Face Facts And Adapt To Warmer World

It might not seem like it, but climate sceptics and climate alarmists agree on a fair bit. One of the biggest flaws with both Kevin Rudd’s emissions trading scheme and Tony Abbott’s direct action plan isn’t that they are great big taxes or climate con jobs. It’s that they are futile.

Any Australian cut in carbon dioxide emissions is worthless if not part of a global effort. And right now it looks like the chances of a global agreement on serious emissions cuts are effectively nil. You don’t have to be a sceptic or alarmist to understand a policy that can’t achieve its goal is a failure before it starts.

The Copenhagen meeting reminded the world the domestic politics and pressures of emerging economies like China and India cannot easily be submerged by a global flood of environmental goodwill. And without including those two polluters, a global agreement will be meaningless.

Worse, it will look meaningless. That is a bigger problem for leaders like Kevin Rudd who wanted success in Copenhagen to endorse their leadership at home. Foreign policy is domestic politics with translators.

There will be another United Nations climate meeting in Mexico City later this year. Don’t get your hopes up. Yvo de Boer, the UN climate chief who retired in February, told the Financial Times he did not expect an emissions treaty in 2010 either. And public support for emissions reduction is dwindling. If you, like our Prime Minister, believe climate change is the greatest moral challenge of our time, you’re probably pretty glum.

But we haven’t had the genuine debate about climate policy.

We could keep trying to stop global warming with taxes, industry plans, corporate welfare, solar panel and insulation subsidies, and fruitless diplomacy. Or we could try to adapt to it. After all, the problem with global warming isn’t the warming per se, it’s the consequences of warming.

Climate change has a disproportionate impact on the poor. The developing world has neither the resources nor the infrastructure to cope with changes in climate. Bangladesh is more at risk from climate change than Holland, even though both are susceptible to flooding.

Bangladesh doesn’t need global carbon dioxide emissions to stabilise. Bangladesh needs to become like Holland. The poor need to get rich. They need economic growth. It also makes countries resilient against disasters not caused by climate change, like the earthquake in Haiti.

Growth produces increasing living standards, jobs, innovation, and individual wellbeing. Because growth is strongest in countries with liberalised markets, rule of law, and representative institutions, it carries with it equality and human rights. By contrast, at best, trading economic growth for lower emissions will just leave us with lower emissions. And we’ll be poorer.

Without an emissions treaty, there’s still reason for optimism. The Intergovernmental Panel on Climate Change says by the end of the century, per capita income will have doubled, at least. The world could be 20 times richer.

Take such predictions with a grain of salt: imagine a bunch of geniuses in 1910 trying to guess what the economy in 2000 would look like. Or what the chemical make-up of the atmosphere would be. (We think we’re pretty smart, well so did our ancestors.)

But the IPCC predicts economic costs of global warming will be a tiny fraction of that growth – between 1 per cent and and 5 per cent of gross domestic product. As the environmental economist Richard Tol wrote in January, “a deep recession wreaks as much havoc in a year as climate change would do in a century. Climate change is therefore not the biggest problem of humankind.” (Tol is an IPCC lead author and therefore not a crackpot.)

It doesn’t really matter whether climate change is caused by humans or part of a natural cycle. It might halve the yield of crops planted in the poorest parts of the world. But if those farmers used the advanced techniques of rich countries, they could more than make up for it.

Malaria caused by rising temperatures could be combated by a co-ordinated political effort to reduce global emissions. Or we could concentrate a fraction of that effort on developing a malaria vaccine.

Growth will fortify us against a climate that always changes.

For if you can’t cure the disease, manage the symptoms

Climategate: What we’ve learned so far

With Sinclair Davidson

The exposure of thousands of emails and documents from the Climatic Research Unit (CRU) at the University of East Anglia is one of the biggest developments in the climate change debate for the last ten years.

The emails-now dubbed ‘Climategate’-reveal a pattern of behaviour. These emails describe attempts to subvert the peer-review process, refusal to make data available to journals, attempts to manipulate the editorial stance of journals, attempts to avoid releasing data following freedom of information requests, rejoicing at the deaths of opponents, and manipulation of results.

But more than anything this illustrates how politicised, manipulated and ultimately uncertain much of the global warming science is.

