Some unwelcome good news

John Quiggin119 Comments

The announcement by Tesla of a new home battery storage system, called Powerwall, costing $3500 for 10KwH of storage, has been greeted with enthusiasm, but also a good deal of scepticism regarding its commercial viability, which depends in any given market on such things as the gap between retail electricity prices feed-in tariffs for solar PV.

This is missing the forest for the trees, however. Assuming the Tesla system comes anywhere near meeting its announced specifications, and noting that electric cars are also on the market from Tesla and others, we now have just about everything we need for a technological fix for climate change, based on a combination of renewable energy and energy efficiency, at a cost that’s a small fraction of global income (and hence a small fraction of national income for any country) .

That’s something hardly anyone expected (certainly not me) a decade ago. And, given how strongly people are attached to their opinions, and especially their public commitments, there is bound to be a lot of resistance to this conclusion. Based on the evidence available a decade ago, people drew some of the following conclusions:

(a) decarbonizing the energy sector will require radical economic changes which will entail the end of industrial society/capitalism as we know it
(b) conclusion (a) is true and therefore climate change must be an enviro-socialist hoax
(c) any solution must involve a return to nuclear power on a massive scale
(d) any solution must involve the development and deployment of a “clean coal” technology
(e) a market-based solution will require a very high carbon price, say $100/tonne

I was in group (e), and was still talking about prices up to $100/tonne as recently as 2012. But it’s easy to revise a price number downwards in the light of technological change, much harder to revise strongly held and publicly stated conclusions like (a)-(d).

So, I’m not going to bother trying to demonstrate the assertion that a technological fix is now possible – from past experience, demonstrations of such points are futile. Rather, I’m going to spend some time thinking about the implications for the next round of global climate policy, and what constructive contributions I can make to getting Australia back on tract.

Going early ?

John Quiggin41 Comments

According to the usually well-informed Laurie Oakes, the Abbott government is seriously considering the prospect of a double dissolution election, following the impending Budget. This makes no sense to me, not that this should mean it is unlikely to happen.

To recap, talk of a double dissolution emerged last year, in the wake of the Senate’s blocking of unpopular Budget measures. Facing bad polls, the government abandoned the double dissolution idea, then dumped most of the measures. The new budget is supposed to be pain-free and popular. But, if so, what is the need for a double dissolution to get it through

The obvious inference is that, once returned with a more compliant Senate, the government will return to its true agenda. How can this argument be refuted, given that the same agenda was explicitly repudiated before the 2013 election, only to emerge immediately thereafter?

Then there’s the question of a trigger/pretext. The only current trigger, I believe, is the bill to abolish the Clean Energy Finance Corporation. This is hardly a popular cause on which to fight an election, but more so than university deregulation, mentioned by Oakes as a possible second trigger.

Insiders generally assume that the trigger is a mere formality, of no electoral significance. But these are the same insiders who assured us back in 2010 that the Prime Ministership is in the gift of the relevant Parliamentary Party and that voters should not presume to be upset by an unexpected change. Given that it is nearly 30 years since the last double dissolution, I imagine many voters will want to know what is going on, and may have the temerity to take the constitution seriously.

Insiders are also easily impressed by a well-timed early election. Experience suggests that voters are not so impressed, and are likely to punish a government that goes early for no good reason. The most recent example was Campbell Newman in Queensland. He might perhaps have lost anyway, but he certainly didn’t benefit from running a campaign during the school holidays, despite his much-touted cleverness in “catching Labor by surprise”. Similarly, Kevin Rudd went early, when he would have done better (IMO) to take some time pointing out the weakness of Abbott’s position. And back in 1984, Bob Hawke went early to take advantage of his massive popularity, but still ended up with an adverse swing.

That’s my take, but perhaps the insiders know better.

