Climate change makes people angry. The left refers to skeptics as denialists, corrupt, heartless, and stupid. The right refers to activists as traitors, fools, frauds, and socialists. Discussions about global warming and climate policy hardly live up to the word “debate” and are more likely to descend quickly into name-calling and dramatic assertions of doom.
When I wrote a monograph back in 2007 looking at some details of a carbon tax, I very intentionally side-stepped the heated debate about the science and just looked at the economics. This earned me hate mail from both sides of the isle.
Compromise seems unlikely, but it is worth at least considering our options.
The key part of the policy puzzle – that often gets ignored in the climate shouting matches – is that effective mitigation can only be achieved with a strong global binding deal. Without such a deal, everything else is smoke and mirrors.
Andrew Bolt has continued to ask all comers about how the Australian carbon tax will impact on global temperatures, and most people have refused to answer. So he decided to work out his own estimate. Using the calculations of Damon Matthews, who suggests that a tonne of co2-e will change temperatures by 0.0000000000015 degrees, and given that the government plans to reduce our emissions by 160 million tonnes, then Bolt estimates that our carbon tax will change the global temperature by about 0.00024 degrees. Fair enough.
From the other side of the fence, the only person I have seen willing to put their name to an estimate is John Quiggin, who thinks the carbon tax will be 100 times more effective and reduce temperatures (compared to “business-as-usual”) by 0.02 degrees. Quiggin should be congratulated for putting his name to an estimate, and it’s appropriate to note his caveat “as should be pretty obvious, it’s not meant to be precise, and claiming precision would be silly in any case”. Fair enough.
Some people are worried about climate change. Many of these people believe that the solution to climate change is to throw politicians and bureaucrats at the problem, and maybe have a conference about setting up the terms of reference for a steering committee that will investigate the rules for a community forum that elects a board to appoint a working group to write a discussion paper.
Take THAT you evil climate.
For the proponents of climate change “action”, I have some good news. Not only will Australia have the world’s biggest carbon “tax”, but we also have a few government programs working to save the penguins from sun-stroke. Did I say “a few”? Let’s have a closer look… Read more…
My carbon tax article in “the drum” in June sparked a lot of debate, with many people angry at my article and a few people saying some nice things. Most of the negative responses were quite dumb and don’t deserve a response, and it seemed that many didn’t read (or at least, didn’t understand) the article before they declared it wrong. But there was a response by “James512″ (20 June 2011, 12:39pm) which deserve a response. I’m going to go back to an old-style blogging technique and “fisk” his comment:
I accept what I see as the mainstream science on climate change. The world has had a warming trend in recent decades, this is partly caused by humans, and I expect it to continue into the future. I am comfortable with the IPCC range of estimates of warming, which has a mid-point estimate of 2.8 degrees over pre-industrial temperatures (ie 2.1 degrees above today). I hope the skeptical scientists are right and that warming will be lower, but I find the IPCC estimates plausible and an appropriate starting point for analysis.
But before I accept a climate policy, such as a price on carbon, I want to see that the policy has more benefits than costs.
It’s great to have good intentions. We all want to do good. But poor people can’t eat good intentions, and good intentions will not cool down the globe. If we really do care about good public policy and making the world a better place, we must not introduce policies that fail a benefit-cost analysis. And the simple truth is that a carbon tax fails under any reasonable set of assumptions.
To do an analysis of a carbon price we need five inputs to the model. We need (1) an estimate for the costs of climate change; (2) an estimate for how much of those costs will be prevented with a global binding deal; (3) an estimate for how much Australia will impact the likelihood of a global binding deal; (4) the costs of the carbon price; and (5) the discount rate. For all of these issues, if we use the most dramatic and pro-tax assumptions we can find, the policy still fails. Even the Garnaut Report admitted that “the accrued benefits [from a carbon price] were almost as large as the costs”. Almost. Amazingly, this didn’t make it into the papers. Of course, Garnaut goes on to say that if you keeping adding in extra benefits (while not adding in extra costs) then eventually you can make the policy pass, but with that approach you could make anything pass.
The debate about the carbon tax is so passionate and divisive that a compromise is almost certainly out of the question. But that doesn’t mean we can’t consider the thought experiment. I am on the public record as being against Gillard’s carbon tax, but after Ross Garnaut came out recently talking about linking the carbon tax with other tax cuts I started thinking about what else could be done to make the carbon tax “less bad”. The following are the demands I would put to the government if they wanted me to consider supporting their new tax…
1. The first requirement, and non-negotiable for me, is that the tax cuts must be at least as large as the new carbon tax. I believe that the federal government is already too big, and I am very strongly opposed to any policy that would further increase the size of government. If the proponents of a carbon tax really believe that the policy is vitally important then they should be willing to offer large tax cuts, even if that means they need to cut government spending.
2. My second requirement, which is also a game breaker, is that the carbon tax must not later convert into an emissions trading system (ETS). While both will have a cost to the economy, in my opinion an ETS is worse, and is likely to be an ever-growing bureaucratic and regulatory nightmare. If there must be a price on carbon dioxide, then it should remain at a low, simple, and predictable tax.
From the 16th to 18th of May the Heartland Institute will be hosting their 4th international conference on climate change in Chicago.
Heartland takes a position that has variously been described as “denialist”, “skeptical” or “realist”, but which I like to call “non-scared”. I say that because the conference includes science contrarians (Willie Soon, Richard Lindzen, Fred Singer, Chris Monckton), but it also includes people who accept the mainstream story of a warming planet caused by greenhouse gases (and I cautiously include myself in that category) but who nonetheless don’t believe this represents an impending catastrophe, and it certainly doesn’t justify rushing into bad public policy.
Yesterday, Malcolm Turnbull explained his reasons for supporting the ETS legislation. The ALP has jumped on the opportunity to attack the Liberals, while some Liberals have jumped on the opportunity to attack Turnbull. Just to be different, I thought I’d actually engage the ideas.
I’ll start with some points of agreement with Turnbull. I agree that the world has gotten warmer over the last 100 years (specifically between 1910-40 and 1970-2000) and that some of the latter warming is due to human emissions of greenhouse gases. I agree that if we continue to emit greenhouse gases then we can expect some continued warming into the future. And I agree that this will cause costs in some areas.
Where I disagree with Turnbull is (1) I don’t think we should exaggerate the expected net cost of global warming; (2) I do not agree that an ETS is the most market-friendly policy available; (3) I believe the long-term solution must be production-based (new technology) not consumption based (lower energy use); and (4) I don’t believe that an ETS will pass a benefit-cost analysis and therefore it shouldn’t be introduced.