Statements suggesting ‘the science is settled’ can no longer be sustained. In an email from Mick Kelly (a reader with the CRU) to Phil Jones (director of the CRU) dated October 26, 2008, we find this gem, ‘I’ll maybe cut the last few points off the filtered curve before I give the talk again as that’s trending down as a result of the end effects and the recent cold-ish years.’ While on July 5, 2005, Phil Jones wrote: ‘The scientific community would come down on me in no uncertain terms if I said the world had cooled from 1998. OK it has but it is only seven years of data and it isn’t statistically significant.’ Kevin Trenberth, head of climate analysis at the National Center for Atmospheric Research (and a lead author of the IPCC’s 2001 and 2007 Scientific Assessment of Climate Change), writes on 12 October 2009 that ‘we can’t account for the lack of warming at the moment and it is a travesty that we can’t.’ Trenberth went on to argue in a 2009 paper in Current Opinion in Environmental Sustainability that it is not enough to claim that natural variability accounts for the lack of warming in recent years – something specific must cause the decline.

Much has been made of an email by Jones where he says: ‘I’ve just completed Mike’s Nature trick of adding in the real temps to each series for the last 20 years (i.e. from 1981 onwards) and from 1961 for Keith’s to hide the decline.’ (emphasis added) The word ‘trick’ doesn’t suggest anything untoward, rather being somewhat clever about some technique. But ‘hide’ is a problem.

Similarly concerning is the apparent destruction of data. The CRU has argued that a lot of their early raw data was destroyed because they couldn’t store it. That explanation is, unfortunately, all too plausible. We live in a world where as recently as 20 years ago, data would have been thrown away for want of storage space. But why then find a 2005 email from Phil Jones, which states: ‘If they ever hear there is a Freedom of Information Act now in the UK, I think I’ll delete the file rather than send to anyone’?

The latest development is that the CRU have promised to make their data available-but we know that a lot of the historical raw data has been thrown away. This makes reconstruction and audit of the CRU research much more difficult. It is going to be impossible to reconstruct an unbiased temperature record based on instrumental observations.

There are numerous emails trying to alter the editorial line of peer-reviewed climate journals. This would be trivial, if it weren’t for the fact that peer-review is treated by the IPCC as the gold standard for academic neutrality. Attempts to subvert the peer-review process show the politicisation of the supposedly unbiased IPCC.

But the most concerning revelations aren’t contained in the emails. They’re in the files detailing the complexity and uncertainty of climate modelling. The contortions which CRU programmers have had to make to force their data into what appears to be a predetermined conclusion underlines just how little we actually know about past and present global climate.

Some of the comments made by programmers contained within the released files (see accompanying box) reveal how unstable the CRU model actually is. It is clear that the data underpinning the CRU’s model has been manipulated, manually altered and patched together. The data is incomplete, inconsistent, and-too often-contradicts observed temperatures.

This is not a trivial problem. It goes to the heart of the international debate about climate change. The CRU model is one of the foundations of the IPCC’s entire climate framework. If the IPCC is no longer able to rely on the CRU, it will be substantially less assured.

With what we have so far learnt from the CRU emails and documents, we can no longer be as confident in the IPCC-or, indeed, the popular view that there is a ‘consensus’ on climate change.

But these are just the early revelations from Climategate. What we will learn once the CRU releases its raw data-or at least, what data hasn’t already been destroyed-may completely reshape the global debate.

Climatologist (and target of many of the CRU’s most vociferous internal emails) Pat Michaels has said that ‘This is not a smoking gun, this is a mushroom cloud.’ We haven’t yet seen how far the fallout from that cloud will reach.

IPA Review Editorial, December 2009

You don’t need an opinion about climate science – nor any opinion about the ‘need’ for action on carbon dioxide emissions – to observe that political action on a national or global scale will be totally futile to achieve the ambitious decarbonisation goals that activists claim are necessary to stop the world from boiling over.

Australian greenhouse gas emissions are 1.5 per cent of the global total. Our carbon dioxide emissions less again. The distorted, costly, lumbering emissions trading scheme which the government has failed to get through the parliament twice, could only reduce emissions at an extraordinary cost. The success of an emissions trading scheme relies on governments ramping up the price of carbon incrementally, and doing so for the next half century. But are future governments going to be eager to do so once the cost of emissions reductions becomes obvious?

A serious global deal is just as unlikely. Compare the international negotiations over carbon emissions to the international negotiations over free trade. Free trade is unquestionably in each individual country’s national interest, yet negotiations have dragged on for fifty years. Emissions reduction is manifestly not in any individual country’s interest, at least in the absence of a consistent, globally applied and enforceable agreement.

Air pollution is either a massive or a trivial failure to allocate property rights, depending on whether you are a climate change believer or a climate change sceptic; it is a failure regardless. But-taking for a moment the worst case climate scenarios endlessly publicised by Greenpeace, Tim Flannery, and the Climate Institute-even when action is necessary, effective action is not necessarily possible.

The idea that we could get anything resembling coherent action on climate change out of self-interested horse-trading that characterises the typical treaty negotiation is as naive as Ross Garnaut’s recent disappointment that the Rudd government didn’t adopt the ideal emissions trading scheme he recommended in 2008.

