An anti-market argument from authority

Miranda Devine’s latest piece on Kyoto (sent to me by Jack Strocchi) adds a couple of new (or newish) talking points to the debate. The first is the claim that New Zealand faces a “cost blowout” of $1 billion as a result of the treaty. As far as I can tell, this is a beat-up. The government had calculated that under existing policies, New Zealand would meet its Kyoto commitments with a bit left over that could be traded on international carbon emission credits markets. Now it looks as if they won’t, which means either changing the policies, buying credits or repudiating the commitments. Its hard to see how the availability of the second option makes NZ any worse off.

What’s more interesting is that Devine attacks not merely the carbon emissions market established under Kyoto, but the whole idea of emissions trading. This is fairly surprising since the whole thrust of environmental policy under the Howard and Keating governments, including the current government’s negotiating position on Kyoto, has been to encourage the used of market-based instruments, of which emissions trading systems are an archetypal example. Although problems can emerge with naive application of this kind of policy, it’s generally the right direction in which to go. The development of tradeable water rights in the Murray-Darling system and elsewhere is a prominent example of both the benefits and some potential pitfalls.

To back up her anti-market stance, Devine says

A 2002 study by the non-profit Clean Air Trust of three similar pollution trading schemes in the US found they were a “dismal failure”. They did not produce environmental benefits, stifled innovation in pollution controls, and led to delays and secrecy.

I was a bit surprised to read this, since nearly all the economic studies I’ve seen reach the opposite conclusion. Here, for example is one from Resources for the Future, a rather more prominent non-profit thinktank.

Devine doesn’t acknowledge that the Clean Air Trust is in the minority on this issue, or even that there’s any disagreement, but simply cites their conclusions as authoritative. I hadn’t heard of the group before this, so I visited their website, which reveals them to be a hardline environmentalist group with a strong philosophical objection to market-based instruments, and very hostile to the Bush Administration. I wonder if she would accept as authoritative the numerous denunciations of all aspects of Bush’s environmental record to be found on the site. More generally, would she prefer that environmental policy be based on the command-and-control approach favoured by the Clean Air Trust?

I haven’t had time to read the Clean Air Trust study and see how it stacks up against the large literature supporting the opposite conclusion (perhaps Devine has done this reading, but I doubt it). Until I get time for this, I’m unconvinced by Devine’s appeal to the authority of an advocacy group, especially one that she would dismiss out of hand if it weren’t for the fact that they are attacking, from a left/green viewpoint, policies that she wants to criticise from an entirely different position.

PS: Jack also advises me that Tim Blair has had a go at my alleged failure to mention Kyoto recently, and has implied that it’s due to the unanswerable power of arguments like Devine’s (his post went up just before my Katrina, Kobe, Kyoto post, which I’d drafted the previous evening here in DC). Blair takes a rather literal search-engine based view, linking to all sorts of posts with tangential mentions of Kyoto, but missing posts on the climate change issue that don’t include the magic word, like this one from a couple of weeks ago, pointing out the vindication of the climate models used to support the Kyoto protocol. It was, I think, on the front page of the blog when Blair’s post went up, and is still “live”, thanks to a long-running and mildly entertaining slanging match between Fyodor and the ubiquitous Jack.

42 thoughts on “An anti-market argument from authority

  1. This is a novel approach.

    Normally right-wing critics of Kyoto simply ignore the fact that it’s a market-based solution and denounce it as socialism.

    I suppose it’s progress of a sort that foerced to choose between her uninformed quasireligious faith in the market and her need to stay in ideological lock-step with George Bush and John Howard she has at least realised the contradiction rather than simply denying its existence.

  2. Unfortunately the contemporary Right, which I have some familiarity and sympathy with, has – for reasons not altogether clear – taken leave of its senses on a couple of key debates, specifically Iraq and Kyoto. Purported Right wingers are placing themselves squarely against both mainstream scientific theory (Iraq – social science, Kyoto – natural science) and standard conservative practice (Iraq – status quo balance of power, Kyoto – market-based emmissions trading).

    My “ubiquity” in this debate is my small part of a campaign, launched by Steve Sailer, to give more prominence to Right wingers “who know what they are talking about” against Right wingers who dont. Miranda Devine is an example of the latter class.

    To carry this counter-empirical case off the modern Right has had to dabble in post-modern epistemology, where truth becomes the servant of partisan politics or ideological frivolity. This disables and discredits conservative Cultural Populists in their most important task, which is dealing with the constructivist nonsense served up by Cultural Elitists.

