The government’s response to the Garnaut report has been less than enthusiastic. Still, who would have thought, a year ago, that the news would be “government reaffirms target of 60 per cent cut in emissions” and that the only effective criticism would be from those saying the target is too soft.
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Category: Environment
One-percenters underbid by McKinsey
I’ve put up quite a few posts supporting the conclusion of the Stern review that large cuts in C02 emissions could be achieved at very modest economic cost. Mostly, the analysis has focused on policies aimed at reducing developed country emissions by 30 per cent by 2020 and 60 per cent by 2050, and the typical conclusion is that the cost would be around 1 per cent of national income. For Australia, at current income levels that would be about $10 billion per year. Today’s news reports a study by McKinsey estimating a much smaller cost, around $3 billion per year. I haven’t seen the report yet but a quick Google found a similar study for the US.
I suspect the report is over-optimistic in the sense that it estimates the cost of doing the job in the most technically efficient fashion, whereas any feasible policy to induce adoption of the necessary measures will have higher costs. But it’s easy to show that the order of magnitude estimate must be approximately right. You can see this by looking at an absolute upper bound assuming we just replace all energy generation by expensive but feasible sources like solar (given the costs of generation, the extra cost required for large grids and pumped storage to smooth out supply variability is a rounding error here). That cost is no more than 10 per cent of income. Taking account of the obvious adjustment responses such reduced consumption in response to higher energy prices implies an even tighter bound, maybe 5 per cent of income.
The most important criticism to be made here is that it is increasingly evident that a 60 per cent reduction in emissions by 2050 may well not be enough. That suggests that, after exhausting the easy options to improve energy efficiency, substitute away from energy intensive activities and so on, there will be a residual 40 per cent of energy demand, almost entirely electricity, that has to be delivered with less than half the emissions of current best practice. Taking Australia’s current consumption of around 250 Twh/year, that’s 100 TwH at a cost of maybe $25 billion a year (=25c/Kwh) or 2.5 per cent of GDP.
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AARES
I’ve been at the annual conference of the Australian Agricultural and Resource Economics Society for the last few days. I’ve been coming to these for nearly 30 years, and it’s always good to catch up with old friends and colleagues. For many, it’s the first time they’ve seen me without a beard, and quite a few failed to recognise me until I accosted them.
The big change in 30 years has been the rise of environmental and resource concerns at the expense of old-style agricultural economics. Most of my early papers dealt with now vanished policies like the wool price stabilisation scheme, and the analysis of production systems needed to inform such policies. Now the conference has continuous sessions on both water and climate change, and only a handful of papers on production economics.
Ross Garnaut spoke on Tuesday and his talk was pretty sobering. Short version – as regards the likely consequences of business as usual, Stern was an optimist. Unless the world acts decisively, and well before 2020, we’ll have emissions higher than the highest of the IPCC scenarios Stern looked at. What’s worse new information on feedbacks suggests that the models relating emissions to temperature change are also likely to be on the conservative side, as the capacity of sinks to absorb emissions declines.
The positive side of this, I guess, is that the problems arise from China (and to a lesser extent India) growing fast, and that means China has more resources to address the problem, if we can only get the politics right.
One aspect of the latter is the near-certainty that we won’t be able to get away much longer with the notion of historical rights for high-emission countries like the US and Australia. By 2050, under any plausible agreement, we’ll have uniform emission entitlements per person, for everyone in the world, at a level well below our current emissions.
Reviewing the Stern Review
The Productivity Commission has just released a paper called The Stern Review: an assessment of its methodology (the full paper is a 1.3Mb PDF). It’s very good, I think, giving a balanced presentation to the Review, its supporters and critics and those who fit into neither category. Here’s the summary:
The Productivity Commission today released a staff working paper titled The Stern Review: an assessment of its methodology. This technical paper contains a detailed examination of key elements of the Review’s analytical approach. Originally prepared as an internal research memorandum following release of the Stern Review’s report, the paper is being made more widely available given its ongoing relevance in light of Australia’s Garnaut Review.