But there are great reasons for optimism. Free market environmentalists have long urged adaptation to climate change to be prioritised over attempts at mitigating or resisting climate change. The practical impossibility of global decarbonisation makes mitigation a white elephant. It’s just not going to happen.

Hence adaptation. We know that the biggest costs of climate change fall disproportionately on the poor. So the solution to climate change-or at least the problems caused by climate change-is economic growth. At the Institute of Public Affairs climate change conference in November, Richard Tol and the IPA’s Alan Moran examined the economic costs of a warmer globe against projected economic growth. It should come as no surprise that the latter dwarfs the former. In this IPA Review, Louise Staley looks at some of the technologies by which the developing world could rapidly grow.

Science can only be one input into policy-making. When formulating policy, there is much more to consider-politics, economics, and morality, to name just a few. We are retrospectively horrified by the progressive eugenics movement not because their science was incorrect, although it was, but by the values of those who adapted it into a political program. Climate change is not eugenics, but the idea that democracy has failed because it has not immediately enacted the policy recommendation of scientists should be treated with the disrespect it deserves. And, as Henry Ergas argues in this issue, this vulgar-authoritarianism isn’t just limited to climate change – it has sadly become a regular feature of policy debate in Australia.

Vegetarians’ Meat Tax Plan Just A Load Of Hot Air

This week British economist Lord Stern called for the world to get off beef and on to broccoli: go vegetarian for the planet. Methane – burped, belched and otherwise released by cows in impressive amounts – is around 20 times more potent a greenhouse gas than carbon dioxide.

So the author of the influential 2006 Stern Review into global warming told Britain’s Timesnewspaper that the climate change meeting in Copenhagen would only be a success if it led to skyrocketing meat prices. Otherwise, Stern predicts, climate change will turn southern Europe into a desert and there will be ”severe global conflict”.

Stern isn’t alone. Also this week, Peter Singer called for a 50 per cent tax on all meat. According to the Australian vegetarian philosopher, cows are pretty much like cigarettes: they’re bad for you and smelly. They should be taxed accordingly.

It may come as a surprise, but there are flaws in this plan. We could all go vegetarian tomorrow if we tried – good news for the vitamin supplements industry. But a world without meat would be a much sadder world. And at best we’d be making a marginal change to global emissions.

According to NASA’s Goddard Institute for Space Studies, 85 per cent of methane from cattle is produced by cows in the developing world, because they have poorer diets, which produces more methane. And many of those cows aren’t just hanging around in paddocks waiting to become tasty beef – they’re work cows. India’s 283 million cows aren’t being eaten.

One environmentalist gripe is that cattle raised for human consumption themselves consume vast amounts of food that could go instead to humans. But grain-feeding produces less methane than feeding on wild grass. Purpose-grown feed is, at least in some respects, more environmentally friendly.

So: cow farts are a surprisingly complex issue.

It’s easy for Stern and Singer to urge the developed world to change its ways. But it would be much harder – and would get them invited to far fewer cocktail parties – if they decided a good use of their time was haranguing poor Indians into giving up their livestock. Stern and Singer are proposing little more than a green indulgence for the wealthy.

Anyway, practical problems aside, there’s something obscene about the idea that governments should deliberately make basic staples of life more expensive.

After all, Stern and Singer’s meat tax is hardly the only tax on food being proposed. Public health activists are adamant that the only way to get people to shed their ugly kilos is by making sweets more expensive.

Taxes on food have been among the most punitive in history. Dissatisfaction with taxes on salt was one of the causes of the French Revolution. Gandhi marched against the British salt tax.

We forget just how far we’ve come. A few centuries ago, getting hold of affordable and edible meat was like playing roulette – if the roulette wheel was made of parasites and salmonella.

Early cookbooks spent almost as much time teaching household chefs how to identify spoiled meat as they did describing recipes. The Compleat Housewife, published in 1727, told readers to prod carefully at beef in a marketplace. If the meat sprang back, it was fresh.

Admittedly, there is a positive spin you could put on the proposals to tax our food consumption: finally, the human race is so rich, so comfortable, that we can start making it a bit harder to get our basic needs. But food taxes will disproportionately affect the poor. If meat was as expensive as environmentalists would like, the rich wouldn’t significantly reduce their wagyu steak intake, but families on a tight budget would certainly eat less three-star mince.

And (need it be said?) hunger caused by inadequate or low-quality food supplies is still a major problem in the developing world. Just this year, in the Central African Republic, malnutrition caused by limited meat has created a humanitarian disaster.

