The 75 per cent solution: tourism

John Quiggin56 Comments

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?

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The future of coral reefs, if any

John Quiggin8 Comments

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.

Less bad news from Iraq

John Quiggin26 Comments

Over the last few months, the volume of bad news from Iraq has diminished. For example, the number of US troops killed in November (about one per day) was the lowest in a couple of years. While it’s much harder to measure Iraqi casualties the number seems to be declining, at least in Baghdad. What does this mean for the policy choices facing the US and its allies?

The short answer is ‘Not much’

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NSW electricity privatisation – a quick look

John Quiggin57 Comments

There’s nowhere near enough evidence in the public domain for a proper evaluation of the announced privatisation of NSW electricity, but there’s enough to do a quick retrospective evaluation of the last such proposal, under the Carr government in 1996 and 1997. At the time, estimates of the sale price for the whole industry (generation, distribution and retail) were “up to” $22 billion (an overoptimistic figure based on extrapolation from Victoria). If entirely used to repay debt (unlikely, this is NSW after all!) that would have saved the government around $1.5 billion per year. Instead the government got dividends of around $1 billion a year, and also extracted at least $5 billion in special capital repayments. So, the total stream of payments was about the same, and the present value was, if anything, a bit higher since the capital repayments came early.

Coming forward to 2007, the government looks set to get more than $15 billion for generation and retail alone, even with a range of restrictions that would reduce the sale price substantially. In general, distribution accounts for at least half the value in the industry, implying a value upwards of $30 billion.

Short analysis: By not selling in 1997, the public lost nothing in terms of cash flow, and accrued at least $8 billion in capital gains.

State of decay

John Quiggin33 Comments

In response to my observation that “… the Labor government in NSW is cementing its reputation as the country’s worst fiscal manager.�

Ken Lovell ups the ante, pointing out

I don’t think you need be so narrow in your description of its incompetence. ‘Country’s worst government’ is fine.

Let me see him and raise him. It seems to me that, looking back as far as I can remember (to the late 60s), NSW has had consistently worse political leadership than any other state.

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Privatisation, 80s style

John Quiggin49 Comments

I haven’t had time for a detailed analysis of the Iemma government’s proposed privatisation of the NSW electricity industry, though what I saw of the Owen report suggested that the case was weak.

Fortunately, the announcement that the sale will .help pay for a “new vision” for urban transport, a European-style metro rail line, better country roads and improved water management.’ tells us everything we need to know. The quotes in that link should be around “pay for”, not around “new vision”. There is no meaningful sense in which selling an income-generating asset allows you to pay for anything. The sale price merely offsets the loss of income.

As a matter of public policy, either a metro rail line is a good investment or it isn’t. Whether or not electricity assets are sold can make no difference to this. However, lots of evidence suggests that when people get money that they can regard as ‘free’, they generally squander it.

This is all set to be a repeat of the 1980s and 1990s privatisations when the proceeds of asset sales were sprayed against the wall (I’ve slightly bowdlerised the picturesque description offered at the time).

Following on from the Cross-City Tunnel fiasco, the Labor government in NSW is cementing its reputation as the country’s worst fiscal manager.

Charter of Rights

John Quiggin22 Comments

In the aftermath of the election, it’s striking how much the dullness of the campaign reflected the fact that a lot of issues weren’t even debated. Labor’s proposal for a Charter of Rights provides one example. From Labor’s viewpoint, those who liked the idea were probably already aware of it, so there was no payoff from pushing it hard. And while the culture warriors would have liked nothing better than to try and make a big deal of it, even Howard could see that running against human rights would be a risky tactic, especially in view of the government’s record.

Having tried and failed to wedge Labor on rights issues (notably gay marriage), the Liberals were quiet on the topic during the campaign. Now they face the risk of being wedged themselves. The rightwing fanatics who delivered the leadership to Nelson will find it hard to back down quietly, but I can’t see Nelson himself wanting a fight on this.

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