    Likewise I find the long running slanging match between Tim Blair and Pr Quiggin to be “mildly entertaining”, albeit carried on at a more heavy weight division than Fyodor-Jack. My judgment is that TB has the better of the bicker but that Pr Q is deploying the heavier intellectual artillery.

    PS For my troubles I have been sin binned out of TB’s comments box by the ferocious Andrea Harris.

  3. In re. the right and Iraq: a right-waing anti-war blogger whose name escapes me asks the reasonable question of why, if right-wingers distruct the US government to run schools and hospitals in the US, they trust them to run a war in Iraq.

  4. The “right’s” support for the war in Iraq is a strange philosophical beast, really. I suppose alot of it is derived from a respect for authority. If they support the leadership (who they perceive as one of their own), then society will better be able to function as a unified “organ”… you know the train of thought, I’m sure.

    I think the “neo-cons” have drawn from a philosophical tradition that has more in common with its interventionist cousins in the Left than it does with its “status-quo” colleagues in the right. If they can succesfully argue a stand-point over the next few years that reconciles the two, they may be a much more powerful/acceptable force.

  5. In an entertainingly large number of cases, the epigones of the Right, post 9/11, have intoxicated themselves with their own moral absolutist, chiliastic rhetoric.

    The vulgar Right have been swept up on the Katrina-like flood tide of events they convinced themselves they were controlling and now find themselves wallowing in their own filth, bellowing for rescue.

    My favourite spectator sport: witnessing stupidity torturing itself to death.

  6. Trouble is, Katz, they control the destinies of millions of people, largely down the barrel of some terrifying weapon in a helicopter gunship.

    I fervently wish it was just a sport.

  7. How does a discussion on climate change always get back to Iraq? Is this like Godwin’s Law updated for the 2000’s?

  8. Tim Blair opposes road congestion pricing and Miranda Devine opposes emissions trading. So what else is new? They are apologists for whatever conservative government is in power, not principled classical liberals.

  9. Jason is spot on. As the soviets would say, Miranda Devine is a “useful idiot”. She is always provocative and often challenges assumptions. However she is not always accurate.

    The problem with some of the comments here is in assuming that the “right” is made up purely of Bush/Howard loving conservatives. Or that it is unified in any other way.

    On economics I am probably most expediently labled as “right wing”. I think free markets and secure property rights are the best way to solve most economic problems and I think taxation requires a heavy duty razor. However I opposed the war in Iraq. I oppose most drug prohibition. I believe in equal marriage rights for Homosexuals. So some might call me “left-wing”.

    In my view Miranda is wrong and Quiggin is right. Or is that left?

  10. “..why, if right-wingers distruct the US government to run schools and hospitals in the US, they trust them to run a war in Iraq.”
    So that Iraqis and Afghanis can decide how to run their own hospitals and schools, rather than be ordered to build palaces, among many other things they have also been ordered to do.

    Jack, the Soviet Union was a status quo balance of power. Not exactly sure what your point is though. ET was also part of a status quo Indonesia. Mugabe’s been around for a while too and the same could have been said of Apartheid. Ah, status quo, aint it grand.

    You may believe in a growing evidence of GW but not believe in Kyoto as the best way to tackle the problem, particularly if it means trading services for the output of foreign smokestack industries to evade your particular imposed costs, or reducing your outputs while allowing all those reductions to be more than offset by the increases of others.

    As far as liberal progressive values go, you may see some social regression in abandoning time honoured family values like mum, dad and the kids for example. When you advocate alternative lifestyles or subsidise that, you may get situations like that for American negroes, where 70% of them are born to solo mothers. You may then draw some sociological conclusions about outcomes, particularly when comparing human behaviour in tsunami and hurricane disasters. When you do, you may then deduce some monumental hypocrisy among white, middle-class intellectuals, who equivocate, advocate or wish to subsidise such lifestyles, they themselves would never dream of adopting for themselves or their offspring, for the very obvious sociological reasons, which must not be mentioned in polite company. It is the attitude of- Although I would never dream of such lifestyle choices myself, if I did I wouldn’t want anyone discriminating against moi.

  11. The problem with most who challenge assumptions is that in Pauli’s words, they are not even wrong. They usually base their arguments on falsehoods, contradictions and faith, which means you can’t even understand their arguments and remain in this universe. Talking to people like that has negative information content, at the end of the conversation you know less than when you started.

    You have to really know a field to intelligently challenge its assumptions.

