Climate Policy Submission

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Here’s my submission to the Senate Select Committee on Climate Policy. It was a bit of a rush job, given competing pressures like the Global Financial Crisis and the continuing (related) problems of the Murray-Darling. Comments appreciated.

42 thoughts on “Climate Policy Submission

  1. Robert Shapiro’s criticism of cap and trade sums it up well.

    “The clearest illustration of the problems with cap-and-trade is the European Trading Scheme, based on the Kyoto protocols covering most of Europe. According to a new report by the Government Accountability Office, there’s little if any evidence that the ETS has had any effect at all on emissions in Europe. One reason is that major emitters such as Germany simply exempt many of their facilities generating greenhouse gases. Another factor is the “offset” permits that European “transition” economies, themselves exempt from caps, can sell to other ETS members. According to a recent study in Nature, once we set aside those offsets, emissions under the ETS have actually increased by 10 percent.”

    http://www.rollcall.com/news/31397-1.html

    The correct path is much simpler, relatively speaking;

    (a) remove perverse subsidies for fossil fuels;
    (b) implement a carbon tax; and
    (c) complement the process by direct government intervention with a timetable to move to a sustainable renewables energy system within 30 years.

  2. Footnote: See the article, “Climate Fraud and Carbon Colonialism: The New Trade in Greenhouse Gases” – Heidi Bachram.

    This ought to effectively demolish all but the most foolish and blind faith in “Capn’ Trade” or Captain Trade to give him his formal title.

  3. The prospect of carbon prices getting too low to fund innovations I think is covered by CPRS ‘gateway’ concept of floor and ceiling prices. If the floor price was say $20 per tonne of CO2 that should generate over $10bn absent free permits.

    The notion of paying the Indos not to raze forests is flawed in both theory and likely practice. Instead of blackmailing other countries they should get a carbon debit if they fail to preserve their forests. There are associated issues of timing, natural variation, stakeholding and additionality, all of which underscore how offsets are a minefield. I suggest if any governments or corporations are making such payments they will want them acknowledged under a carbon tax.

    Alas we now have the Clean Coal Institute as a possible delaying mechanism. If Rudd was a footy umpire I suspect he would give away a lot of free kicks to one side.

  4. I agree Brett’s comments above (25).

    With a price floor, there is no limit to the amount of low cost abatement, where low cost abatement is abatement that costs less than the level of the price floor. Also, if the price floor is sufficiently high that it is likely to be in operation, voluntary actions will count. Innovation can also make a difference to greenhouse gas levels.

    In my opinion, an ETS with a price floor is a superior way of taking into account voluntary action than a pure cap-and-trade system where permits are allocated for voluntary action. The latter system would require a regulator to decide on what constitutes voluntary action, which would be complicated.

  5. dk.au, in what sense do you think EU Phase II has failed? It seems to be going reasonably well to me, and a move to fully auctioned permits has been foreshadowed

    Carbon markets like the EU ETS do not bring willing buyers and sellers together to determine price, as in classical economic theory. Instead, they are controlled by the release of permits from certain institutions like the UN’s CDM Executive Board (thanks to the linking directives in the case of the EU ETS or the proposed CPRS)

    I disagree with you that they should be seen as simply another item on balance sheets. Regulatory carbon markets are created with specific policy goals in mind. The price collapse in the EU ETS risks undermining these goals without significant rejigging of the rules. As Michael Grubb puts it, governments will snatch defeat from the jaws of victory at this rate.

    At a minimum, what Peter Wood said – a price floor is necessary – one that reflects the policy intent of the scheme.

  6. I strongly support John Q’s censorship (Post 16 & 20). I only wish it wasn’t necessary. Why is it people fill their responses with abuse, red herrings, rants, extreme statements etc rather than arguments and discussion? Civility does seem to reduce on blogs, for reasons I don’t understand.

  7. Dissenting views are usually censored on this blog.

    Which no doubt explains why it includes 451 comments from you – JQ

    John, no disrespect to your convictions or related work, even if those convictions are delusional.

    AGW is a fraud.

    Carbon is increasing in the atmosphere, but it is only assume that it is anthropologically source. The increase in atmospheric carbon could be coming from anywhere.

    If Australia cut carbon emissions by 100%, it will not have any effect on carbon increasing in the atmosphere.

  8. If I go by my own case, I have to say that John Quiggin tolerates dissent very well provided there is some point being made and at least a shred of reasoning to go with it. I’ve certainly been dissenting in this thread.

    I’ve been long-winded, repetitive and a bit snarky. If JQ deleted my last few posts, I’d have to admit I probably deserved it.

  9. Very good submission from our learned Professor. Lets hope TPTB give it the consideration it deserves.

    RE: the carbon tax vs ETS debate: There are really only two reasons for preferring a carbon tax over emissions trading and they are:

    1. A carbon tax is simpler.
    2. A carbon tax is less susceptible to manipulation by the cowboys that gave us the GFC.

    I’d happily support an ETS if someone could convince me these problems could be overcome. As it stands, the CPRS seems inordinately complex with lots of outs and exceptions.

