Access Economics and CEDA on carbon taxes

John Quiggin35 Comments

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 ?

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The macro wars

John Quiggin202 Comments

Paul Krugman’s piece on “Why did economists get it so wrong” has attracted a vitriolic response from John Cochrane, reproduced here. Krugman’s piece was strongly worded, but the reply ups the ante, and I expect further escalation. Economics conferences in the next few years are going to be interesting events.

Given that, as Krugman himself notes, disagreements between economists were notably mild until the crisis erupted, what is going on here?

I’m visiting Berkely at present and just had a chat with Brad DeLong. These are some of the thoughts I had about the great macroeconomics wars as a result.

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The race for a low carbon economy: A form guide

John Quiggin128 Comments

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).

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Three Cheers for Judith Troeth

John Quiggin56 Comments

In my last post, I was thinking about the fact that one Liberal willing to cross the floor and combine with Labor, the Greens and Nick Xenophon, would be enough to pass an improved emissions trading scheme. Now, this pattern of votes has combined to repeal the Howard government’s hateful practice, inherited from the Keating Labor government, of charging immigration detainees for their own imprisonment. The sole Liberal was Judith Troeth, and she deserves our heartfelt congratulation.

Alleged Christian Steve Fielding voted, not merely to pass by the other side like the priest and the Levite, but to join the thieves who beat and rob the needy stranger. I incorrectly stated that Steve Fielding voted against the bill. He spoke against, but voted for.

Improving the CPRS

John Quiggin49 Comments

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.

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Hansen on climate change over centuries

John Quiggin152 Comments

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?

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Various links

John Quiggin6 Comments

A few things where I’ve had a direct or indirect interest

* This study of media bias by econobloggers Andrew Leigh and Joshua Gans has unsurprisingly attracted interest from the media and econobloggers (Andrew gives some links). The striking (if not particularly surprising) finding is that the ABC as a whole is to the right of most newspapers. One aspect of it was how much the media cited public intellectuals identified as partisan by the fact that they were commonly mentioned in favorable terms in Parliament by one side, but not by the other. Interestingly, I didn’t pass this test. I had about 30 favorable mentions, of which about 30 per cent were from the Coalition.

* My Senate submission on deposit guarantees got a good run in this SMH piece, which opens with a look at the incidence of John Dillinger’s bankrobbing exploits, as described by Johnny Depp. Since been romantically linked with Angelina Jolie, I’m keen for more brushes with fame.

* Back when I was doing my Pure Maths degree, I studied fixed point theorems. One implication of the standard Brouwer fixed point theorem is the hairy ball theorem which implies, among other things, that there must always be a place on earth where the wind isn’t blowing. I said at the time that I aimed to get a research grant to test this theoretical result in practice, by travelling round the world and moving on whenever the wind blew. Today, my fellow-student and major source of technical advice for this blog, Martin Ellison, advises me that I’ve missed my chance. These guys have found the spot, in remotest Antarctica.