I was at a conference on uncertainty and climate change in Berkeley last week, and gave the wrap-up panel discussion with Geoffrey Heal. We’d discussed a wide range of uncertainties and ambiguities, from future emissions scenarios to model uncertainty to perception and communication issues, and we were asked to comment on how, with so much uncertainty, economists can make useful recommendations.
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Category: Environment
Access Economics and CEDA on carbon taxes
I’ve seen a number of reports of statements by CEDA supporting a carbon tax as an alternative to emissions trading. This seemed surprising, since the two are basically equivalent. Given that the ETS is almost in place, suggesting such a variation seemed rather pointless.
But I’ve now received an email from CEDA which appears to explain everything. The real distinction is not between a tax and a trading scheme but between a tax levied at the point where carbon is used and one where final products are consumed. Since Australia exports a lot of embodied carbon, the tax on final consumption would raise a lot less revenue, and cause a much smaller economic shock.
In fact, modelling by Access Economics (PDF) suggests that the loss of income under a consumption-based carbon tax would be about half that from a production-based tax or ETS
So what’s the catch ?
The race for a low carbon economy: A form guide
If, as I think is now possible, the Copenhagen summit leads to an agreement to reduce CO2 emissions substantially in the next decade and to very low levels by 2050, we will need to replace, or do without, a lot of energy currently derived from carbon-based fuels. It’s probably a good time to take a look at the main contenders for achieving this. Here’s my form guide. (I’m not going to give lots of links – Wikipedia is, as usual, a good place to start).
Improving the CPRS
It seems virtually certain that the CPRS legislation will be reintroduced to Parliament later this year, and highly likely that it will be passed with the support of some or all Liberal Senators. The alternative, a double dissolution fought on an issue where the party is split down the middle, would be catastrophic, good reason for any party with an interest in long-term survival to avoid it. I’m guessing the Liberal Party still fits that description, or at least that enough of its members do to provide a Senate majority.
In these circumstances, it’s unlikely that we will see improvements on the current proposal, in fact the opposite. It makes tactical sense for Labor to offer the Libs some further modest concessions, enough to get their support while splitting off the Nationals and leaving the delusion, delay and do-nothing faction among the Libs deeply unhappy.
Undaunted, I’m going to suggest some ways in which the scheme might be improved.
Hansen on climate change over centuries
Following my recent post, a number of commenters suggested that I ought to respond more directly to the arguments of James Hansen and others for a CO2 target of 350 parts per million, as opposed to the 450 ppm that forms the basis of much current policy discussion. I’m using this paper as a basis, and take the following two points as its central claims
* To avoid unacceptable risk of passing a point of no return beyond which explosive feedbacks (icecaps melting etc) are inevitable, we should aim to reduce CO2 concentrations to 350 ppm by 2100. This is below current levels and won’t be achieved simply by ending net emissions
* We can achieve part of this (maybe a reduction of 60 ppm) through reforestation, biochar and similar measures
* Further reductions will require expensive technological solutions, estimated cost $200/tonne or $20 trillion to remove 50 ppm. Given a maximum point around 450 ppm and 50 ppm from reforestation, that’s about the amount required.
What then should we do? In particular, how much should we be willing to pay now, to avoid high costs in the second half of this century?
China, again
My piece in last Thursday’s Fin is over the fold
Two degrees of warming
Now that it looks as if some sort of agreement may come out of Copenhagen, its natural to ask what sort of agreement we need. The current targets being proposed suggest that warming should be limited to 2 degrees over the next century. That implies stabilising atmospheric C2 concentrations at 450 ppm, and an agreement to cut developed country emissions by 20-25 per cent by 2020, with convergence to a level 90 per cent below current developed country levels by 2050 would be adequate (note that this part of the post is based on my reading of Garnaut, Stern & IIPCC, not my own expertise).
At least some discussion in Australia suggests that these targets are hopelessly weak and by implication that it would be better to oppose any action than to lock ourselves into an agreement of this kind. I disagree, and I will try to spell out why.
The politics of the CPRS
In the process leading up to the Senate’s rejection of the government’s Carbon Pollution Reduction Scheme, no one has covered themselves with glory. Starting with the Independents, there’s little that can be said about Fielding except that the sooner he is sent home to nurse his delusions, the better. Nick Xenophon has unfortunately followed his customary line of trying to come up with his own alternative scheme. At this stage of the game, this position is not much different, in practice, from Fielding’s, though it offers more chance of a rethink on the second round. The Nationals have pretty much followed the Fielding line, and the Liberals have been all over the shop, as usual.
That leaves Labor and the Greens, neither of whom can be particularly proud of themselves. In the absence of a disaster, they will control the Senate between them in the next Parliament and will have little choice but to make deals on climate policy. As a leadup to this, it would be great if they could have reached an agreement on an improved, if still imperfect, CPRS. But Labor is more interested in wedging the Libs, and the Greens are more interested in political purity.
What would an improved CPRS look like? First, as I’ve argued already, the government’s conditional target of 25 per cent is about right. There’s no way Copenhagen will produce a number much larger than this – the US is offering 17, and the EU 30 with an asterisk (a choice of start date that makes them look particularly good). The 5 per cent target could be higher, but really, if we don’t get a global agreement, nothing Australia does really matters. The big flaws in the CPRS are the excessive giveaways of free permits (and the correspondingly limited compensation for households and displaced workers) and the fact that the design negates the benefits of any voluntary reductions (I initially thought the changes announced in March addressed this point, but they don’t).
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Delusion central
Australians and others who were happy to be included on Senator James Inhofe’s list (PDF, may need converting) of “scientists” whose “work” contradicts the mainstream view on anthropogenic global warming (scare quotes deliberate) may be interested to know that Inhofe has now emerged as a Birther, or at least a fellow traveller. Of course, Inhofe is also a young earth creationist, and his list includes people like creationist weathercaster Chris Allen who has no more (and no less) relevant qualifications than most of the Australians on Inhofe’s list.
It’s sad to see people with distinguished careers like those of Don Aitkin and Ian Plimer ending up supporting lunatic conspiracy theorists like Inhofe. But the whole basis of climate science delusionism is a conspiracy theory. It’s only by invoking a conspiracy among mainstream climate scientists that delusionists can argue that any attention should be paid to the views of a minority so tiny that even a list of 650 has to be padded out with economists, retired historians, weathercasters and lots of cranks: the number of active, regularly publishing climate scientists on the list is in the single digits.
Presentations at Wollongong and Parramatta
I did two presentations four hours apart which made for something of a rushed day. I’ve attached them over the fold in PDF format.
John Quiggin 