These contemporary crises should remind us that humanity’s greatest struggle has been against malnutrition and starvation. Not for nothing did the Nobel Prize winner Robert Fogel title his groundbreaking study of recent global history The Escape from Hunger and Premature Death.

Since 1950, the global population has increased more than 150 per cent. But, in real terms, the price of food has sharply declined in that period. Basic commodities such as grain and vegetables are 75 per cent cheaper than they were 60 years ago. And it’s the potent combination of rapidly expanding economic growth and technological change that did it.

But we shouldn’t forget how hard it was to get where we are today. Cheap food is our inheritance as human beings.

Climate Trumping Needs Of The Poor

At one of those weird, celebrity-laden events they have every few months in New York, Hugh Jackman announced last week “climate change and poverty are inextricably linked”. World leaders furiously nodded their heads in stern agreement.

In a basic sense Jackman is right. Rich societies can cope with changes to climate. Poor ones cannot. Subsistence farmers will struggle more with any global warming than accountants in suburban Australia. But for all the talk of climate aid and sustainable self-sufficiency, the developing world needs to do just one thing to successfully adapt to climate changes: get on with developing.

But the political demands in developed nations for inspiring, grand, historic, operatic action on global warming are putting those stodgy old targets of economic growth in developing countries on the backburner.

Jackman inadvertently gave an illustration of why. Admitting his wolverine claws and mutant powers would be ineffective against climate change, he told of an Ethiopian coffee farmer converting methane from his cows into gas for electric lighting.

It’s a great story. It’s wonderful to hear of anyone using their resources more productively, particularly where those resources are at such a premium. But it misses the point. A greater thing to celebrate would be the coffee farmer being connected to the power grid, or wealthy enough to get decent medical care or education. Or when he is wealthy enough to pay others to generate electricity for him.

Industrialisation and economic growth in Africa and Asia no longer seem a universally agreed goal. Instead, some see it as a potential threat, if not carefully supervised by the West. If growth is to occur, aid agencies believe it must follow a strictly delineated path of sustainability and low emissions.

This new attitude has some dire consequences. According to a new study by World Growth, a non-government organisation, the share of aid directed to economic growth has fallen from 28 per cent 10 years ago to just 12 per cent today. Instead, aid is being focused on social and environmental aims.

The more priorities, the less likely anything will be done. It’s not thrilling to hear the United Nations, the European Union and many national governments repackaging foreign aid as “climate aid”. The EU plans to offer the developing world €15 billion ($25.4 billion) of climate aid as a sweetener to play ball at Copenhagen. This builds on the host of new programs and agencies distributing “climate-specific aid” such as the UN’s Clean Development Mechanism and Global Environment Facility, or the World Bank’s Carbon Finance Unit and Carbon Investment Funds.

With sufficient economic growth, the developing world can cope with the stresses of a changing climate and any number of the other stresses: chronic malnutrition, infant mortality, illiteracy and many diseases we believe to be “tropical” today, such as malaria, but are the consequences of extreme poverty. These problems could be exacerbated by climate changes, but they are problems right now. Only wealth can alleviate them.

From an environmental perspective, we should push for rapid economic growth in the developing world. Wealthy societies are cleaner; the technology to reduce pollution is as much a product of economic growth as the pollution is in the first place. First World factories are cleaner, more efficient, and healthier for their workers than Third World factories. Local industrial pollution in the developing world can be devastating.

Poverty is a dog of a problem. And foreign aid has always been an imperfect way to fixing it. Aid has congealed bureaucracies at the expense of the poor and funded the lavish lifestyles of oppressive dictators.

Nevertheless, a few years ago the theory and practice of overseas aid was getting somewhere. Encouraging development was not as simple as funnelling money from treasuries in the First World to treasuries in the Third World.

More important is allowing nations to build the institutions and legal frameworks that organically grow a productive economy. And we know trade liberalisation, deregulation and open markets are extraordinarily powerful drivers of growth.

Climate aid is just another illustration of what the economist William Easterly calls development paternalism: a belief well-paid international experts, equipped with enough power and resources, should take the third world’s destiny under their benevolent wings.

When those experts shift their priorities from economic growth to sustainability, they make it less likely they will achieve either. Unfortunately, as the Copenhagen looms, it seems the “right to develop” is no longer absolute.

Going Green Is Just Another Rinse In Government Washer

There’s no better way to dress up your drab, colourless economic plan than calling it ”green”.

The Victorian Government has been trying to create a ”green economy” where business innovation is guided in a greenish direction by the gentle hand of subsidies, taxes and government purchasing decisions.

