SMH Opinion: And the magic word is …

by ericknight

In the racy world of agents and publishers where I have been trying to sell my book, I’ve been told that the words ‘climate’ and ‘change’ send even the most resilient of punters to sleep.

You may be an exception to this theory of human nature. If this is the case, have a read of today’s SMH opinion page. I’ve made a contribution which aspires to be both light-hearted and serious. It’s two cents on one of our nation’s most vexing political issues.

{ 9 comments… read them below or add one }

Megan Donnelley March 5, 2011 at 4:33 am

I thought your article broke down the topic well, and examined the issues fairly and logically, examining the counter argument where you could. Thanks!!

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dave March 5, 2011 at 8:02 am

Hi,

interesting article and I read your previous post that had a similar theme. I’ve got some thoughts on it and would welcome any counter arguments or other thoughts of yours. (also I’m a friend of a friend I believe – I know megan/erin/lou/liv etc).

Just in terms of your predisposition to nuclear I’m wondering if you’ve read anything by Helen Caldicott re: the dangers of nuclear and further to that if you’ve read Clive Hamilton’s “requiem for a species”, he talks about the idea of nuclear as the answer (or at least a major part). From memory, he makes the argument that it would actually take too long to get all the required nuclear power stations up and running.

Similarly I don’t think we can centre our carbon pricing efforts/policy entirely around research (though obviously it is extremely important) as again we need to start acting now. The science shows that it’s supremely unlikely that we’ll be able to avoid 2-4 deg C temperature increases which will have (more than likely) dramatic effects and pass environmental tipping points. This is why sequestration is not the magic bullet that people hoped – it’s not proven and won’t be ready in time (with luck it will be as useful as hoped in the future).

Personally I’m not a big fan of nuclear for many reasons including the ones you briefly mentioned in the article but realise that it may end up being part of the solution. I don’t think we can rely on it though especially not in the near future, we need to accept that for the good of the planet we have to change our lifestyles somewhat – especially those of us who can afford to do so. Part of that will be pricing carbon with intent to very significantly decrease emissions and part will be other efforts which should include coal mining + exports. For carbon pricing to give us a certain carbon emission reduction we need the trading scheme and not the tax. while I understand the rationale for starting with a tax and transitioning to a trading scheme, I don’t think as you seem to imply we should be extending the taxation period longer than the proposed 3-5yrs for the above reasons relating to needing to actually cap the amount of emissions.

Do you accept that after the initial taxation period we need to transition?
If so, do you have a proposal that would work better than putting a 3-5yr time frame on transition?

Hopefully the 3 yr window allowed by Gillard’s proposal would give enough time to choose a relatively opportune moment to transition to the trading system. For me the problem with the transition time frame is that it’s highly dependent on the next election and may leave us short of actually achieving the trading system we need.

cheers,
dave

sorry if this is too lengthy or ineloquent

part of clive’s book
(http://www.clivehamilton.net.au/cms/media/documents/articles/rsa_lecture.pdf)

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ericknight March 5, 2011 at 8:27 am

Hi Dave,

No premium on elogence is required. You have obviously thought through this a lot. At the risk of losing my evening to this blog I’ll give you the high level thoughts on this.

1. On nuclear, the technology has been used for decades. Look at the IEA stats on the carbon intensity of national economies and you’ll see the steep fall in France’s emissions profile comes from its uptake on nuclear in the 1970s. Ditto elsewhere. Yes an aging Soviet empire made a huge blunder. But they are not the only people who have used nuclear.

If the timing point refers to how long it takes to build, one must ask themselves whether this is the wrong question. The measure is not how long it takes to build a nuclear power station vs a wind fram. It’s how long it takes to build the equivalent volume of energy infrastructure: nuclear v xx number of windfarms. The financials kick in here, it goes to planning approvals etc but you get my point.

2. On the tax, my point is that it’s a mugs gaming guessing when the economy is ready to transition. A carbon tax is clean, simple, and people get it. They may not like it, but they get it. Democracy will do the rest.

More here to chew but keep posted….got to run

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Megan Donnelley March 6, 2011 at 7:09 am

Hi Eric, I am not as well read as Dave as I have just realised my interest in this area, but I do feel very passionately about the environmental damage the Coal Seam Gas industry is getting away with, and the controversial way the Labour Government is dealing with it. Do you have an opinion about this, and the best method of instigating change?

