Monday Message Board

It’s time once again for the Monday Message Board. Please post your thoughts on any topic. Civilised discussion and no coarse language, please.

44 thoughts on “Monday Message Board

  1. “Spending the revenue raised on anything other than infrastructure to reduce greenhouse gases is unlikely to have much effect as the whole purpose of the tax is to reduce emissions. It is best to give the tax back to consumers provided they agree to spend the money on greenhouse reducing infrastructure. We would suggest giving the money back to people whose lifestyles produce few greenhouse emissions.”

    Basically omniscient Kevin would like to give our taxes to Aboriginal hunter gatherers or perhaps greener meat eaters-
    http://www.news.com.au/story/0,23599,23316324-23109,00.html
    The world is full of Kevins who always know what’s best for us all. Of course is this wasn’t just another power grab by all the Kevins, and CO2 was the greatest threat to mankind since George Bush, they could easily instal a constitutional marketplace where all revenue was gathered via fossil fuel taxes and let the market run. You wouldn’t need econometric models to work out what a dramatic change of investment/consumption patterns that would produce, but then that’s not really the object of the game here.

  2. Terje,

    The problem with measuring gas use as a proxy is two-fold:

    1. Some gas is lost to the atmosphere as vagrant emissions. Natural gas is mostly methane and if leaked into the atmosphere has about 50 times as much warming potential as carbon dioxide released by burning it. Losses can be 1% or more of total volume of gas processed.

    2. Some gas plants (i.e.e Kwinana in WA) process natural gas to make ethylene and other organic chemicals. So volume of gas processed isn’ the same as volume of gas burnt.

  3. Ian Gould

    Posters who subscribe to the idea that Aboriginal “self-determination� is the source of all evil and things were much, much better in the Good Old Days, might want to consider the following

    Who are these posters?

  4. observa,

    I am not sure of the point you are making. Are you claiming that the proposal will not increase GDP? Are you claiming that burning fossil fuel is less costly than renewable energies. If so then please explain why if the running cost of a thermal solar plant or geothermal energy plant is half the cost of fossil fuel plants we will be worse off?

    Major reasons we do not have renewables producing most of our energy today is a failure of the energy markets caused by inbuilt bias to fossil fuel systems and because of the strange accounting rules that mean that spending money on cigarettes is as “valuable” as spending money on infrastructure.

    This is not a conspiracy or anything like that. It is failure to apply systems thinking to the problem and to rely on the existing flawed economic models which have brought us the prime loan crisis and increasing inflation and unaffordable housing in times of prosperity. Of course the existing systems are flawed and it would be a brave person to claim otherwise. The suggestions being made are simple affordable tweaks that keep the current system and can fix the problems.

  5. Re 1:

    On the subject of when can we introduce an emissions trading scheme, whether you have a carbon tax or cap-and-trade, the central issue of getting information remains the same. The National Greenhouse and Energy Reporting Bill 2007 addresses this issue and the first reporting period will be 2008-2009. I therefore think we could easily introduce emissions trading by mid 2009. By having it start with emitters with emissions over 20 kT CO2-e, it should start off reasonably simple.

    As far as what to do with the money raised from auctioning permits, about 20% of emissions are from the residential sector including electricity and transport, so a minimum of 20% of money raised should be used to compensate low income households. The remainder should be spent on RD&D and reducing and reversing emissions in the land use and forestry sectors. This is because emissions from land use are hard to measure, but easy to reduce. If money is allocated to activities like biodiversity plantings, this will provide valuable information on how much emissions are offset by such activities (effectively being a form of RD&D) as well as having biodiversity cobenefits.

  6. Given the climate change issues, who could argue that further subsidies to fossil fuel industry are anything but madness? Yet Australia continues to throw billions in subsidies to the fossil fuel industry and to spend next to nothing on renewable energy R&D. This was the picture in 2007 and there has been no substantial change since.

    http://www.smh.com.au/news/business/governments-10-billion-boost-for-global-warming/2007/04/30/1177788029542.html

    So the task is first to remove these $10 billions in perverse subsidies and then to implement a negative externalities tax on CO2.