Last year’s Green Car Innovation Fund gave a nice, fresh, enviro-trendy spin to the traditional Australian pastime of taking money from successful, productive industries and giving it to car companies. For a short time, we all seemed convinced that dumping money in the deep black hole that is the Australian automotive sector was the best thing we could do for the environment.

Ten years ago, it wasn’t green jobs but technology start-ups that were going to be the future of our economy.

Remember the great tech hub in the Docklands that was supposed to make Melbourne the Silicon Valley of the southern hemisphere? The Victorian and federal governments spent millions on ”ComTechPort”, a network of buildings to host innovative tech start-ups. But the jewels in ComTechPort’s crown now have as their tenants such innovative, nimble start-ups as the Australia Customs Service, the Bureau of Meteorology, VicTrack and the Telstra Corporation.

Unfortunately, it looks as if we’re seeing that same cycle of wishful thinking and half-baked policymaking when governments talk about all the new cool green stuff they’re doing.

The Federal Government’s recent announcement of 50,000 new green jobs hit a quick snag when Participation Minister Mark Arbib, and then Kevin Rudd himself, admitted they weren’t ”new”, they weren’t really ”jobs” (most of them were more like work experience and training positions) and there probably wasn’t going to be 50,000 of them.

But they are still green. We will be getting a new Green Jobs Corps, educating, oh, a dozen-thousand or so unemployed youth in the finer points of tree planting and walking track construction. We’ll get a few more thousand ”local green jobs”, which also involve tree planting. And we’ll get 30,000 green apprentices. That last program will involve, among other things, ”training mechanics in green car engines”. There have been only about 10,000 hybrid cars sold in Australia. If all goes to plan, they’ll be very well maintained.

Government-created green jobs don’t tend to make a lot of economic sense. We might have great ambitions for a green, sustainable economy, but other countries have tried it already. In Spain, a recent study has found that each of the green jobs created in that country has cost nearly $1 million, and each job cannibalises more than two jobs from another sector.

Of course, some things are more important than money or the economy. But governments can’t simultaneously claim their green jobs schemes will drag us out of the economic doldrums, and argue green jobs are too important to dismiss with crude, heartless, economic analysis.

Nevertheless, a lot of people seem to view the financial crisis as a time to pursue other goals – we mustn’t just have one of those standard, boring economic recoveries, we have to have an exciting, innovative and forward-looking green economic recovery! But Australia’s unemployed would no doubt be a lot happier to get back into work as soon as possible, rather than waiting to be funnelled into a hypothetical green job according to the Government’s policy priorities.

Green is fashionable, sure. Consumers are demanding more environmentally aware products, and businesses are supplying that demand. Indeed, right now the private sector is doing a hell of a lot better than the Government when it comes to innovative green products and services.

But governments that slavishly follow fashions might just find themselves with a wardrobe full of old, worthless policies that don’t fit and cost the taxpayer way too much.

Emissions Trading: Towards the biggest economic change in Australian history

With Alan Moran
‘Placing a limit and a price on emissions will change the things we produce, the way we produce them, and the things we buy’, states the Federal Government’s Carbon Pollution Reduction Scheme Green Paper, which compares the economic impact of the proposed emissions trading scheme with the breaking down of tariffs and liberalisation of the financial sector in the 1980s.
The introduction of a wide-ranging emissions trading scheme (ETS) is, as the Minister for Climate Change and Water, Penny Wong, acknowledges, a ‘tough … whole-of-economy’ measure. It is an unsettling statement of politics in the 21st century that this dramatic change to the economic structure of the nation is being formulated without any clear appreciation of what it will cost, where the costs will fall and whether the costs will bring any benefits.

The ETS vs. the GST

Many commentators have pointed to the introduction of the GST in 1999 as an economic reform on the equivalent scale of the ETS. In fact the ETS is a far more comprehensive policy measure than the GST. The GST saw the introduction of a flat and stable broad based consumption tax, to raise revenue. By contrast, the ETS seeks to penalise energy intensive forms of production, such as coal, and to a lesser degree, gas based electricity production. And it plans to do so in ever-increasing increments.
After its introduction in 2010, the government plans to steadily raise the price of emissions permits by restricting their supply, until, in 2050, the country is emitting 60 per cent less greenhouse gases than it was in the year 2000. The government’s objective is for an ETS to bring snowballing price rises spreading across the economy for at least the next four decades. But the outcome will be far more injurious than this. It will mean-at least if Australia’s tax approach is not followed by all nations-the disappearance of staple industries like smelting, cement production, cattle and sheep rearing as well as the coal based electricity industry which supplies 90 per cent of our needs, and for which there is no alternative.
It will also mean a vast increase in the taxation of petrol. The price of petrol would need to rise to over $5 and perhaps $10 per litre to choke off the demand to the level proposed by the government.
As a consequence, the ETS will vastly devalue homes, factories, and commercial premises. It will require revolutionary and painful changes to the way we socialise, work and play.
The ETS differs from the GST in many other respects. Not least among these is the duration of its prior consideration. The GST was a policy initiative debated in political and business circles for nearly two decades and road tested in many nations around the world. Since it was promoted by then-Treasurer Paul Keating at the 1986 tax summit, the country fought three elections on the issue of a consumption tax. 1993 saw John Hewson’s FightBack! package partly flounder on the GST issue, 1998 saw John Howard successfully take the GST to the ballot box, and in 2001 Kim Beazley asked voters to support a partial rollback of the now implemented tax.
By contrast, the federal government’s approach to the ETS has been to emphasise urgency, and to produce a steady stream of draft and interim reports, green papers and government responses that add to the air of inevitability.
Moreover, we are not even going to see any modelling of the economic impact of the ETS until Treasury reports back in November this year.

