Carbon Constraints call for Clear Communication

While the climate scientists are starting to communicate clearly (see below) the government is not. I know I have used this Marc Roberts cartoon before, but it’s just too perfect for this post.

Here in Australia we are going through another attempt by the government to implement a price on carbon. The previous attempt, by the Rudd government was voted down by the opposition Liberals and Nationals and the Greens either because, as conservatives, they either deny climate change or despise government intervention in the market, or because the Greens felt it overcompensated the polluters and would have had little effect. The current attempt is demonstrating an extraordinary level of vitriol, misinformation, and an amazing lack of competence on the government’s part. As such it’s a pale echo of the nastiness going on in the USA.

Julia Gillard is leading a minority government which has repeatedly flip-flopped on the subject and now has to succeed to survive. It is strange therefore that her government is not selling the project at all well, to the point where the cynical might wonder if they want to fail. While the opposition is almost rabidly attacking the project and its supporters, the government announcements have been lame and unfocused. As none of the real decisions on how much and who pays have as yet been made, only the principles of the matter can be sensibly debated.

Folk tend to think of a tax as a cost and therefore as purely a negative thing, but it is always a redistribution of wealth, taking from some and giving to others. The problem, as with many of the tragedy of the commons type problems, is that those who pay can clearly see the loss, while the gain is often diluted (and sometimes wasted) so that most folk don’t see the same benefit. This requires clear and simple communication by any government implementing a new tax, and that is exactly what we don’t have.

The key questions at this stage of the debate are:-

• Should we put a price on carbon now or wait till other countries do more?
• Should it be a Carbon tax or a Cap and Trade mechanism?
• What will the money be used for?

• It is clear we need to act now. Australia is the highest per capita emitter of carbon other than some of the much smaller Gulf States. A recent study shows that we are way behind the pack when it comes to doing anything about reducing our carbon footprint. It calculated an implicit carbon price for Australia and five of our major trading partners and concluded that Australia’s price was $2.34 while the US was $5.05, China was $8.08 and the UK was $28.46. These numbers are calculated at market exchange rates, and are even more unbalanced if purchasing power parity exchange rates are used with Australia now at $1.68 to China’s $14.22. We are also the most likely of the industrialised nations to be badly affected by climate change and are already seeing unprecedented predicted extreme weather events, while our agriculture is at serious risk.
• While most governments initially favoured cap and trade, for its supposed efficiency, the early signs in Europe have not been good, with widespread rorting and wildly fluctuating prices just two of the problems. A tax is much simpler, and while it needs adjusting yearly to ensure carbon targets are met, we seem to be able to manage this with income tax. As such it seems a good starting point. Crucially it drives change in Australia, rather than allowing international offsets, which are usually so subject to fiddling that they are not effective in reducing emissions.
• The government says “Every cent raised from pricing carbon will go to assisting households, helping businesses manage the transition and funding climate change programs”. But in what proportion? The previous ETS was very generous to industry of all sorts, reducing the incentive to act quickly, and allowing companies to increase both prices and profits during the transition. Given that, as shown above, our major trading partners are all doing more than we are and that our industries, far from being in danger of going overseas, are actually benefitting from our cheap dirty power and failing to keep up with overseas advances, we need minimal compensation for trade exposed industries. As for the massive giveaways to the electrical industry proposed in Rudd’s ETS, they are simply ridiculous. As in so many cases simple is good. A proportion of the money should be extracted for funding climate change programs and the rest should be returned to the human population as a cash refund. Prices will rise, but most folk will be more than compensated and the rest will have an incentive to change, which is the whole point of the exercise.

There is only one problem with this, most recent governments have acted as if they are elected by the corporates rather than the people, and the current incumbents are no exception, having recently caved in on the mining tax to the tune of about $6 billion per year. So we can expect a lot more waffling until the detail comes out later in the year and a lot more bleating from industry about how hard it will be and how many jobs will be lost. The fact that most of this is shown after the event to be the purest bullshit is conveniently ignored by the corporately owned media. The Greens will have the balance of power in the Senate during this period and are already signalling that they want to minimise industrial compensation. Hopefully they hold their nerve.

The opposition, continuing with the tactics they have used successfully since the election is against anything and everything and promising to repeal the tax if they gain power. Given the Greens balance of power in the Senate this would require a further double dissolution election.

Interesting times, but unfortunate in that we are missing out on the start of a real shift in power generation. Both Europe and China are putting real money into renewables and the effects are starting to be seen. While it was only for one day, Spain generated 75% of its electricity from renewables on January 6^th. (It was 35% for the whole of 2010) and Portugal has gone from 17% renewable to nearly 45% in the last 5 years. Australia has a better supply of renewable energy than either, and our peak electricity loads come during those hot summer days when solar is going to be available, making it much more attractive.

On the dirtier side of the fence, a recent study from the Harvard Medical School quantifies the health costs of coal to the US economy at between $140 billion to $242 billion per year. This is just the health costs with no accounting for carbon emissions but would still be enough to more than double the cost of coal.

Climate Science is now able to show that global warming is responsible for exacerbating the extreme weather that we are starting to see, though it takes a considerable time to analyse the data, so they are reporting on events that are years old, rather than the recent deluge of events. One of the studies mentioned above showed that Climate change doubled the likelihood of the devastating 2000 UK floods. Separately a study shows that the risk of abnormally wet or dry seasons has doubled in the south-eastern US in the last 30 years, while the massive reinsurance company Munich Re states that the number of weather-related disasters have more than tripled in Germany over the past 40 years.

To finish, if you have an hour to spare and want a feel for the massive changes we need to make have a look at this video (it assumes we need to stabilise at 450ppm while recent thinking indicates 350ppm so the job’s rather harder than portrayed!). If you prefer a bit of dark humour try this recent bill declaring that global warming is natural and “beneficial to the welfare and business climate of Montana”.

I don’t think I can top that.