provides cover for politicians to do what they know or believe to be right, but often find hard to sell to their electorates. That cannot continue for two reasons: firstly the EU institutions don't really like or understand the basic principles of 'subsidiarity', 'proportionality' and 'conferral' that supposedly underpin the balance of powers between member states and the EU. As a result it does too much, does it badly and does it with poor democratic accountability. It is right to be Euro-sceptic about this. Secondly, we need the EU to do more outward-looking things - be a global player on behalf of the member states... and that will require more pooling of sovereignty. This is where the EU needs more support and less scepticism. So big changes are needed, and the public will have to understand them and want them. In other words, the EU needs a renewed popular mandate based on what it now is and should become. The mandate secured in 1975 for continued membership of the 'Common Market' has run out.

7. Have a meaningful referendum in the next parliament. I think at some point the EU will have to stop being an elite programme and be respected and accepted by the wider public - a point we are far away from now - or we leave it. To do this, we need a proper vision and debate about the future of the EU, both in the UK and in the EU itself. The real future of the EU is obscured in the treaty and there is virtually no debate about what it will be doing in even 10 years (though the budget review might help with that). But this is what we should be discussing - not the cycle of Commission appointments or voting system for comitology or other arcane details. A referendum would present people with a stark in/out choice and force us all to examine what we want the EU for and where it is going.

To summarise: the treaty has virtually the same effect as the constitution and is a useful improvement to the EU. But it is not of such consequence that it justifies a referendum (and it never did). However, the popular mandate for EU programme from the British people has expired and needs to be regained. Legitimate scepticism and a bold outward-looking vision need to face down Euro-phobia and the globalisation-denial of the Little Englanders. I think the best strategy for the government would be for parliament to decide on the treaty in 2008, but for the government to promise a referendum on EU membership for the next parliament - and then present a vision and make the case.

Other political parties could declare for a referendum or even for leaving the EU in their election manifesto. Europe would be a central issue at the next election. It's about time it was taken seriously - the last time it was an election issue, it was William Hague pledging to 'save the pound'.

And that was quite enough of that sort of thing.