An open-checkbook…

Less than 18 months away from the implementation of a ‘whole-of-economy’ reform, Australian businesses and consumers have almost no idea what is going to happen to prices. It is no surprise that investment is drying up in vital sectors like energy and energy intensive activities, while firms nervously wait to find out what impact the ETS will have on their business models-or what concessions they are able to squeeze out of the implementation process.
The level of ignorance about the facts and the rationale for an ETS is widespread. In July, an ACNielson poll reported that while 67 per cent supported the introduction of the system, only 39 per cent professed to understand what it was. Confusion is also apparent in political circles. For example the Treasurer, Wayne Swan, has claimed that the inflationary effect of the ETS will be a once off. Unless the initial permit allocation somehow manages to dramatically reduce carbon emissions to 60 per cent in the first twelve months after implementation, the ETS demands a steady price increase over a number of years to achieve that goal. The government is hoping that technological change will be able to offset some of the price rises, but this is surely the first time that the health of the Australian economy has been bet on the entirely unpredictable pace of invention and innovation. And throwing money at research and development-as the government plans to do with some of the proceeds of the ETS-is no guarantee of commercially viable technology.
The ETS is the largest change to the Australian economy since settlement 220 years ago. For such a significant reform, it is being designed, prepared and implemented at unprecedented speed. It lacks the comprehensive nature that would be crucial to ensure its impacts are felt equitably-the inclusion of major sectors like agriculture is being deferred and other sectors are receiving preferential treatment.
The opportunities created by inconsistent burdens and political favours will be targeted by lobbyists seeking competitive advantages around the new system.

…and the minister with the pen

And in charge of all of this is the Minister for Climate Change and Water, Penny Wong. Her stewardship of the political negotiations necessary to implement the ETS make her one of the most powerful government ministers in Australian history. Under the banner of the ETS, there is no sector of the economy which is outside of Wong’s purview; no price in the country which will not be affected by the political decisions made in her ministerial office.
One particular example of the scale of these ministerial decisions is the issue of ‘trade-exposed’ industries, which will be granted some free permits until there are ‘broadly comparable’ ETSs developed in competing countries. There are numerous unanswered questions about these measures, which will involve making arbitrary distinctions and relative value judgements. For instance, not all industries can be neatly siloed off into ‘trade-exposed’ – a small army of lobbyists are descending on Canberra with their briefcases full of trade statistics for the industries they represent. How ‘broadly comparable’ must international ETSs be to make industries ineligible for free permits? Those lobbyists will have a view on that question as well. The same challenge will be presented by the energy industry, many of which will be granted some degree of assistance as the scheme is implemented.
And as some industries are in part excused from paying for the cost of carbon, achieving the ETSs short and long term goals will be ever the more challenging, and borne by those industries which are unable to receive government assistance. Further discretion will be available to the Climate Change Minister as targets are set and adjusted and other sectors are dragged into the scheme. The complexity of the ETS and the political manoeuvring which will be necessary to implement it will make the administration associated with the GST look like a family picnic.
What of the goal of the ETS? The IPA Review has long been one of the few outlets in Australia which publishes views that dissent from the global warming consensus-from critiques of the science around carbon dioxide pollution and its impact on global temperatures, to discussions of green political ideology.
The government has to be asked how the ETS will be adjusted if the now ten-year-long period where the global climate has been stable continues. Is the ETS a policy to be pursued no matter what, or is it contingent on long term temperature rises and the sturdiness of the model of relationship between carbon dioxide emissions and temperature?
Nevertheless, even if we accept the government’s goal of reducing greenhouse gas emissions, there is much to be critical of in the ETS. How does the government intend to leverage a domestic ETS into a global carbon pact, when the self-interest of China, India, Russia and the United States seem firmly opposed to such a pact? Australia’s contributions to global emissions are as little as 1.1 per cent of the total. Do Australian politicians have such a surfeit of hubris that they imagine others will follow simply because of the example they set or be persuaded by the rhetoric they offer?
Australia is staring down the barrel of long-term, entirely unpredictable price increases, coupled with the opportunity for rent-seeking and political opportunism to redraw the contours of the Australian economy.
And, as the government points out, a domestic ETS is only the prelude to an international agreement – one which may take these complications out of the hands of our domestic climate change minister and into international bureaucracies.
The ETS may be ‘brave’, it may be ‘tough’ and it may even be ‘courageous’ economic reform. But that does not mean it is desirable.
Australia already has in place a plethora of taxes, subsidies and regulatory measures targeted at reducing emissions. These include requirements on electricity suppliers to use renewable energy, subsidies for low carbon dioxide emitting technologies and regulations on the design of houses and whitegoods. If there is a political imperative to maintain and augment these, the government’s approach should be one that is carefully targeted and able to be withdrawn or intensified causing minimal disruption, while avoiding jeopardizing international competitiveness. Recognizing the consensus that petrol is now out for the time being, a tax on gas and electricity that is directed to the household consumer would be a place to start-offering some incentives to start on what may or may not be a long haul to diminish the nation’s wealth and transform its economy.
But in the manic rush to implement the ETS, such a measured – and reversable – policy appears to be off the government’s table. It will be the Australian economy that suffers.

