Home > Economic policy, Environment > Garnaut draft report released

Garnaut draft report released

July 4th, 2008

The Garnaut Review draft report has just come out. The site is clogged, but I’ve managed to get a copy of the report and press release (I’ve attached the latter here.

There’s a lot of discussion of the Murray Darling Basin where the worst-case projections are about as grim as they can possibly be. My UQ research group (Risk and Sustainable Management Group) did the economic modelling that translated the climatic projections into predicted changes in land and water use. There are big adverse impacts under most of the ‘business as usual’ scenarios. On the other hand, in the projections where CO2 concentrations are held to 450 ppm things aren’t bad, and even 550 ppm would still allow irrigation to continue.

More soon on the policy recommendations. Whether or not the government ultimately follows Garnaut’s proposed model, there’s no doubt that the Review has shifted the terms of debate substantially. Those (like the Federal Opposition) who are tempted to play the issue for short-term political gain will pay a big price in the end if they succumb to that temptation.

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  1. July 6th, 2008 at 22:19 | #1

    Peter Wood #47

    In my opinion the decision by Australia to continue to expand coal production is a decision to be a free-rider in this prisoner’s dilemma.

    Of course it is, and this is the dirty little secret of the whole climate debate in this country. Fact is, we’re coal junkies, the lot of us. We are profiting from the destruction of planet earth. Not only that, the economists tell us we desperately need to fix “infrastructure bottlenecks” so we can destroy the earth faster.

    Am I the only one here who is just a little bit horrified by all of this?

  2. wbb
    July 7th, 2008 at 00:26 | #2

    No, you are not the only one, carbonsink. Those on the left need to call out the CFMEU on this very loudly.

  3. Socrates
    July 7th, 2008 at 00:51 | #3

    Jack Strocchi

    Sorry I should have made myself clearer; I was referring to the difficulty to get businesses in all nations to join in. I assume as per public choice theory that they will simply lobby governments to avoid having such taxes introduced.

  4. rog
    July 7th, 2008 at 07:36 | #4

    The policy that Howard adopted is much the same as India; an

    overriding priority of maintaining high economic growth rates

  5. Ken
    July 7th, 2008 at 08:04 | #5

    I don’t think Howard was necessarily a Climate Change delusionist, rather, that it was something hard, expensive, too restrictive on businesses that were feeding vast royalty monies into gov’t coffers – and (as others here see it) primarily something for others to do.

  6. observa
    July 7th, 2008 at 08:08 | #6

    “After following most of the arguments on this thread I cannot help feel depressed. It has always seemed to me that emission trading is like getting people to voluntarily tax themselves, which few will do.”

    I’m with you a bit on that Socrates, in the sense that I don’t believe this Keynesian Grand Plan with all its jurisdictional warts can be pulled off as an answer to all our prayers. I’d liken it to trying to do a Republic on the cheap (ie lets just get rid of the GG) without seriously addressing our whole Constitution and any practical shortcomings. That’s essentially what Garnaut is trying to fudge here, no matter how he spins it. Jumping on board an international C&T scheme is just more fiddling about the margins of a constitutional marketplace that is now fundamentally flawed. Jack is right that we will opt for voluntary taxation if it’s seen as fair and reasonable reform, but this won’t be. Capping ourselves and business as usual with coal exports is a no-brainer really. As well we now have to deal with the problem of SWFs buying into our resources. These problems are all related in the sense we need to change our CM radically to be an exemplary model for the ROW to follow. At present this is just more short term ‘meetooism’. Get the CM right and let the marketplace do what it does best for all our benefit. There are glimpses of it staring us all in the face
    http://www.news.com.au/adelaidenow/story/0,22606,23979196-2682,00.html?from=public_rss

  7. Socrates
    July 7th, 2008 at 09:17 | #7

    The lobbying and spin has already started. A spokesman from the AWU on radio this morning was trying to argue that introducing emisions trading on aluminium would make things worse!!?? The claim was that aluminium refining in China was twice as polluting on a unit basis, and the production would simply shift overseas with a cost penalty imposed here. Similar arguments will come from steel manufacturers. These people simply won’t reform unless forced or paid to. Look at cigaretes – we still have tobacco growers over a decade after the harm caused by smoking was proven.

  8. Peter Wood
    July 7th, 2008 at 10:13 | #8

    I find this particularly ironic because the emission intensity of Australia’s aluminium production (in t CO2/t aluminium) is over twice as high as the weighted world average (pdf, see page ix). Because our electricity is so dirty, shifting production overseas would often be a good thing. We should also keep in mind then most emissions intensive industries are also highly capital intensive, so production does not move quite so easily. What we are seeing at the moment is what I like to describe as “rent-seeking by crying wolf”.