The staff paper finds that the Stern Review made some important analytical advances. The Review sought to move beyond analysis based on the mean expected outcome to one that incorporates low probability, but potentially catastrophic, events at the tail of probability distributions. The Review also attempted a more comprehensive coverage of damage costs than most previous studies.
The paper also finds that value judgements and ethical perspectives in key parts of the Stern Review’s analysis led to estimates of future economic damages being substantially higher, and abatement costs lower, than most previous studies. The paper notes that the report could usefully have included more sensitivity analysis to highlight to decisionmakers the consequences of alternative assumptions or judgements.
Looking at the way debate has evolved both within and outside the economics profession, a few points have emerged
* No-one credible now disputes the view that a well-designed set of policies could greatly reduce CO2 emissions at very low cost. The Stern Review is marginally lower than average at 1 per cent of GDP, but it would be hard to find any serious analyst claiming costs much higher than 3 per cent. These are once off changes in levels corresponding to a once-off loss of between a few months and one year of improvements in material living standards. It’s intuitively hard to see how risking the worst case outcomes of climate change to avoid such a small economic cost could possibly be justified.
* While there is still plenty of dispute about the economic costs of doing nothing, relative to stabilisation, the median estimate has been revised sharply upwards following the Stern Review. On the issue of discount rates, the (still controversial) choice of a low rate by the Stern Review pointed up the dependence of earlier estimates on rates that now look implausibly high. And on the treatment of risk and damage to the natural environment, Stern’s look at these issues points up how badly neglected they were in the past. If anything, subsequent discussion has suggested that Stern was too conservative.
The speed with which the economic debate has evolved has left the political advocates of doing little or nothing stranded. Most of them had no qualifications in climate science, and embraced delusionist arguments against the science because they were opposed on political, economic or culture-war grounds to the kinds of policies needed to stabilise climate. Many of them clearly envisaged a campaign in which they would fight as long as possible on the science before turning to the economics. But the speed of change has left them flatfooted. Rather than being able to make a graceful retreat to a prepared position, they are trying to argue against what is now the mainstream economics position, while still being lumbered with their now-discredited attacks on mainstream science.
Science and antiscience, part 2
All discussion threads eventually wander way off-topic if they are left to run long enough, and that’s certainly happened with my last post on the peppered moth controversy. At Crooked Timber, the debate was mainly about the role of experts and drifted into debate and meta-debate about Iraq and WMDs. On this blog, it’s got even odder, into a discussion of the well-known rightwing talking point “environmentalism is a religion”. A couple of links back to the original post have been missed though.
First up, it’s important to note that the “environmentalism is a religion” gambit is straight out of the creationist playbook. Creationists have long argued that evolution is not a scientific theory but part of a religion of “secular humanism”.
Second, the peppered moth controversy has an exact parallel in the global warming debate, the dispute over the hockey stick graph showing global temperatures at their warmest level for the past thousand years. As with the peppered moth
a striking, though minor, scientific finding, was used to illustrate a well-established scientific theory, and becomes the target of those opposed to the theory, and to science in general, for political or religious reasons. Minor errors in and procedural criticisms of the work supporting the finding are conflated into accusations of fraudulent conspiracy that are then used to attack the theory as a whole. Distorted versions of the whole story circulate around the parallel universe of antiscientific thinktanks, blogs and commentators, rapidly being taken as established fact.
Pons asinorum – CIS edition
The scientific debate regarding global warming has been over for some time, and the Australian policy debate has moved beyond the point where delusional pseudoscience has any impact. What remains of the scientific debate is a screening device in which individuals and institutions identify themselves as so lacking in intelligence, judgement or honesty as to cast doubt on their contributions on any topic. As with Euclid’s fifth proposition failure on this test distinguishes the donkeys.
The latest to self-identify as a donkey is Barry Maley of the Centre for Independent Studies whose latest piece in the Oz states, among other pieces of nonsense scooped up from teh intertubes
Beyond a relatively small concentration, the effect of additional carbon dioxide decreases logarithmically, almost to vanishing point.
As Wolfgang Pauli would have said, this is not even wrong, since “decreases logarithmically” is a contradiction in terms.
