29 thoughts on “Monday Message Board

  1. Question to JQ: one of the things I have been waiting for ever since Rudd announced the policy has been a bit of analysis by the Climate Commission, or the CCA, or anyone else really, about the efficacy of going to an immediate floating price for an ETS.

    Given that everyone was saying that this would mean an immediate substantial drop, and (as I understand it) this would be to a level previously thought to be well below what was really needed, I have been expecting some analysis by economists who do want to see real action on CO2, either for or against the proposal.

    If it has happened, I have missed it. Any suggestions to where I might look if it is out there?

    Given that Clive Palmer’s party is virtually guaranteed of disintegrating at some (probably early) point in time, I would have thought that it would be worth laying the groundwork for convincing possible breakaway Senators that Labor’s approach is worthwhile (if it is.)

    But I can’t see that it has been done. Bill Shorten & Labor has sort of been left to run the argument alone, as far as I can see.

  2. I think an emissions cap based approach is the way to go. Firstly it should shrink by 1-2% a year consistent with 80% by 2050. Secondly it should not have stupidly generous escape clauses. For example it only came to light when the PM said Alcoa was a victim of carbon tax that the company had sold some free permits for $53m cash. Another copout is foreign offsets of the CDM type which may be inherently worthless albeit cheap to buy.

    If the loopholes were closed (made ‘stringent’ according to Stiglitz et al) it’s hard to predict what the carbon price might be. Former energy minister Marn Ferguson now sings to a different tune and says that different forms of renewable energy have a cost of CO2 avoided in the range $30-$290 a tonne. While c.t. continues the official price is $24.15. Suppose a stringent ETS came up with say $15. That would probably mean no more wind farms get built for years. OTOH if we all stopped using dirty electricity the carbon price must shrink. I say do it and see what happens.

  3. @steve from brisbane The CCA has done this analysis (though not as a standalone report). Essentially, a floating price involves replacing emissions reductions in Australia with emissions reductions in Europe (there’s also the Clean Development Mechanism for developing countries) but that’s a separate issue.

    From the Australian point of view, and assuming that low European prices won’t last forever, the question is whether it is better to start reducing our own emissions rapidly now, or take things more slowly.

    Of course, all this is hypothetical given that the shift to a floating price never took place. On the further hypothetical that Labor gets back in 2016, a floating price would be consistent with all of the versions they put forward while on office.

  4. @steve from brisbane

    For what its worth, I agree with James Hansen, who just wants a tax. This is because he regards emissions trading as too likely to be subverted so it doesn’t work.

    What is obvious, whether we have a tax or an ETS, is that for it to work the price on carbon has to be high enough to make coal fired electricity uneconomic. Ideally we do that gradually over 20 years, which would still be a pretty flat out pace.

  5. Thanks JQ for the answer.

    I’m still a bit confused about the media silence re the Labor position.

    No economist that I can think of thinks the Coalition direct action plan can work to achieve its aims. The only limited support it has is from economists who don’t believe climate change needs to be addressed, because they think it less harmful to business.

    But on the other hand, the economists (or corporate) media silence about any merits of the modified Labor plan has been pretty obvious. Is it because it is all so tied to the future of the European ETS (which I presume still needs further work to be “fixed”) that few economists want to go out on a limb about it?

    As I noted in my original comment, if the matter is not supported by people with some expertise in the field, it is leaving possible independently minded Senators with no reason as to why they would swing towards the Labor policy…

  6. @John Brookes

    Some usages lend themselves well to auctioned quotas to emit (hence an ETS) and others to more direct pricing or direct investment in low carbon footprint technology. A portfolio approach is best.

    One option is for the phase out of the tax deductibility of “dirty energy”. This would gradually raise the price of dirty energy and predispose sourcing energy from cleaner sources. This would have the advantage of working across the entire commercial sector of the economy rather than merely the 250 highest emitters.

  7. @Ivor

    I think it was mentioned at comment #12 in last week’s ‘Monday Message Board’ (18/3/14).

    I asked about it and JQ responded:

    I’m not really that interested in monetary issues, so my take may well be just as unreliable as yours. That said, I read the BoE piece, and I couldn’t really see what the excitement was about. On my interpretation, BoE was saying that rather than controlling base money (as was attempted under monetarism in the late 1970s) and thereby broader measures of money supply, central banks these days mostly set short-term interest rates, so that the equilibrium money stock is determined by the demand for money (which is a function of interest rates). In the first case, the notion of a “money multiplier” is often used to describe what is going on.

    Keen and MMT fans don’t like money multipliers so they are reading this piece as a big concession from BoE. I don’t see that, but I haven’t followed the debate at all closely.

  8. I don’t see how Direct Action can get off the ground. There is the problem of setting subjective benchmarks, general revenue as a funding source, the need for 10 year investments for a 5 year program and the possible non-achievement of the weak 5% cut. Soon enough people will estimate an implicit carbon price which is likely to be greater than $24 per tonne.

    An example of an implicit carbon price is that Obama wants thermal plant to emit less than 1,000 lb (454 kg) of CO2 per megawatt-hour. Therefore subcritical (US ‘pulverized’) coal plant has to be replaced by or install carbon capture to at least match combined cycle gas. Suppose the busbar electricity price goes from $50 per Mwh to $100 in order to save 0.4 tonnes of CO2. The implicit price is then $50 cost difference divided by 0.4t CO2 saving which is $125. Our own coal barons will do this exercise if such serious Direct Action was touted here ensuring Abbott caves in.

