What would be the best result now at #COP28? The talks are deadlocked over whether they should call for an eventual end to the production and consumption of unabated fossil fuels. This is what the globally agreed goal of limiting warming to 1.5C requires. What are the options? /1 It seems more or less impossible now to get a wording that clearly calls for the ‘phase out’ goal, as demanded by the small islands and the EU. The OPEC states won’t agree to it, and the UAE (a member of OPEC) won’t insist on it from the chair. /2

So, Liz Truss, what went wrong? The idea that she was stymied by the ‘economic establishment’ is silly but interesting. Silly because it was the bond markets that did for her, as we all said they would if she went through with her pre-announced tax-cutting and borrowing plans. /1

https://twitter.com/peston/status/1622166133796208640

But interesting because it speaks to a wider but largely unacknowledged truth: the economics establishment HAS become more left-wing since the 2008 financial crash. Not in an ideological sense, but as a result of empirical evidence and theoretical and policy analysis. /2

The govt claims it cannot give nurses and other public sector workers a decent pay rise because it has no money and it would be inflationary. The influential @martinwolf_ in the @FT has now joined other economists in disagreeing. Why? 🧵/1 on.ft.com/3v13mId a In the first place, pay increases for public sector workers can’t create a ‘wage-price spiral’ because the public sector does not have prices. (Duh!) They will add to aggregate demand, but overall demand is falling as we are now in a recession. So they won’t add to inflation. /2

Fair-minded economist @Gilesyb has challenged those like me (eg @JoMicheII, @meadwaj, @jryancollins, @alfie_stirling, @geofftily, @carsjung, @carysroberts @JeevunSandher) who have questioned the ‘fiscal black hole’ and say the fiscal statement should not include spending cuts. 🧵

https://twitter.com/gilesyb/status/1592462333678620672

Giles (and @ChrisGiles_ and @PJTheEconomist) claim that we anti-austerians are not taking the dire position of the public finances seriously enough. There is a fiscal crisis and we are apparently ignoring it. (See Chris’s analysis below). /2 on.ft.com/3hNlOAJ

Jeremy Hunt’s latest justification for austerity is economically illogical. First, it’s Interesting that last week’s rationale - the ‘fiscal black hole’ - has disappeared. That was debunked by economists showing how the govt had made it up. So how does this one stack up? 🧵/1

https://twitter.com/hmtreasury/status/1592425780344066048

Hunt says his priority is fighting inflation. But cutting spending and raising taxes won’t do that. Today’s inflation has been caused by global energy costs, not by excessive domestic demand. Wage rises (figures out today) are lower than inflation so are not contributing to it./2

Jeremy Hunt tells us that we must return to ‘Treasury orthodoxy’ now that Truss and Kwarteng have demonstrated what happens if you depart from it. But what is this orthodoxy and is it a good idea? A short(ish) thread. /1 news.yahoo.com/voices-treasur… The attached defence in the @FT of Treasury orthodoxy (let’s call it TOx) by former HMT Permanent Secretary (and my old colleague) @nickmacpherson2 is a good place to start. It is eloquent, largely sensible and almost entirely misses the point. on.ft.com/3E1xGpX

I don’t think anyone is saying not to use macroeconomic models. What @JOMICHELL and others are saying is that the OBR’s modelling (which is mirrored, though in a more black boxy way, by IFS, RF and others) is not a robust enough modelling basis for the kind of spending cuts… /1

https://twitter.com/timpitt11/status/1591030446653329408

… and/or tax rises which are (deliberately) implied by all HMT’s briefing and media reporting of the ‘black hole’. The current economic situation is very uncertain: simultaneous inflation (almost certainly on its way down)… /2

As an economist and climate policy person I have thought a lot about this comparison. There are 2 differences between macroeconomic and climate models. /1 @tianran @Gilesyb @TimPitt11 @JoMicheII @CJFDillow @ChrisGiles_ @DuncanWeldon @ianmulheirn @jhawksworth5 @andyverity @meadwaj

https://twitter.com/tianran/status/1590806585311645698

(1) Climate models are based on geo- and bio- chemical system patterns which are uncertain but follow scientific laws; macroeconomic ones rest on past economic relationships which may not continue in the future and concern uncertainly predictable human/institutional behaviour. /2

So this COP27 – what’s it all about? Is it really worth Rishi Sunak and other world leaders going? COP27 will (try to) do the unfinished business from COP26 in Glasgow. But it will be hard to follow! I have written an explainer article - and thread. /1 insidestory.org.au/what-exactly-i… To start with, COP27 will NOT make any progress on cutting emissions. You may remember COP26 only avoided failure by tasking countries to come back this year with stronger commitments. But only four (Australia, Norway, Thailand and UAE) have done so. /2 climateactiontracker.org/climate-target…

