Month: December 2012

Peak (thermal) coal ?

John Quiggin20 Comments

Most of the news on CO2 emissions has been bad. In particular, there are plenty of stories suggesting that coal-fired electricity is booming, and that this can be expected to continue. Although the evidence is mixed, I’m coming to the opposite conclusion. It’s already clear that no new coal-fired power stations will be constructed in the US for some time to come, and that many old ones will close, thanks to cheap gas and EPA regulations. And, while there are some new stations coming on-line in the EU, closures will predominate there too, although they still need to work out what to do with Poland.

But the big news is from China. Not that long ago, the standard story was that China was turning on two new coal-fired power stations every week. Now as this AFR report (paywalled, but another version here) says, China is cutting back hard on coal expansion. I found this story from March, in which the China Electricity Council says that it expects coal consumption in 2015 to be below the 2011 level, implying that the peak is very near. India is also planning some big expansions, but if China can grow without coal, so can they.

All of this suggests that the peak in global use of thermal coal could be much closer than is generally thought. Demand for metallurgical coal, used to produce steel, seems much more robust at least as long as investment-driven growth continues apace in China and India. Looking at the other fossil fuels, we reached plateau oil at least five years ago. On the other hand, gas (less carbon-intensive than the others, but still a source of CO2) is booming. So, there’s still a lot of work to be done before we can end the growth in emissions, let alone start on the 80 per cent reductions we need.

ACMA fails again

John Quiggin144 Comments

Following the tragic suicide of a British nurse, the victim of a cruel and unfunny practical joke by an Australian radio station 2DAYFM, what action can we expect from the Australian Communications and Media Authority which is supposed to regulate such matters? Following the most recent of many such breaches of license conditions, in May last year, ACMA warned 2DAY-FM that it could lose its license if such behavior continued. But ACMA has never cancelled a license, and clearly never will. So, we can expect another warning, or perhaps some meaningless, and unenforceable, license conditions.

ACMAs total failure contrasts with the success of the Facebook backlash against Alan Jones, which has cost him and his employers millions in lost advertising revenue, and greatly reduced his power and influence.

At this point, it’s clear that licensing has failed. Rather than continuing with this farce, we should auction the spectrum currently allocated to commercial radio, and let the winners do what they want with it, subject to the ordinary law of the land (which prohibits recording deceptive calls, though this law is never enforced against radio stations). As a community, we should continue to punish the corporations that sponsor the likes of Jones, Kyle Sandilands, and their latest imitators.

Just when you think they couldn’t get any worse …

John Quiggin67 Comments

The Queensland LNP comes up with this. Fortunately, I doubt that this silliness will have any effect, except to increase the likelihood of a one-term Newman government, already close to even money in my view.

Having lived in Queensland for most of the last 20 years, the only LNP government I can remember is that of Rob Borbidge, who seemed like a paragon of good sense compared to this lot. It really is as if the entire LNP has been in cold storage since the Joh era and revived for the occasion. But, given Labor’s appalling betrayals of its own voters, they were certain to win, and better that they should be so obviously silly as to make the next election a chance for real change.

A surplus of stupidity

John Quiggin62 Comments

When commentators as disparate as me, Warwick McKibbin, Bernie Fraser, ACOSS the Australian Industry Group and the Business Council of Australia are all in agreement, it might be time for the government, and the opposition to start paying attention. At this point, I doubt that there is a single credible economist who thinks that the government’s promise to return the budget to surplus this financial year is a good idea. Yet the Treasurer remains absolutely committed, and the Opposition is ready to denounce him if we miss the target by even a single dollar.

To restate the case, it’s clear that growth is slowing, and, as usual in these circumstances, monetary policy is becoming less effective. In cases like this, fiscal policy ought to be moderately stimulatory, or at least left neutral, so that the automatic stabilizers (declining revenue and increasing welfare payments) are left to cushion the impact of a slowdown. Instead, thanks to this absurd pledge, the government is committed to matching every reduction in economic activity (and therefore in the budget balance) with its own cuts or tax surcharges.

Obviously, the reasoning here is political not economic. The government suffered badly from the gratuitous “no carbon tax” promise[1] made before the 2010 election. To dump the equally gratuitous “early return to surplus” promise would involve a whole world of pain. And of course Tony Abbott cares nothing at all about good policy, unless it’s defined as policy that will make him PM. So, we have the politicians united on one side of the debate, and everyone who has any idea of economic reality on the other.

fn1. Feel free to parse this in comments, but the fact remains that the Rudd government was elected with a strong commitment to carbon pricing, which Labor then dumped in a loss of nerve before the 2010 and was forced back to (something like) its original position by the election outcome. In this context, the question of whether a specific promise was made and broken is of secondary intersest.

Sandpit

John Quiggin62 Comments

Comments seem to be veering off-topic, so I’m opening a new sandpit for long side discussions, idees fixes and so on. In particular, this includes MMT-related discussions. I’m planning a post which will address some of the arguments raised by MMTers and others as to when, if at all, the government’s budget constraint is binding.

Doing the time warp

John Quiggin34 Comments

Following up on my post about Rachel Nolan’s arguments for privatisation, I ran across this interview with former ALP education minister and attorney general Cameron Dick, generally regarded as a rising star while Labor was in office. Before Nolan, Dick was the only minister willing to go on record with thoughts about Labor’s defeat and he had this to say

he felt the party should have concentrated more on the economy during the election campaign, emphasising the decisions it had made.

‘‘I do think Labor fell into the error, or seriously miscalculated and under-estimated the desire for Queenslanders to hold onto the AAA credit rating,’’ he said.

‘‘And I think the concern Queenslanders had generally about government debt and deficit.

‘‘And I think we were unable to effectively tell our story about investing in infrastructure to keep jobs.

‘‘I mean, that was the strategy we took as part of the global financial crisis.’’

Say what? All of these points would be a great explanation if Labor had lost the 2009 election, after sacrificing the AAA rating to maintain infrastructure and jobs as a strategy in response to the global financial crisis. But, in reality Labor won that election easily. The plunge in the polls came when they announced a drive to restore the AAA rating by selling public assets, mostly infrastructure, and by pushing the panic button with respect to government debt and deficits. All the polls showed that no one except the pollies (and powerful bureaucrats like Doug McTaggart and Leo Hielscher) gave two hoots about the discredited ratings agencies. They hated the asset sales, and dumped the government as a result.

To strengthen my conclusion from last post, while the Newman government has been a disaster, the Labor MPs who supported the sales to the bitter end (all but a handful) brought their fate on themselves, and deserved it. Labor will certainly win lots of seats next time around, and perhaps even win government. I hope they can do a better job selecting candidates whose views reflect those of Labor voters.

Rachel Nolan on the case for privatisation

John Quiggin60 Comments

During the long debate over the Bligh government’s sale of public assets, I was frustrated by the government’s refusal to mount a serious case in favour of the sales. The official argument, that the money gained from the sale of income-earning assets could be used to finance the building of schools and hospitals was such obvious nonsense that even strong advocates of privatisation like Henry Ergas were willing to sign a letter I organized pointing this out and calling for a proper debate. Now finally, former Transport Minister Rachel Nolan has given us some idea of what the government was really thinking.

Nolan has a piece in Quarterly Essay (paywalled, but there is a summary from Laura Tingle here), in which she laments that Australians “have little philosophical grasp of the (rightful) diminution of governmental power which deregulation has brought” . She retails some anecdotes of being besieged by “rent-seekers” wanting her to direct Queensland Rail in various ways[1], and complains about constituents wanting her to fix various things outside her control.
Read More »