    The carbon content of all fossil fuels (by volume or weight)is easily calculable by any high school chemistry student. There is no difficulty at all in taxing fossil fuels.

    I find it passing strange the JQ continues to remain silent (at least in these blogs) about the many perverse subsidies in our present economy.

    That’s a direct challenge to put up a post mine host. 🙂

  7. Peter,

    Calculating emissions is unimportant in the system proposed as an alternative to emissions trading. You do not have to be “exact” because the important thing is where the money is spent and the amount of money spent. Give money to people whose lifestyles cause few emissions (mainly the low income) but require them to spend the money on ways to reduce emissions. They can of course sell the money if they have no idea what to do with it but the money has to be spent sooner or later on reducing emissions.

    Distribute some of the money for R&D through a competitive process. However we don’t need much R&D as we already have the technologies to reduce emissions to zero or less for low cost.

    There are many ways that people can build infrastructure to reduce emissions and anything that looks reasonable can apply to be considered. If it is found that the infrastructure is a scam and does not reduce emissions then the proponents are banned from the system.

    The name of the game is investment not increasing prices because investment is the only way to solve the problem. However it is too hard to pick where to invest and hence we need a market in infrastructure to do the allocation.

  8. The problem with measuring gas use as a proxy is two-fold:

    Ian,

    I actually proposed using electricity output as a proxy, not the quantity of gas input, however I do see your point. I imagine though that there is already a significant economic incentive to avoid leaks and proxy measurement would only be an interum measure. What is better a proxy tax or no tax?

  9. The possibility of emissions trading has been on the agenda for a decade or longer.

    Most major multi-nationals have their own internal requirements on all their facilities, wherever located to report their emissions.

    The gas industry’s claims just don’t sound credible to me.

  10. Of the $10 billion, $7 billion is in subsidies for fossil fuel based transport because more money is spent on roads than is raised through petrol excise.

    By this daft analysis, if people drove electric cars powered by solar energy, it would be a $7B solar energy subsidy. Why isn’t it a $7B steel subsidy (after all, most fossil fuel based transport is made out of steel)? Or a $7B rubber subsidy (tyres are made of rubber)?

    And to think the Australian taxpayer funds the idiot academics behind this study.

  11. I must question the studies claiming a “$7bn subsidy on roads”. This claim is just false and misleading. For starters it only considers one component of the taxes and charges on transport. What about registration fees? Or vehicle sales taxes/GST? Or import tariffs and fuel duties? Roads are not subsidised except in some rural areas without mining. In fact urban roads are a great source of income for government, that is why they much prefer to build tollways than train lines. That is the problem – PT needs subsidising by government hence we underfund it.

    I wish to make clear that I am in favour of carbon taxes and using the money to fund public transport. That is still the right answer from an economic/total community cost viewpoint. But lets have realistic numbers please.

  12. Re #35, Keven Cox,

    1. I don’t understand your statement: “Calculating emissions is unimportant in the system proposed as an alternative to emissions trading.” What does the expression ’emission trading’ mean to you?

    2. I find your statement: “However it is too hard to pick where to invest and hence we need a market in infrastructure to do the allocation” quite amazing. You seem to assume that the idea of a ‘market for infrastructue’ makes sense. What is your notion of ‘infrastructure’? What is your notion of ‘a market’?

    Re: #1. While I would agree that emission prices (and taxes) have a function in an economic system that is akin to that of information system, I don’t think it therefore follows that knowledge about the development of informtion systems which do not involve humans but are controlled by humans are helpful in shedding light on the nature of the problem. Economics is concerned with the material (physical) welfare of humans. It seems to me you are offering a solution to a problem we don’t have but none for the problem we do have.

  13. Ernestine,

    Please bear with me as I try to explain myself.