  12. Thank you, Observa for that medley of the irrational right’s Greatest Hits:

    Free the Iraqis! (so they can be intimidated into voting in a Iranian-style theocracy)

    Alternative lifestyles!

    Welfare mothers!

    Tax cuts for all! (And never mind the deficit)

    I’m surprised Stalin didn’t get a mention.

  13. I had thought that the NZ Govt through ‘Climate Change Minister’ Pete Hodgson had confirmed the $NZ1B “blowout”.

    Officially they had calculated they were to be $500M in the black, now they are to be $500M in the red. This change was brought about by ‘more refined’ modelling.

    The Minister for Climate Change hadly previously argued that to not sign Kyoto was to set fire to “a very big cheque”.

    Had NZ been aware of this additional cost it is doubtful they would have ratified the Kyoto protocol.

    Incredibly under Kyoto pine trees planted on land previously covered with scrub are not to be counted as eligible for credits.

    Whilst it may employ some elements of free market systems to trade credits, Kyoto in itself is an unproductive imprecise ineffective imposition on the market.

  14. Rog,

    So how much additional carbon is sequestered in a hectare of pine forest as opposed to a hectare of scrub?

  15. Personally I think that the Kyoto Protocol is amoung the best methods to cut CO2 emmissions.

    My concerns are:-

    1. Do we really need to reduce CO2 emmissions.
    2. Will Kyoto work if China and India are excluded.

    I accept that CO2 levels have increased. I just don’t think the argument from there to global warming is settled.

  16. Observa wrote:

    “Jack, the Soviet Union was a status quo balance of power. Not exactly sure what your point is though.”

    *My* point (which I suspect Jack might have some sympathy with) is that the Soviet Union was *not* the subject of a US-led war of liberation, even though the likes of Stalin and Beria made Saddam look like a Quaker. It subsequently experienced a process of half-baked internal liberalisation under Khrushchev, regression under Brezhnev and his immediate successors, and finally full-blown democratisation at the initiative of Gorbachev & Co., culminating in a situation which, whilst still far from completely democratic (e.g. the authoritarian tendencies of Putin and the later Yeltsin in Russia, Karaman’s dictatorship in Uzbekistan, the situation in Belarus, etc.), is considerably freer and more hopeful than what we are currently witnessing in Iraq.

    For that matter, Spain, Portugal, South Africa, Indonesia, South Korea, Taiwan, etc., were also not the beneficiaries of a US-led invasion to “liberate” them from Franco, Salazar, apartheid, Suharto, various post-WWII dictators, the Guomindang, etc. They all seem to be doing better than Iraq.

  17. Paul, I can accept that laid back evolution may be viewed as more beneficial in the long haul than perhaps overenthusiastic intelligent design, but simply point out that ruthless unintelligent design can seriously hamper that evolution. Always a matter for fine judgement and tolerating some uncomfortable tradeoffs from time to time. That judgement can depend on where you’re coming from of course like this bloke here http://www.news.com.au/story/0,10117,16492912-23109,00.html Obviously he’s just a Bush sock puppet. Still, I suppose it’s the thought that counts, when you’re up to your tits in responsibility for cutting off the supersize Maccas, fries and Coke to one lot of critics and pragmatic, secular, status quo govt for another lot. Ah well, you can’t please all of the people all of the time. The sock puppets and mum will still luv ya.

  18. uhh, yeah observa
    Muslims have as much right as happy clappers to form political parties. and if their party comes up with stupid policies we have every right to ridicule them and criticise them. and note they’re forming a party rather than driving a plane through parliament house.

  19. Paul Norton Says: September 5th, 2005 at 10:26 am

    Observa wrote:
    “Jack, the Soviet Union was a status quo balance of power. Not exactly sure what your point is though.�

    My* point (which I suspect Jack might have some sympathy with) is that the Soviet Union was *not the subject of a US-led war of liberation,

    Yes. The USSR-CCCP had a regime change, but this was through internally-exposed evolution rather than externally-imposed revolution. The PRC-CCP has been going through a comparable process.

    The Russians started their evolution with political culture (glasnost) and then moved to political economy (perestroika). The Chinese reversed that procedure, which seems a more rational.

    Either way the regime changes in these states have been accomplished more or less peacefully, and utilising national, rather than international, resources. Hence there is some prospect for success.