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Dominic Meagher March 7, 2011 at 7:19 am

Hey Eric,

Just moving my email to the comments section. In your article you state this:
“A trading scheme, by contrast, operates by the opposite logic. It puts environmental standards front and centre and lets the price bounce around like a volleyball. This is hardly a recipe for long-term investment stability.” (in separate writing you suggested the reason is that the price uncertainty paralyses investment decisions).

But if you treat carbon credits as a factor of production, why is it problematic to let the government set the quantity and have the price set by the market? Other factors of production have prices set by the market (labour, oil, steel, shipping, retail space…) and some of these have fixed (or even government determined) quantities. In some cases the prices are sticky (labour) and in others they bob around like your proverbial volley ball, but in those volley ball cases futures markets seem to take a lot of the volatility away from the users of the product and into the hands of traders who love it. On the other hand, there’s no reason to assume that a tax would remain constant (actually, a tax is likely only to go up, whereas a market price could go up and down depending on demand for emission credits).

A side note is that I don’t know how impartial Marius Kloppers (CEO, BHP Billiton) is. His interest extends beyond “knowing the damage” – he’s also interested in minimizing it. Garnaut recounted an anecdote (I think in “The Great Crash of 2008″) where some CEO or other saying they preferred taxes to permits because it was so much easier to get exceptions without the pubic noticing.

Also, I understand there are already lots of low-carbon options that could be taken to market if the price was right. Many companies have been investing in these for a decade or so, and I know China sees this as a leading candidate for industrial expansion without all the competition of mature industries. So I don’t think we’re going to see a situation where a trading scheme gets introduced but early stage R&D languishes due to price uncertainty.

Basically, I think you’re overstating the problem with a market determined emission price. The main obstacle I can see to a permit scheme is its political vulnerability due to the complexity of establishing that kind of scheme. Possibly I’m either misreading you or missing some important point though. Anyway, that’s my not too deeply considered position.

Dom

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ericknight March 7, 2011 at 10:40 am

Hi Dom,

You make good points. You may well be right about Marius Kloppers. I was told by a tax barrister over Christmas that his clients see tax as a cost which needs to be minimized!

I suppose my point on the tax really comes from a following assumption. Given that an ETS emissions targets only really holds environmental integrity in the context of a global ETS, it might be better (in the first instance) to front load the effort you put into tech investment. Arguably a tax gives a government more direct control over this. This is not an argument at all against an ETS. It is just a point about timing.

Anthony Giddens in The Politics of Climate Change makes a similar point. Stern, in the Economics of Climate Change makes a strong point in favour of a global emissions trading scheme. But he omits a discussion about the politics of how you get there. My sense is that a tax is far more transparent to the average punter and makes it an easier sell.

On the point about investment, the UK launched an investigation into Phase I of the EU ETS over 2010. Some of the testimony went to the fact that feed-in tariffs did more to spur investment in low carbon technology than the EU ETS. Admittedly this was focussed on Phase I but I think the issue probably deserves some attention. Anyway you can read more at: http://www.parliament.uk/business/committees/committees-archive/environmental-audit-committee/eacpn080210/

Lots to talk about here Dom: let’s grab a beer after you’ve done the draft of your thesis.

Megan, on your point, sadly I am very ignorant of the Coal Seam Gas industry. Feel free to enlighten me…

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Sam Wills March 9, 2011 at 4:45 pm

On balance I also think the tax is probably the way to start, as certainty is crucial in these early stages. I haven’t been able to find much on how they’re going to cushion the blow though – has much been said? I agree that they should cut back on other inefficient taxes in the system, though I’m not sure income tax would be first on the block. I’d probably take aim at things like stamp duty and payroll taxes first to free up the flow of labour between sectors. Particularly if this is designed to reshape the industrial base.

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dave March 10, 2011 at 12:47 pm

I talked to megan yesterday and she mentioned that she’d heard clive hamilton was perhaps a bit alarmist – for anyone who’s interested in hearing the latest on what’s going on with the science of climate change from the expert leading the IPCC here’s a link to a talk he gave recently in australia. (ps. it does seem to be consistent with the science that clive hamilton is quoting/using)

http://www.themonthly.com.au/ipcc-lead-author-michael-oppenheimer-how-policy-can-catch-science-2444

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Olivia Pembroke March 14, 2011 at 6:26 am

Hi Eric,

Just wondering what your thoughts are regarding nuclear energy and safety issues in light of the tragedy in Japan?

Olivia

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