IPA Review Editorial, September 2008

This edition of the IPA Review focuses on the federal government’s new emissions trading scheme (ETS). It does not, however engage with the science behind climate change. In fact, in this edition at least, we avoid it deliberately.

We have all seen how the scientific contention that an increase in carbon dioxide emissions is causing rising global temperatures gets simplified and distorted by the meat-grinder that is the popular press. An article featured in The Age on August 9 shows just how far off the ranch the environmental hysteria has gone-‘rising temperatures are likely to bring increasing levels of violence to Melbourne by 2010′. As the blogger and Daily Telegraph columnist Tim Blair pointed out-‘that explains the constant riots in Queensland’.

At least these vacuous news items are slightly better than that cringe-inducing combination of moral superiority and product placement that passes for environment journalism in the lifestyle sections of our ‘serious’ broadsheets.

But anybody who points out that polar bears are not dying en masse, or that human history is full of doom-sayers who proclaim our imminent demise, are quickly characterised as ‘denialists’. Indeed, this has been the strategy pursued by the federal government to market its ETS. Rather than discussing the specifics of the scheme, the government has been careful to keep media focused on the unfortunate dithering in the upper ranks of the federal opposition.

Government-friendly commentators have been similarly eager to avoid discussing the mostly complete proposal set out in the emissions trading scheme green paper.

But as advocates for small government have argued for decades, there are two parts to every government policy. It is not enough to set a goal. You have to design and implement a policy to reach that goal. And it is most often in the design and implementation phases that policies reveal their critical weaknesses-unintended consequences creep in, and everything just seems to take on a life of its own.

But a discussion of the specifics of the ETS has been notably absent from public debate. And for good reason. For the last decade, public debate on climate change has been predictably orientated-skeptics on the right, alarmists on the left. The debate has consisted of a pastiche of hockey-stick graphs, apocalyptic predictions and ice-coverage maps.

As a consequence, left-wing commentators give the government a free pass on the scheme’s merits because they don’t fully understand the enormous economic and political complexities of an ETS. Nor do they recognise the opportunities for rent seeking and regulatory gamesmanship that the ETS presents. They don’t understand just how large the scheme looms over the economy, choosing simply to dismiss criticism as the ranting of ‘denialists’.

The science of climate change continues to be crucial to public policy debate, and the IPA Review will continue to interrogate it, as we have done for more than two decades.

But free-marketeers cannot refuse to engage and critique the ETS just because they are not happy with the science. The general public supports some sort of action on climate change, and until that support diminishes the government is unlikely to retreat from implementing a climate change mitigation policy. But as we note in this IPA Review, the public may be eager for action on climate change, but remarkably few people understand what that action might entail-let alone understand what ‘emissions trading’ means.

But if it is introduced, the ETS will define Australian economic life for decades. We have provided a condensed guide to the ETS in this edition (see pages 38-39)-we’ve stripped out the jargon, targeted the key problems with the scheme, and tried to answer some of the big questions the ETS raises.

This edition of the IPA Review was prepared under the shadow of the ETS.

Considering the ETS’s monumental importance to Australian prosperity, it could not have been any other way.