So are we heading for Austerity 2.0, with huge public spending cuts to fill the ‘eye-watering black hole’ (copyright HM Treasury) in the public finances? Well (a) this is certainly not inevitable or necessary; and (b) the Govt is having you on. A thread./1 theguardian.com/business/2022/… Let’s start with this ‘black hole’. The Institute of Fiscal Studies thinks it is (or was) £62bn, the FT £50bn, the Resolution Foundation £40bn, Bloomberg claims Treasury thinks it’s £35bn. But what precisely IS this thing? The answer is: it’s made up. /2 ft.com/content/acbddf…

Liz Truss's mantra of 'growth, growth and growth' sounds simple enough, no? But it really isn't, for growth no longer does what it says on the tin. I've written a piece on growth in @guardianopinion today and thought I would share a thread on it. /1 theguardian.com/commentisfree/… When rising national income (GDP) first became government's main economic goal in the 1950s, it was obvious why: it led to lower unemployment, higher incomes, lower inequality, higher tax revenues for public services and even some falls in pollution. /2 newforum.org/en/studie/grow…

The Chancellor is holding a 'fiscal event' (that is, a Budget) tomorrow. But he has already announced the cut in National Insurance contributions today. Confused as to what Kwarteng and Truss are doing? So are most economists. Could this end in disaster? It could start in it.🧵/1 The Govt is adopting an extraordinary approach to fiscal policy. Borrowing is already historically high, and higher interest rates have raised the cost of servicing it. But the Govt is going on a splurge. Cutting NI contributions will cost c£14bn a year./2 ifs.org.uk/publications/r…

The govt will announce today a much lower energy price cap, subsidising energy retailers to the tune of £100bn+, paid for by government borrowing (with no additional windfall tax on the oil and gas majors, to whom these higher bills are going). Is there an alternative? Yes. 🧵 This policy is the only viable one (minus the extraordinary decision not to increase the windfall tax) for the next 6 months. But it will be hugely expensive for 18 months or more, and does nothing to incentivise energy saving like home insulation. /2

So, the Tory leadership race: why all this worshipping at the shrine of St Margaret Thatcher? Didn't she leave office 32 years ago? How could her policies of tax cuts and a smaller state be relevant to today's economy? A thread. (Spoiler alert: they aren't.) /1 First, some history. Thatcher DIDN'T cut taxes. She cut income tax rates: the basic rate from 33% to 25%, the top rate from 83% to 40%. But she raised VAT (from 8% to 15%) and National Insurance. Result: the overall share of tax in the economy was 30% in 1979 and 30% in 1990. /2

In the 3rd yr undergrad course on policy making I teach at @ShefUniPolitics we discuss how the ‘rational’ model does not capture well how policy is actually made. The government’s new energy strategy will provide me with a helpful case study for years to come. A short thread. /1 The reason the govt is publishing an energy strategy now is that the rise in oil and gas prices and the war in Ukraine have accelerated the need to find cheaper and more geopolitically secure sources of energy. /2

I am normally content to RT others' hot takes, but I am so shocked and appalled at @RishiSunak's Spring Statement I have been moved to comment. A short thread. /1 By far the most important announcement was the one Sunak didn't make. Faced with an energy cost crisis which will plunge 10 million into fuel poverty, Sunak provided nothing to low income households on benefits and pensions. /2

So this #COP26 thing – what happened? Agreement wasn’t reached until late Saturday evening – and only after a last-minute weakening of the text by India which left COP President Alok Sharma in tears. Here's a🧵with the highlights (and a few lowlights). I hope helpful. /1 On mitigation (cutting emissions), the agreement instructs countries to come back in 2022 with strengthened emissions reduction commitments ('nationally determined contributions' or NDCs). Some may have hoped that NDCs would be strengthened here, but that was never possible. /2

OMG it’s Friday already! Now what’s happening at #COP26? For the dazed and confused here’s a thread which I hope might help explain the issues on this last day of the conference (except it won’t be - it’s obvious now this will go into Saturday). 🧵 /1 Today the UK Presidency published a second draft text of the final ‘Glasgow agreement’. The first, on Wednesday, was widely criticised for being unbalanced, leaning too much towards the developed countries and China, and too little to the poorest countries. /2

The US-China joint declaration at @COP26 has sparked a lot of comment. It is obviously very good for the world that China and the US want to cooperate on climate. But after 30 meetings they have apparently had, the statement is remarkably thin on substance. Short🧵/ 1 The methane cooperation is good. China’s NDC only covers CO2, so this is potentially additional emissions reduction. (Shame they didn’t sign last week’s methane agreement.) It’s always good to repeat past commitments on deforestation (only the illegal type though). /2

Lots of people not professionally involved in climate change may be finding it difficult to understand what is going on at COP26. Many of the people here have no idea either! So I have tried to summarise where we are with three days to go. Hope it may be helpful. 🧵/1 The COP (short for ‘conference of the parties’) is the annual @UN climate change conference. This one is critical because under the Paris Climate Agreement every five years countries must strengthen their climate commitments. This is that moment. /2