Bank of England urged to give climate scientist a warm welcome

• MPC needs green advocate, says former scientific adviser • Economic policy must not overlook low-carbon projects

Patrick Wintour
guardian.co.uk, Monday 14 December 2009
The government's former chief scientific adviser is calling for a climate scientist to be given a seat on the Bank of England's monetary policy committee, saying the bank currently operates without regard for the environment.
The proposal today from Sir David King, scientific adviser under Tony Blair and Gordon Brown, is known to have the support in principle of some MPC members.
King also criticises the Treasury under Alistair Darling, saying "it is pulling in the wrong direction" and not doing enough to promote a green economy. Writing in Prospect magazine, King lambasts the Treasury "for a wasted opportunity", saying it was "shaming and frustrating" that only 10% of its economic stimulus package could be classified as green.
"Most of that money could have been directed into low-carbon projects, such as energy-efficiency boosts for our ageing housing stock. This also would put unemployed construction workers back to work," he writes.
He points out that South Korea committed 80% of its stimulus money to low-carbon growth and China managed 50%.
He suggests that in Britain: "At best, the Treasury sees carbon reduction as a distraction from their primary focus: GDP growth, reducing unemployment and raising productivity. At worst, they follow the Nigel Lawson school: that even if climate change is real, we should let pure markets operate to solve it.
"The same is sadly often true for central bankers, who rarely even consider carbon as an important by-product of a stable money supply and low inflation".
He writes that the only effective international response to the threat of climate change is market intervention through a global carbon price. But at a national level, effective government interventions to reduce carbon can be undone by monetary policy including the setting of interest rates very low to stimulate growth.
"The problem is that any big levers the government might support – carbon pricing, long-term rules forcing more renewables and nuclear energy into the grid, much higher road tax and congestion charges – could be partially undone by the Bank if monetary policy is used to push for less sustainable patterns of growth."
He suggests the current arms-length climate change committee, chaired by Lord Turner, should be relocated to the Bank.
Traditionally, the Bank has been wary of anything that might dilute its aim of targeting inflation. But MPC members such as Andrew Sentance, who is on the green fiscal commission, could be interested in discussing King's ideas.