    There are other incongruities such as the PM’s avowed aim of logging national parks which sits oddly with the soil carbon initiative. You’d think if it all goes badly Hunt as the architect would have to fall on his sword but conservatives seem to be immune to feelings of guilt.

  9. Oh dear, Abbott has just announced that knight/dame-hoods will be returning. Her Majesty the Queen will make up to 4 appoints per year on the recommendation of the prime minister. Obviously we missed this during the election campaign, you know the, the bit about becoming a laughing stock.

  10. patrickb :
    Oh dear, Abbott has just announced that knight/dame-hoods will be returning. Her Majesty the Queen will make up to 4 appoints per year on the recommendation of the prime minister. Obviously we missed this during the election campaign, you know the, the bit about becoming a laughing stock.

    Do I hear Sir Tony Abbott mentioned?

    Seriously, wtf? I keep thinking I’m living in a 1950’s nightmare.

  11. @Megan

    That was a quip by Quiggan – not a response.

    Money – finance – derivatives – credit, all need consideration.

    What else does the GFC, and GFC caused wages cuts, and GFC caused unemployment, and GFC caused stimulus consist of?

    Is this the end of academic economics?

  12. At work today we speculated that the new Noah film, starring Rusty Crow as the Antediluvian Dynamo or, if you prefer, the BC Ben Lexan, could spell the end for the beard craze. Thoughts?

  13. I think this all goes to my contention that the prime minister is afflicted by a significant mental disturbance.

  14. NZ has just released figures showing that Govt investment pays heaps. Clearly privatisation is a losers game and we need more not less investment by govt. NZ lost the AC so obviously it’s not required to ‘pick a winner’ just loosen the purse strings.

  15. A little vignette on today’s labour market …

    No.1 son turns 30 next month. He’s bright, has excellent interpersonal skills, is a qualified chef and has managed kitchens catering to large parties of people paying substantial amounts per head. He is currently employed in that capacity and continually fields calls within the business to work for other establishments, but he is keen to have a career change from hospitality to one in which he has weekends and evenings to himself. He isn’t bothered at taking a substantial wage cut but would like a new career and is trying to get an apprenticeship in the electrical trades. He has been trying unsuccessfully to do that for nearly six months.

    At first he tried the obvious routes. I helped him compose resumes and covering letters to employers and agencies. The extended family and friends reached out to people we knew in the business. He knocked on doors. The results were disappointing. Few even bothered to respond and follow-up calls were no better. It appears that to become an apprentice, you first have to become an apprentice.

    He noted that the ADF was advertising for apprentices and applied. He passed their recruitment processes easily but was then told by them that there were no current positions as these were much sought after. He could go onto a waiting list which might be 2 years, though if he liked, he could join the general infantry instead. He declined the offer and suspected the whole thing was a bait and switch scam.

    He wondered why someone who was well-organised and experienced managing people would not be appealing at apprentice wages to someone. Then thinking laterally, he decided that this might be the problem so instead he began sending out poorly phrased letters, inviting the suggestion that he was clueless and perhaps not even permitted to work in the country, with only vague non-specific references to experiences of work. Perversely, these letters elicited responses on 45% of occasions. He went to two interviews but forced to provide a work history that belied the letters, he was told they were looking for a more junior person that they could “mould” — which he took as meaning “rip off”. He said to them — “look, I don’t care if you pay me minimum wage. I just want to get a job. ” No dice.

    It’s a funny old world.

  16. The comments are closed on the most recent thread discussing privatisation, but I wanted to make a comment (ok, rant to like-minded people) about the recent AWH scandal in NSW. A lot of the media, and politicians, seem to be reducing the scandal to how many degrees of separation there is between someone and Eddie Obeid, but they’ve really missed the point.

    The corruption scandal clearly has a hero, a public servant beauracrat who took personal risks to safeguard taxpayer’s money. On the other hand, the villians we have are a group of mainly politicians and associates who were determined to fleece as much money from either the Government, or the public via holding a monopoly contract on delivering the most basic requirement of human life, water.

    Of course, this is counter to a fairly substantial media narrative that the private sector is more efficient, Governments are lazy and public servants useless and that the public needs protection from the worst excesses of the market. That the villians in this piece are all strong proponents of this ideology, even if they are identities of different political parties, seems to be an inconvenient fact for many.

  17. Many readers will be saddened to learn of the death on Friday 28 March of Frans Timmerman. Frans was a lifelong activist of the Left going back to the 1960s and the Vietnam Moratorium Campaign, a committed but also thoughtful supporter of the Palestinians, a talented writer and editor, a prominent figure in the ALP Left for many years, a noted bookseller, and a generous and cultured man.

  18. Congratulations, Professor Quiggin, on your interview by Erin Ade and Edwin Harrison. It was reassuring to see you demolish the neoliberal economists’ dogmas that governments’ budgets (but not the whole societal budget including training, health, environmental care, etc.) must always be ‘balanced’ and that austerity causes economic growth.

    (Steve Keen is interviewed in the next session of the 29 minute video broadcast.)

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