The cost of a policy depends on what policy you choose

I don’t usually respond to posts on Catallaxy, but I will try on this occasion to fix up what I hope is simply a misinterpretation. Responding to the recent proposal by the Climate Change Authority (of which I am a member) for an emissions reduction target of 30 per cent, relative to 2000 levels, to be achieved by 2025, Sinclair Davidson picks out the following sentence

As noted earlier, the Authority is not in a position to prepare meaningful estimates of the costs of meeting its recommended target, primarily because many of these costs will depend on the policies adopted.

and responds

Wow. Really wow. Let’s adopt a policy even though we have absolutely no idea how much it will cost.

This is a serious misreading. As the report says, there a variety of ways in which this target might be reached. There are the methods favored by economists, involving a major role for carbon prices. Costs of achieving emissions reductions using these methods have been estimated on many occasions. The invariable finding is that carbon prices can achieve large-scale reduction si emissions very cheaply.- typical estimates are for a reduction in the rate of economic growth of around 0.1 percentage points. Or, there are much more expensive methods, such as a massive expansion of the current government’s Emissions Reduction Fund (on which more later, I hope).

Since we don’t know what policy this, or a future government, might adopt, we can’t estimate the cost. So, to rephrase Davidson “Let’s propose a target even though we don’t know how the government, should they adopt it, will choose to achieve it”. That is, of course, exactly what the government asked the CCA to do in this report.

14 thoughts on “The cost of a policy depends on what policy you choose

  1. Is recommendation contingent on the reduction being achieved at some reasonable cost?

  2. The CCA seems to be missing in action by not rebutting the gushing media praise for the ERF auction. These ‘reductions’ are either business as usual or unverifiable. Take landfill gas for example; health regulations will require them to be covered over and the gas burned. They are still causing emissions albeit it less than before. They shouldn’t be paid a cent as they are doing normal practice. It particularly grates that the money comes out of Consolidated Revenue which needs every dollar for health care.

    Some of the claimed carbon sinks are shrouded in imprecision. It is claimed that indigenous burning of NT savanna reduces atmospheric CO2. Extraordinary claims need extraordinary evidence. We know for sure burning a million tonnes less coal makes a difference but that doesn’t seem to fit Hunt’s thinking. The CCA fronted by Flannery has also weighed into technology issues, surely a minefield. Choose the metaphor.. missing in action or barking up the wrong tree.

  3. @Hermit

    Just to be clear, Flannery is associated with the (now private) Climate Commission, not the CCA.

    It’s not the function of the CCA to provide running commentary on government policy. But, as hinted in the OP, individual members may well have something to say.

  4. @Tom Davies

    This comment misconceives the process in much the same way as Davidson’s. The job of the CCA, taken as a whole, is to recommend both targets and cost-effective ways of achieving them. The government, and the Parliamnet, can adopt any, or all, or none of these recommendations.

  5. Yes John Quiggin, that was worth the effort.

    Now we see Sinclair Davidson’s lazy, fitful and obscurantist mentality in its full ignominy and wonder why he can’t get therefore get ” find the facts” when even we can understand that this is the actual point.

    If the bucket leaks, you spend a moment at least finding the hole and probably fixing that, you don’t give up carrying back the day’s drinking water.

  6. There is one very real problem with the target setting being somewhat contingent on cost, which seems to be the way that recent governments have approached it. The climate scientists, especially some of the field scientists, are clamouring for very significant cuts globally, and by extension, country by country. Climate scientists are extremely concerned about the explosion of evidence of major tipping points, which once passed are effectively irreversible. There is a wealth of data now, and it is pointing towards significant changes afoot in the landed ice burden, and instability on both the west and the east coasts of Antarctica. In the northern hemisphere, permafrost potholes, upon recent examination, seem likely to have occurred through methane gas blow-outs, thanks to thawing permafrost.

    The problem is when a potentially irreversible tipping point is treated as if it is a smoothly varying and reversible change: when people such as Bjorn Lomborg treat AGW/climate change as secondary to increasing wealth by coal burning (i.e. the advocated “solution” for lifting India’s impoverished out of the mire), they are in denial about the risks of irreversible changes, and of the scope of those changes. While efforts should be made to reduce poverty now, how we go about it must recognise the risks of using that solution (e.g. burning more coal) over other available solutions (e.g. providing solar and wind based energy, clean water and sanitation).

    The east and west instabilities of the Antarctic ice is a 6 metre rise in sea level, give or take. We are still in the complicated process of working out just how rapid such a change would be, given we have crossed the threshold and set it in train. Much more data is being collected.

    So far, our record of response versus risk assessment has been lousy, consistently under-estimating the probabilities of the risks which we are now seeing actualised. Governments have also consistently over-estimated the costs of transformation of our energy structures and usage patterns. How can we knock some sense into our government ministers on this?

  7. The great thing about a carbon tax over alternate policies is that the price is transparent. For advocates of CO2 emission reductions the great problem with carbon taxes is that the price is transparent.

  8. @Donald Oats
    There is no point “knocking sense” into our govt. ministers. They know the truth. They just don’t care. Their job is to carry out their mission as laid out by the IPA. Repealing the carbon-tax, which was bringing in money and replacing it with a scheme that spends money but achieves nothing is the best way to ensure that this nation delays de-carbonisation of its economy. It also increases the fiscal deficit, giving a bigger excuse to cut expenditure (in other areas such as health, welfare and education). What part of this is not to the IPA’s liking? It’s all going very well. Every time a coalition govt. comes in they advance this agenda a little further. It’s hard to reverse these changes and the ALP just isn’t up to it.

  9. @TerjeP

    Yep and the voters won’t like climate change either, when it really bites. It is already beginning to bite and costing us. The weather changes are already statistically significant from what I read. I refer to air temperature but I suspect ground temperature is also up and gound moisture down on average. Not good for farming and it means more bushfires.

    “Climate change is already contributing to the deaths of nearly 400,000 people a year and costing the world more than $1.2 trillion, wiping 1.6% annually from global GDP, according to …
    The 331-page study, entitled Climate Vulnerability Monitor: A Guide to the Cold Calculus of A Hot Planet and published (in 2012)…carried out by the DARA group, a non-governmental organisation based in Europe, and the Climate Vulnerable Forum. It was written by more than 50 scientists, economists and policy experts, and commissioned by 20 governments.”

    Considering the acceleration of the process it might be safe to say it’s now costing us $1.5 trillion and wiping nearly 2% from global GDP. And we aint seem nothing yet. Sleepers Awake!

  10. @TerjeP

    Are you saying that the LNP got elected in 2013 because the voters didn’t like the starting price of the “carbon tax”?

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