Maley identifies himself as a “former academic” and his CIS bio describes him as a former senior lecturer in Behavioural Science who has worked on family and social policy. It’s a safe bet that he wouldn’t know a logarithm if it bit him, and that the simple exercise in logarithmic differentiation required to convert the claim above into something that can be assessed and refuted (here’s a good post that covers several more of Maley’s talking points) would be utterly beyond him.
Clearly he’s scrambled together a bunch of nonsense from delusionist Internet sites, and published it along with his “research” on family issues. Since he invites us to treat the two as being equally credible, I’m happy to accept. And since the CIS invites us to treat Maley as a serious researcher, the same goes for them.
A big win for the planet, and others
The outcome of the international climate talks in Bali has been a huge win for the planet. Given the participation of the Bush Administration, we were never going to get firm short-term targets in the agreement of this round of negotiations (except as the result of a US walkout, and a deal struck by the rest of the world). But on just about every other score, the outcome has been better than anyone could reasonably have expected, including:
* Agreement in principle on a 2050 target of halving emissions
* Agreement to negotiate a binding deal in 2009, when Bush will be gone, and short-term targets back on the table
* Agreement to provide assistance to developing countries for both mitigation and adaptation
* Agreement by China to pursue emissions-cutting actions that are “measurable, reportable and verifiable.�
There are of course, some individual winners too, of whom the most notable is undoubtedly Al Gore. His intervention, correctly blaming the US Administration for the lack of progress at the talks, and putting effective pressure on its remaining allies, the governments of Canada and Japan, made it clear that the political price for a failure would be paid by the US, and that those who backed Bush now would find themselves alone in the near future.
Kevin Rudd has also been a big winner. Until his election, Australia, as the only other significant country not to ratify Kyoto, was Bush’s most important supporter. After the switch, Australia was able to pursue a negotiating strategy which sometimes seemed to accommodating to the US, but ultimately produced an excellent outcome.
The 75 per cent solution: tourism
A lot of discussion of climate change is based on the implicit or explicit premise that, since we use energy in everything we do, and most energy is derived from carbon-based fuels, large reductions in CO2 emissions will require radical changes in the way we live. Some people welcome this prospect, but most do not.
Having looked at this problem in various different ways, I’m convinced that this premise is wrong, and that quite modest changes, many of which would follow more or less directly from the imposition of a suitable cost on CO2 emissions, could achieve large reductions in emissions. I’ve argued this at the macro level, based on demand elasticity estimates, and also at the micro level in terms of road transport. I thought it might be a good idea to attempt more micro estimates and, while I was visiting Cairns last week, my thoughts naturally turned to long-distance tourism.
So, this is hoped to be the first in a series where I consider the question: Could we reduce emissions in a given sector of the economy by 75 per cent in a way that wouldn’t substantially change the services delivered by that sector?
The future of coral reefs, if any
A report in the Australian summarises an article in Science, stating that coral reefs are unlikely to survive the next few decades. The meeting I went to in Cairns had a marginally more optimistic view. If we can drastically reduce other pressures such as overfishing and nutrient pollution, reefs might be sufficiently resilient to recover from bleaching events and other consequences of global warming.
All of these pressures act cumulatively. Bleaching kills corals, excess nutrients encourage the growth of algae which prevent new corals from establishing themselves and overfishing removes herbivores that eat the algae. A big reduction in nutrient and fishing pressure might offset the more frequent occurrence of bleaching events.
Bleached
One of my newer research tasks is to look into ways to offset the damage caused to coral reefs by global warming and other aspects of climate change. I’ve been in Cairns at a workshop on this issue, and yesterday we went for a day on the reef snorkelling and diving. Mainly R&R but the trip brought home the severity of the damage caused by the bleaching events* in 1998 and 2002. While the reef is still colourful and full of life, and new visitors have a great time, we were told on the tour that returning visitors often express disappointment. So, climate change is likely to have economic impacts on the tourism sector in the near future.
I made a foray into underwater photography, with results that could charitably be described as “mixed”. Here’s an example of the conseqences of bleaching.
John Quiggin 