Battling Green Noise

“Beyond Petroleum” is a strange slogan for a company that sells mostly petrol. Is BP really that embarrassed by the 3.8 million barrels of oil they produce every day for grateful motorists, and presumably even more grateful shareholders?

If the amount of effort the petrol retailer is going to to promote its coffee is anything to go by, then it appears so.

BP has recently switched its entire coffee supply to “fair trade”. This switch has been matched by an ad campaign of billboards extolling fair trade’s social and environmental benefits.

Surely in the history of retail this is the first time that an oil company’s marketing department has decided to emphasise its petrol station coffee instead of its petrol. It’s an interesting strategy – come for the lattes, stay for the fossil fuels.

But BP is hardly alone. Corporations across the world are trying to squeeze into green clothes. Green is the new black. Apparently, environmentalism sells.

Traditional eco-activists describe all of this in the most disparaging of terms – “green wash”. But what did they expect? Years of environmental moralising has elevated eco-friendly products to the lofty status previously held by Chanel, Porsche and Rolex.

Would anybody really be surprised if in the next few years James Bond was driving a Prius? A licence to kill is not a licence to act irresponsibly, you know.

There are two characters in this story. The first is the usually well-meaning, if naive, environmental activist who seeks to activate green consciousness in the masses. The second is the entrepreneur who has figured out that consumers might pay just a little bit more for products described as “eco-friendly”.

We’ve seen the relationship between these two characters play out before. A few years ago, when “corporate social responsibility” was all the rage, businesses started filling their marketing departments with social activists and scheduling meetings between non-government organisations and CEOs. Both usually left these meetings either annoyed or just disappointed that they didn’t speak each other’s languages; businesses aren’t charities, and charities aren’t businesses. But everybody got to shake hands in front of the company photographer, and the photos were successfully reproduced in annual reports across the country.

But corporate social responsibility was so 2003. Activists and marketing departments are working together again – this time for the environment.

As a result, products claiming that they are environmentally conscious have flooded the market. Certainly, there’s nothing wrong with trying to be environmental or ethical when you shop. And there’s nothing wrong with businesses trying to market their products according to contemporary fashions.

Nevertheless, remember the good old days when products were just either “biodegradable” or “not biodegradable”?

In those simpler times, products either decomposed quickly, or survived 60 ka-trillion years in a landfill.

It is all getting a little bit silly now. Publicists pile adjective upon adjective, desperately trying to beat the competition – eco-friendly, environmentally friendly, renewable, sustainable, recyclable, reusable, natural, organic, low-footprint, low-carbon, low-impact, or just clean. How can something be “100% earth-friendly”?

Green products and services have multiplied. Should we buy new organic jeans?

Across the world, real estate agents have started marketing themselves as “EcoBrokers”. And the idea of “sustainable graphic design” would sound like a parody if it wasn’t for the dreary earnestness of its advocates.

This isn’t green wash, it’s green noise. Claims that products are sustainable are more often than not confusing and contradictory. Those organic jeans rely on dyes and finishing agents that should chill the environmental heart.

And most of the time, labelling a product as “eco-friendly” is as meaningless as labelling a product as “great”. Think back to your childhood – just because tiny chocolate bars are described as “fun-size” doesn’t mean they are any more fun.

It seems that in 2008, no self-respecting marketing department can avoid pointing out just how environmentally beneficial their new range of shampoo is. (Marketing seems like a fun job: “New slightly thicker shampoo bottles can now be refilled with water for your convenience – and the planet!” or “Now dolphin free!”)

But there is evidence to suggest that all this green noise is leading to green fatigue – everybody is just getting a little bit eco-exhausted.

In a recent survey conducted by the Shelton Group, a Texas-based ad agency, 49% of US consumers said the environment was an important consideration when they purchased a product. But only 21% said that environmental considerations had led them to choose one product over another.

That’s right – less than half of the people who said the environment was a significant factor when choosing products had ever chosen a product because it was better for the environment.

So either a quarter of consumers are deliberately choosing the most environmentally damaging product in a manic desire to destroy Mother Nature, or people are just buying what suits their needs – environment be damned.

And the survey found that in 2007, 20% fewer consumers deliberately bought an environmentally friendly product than in 2006. Consumers seem to be figuring out that most eco-friendly claims are just a lot of marketing bluster.

Environmental groups find green fatigue frustrating, but they have been encouraging the overmarketing of sustainability. Greenpeace enjoys putting out press releases disapproving of new products – when Apple’s iPhone was launched, it was greeted with a barrage of overexcited condemnation for its lack of green features.

In the face of these sorts of campaigns, it is no wonder that marketing departments are trying to play catch-up.

But for a lot of businesses, the environment is just another publicity stunt.