In front of the world?

Coincidentally, Australia’s carbon price will come into effect on the same day, 1 July, as the new feed-in tariffs for solar PV, wind and other renewable adopted in Japan as part of the response to the Fukushima disaster[1]. The tariffs are incredibly generous (around 50c/kwh on a net feed-in basis) and supposedly guaranteed for 20 years. I can’t see it lasting that long, but it will certainly make Japan one of the world’s biggest markets for renewables, having installed almost none until now. China has also adopted feed-in tariffs, but at more realistic prices around 20c/Kwh. These policies will ensure continuation of the spectacular growth in installations of renewable energy and the associated reductions in costs.

What does this make of the claim that Australia is moving ahead the rest of the world with the carbon price policy. There’s a sense in which it’s true – our experience with MRET and various state-level policies have shown that these are second-best options compared to a comprehensive carbon price. The Europeans can teach the same lesson, but it seems as if everyone has to learn it for themselves.

But the belief among economic doomsayers that we are the only country doing anything about this is just nonsense. Even in the US, where nothing can be done through legislation thanks to Republican delusionists, a combination of regulation and low gas prices is leading coal-fired power plants to shut down at a rapid rate.

At this point, the global choice is not between doing nothing and doing something. It’s between sensible market-based policies and costly second-best options, of which the worst is the “direct action” in which Tony Abbott claims to believe.

fn1. Two nuclear plants are also to be restarted, and presumably most of the rest will follow eventually. The government still wants to build more,

35 thoughts on “In front of the world?

  1. @rog
    Fair enough. But the smart grid won’t fall over if 5% of the population don’t sign up. It’ll just be 5% less responsive.

  2. @Hermit
    I always read what you write, though I’m quite sure the favour is not returned. The point is that in Australia, solar power doesn’t add stress to the grid, because the sun always shines when prices are at their highest. And all this rubbish about a “daily grid energy ration.” When has JQ ever called for anything like this? When has this even been implied?

  3. “Even in the US, where nothing can be done through legislation thanks to Republican delusionists”

    The 2008 Republican Party presidential nominee supported cap-and-trade.

    McCain had a strong legislative record. He introduced a bill with Joe Lieberman to introduce carbon trading in 2003.

    See http://www.cfr.org/climate-change/candidates-climate-change/p14765 which says that ‘McCain has been one of the most outspoken members of Congress on the issue of climate change’ and he “managed to force the first real Senate vote on actually doing something about the largest environmental peril our species has yet faced.” The McCain-Lieberman bill lost 43-55.

    In 2007 he reintroduced his bill, with bipartisan co-sponsorship. Obama missed the June 2008 vote on the Climate Security Bill of 2008.

    In a March 2008 speech, McCain called for a “successor to the Kyoto Treaty” and a cap-and-trade system” that delivers the necessary environmental impact in an economically responsible manner.” McCain’s climate policy included by 2012, U.S. emissions should return to 2005 levels; by 2050, the U.S. emissions should be 60 percent below 1990 levels.

    In January 2010, the Pew Research Center asked Americans to rank the importance of twenty-one issues. Climate change came in last. After winning the fight over health care, another issue for which polling showed lukewarm support, Obama moved on to the safer issue of financial regulatory reform.

    Many others including McCain soften or reversed positions as voter support waned as the great U.S. recession depended.

    CO reduction action will be limited to modest reductions of a largely token character.

    There are many expressive voting concerns that politicians must balance to stay in office and the environment is but one of these. Once climate change policies start to actually become costly, expressive voting support for these policies will fall away.

    p.s. there were 5 republican senators who would have voted for the cap and trade bill in April 2010: Lindsey Graham, Susan Collins, Olympia Snowe, Scott Brown and George LeMieux.

  4. In this cold winter Melbourne is having, I keep thinking about how it must have been for indigenous Australians living here before Europeans came. How did they feel about winter? I thought maybe thy might stand around a fire all day, cold and wet, and tough it out for a couple of months. Then I realised they would need to spend a fair amount of time each day hunting and foraging. Pretty tough!

    Now here we are talking about access to affordable air conditioning being a life or death situation. Have humans become less robust, or are heat waves stronger, or did people simply die of heat exhaustion before widespread domestic air conditioning and that was simply that? I’m really curious about this.

    I was born in 1969 and grew up without air condioning, and choose to go without it as an adult. On those unbearably hot nights (i.e. when the house itself has heated up) i sleep in my back yard in a hammock. I like seasons!

  5. rog, voter concerns and priorities are sensitive to the business cycle.

    The pro and con arguments about global warming were around for a long time. The for and against cases needed to wait for a market, as do ideas about economic reform.

    Stigler contended that economists exert a minor and scarcely detectable influence on the societies in which they live.

    He said that if Richard Cobden had spoken only Yiddish, and with a stammer, and Robert Peel had been a narrow, stupid man, England would have still moved toward free trade in grain as its agricultural classes declined and its manufacturing and commercial classes grew in the 1840s onwards

    As Stigler noted, when their day comes, economists seem to be the leaders of public opinion. But when the views of economists are not so congenial to the current requirements of special interest groups, these economists are left to be the writers of letters to the editor in provincial newspapers. These days they would run an angry blog.

    In DEMAND FOR ENVIRONMENTAL GOODS: EVIDENCE FROM VOTING PATTERNS ON CALIFORNIA INITIATIVES, Journal of Law and Economics, April 1997, MATTHEW E. KAHN and JOHN G. MATSUSAKA studied voting behaviour on 16 environmental ballot propositions in California in order to characterize the demand for environmental goods:

    • The environment was found was to be a normal good for people with mean incomes, but some environmental goods are inferior for people with high incomes, at least when supplied collectively.

    • An important price of environmental goods is reduced income in the construction, farming, forestry, and manufacturing industries.

    • In most cases, income and price can explain most of the variation in environmental voting – it is not essential to introduce non-economic concepts such as ideology and politics.

  6. Here is an extract from an article on the arrival of Solar Impulse in Morocco.

    “A solar-powered airplane flying to Morocco’s Quarzazate region, home to the Moroccan Agency for Solar Energy (MASEN), sends a powerful message as to the future of clean energy in the desert heat. This intense sunlight and heat will help power a 160 megawatt thermo-solar power plant, first of several such units that will eventually produce 500 MW. Morocco is counting on this and other forms of renewable energy to provide 42 percent of its energy needs in less than 10 years”

    What was that? a third world country managing towards having nearly half its electricity from Renewable sources within the next eight years?

    I thought that I heard Tony Abbott declare that Australia should not get ahead of the rest of the world on Climate Change Action. Well he can stop worrying, there is no fear of that happening at all.

    I wonder what the next lame Coalition excuse will be?

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