    The Iraq venture, which I stupidly supported, was a classic example of a foolish disruption to the status-quo. It entailed the use of revolutionary means (violent regime change) to effect utopian ends (a multicultural Islamic democratic state). very much in the Old Left radical tradition actually – not for nothing is Hitchens constantly invoking the name and fame of Tom Paine, in self justfication.

    Conservatives are not mindlessly against change. The theory of evolution proves that change is pervasive and perpetual, here and there and in fits and starts at least. They are simply against rocking the boat for no good reason, especially when the boat seems to be seaworthy, on an even keel and heading in the right direction.

    Change, whether innovative or rennovative, must be accomodated. Its just that much recent political change has been too much, too soon and run by the wrong sort of people.

  20. I’m glad someone is taking Miranda Devine to task.

    To answer your question about the Clean Air Trust papers, I was also interested, and researched and discovered that the reports relate not to greenhouse gas emissions trading, but to air pollutant trading schemes. The evaluations use entirely different indicators and valuation mechanisms. It’s like comparing apples with pears.

    In addition, criticising the fundamental premise of a market for the results is… umm…. like criticising the US dollar for incidences of bad project finance outcomes in Asia?!

    Given that the project finance in this and every other case involving emissions trading is dependent upon a blend of ‘carbon’ and traditional finance, maybe we should be criticising the capital markets in general??!! Why ascribe the fault to the carbon market dollar, rather than the ‘traditional’ capital market dollar when that is where most of the cash for this and almost every other emissions trading project comes from ??!

    Now who is sounding like the leftie- central planning freak?

    Surely the deficiencies are down to project-specific governance issues and regulatory issues, rather than the market or currency itsself?

    It is in fact the local regulatory and planning context in New Zealand in this case (as it is a NZ project she has picked up on twice in SMH articles now) that is at fault, if there is one, not the market.

  21. On Tim Lambert’s blog (http://www.timlambert.org) I ended up spending an inordinate amount of time running down the details of the New Zealand Kyoto “blow-out”.

    Key points:

    1. The actual contingent liability is not NZ$700 million, NZ$1 billion; NZ$1.2 billion or whatever other ludicrous figure National Party figures spout in the course of the current election campaign and right-wing airheads like Devien sedulously repeat. It’s NZ$307 million. This figure is cited in New Zealand’s budget statement – and New Zealand’s budgeting standards and public disclosure are probably the best in the world – literally.

    2. The principal cause of this blow-out is that the New Zealand economy grew faster than expected as a result of the commodities boom. As a result, emissions fron industry and transport are expected to be higher than previously estimated. So much for the idea that Kyoto is going ot wreck the New Zealand economy.

    3. The other cause of the blow-out was that the final rules for credits for afforestation were worked out and New Zealand got a less favorable deal than it previously expected. This accounts for around 1/3 of the blow-out, meaning it will cost New Zealand around NZ$100 million over 5 years. That’s $20 million per year or around $5 per New Zealnder per year. I’m sure that missing 10 cents a week will really impact on living standards.

  22. Incredibly under Kyoto pine trees planted on land previously covered with scrub are not to be counted as eligible for credits.

    Kyoto excludes counting of credits for vegetational changes to avoid incentives for deforestation. To reinforce the idea, plantations receive credits only if they have been established on land not forested prior to 1990.

  23. It doesnt matter how you want to look at it Ian, the Labour Govt of NZ made a $1Billion stuff up in their calculations.

  24. It does matter quite a bit how Ian looks at it Rog, if it’s actually a NZ$307M stuff up, that costs each kiwi 10c a week. Makes it patently irrelevant, and makes Devine’s weak point totally trivial.

  25. In parliament PM Clarke confirmed that Kyoto would cost $500M in the first term.

    That does not include the amount that they had originally estimated that they would receive. The govt had originally calculated a credit of 32.6mt CO2e which is now a liability of 36.2mt CO2e.

    KPMG and Castalia have advised that the govt should allow for an estimated contingent liability of $9 billion to $14 billion in its accounts.

  26. http://uncorrectedtranscripts.clerk.govt.nz/

    This appears to be the exchange in question – on July 27, 2005:

    Dr Don Brash: Can the Prime Minister confirm that the Government notified the United Nations climate change secretariat of New Zealand’s changed carbon credit position on 15 April this year, but did not notify the New Zealand public until last week; if so, why did she try to hide such a major change in New Zealand’s circumstances from the New Zealand people?

    Rt Hon HELEN CLARK: I do not have that particular piece of paper at hand, but my understanding is that the UN was advised of the level of emissions for a current year, not projecting forward.