  9. observa
    July 7th, 2008 at 10:34 | #9

    With an emphasis on quantity controls what did you expect Socrates? Remember also that these quantitative measures(ie caps) can be whisked off around the globe to be applied wherever they can find their best return.(ethanol in ET anyone?) That will no doubt be in third world countries where environmental concerns,etc (ie costs of doing busines) will be lowest. What Australians really need is a level playing field price regime facing all in which to ply their trade in an environmentally sensible manner. That includes overseas capital whatever its origins. C&T is too singularly focussed to ever address that. It’s just simplistic, hot button, international plastic shopping bag knee jerk really, when the supermarket is full of the bleeding obvious. It doesn’t have to be that way if we put our thinking caps on and design a better CM for the world to beat a path to our door and emulate. Simply put that’s the visible invisible hand to guide us all and those who would sail with us from time to time. In that respect, you’ll note that with no income or company tax in my CM to date, if they don’t emulate us, we’ll quickly become the corporate headquarters of the world. It’s an example they simply can’t afford to refuse.

  10. observa
    July 7th, 2008 at 10:51 | #10

    Here’s another glimpse of the possibilities of getting the CM right-
    http://www.ft.com/cms/s/0/314b9b86-439e-11dd-842e-0000779fd2ac.html
    Get the settings of the CM right and when you’ve got them by the ghoulies, there hearts and minds will follow you silly Keynesians. Stop trying to run the bloody world for chrissakes!

  11. Socrates
    July 7th, 2008 at 12:32 | #11

    Peter

    I agree the aluminium industry figures are deceptive and self-serving. The Aluminium industry in Australia uses 10% of the nations electricity for relatively little economic return. It is an $8 billion export industry (<1% of GDP) but there is very little value adding. We refine over 1/3 of the world’s alumina, but produce only 1/5 of the world’s aluminium. So the energy intensive refining is done here becease various state governments have caved into the industry and agreed to give them very low energy prices. Meanwhile the higher value work is shiped overseas.

    Also, saying that our industry is low emission is quite misleading. The hydro powered Tasmanian plants are very good; the brown-coal powered Victorian plants are not.

  12. July 7th, 2008 at 14:00 | #12

    Garnaut in his interim report emphasised that the greenhouse gas problem is a tragedy of the commons problem and this is illustrated by so many comments in this blog.

    Emissions trading, carbon taxes it does not matter. What matters is investment in energy sources that do not emit greenhouse gases. The best way for this to be achieved is through a market place in investment opportunities in green energy sources. This can be done through redistributing the money collected through taxes or trading but REQUIRING the money distributed to be spent on investing in renewable energy sources. You can see more on this idea at

    http://www.henrythornton.com/article.asp?article_id=5259

  13. July 7th, 2008 at 14:02 | #13

    Garnaut in his interim report emphasised that the greenhouse gas problem is a tragedy of the commons problem and this is illustrated by so many comments in this blog.

    Emissions trading, carbon taxes it does not matter. What matters is investment in energy sources that do not emit greenhouse gases. The best way for this to be achieved is through a market place in investment opportunities in green energy sources. This can be done through redistributing the money collected through taxes or trading but REQUIRING the money distributed to be spent on investing in renewable energy sources. You can see more on this idea at

    http://www.henrythornton.com/article.asp?article_id=5259

    This approach deals with the tragedy of the commons and if we show it can work then the rest of the world will follow.

  14. melanie
    July 7th, 2008 at 14:51 | #14

    JQ,
    I’m most curious to read your views on the MDB and continued viability of irrigation (how much of it?). Last July I stood on the bank of a stagnant pond called the Darling somewhere between Wentworth and the Menindie lakes. It was a shocking sight, even in a drought, especially given that the tourist placard pointed to an earlier history as a paddle steamer port. Below the weir you could scarcely get a canoe up the creek. But as a native of Adelaide I’ve been conscious of problems like salinity for decades now. Given the lack of past action, I don’t feel very hopeful that 450 ppm is going to aid sustainability of this river system.

  15. James Haughton
    July 8th, 2008 at 15:40 | #15

    A few arguments for Australia being an early adapter that I haven’t seen elsewhere yet:
    1) Emulation: India, China, etc, have growing middle classes who emulate and aspire to the lifestyle they see enjoyed by western middle classes. If being carbon-sensitive becomes seen as part of what is acceptable Western middle-class behaviour, they are likely to emulate it. Vice versa if we don’t join in.
    2) Tail-wagging-dog: the impact we could have on the US in this area could be quite significant. Rudd signing up to Kyoto has isolated them as the only stand-out. Once Bush is gone, the next president, almost certainly a Democrat, is likely to bring in some kind of carbon tax (or cap, trade, etc) and by doing it first, and doing it successfully, we can strengthen that president’s hand against the powerful vested interests he will confront.
    3) Policy lab for the world; to be blunt, we are a very prosperous country overall, and if we muddle around and screw up a bit until we get the carbon tax (trade, etc) settings right, it isn’t going to hurt too much. By contrast, if China or India put in a scheme that fails, it could actually lead to people starving to death if it crashes their still fairly fragile industrialising economies. If the West (North America, Europe, us+NZ, Japan) is willing to bear the experimental brunt of trying the different policies until we hit on a workable, globally-coordinatable one, then we give the developing nations a pre-existing framework they can adopt much more easily.