Loaves and fishes, again

John Quiggin20 Comments

I expanded my earlier analysis of the Galilee Basin mines in this piece for The Guardian. The really striking number is 483, the number of long-term new jobs the Carmichael mine is estimated to generate in the local (Mackay Isaac Whitsunday) region. That estimate comes from a computable general equilibrium (CGE) modelling exercise by Adani’s own consultants, ACIL Allen. Before the Queensland election, of course, much bigger numbers of 10-20 000 were bandied about. That’s partly a difference of coverage – the bigger numbers envisage, implausibly, that all the proposed mines in the Basin will go ahead, along with rail lines and port expansions.

Also, some of them focus on peak numbers during construction for each project, so that the jobs in question would only last a year or so. But the big difference is that the larger estimates were made using the discredited input-output method, in which each job created directly generates many more indirect jobs. This is an extreme version of the Keynesian multiplier effect, valid during a deep recession. But, as ACIL Allen observes, it makes sense only if you assume that the recession is going to last for the life of the project.

Sandpit

John Quiggin56 Comments

A new sandpit for long side discussions, idees fixes and so on. Unless directly responding to the OP, all discussions of nuclear power, MMT and conspiracy theories should be directed to sandpits (or, if none is open, message boards).

The tragedy of Gallipoli

John Quiggin83 Comments

100 years ago today, Australian and New Zealand forces landed at what is now Anzac Cove in the Gallipoli Peninsula, suffering heavy losses as they attempted to storm entrenched Turkish positions. Eight months later, having failed to dislodge the Turks, despite the loss of more than 10 000 killed and 20 000 wounded the Anzacs withdrew, managing to conceal the retreat and evacuate their positions with minimal casualties. This much, along with individual stories of heroism and suffering, is known to just about every Australian.

But there are many important facts that are less well known, and many questions that are rarely asked
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Rethinking tax policy for Australia

John Quiggin96 Comments

The title of this post is taken from that of the recent Treasury Discussions Paper on Tax, entitled Re:Think. Sadly, as I point out in this Guardian piece, there’s very little evidence of rethinking from Treasury. Most of the paper could have been lifted straight from the Asprey Review of 1975, and the sensitivities of the current government have ensured a step backwards from the Henry Review, with carbon taxes and resource rent taxes now off limits.

Undeterred, I’m going to start on my own review. I’m going to try something a little different in blog terms. This post will be updated whenever I get a chance, both with new material and in terms of publication date so that each new version will appear at the top of the homepage, hopefully with the comments being carried with it. I’m putting in some headings, and starting off with an idea I mentioned recently, that of a tax on bank profits

Aggregates: Revenue, expenditure, budget balance, debt and net worth

Revenue options

* A tax on the super-profits of banks, reflecting their privileged position. Tax base $29 billion. Possible revenue $5-10 billion, or 0.3-0.6 per cent of national income/GDP.

* Reforming the treatment of negative gearing “Quarantine” business losses for individuals, at least with respect to housing investments, and allow them only to be used as an offset against capital gains. Revenue estimate: rising over time to $5 billion a year, or 0.3 per cent of national income/GDP.

Expenditure requirements

Negative gearing

John Quiggin17 Comments

As I mentioned a while back, I’m planning a series of posts on tax policy. Since debate about “negative gearing” has been spurred by the suggestion that Labor might restrict it, this seems like a good time to cover the topic.

I’ll give my summary upfront, then go on. The problem is not negative gearing in itself but its interaction with the concessional treatment of capital gains. There are a variety of solutions, but the best is probably to “quarantine” business losses for individuals, at least with respect to housing investments, and allow them only to be used as an offset against capital gains.

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The cost of a policy depends on what policy you choose

John Quiggin14 Comments

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.

Lomborg review: repost from 2005

John Quiggin25 Comments

The announcement that the Federal government will be (they say, only partly, but UWA appears to have a different view) funding a move of Bjorn Lomborg’s Copenhagen Consensus Center to the University of WA has attracted plenty of comment.

Rather than pile on, I thought I would repost my, decidedly mixed, review of Lomborg’s first CCC effort in 2005.

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