    1. I wanted to emphasise that the problem is an investment problem more than an emissions reduction problem and so that is why it is not all that important to be able to accurately calculate emissions. Emissions trading means emissions permits trading. That is, we trade permits to pollute. The reference is Tietenberg – “Emissions trading – principles and practice”

    2. We already have a gigantic market for infrastructure on ways to reduce emissions and it is going quite well. It consists of investing to build solar thermal plants, insulate your home, build public transport systems, etc. The issue is getting even more money into that market. What we propose is a direct way of getting money into that market – not an indirect way as used in emissions permits trading or carbon credits. Note it is not a market in energy but a market in infrastructure that will reduce emissions.

    #1 I see the physical and material welfare of humans as an emergent property of an economic system not as the system itself. One way of thinking about an economic system is as an information system that enables humans to exchange information about the value of goods and services. When you start looking at an economic system this way you get different insights. For example we know that building information systems is best done incrementally and that you can never fully design a complex information system involving human interaction but you build them to evolve and you direct the evolution in ways that work best. It also turns out that an economic information systems look remarkably like an evolutionary information system. This means that the best tools to model economic systems are probably similar to the best tools we use to model evolutionary systems and at the moment these turn out to be best done by modelling at the individual transaction level. The example I like best is modelling an ant colony. To model an ant colony you model the transfer of information each ant passes to other ant. It turns out that you can very accurately model the behaviour of ant colonies under all sorts of external shocks (e.g. someone destroys an ant trail with insecticide) using this method. We can model the economic behaviour of an ant colony in the way it optimises the collection of food. If you can successfully model the economic behaviour of an ant colony just by considering the information transfer between ants why not model the economic behaviour of humans by modelling the transfer of economic information between humans when they trade? It turns out that you can and you can use the models to predict what will happen when the system gets external shocks (like global warming).

    Have a look at the following talks to get a better idea of what I am saying.
    http://www.ted.com/index.php/talks/view/id/145
    http://www.ted.com/index.php/talks/view/id/216

    The next step in this line of thinking is that if your models work well by considering transfers of information in trades then that is the area you need to look at for finding solutions to complex problems. That is look for a “fair trade” in the way we use community goods because that is the problem we are trying to solve (The tragedy of the commons). Hence that is why I had the idea of paying frugal people who were low consumers of a common good but as part of the trade requiring them to spend the money they obtained on increasing the common good. It then becomes a “fair” trade. If we do this then what happens?

    My apologies for going down this trail but you can see why it is difficult to try to explain what I am talking about because the models I have in my head are quite different from the models that people trained in economics have in their heads.

    Economic thinkers seem to think in terms of moving from one steady state to another. That is you have an economic system that is in balance and if you change one part then there will be a change in another part until the whole system returns to a stable state. Thus if we reduce emissions then we will get a change in the economy such as higher prices of energy that will be needed to bring the whole system back into balance.

    Evolutionary thinkers think quite differently. They think of an economic system much more like an ant colony with people exchanging information at an individual level and things like reductions in emissions as an emergent property of the totality of the individual trades. I postulate that if we make fair trades as explained above then the emergent property will be a reduction in emissions and depending on the amount of money given to the frugal we can calculate the reduction in emissions.

    On the bright side if I am right my back of the envelop calculations estimate we can have zero emissions in Australia with more wealth for all in ten years time. My modelling says that renewable energy rather than being a drag on the economy will make it grow more that if we stay on fossil fuels. The underlying reason? Excluding capital costs the running costs of a solar thermal or geothermal plant is currently half the running costs of the best coal plants and the gap is widening.

  14. There is a submission to the Garnaut Review by Cameron Hepburn and Nicholas Stern that responds to the Productivity Commission working paper.

    http://www.garnautreview.org.au/CA25734E0016A131/pages/submissions-general-submissions

    According to the submission:

    “The WP asserts that the Review `draws heavily on studies that have a more pessimistic view on climate change and its impacts, and gives little attention to more optimistic views.’ If anything, the opposite is true. In retrospect, the Review could be criticised for being overly optimistic in each of the four steps linking human emissions to climate change: (i) future emissions growth, (ii) the carbon cycle linking emissions (flows) to concentrations (stocks), (iii) the climate sensitivity, linking concentrations to temperature increases, and (iv) damages from a given temperature increase.”

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