  16. John Mashey
    July 11th, 2008 at 06:40 | #16

    I have a question about the Garnaut Report:

    p.240
    “Productivity growth is the primary driver of the global economy, with per capita GDP projected to increase by more than 900 per cent over the coming century, compared to a 380 per cent increase over the 20th century. Overall, the global economy is projected to be roughly 15 times larger in 2100 than in 2005.” [That's assuming population rises from 6.5 billion to 9.3 billion by 2100.]

    What does per capita GDP +900% (= 10X richer) actually mean? What does that count? [More-or-less similar numbers can be found in stern, Nordhaus, and elsewhere.]

    I’ve been asking, in various ways how this desirable outcome happens, and I still don’t quite understand, given that:

    - it appears water will become more expensive in many places, and some aquifers are being drawn down.

    - fertilizer (at least nitrogen, via natural gas) looks to get more expensive

    - oil & natural gas would look to be trending up in price, with usual jiggles

    - food, especially via heavily mechanized farming depend on all of the previous

    - building sea-walls, dikes and rebuilding low-lying infrastructure (mostly built with $30 oil) would seem more expensive in 2050-2100, when oil will surely be >>$200/bbl.

    + but of course, we do have a lot of low-hanging fruit on efficiency, the usual improvements in crop yield, and technology improvements in renewable energy.

    - but still, we have a century of needing to totally rework the world’s energy systems, which will surely cost money, especially as EROI is decreasing.

    So, what does 10X richer really mean?

  17. John Mashey
    July 12th, 2008 at 11:53 | #17

    re: 365 James Haughton

    Interesting arguments (for doing Right Things).
    #1 might be possible, especially given Oz’s location.

    #2 everything helps, although not as much as we’d like until the “World’s biggest polluter” departs the US Presidency, as I’m afraid Oz signing on was insufficient embarrassment.

    Also sad to say, many of my fellow Americans aren’t really sure where Oz is, or what it is, except as the home of Crocodile Dundee and kangaroos. Many are slightly surprised to learn that Oz actually has cities [doesn't everyone live in the outback?] This is unsurprising, as many think that Canada is really some 51st state where they say “eh” more often. Hence, good actions in Oz may not have as much effect (in the US, anyway) as you might hope, although smart people study solutions from all over the world and copy what works.

    You might look at Art Rosenfeld on Energy Efficiency, slides 7-8. On such slides, lower left is where we all need to get, and unfortunately Oz is at the upper right. Rosenfeld is the California Energy Commissioner, and a hero of energy efficiency.

    California (whose population & economy are about 2X that of Oz) is in lower left quadrant, and we do have (strong) US Senators & Speaker of the House, and the largest representation in the House, which all help. When we stop having to sue the US Federal government for everything, a bunch of other states are set to follow.

    [Few people outside the US and many inside don't know that CA has a magically-special legal position regarding pollution control in the US.

    The US EPA sets uniform emissions control rules for the US, to avoid the chaos of everything state doing its own thing. When Pres. Nixon created the EPA in 1970, CA had had emission control laws for years, and it got a special grandfather clause.

    If CA wants to have *stricter* emissions controls than the US, it apples to the EPA for a waiver, which it has done ~50 times, and until just recently (the CO2 / auto one), has always been granted with minimal fuss. However, once CA has a stricter law in place, any other state can copy it, so there is effectively a 2-track system.

    If for some reason a Federal government wishes to maintain loose rules, it *must* fend off CA, which is why we've spent a lot of effort suing them lately. We're only a state, not a country, sigh.]

    In some case, manufacturers, after much whining and moaning, match the CA rules, and of course, get tired of building two different products … and then discover it’s not so bad after all, and in some cases (refrigerators) ended up being more efficient at no extra cost. See Rosenfeld Bio, p45. Also, high-frequency ballasts for CFLs and low-E windows came out of the same place. Much to Detroit’s surprise, tailpipe emissions controls were not the end of the auto industry.

    Rosenfeld writes (p.66-67):

    “The cleverest measures to save energy are the ones that cost the least, but these are least likely to excite the profit motive of a utility…”]

    =====
    But if I had a wish, there is something we can’t really do in CA that you might do in Oz: make coal CCS get real.

    I don’t know if that will ever be practical, and you could well do OK on solar and wind, but you surely should have some motivation to work very hard on CCS for real, not just greenwashing or happy ads about “clean coal”.

    CA and Oz have some relevant similarities [climate, water issues, major coastal populations, agriculture, sun, wealth], but CA can’t really do anything for coal, whereas Oz might.

    That would indeed be a terrific service.

  18. Gman
    August 27th, 2008 at 23:28 | #18

    “why impose the meaningless expense of an emissions cap upon ourselves?”

    Apart from the myriad reasons that readers have already supplied, why not pick up the ball and run with it, maybe provide an example of what Australia can do when we put our minds to something and be part of world leadership and best practice?

    There are huge benefits down the road for Australia if we can be part of the technology and policy forefront on the challenge of climate change and environmental issues.

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