  10. There is a voluntary action that will work under the CPRS. Anyone can buy a permit and not use it. If 5 million people buy 10 permits and tear them up that in itself will reduce emissions by 10%. The cost will be $100 per year per person. State and local governments and NGOs could do the same.

    How do you organize 5 million people to do it? Don’t know. Getup! could give it a try.

  11. Peter Wood, you are missing the point. It isn’t about whether JQ has the right or the ability to censor, but whether he was wise to exercise it on that occasion, in the special circumstances of this thread.

    JQ, your rebuttal at comment 20 relates to the wisdom of your practice and policy in general, without regard to the special circumstances of this thread, which I believe made it unwise in this case for the reasons I gave. I note that you pretty much followed the suggested alternative approach at comment 33, which means that other readers know just how far to take invited criticism that is meant constructively.

    Ikonoklast at comment 34, that last point and your comment rather illustrate what I was getting at. As, when and if your comments were ever deleted like that, you and JQ knew what was going on – but others only saw JQ’s brief note announcing the censorship. That’s no big deal usually, but on a thread like this the only information that gets out – the message that gets sent – is, criticism is requested and gets slammed against the wall. Sure, that may not be how it really was, and some readers may not see it as a big deal even if it really was like that – but others may be like me and see that sequence as inconsistent with the openness implied by the original request for feedback. And that’s the chilling effect.

  12. I thought we were having a discussion on climate policy, rather than comments policy.

    In response to parts 1 and 2 of mp’s comment (23), there is a case to have complementary policies in covered sectors when there is market failure. The fact that energy efficiency is very poor in Australia is a clear example of market failure. There are several reasons for this failure to occur. One is due to informational failures, which occur because there is very poor information about energy usage of buildings and appliances. Another is because of split incentives – where a landlord is not interested in investing in reducing energy usage of a building because the benefits will go to someone else (the tenant).

  13. @carbonsink my two point argument for an ETS is
    1) it gets the physical target every time
    2) the spot CO2 price lowers under weak demand.

    There is no reason to suppose dodgy offsets under an ETS won’t morph into dodgy deductions under a carbon tax. Same goes for industry wide exemptions. Now a problem might be if the ETS floor price is $20 and a free floating price was more like $7.50. As NEMMCO have shown with electricity price limits these can be changed under compelling circumstances. The problem then becomes funding the ‘green shift’. For example only $500 of free insulation to homes not $1600.

  14. Peter Wood:-

    – it’s not the policy so much as the practice; and

    – where there is censorship, there is no material directly related to the thread to discuss but only its absence – and that’s the practice.

  15. I agree with JQs right to remove blog postings. I run a discussion board and I do the same myself. JQ did much better than me – he stated why he removed it publicly. I do that privately and quietly and often get a private apology from the perpetrator. If you run a blog or discussion board – you know what works in the interests of maintaining civility and some people in blogs can get very rude, pedantic or uncivil or overly personal. Im not saying Observa did any of that but JQ noted he didnt make a point presumably accompanied by a negative comment. Well, this time Observa didnt get away with it. Others do get away with it sometimes in here. Luck of the draw because it isnt only Observa but it reminds us all about an acceptable code of behaviour to have a civil (strong even) debate without it degenerating into a slanging match or a vicious whinge session.

    No one should call JQs intervention censorship. That is taking the concept of the freedom of ideas too far (let a thousand flowers bloom etc even the rampant weeds and thistles??).

    Its actually like having a referee at a footy match to be sensible about it.

    The umpire only intervenes when he needs to and everyone else gives the umpire respect.

    Nothing worse that a game of cricket that descends into a rugby scrum. Fair is fair. Thats part of the reason why JQs blog is so well received.

  16. I agree with Carbonsink’s points.

    “1. A carbon tax is simpler.
    2. A carbon tax is less susceptible to manipulation…”

    Hermit argues the other position;

    “… my two point argument for an ETS is
    1) it gets the physical target every time
    2) the spot CO2 price lowers under weak demand.”

    I don’t think the supporters of the ETS are watching the empirical outcomes of the political process to date. The special pleadings of the fossil fuel lobby are resulting in a scheme with free permits for big polluters and NO REAL CAP.

    I argue most strongly that the cap is illusory. Not only is Rudd’s cap high and therefore weak, it is also hedged in so many ways that it is illusory. JQuiggin may well be arguing for a better ETS that has a lower cap and a real cap (I think he is). However, the empirical reality of this political process is showing us that ETS negotiation outcomes tend strongly to favour big polluters and to set in place not a cap but a colandar full of holes.

    It is a complicated “one-remove” process which attempts to handle the problem with clumsy “market-gloves” when direct government action of “Tax and Enact Alternatives” would achieve real results. Let us call that the TEA scheme.

    Is anyone who is pro-ETS ready to argue why they think the cap is real and why they think corporations won’t “game” and defraud an ETS? The latter would also entail an exposition of how international compliance would be enforced and how carbon rating agencies will be any more reliable than financial risk rating agencies.

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