    Peter Brown: Will the Prime Minister confirm whether the advice that she seeks will come from the same person who advised that the country would be in $500 million surplus, as against a $500 million deficit; is the same person going to give the advice to the Government?

    Rt Hon HELEN CLARK: There is quite a sizable group of officials that has advised the Government for a long time, and it has consistently advised Governments from the time of the honourable Simon Upton that New Zealand would be in a net credit position. It is important to note that while Don Brash does not know whether there is a global warning problem, Tony Blair considers it to be so significant that he is having a row with his best friend, President Bush, about it.

    – Not much of a “confirmation’.

  27. Rog,

    The only “contribution” Clark seems to have made on the subject on 21 June is to have interjected and been thrown out of the chamber.

    I looked at the Minister’s comments and didn’t find an admission about the claimed $1 billion cost in them either.

  28. wilful, it’s worth noting that Ian’s “10 cents a week” figure relies on arbitrarily excluding two thirds of (his estimate of) NZ’s losses due to Kyoto. Fiddling with the numbers in that way is exactly how you end up with Devine’s chinese-whispers style statistics.

    Ian, I’ll also note that the gap between your numbers and those Rog is citing might be partially explained in your figures are for NZ’s total liability and ignore the dissappearance of a previously-projected surplus – so that your 300 million is effectively Rog’s 500 million deficit. (Though the correct number for “costs imposed on NZ by signing Kyoto” should only take the deficit into account, though it will need to consider all of it, rather than one third of that number).

  29. Luis wrote: To reinforce the idea, plantations receive credits only if they have been established on land not forested prior to 1990.

    I would have thought that much of the world was forest at some point prior to 1990. Although 11000 years ago the ice age did clear a vast amount of land. A lot of these forests grew back again.

    Maybe it needs to be better qualifed with a date range rather than simple saying before 1990. Otherwise it might discourage reforestation.

    PS

    starts bold text. closes bold.
    starts italic text. closes italic.

    But how do I put tags in this blog to create an indented quote?

  30. Paul,

    Would New Zealand be better or worse off if it’s economy had grown at the slower rate preiovusly projected?

  31. Ian, the effect of signing Kyoto on NZ’s economy is the effect of signing Kyoto on NZ’s economy. To clarify: above projection economic growth which is unrelated to the Kyoto decision means that Kyoto is more costly than it otherwise would have been, and that this second figure is the true cost. The cost “blowout” to the extent we’re interested in it, would be the sum of the actual deficit and the (alleged) missing surplus.

    My calculations are only incorrect if NZ’s growth was caused by Kyoto and owuld not otherwise have occured. I do not read your post, or anyone else’s, as suggesting this.

  32. Paul,

    The figure in question isn’t the cost of signing Kyoto to the New Zealand economy – it’s the cost of signing Kyoto to the New Zealand government.

    In fact it’s not even that – it’s the gross cost of one compoent of that cost.

    Assuming that higher carbon emissions means higher carbon tax receipts, the actual cost ot the government will be reduced accordingly. For that matter if the carbon tax exceeds the market price, the government could come out ahead on the deal.

  33. You’re right that I’m blurring the line between governmental cost and total economic cost. However to the extent that you’re arguing that NZ will be better off because, while it will have to pay 300 million to comply with Kyoto it will receive internal transfers from other segments on the New Zealand economy equal to a portion of that, I’d say you’re missing the point about complaince costs.

    The NZ government is perfectly free to levy a carbon tax, or nitrogen tax, or any other tax it feels like at any level it feels like, whether or not it is a signatory to the Kyoto protocol (in fact Zimbawe just introduced a “carbon tax” of its own). Revenue raised from that tax (leaving aside the environmental benefits which will be shared with the world at large) is not “free-money” and can not count to offset the costs of another policy, the adoption of which is neither necessary nor sufficient for the carbon tax to come into existence.
    To repeat: The cost of complying with Kyoto is the cost of complying with Kyoto, and quoting a handy figure based on ignoring two thirds of that cost “because it comes from economic growth” is as disingenuous as what Devine is being accused of.

  34. You just can’t please some people. As far as I remember, the carbon-trading system was reluctantly adopted as part of Kyoto at the Bonn meeting of Conference of the Parties #6 (COP6) in (I think) 2001. It was a fairly desperate attempt to rope in Australia and Japan, and was vigorously opposed by some European governments and NGOs like Greenpeace. Seems like it was a waste of time for everybody except economists.

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