Club Troppo

Brian Bahnisch over at Larvatus Prodeo has a useful summary of the state of play (such as it is) at the current Durban climate change talkfest:

China, it seems, wants the continuation of the Kyoto Protocol for the developed countries, and wants them legally bound to deeper cuts in the order of 45% by 2020. Then it has indicated it will come to the party.

Their attitude is based on the ‘legacy concept’ – those who caused the problem should fix it, while the developing countries should continue to place the highest priority on development for the next decade.

India appears to be essentially with China, although they claim to be flexible.

The US will not sign up to anything unless the major emitters sign and won’t start to talk before 2015. The 5 biggest emitters are, in order, China, the US, India, Russia and Japan.

Most of the developing countries want an extension of Kyoto, and desperately want legally binding cuts. They want the major developed countries legally bound, with penalties, and don’t trust anything else.

The EU is willing to continue with a Kyoto phase 2 if everyone signs up to talks leading to an agreement by 2015, to be implemented from 2020. They are supported by a handful of Kyoto Annexe 1 countries like Norway and Sweden and at least 90 developing countries, making about 120 in all. Unfortunately all countries must agree, not just a majority.

I want to focus on the sentence in bold above. I suspect most environmentalists and left-leaning readers would intuitively accept the logic/morality of the Chinese argument.  But they would be wrong, as Nicholas Gruen has argued before here at Troppo.  While it’s certainly true that affluent western countries were not subject to restrictions on their carbon emissions over the century or more in which they developed and became wealthy, that’s only one side of the equation.  The fact that those wealthy countries did the “hard yards” of development, invention, research and development over two centuries means that China and India now have the benefit of a developed world economy into which they can sell their cheaper products and services, along with perfected technologies and production processes they can simply adopt and exploit rather than having to develop them for themselves.  That’s why they’ve been able to develop almost from a standing start into huge industrial economies in just a little over two decades in contrast to western countries which took a hundred years and more to reach that point of development.

Because they’ve benefited at least equally from the industrial development whose side-effects include more and more atmospheric carbon dioxide, it’s entirely reasonable that China and India should be required to sign up to binding emissions targets.

I recently decided to install an air conditioner in my study. Naturally, caring about the environment (but not enough to forego my comfort) I chose the most energy efficient model on the market (the only 6 star split system).[1] Got a phone call yesterday – the importer is out of stock until mid-December. Apparently they so misread the demand for this unit that they have none to sell during the peak sales season!

[1] Search on www.energyrating.gov.au if you are interested (and not in a hurry).

In light of Paul Frijter’s sketpticism about the possibility of co-ordinated international action on carbon emissions and his recent offer of a wager on the outcome of international action, I thought I’d try to put the economic problem into some of the language of International Relations. After all, the problem is international, and Paul’s wager should extend to specialists therein who are willing to take it. How would the question be framed in IR.

The problem in economics terms is that of a global public good, or tragedy of the global commons. We have a resource that is not privately owned (or can not be owned) such as a village commons, fishery or atmosphere. If we assume homo economicus, or rational self interested agents then the resource will be depleted or polluted. The agents will derive private benefit in doing so, but the costs of their actions are shared amongst everyone and are therefore not taken into account. The aggregate result is not good, but this does not affect the decisions made by each individual. The desire to free ride prevents collective action. To achieve a optimal outcome when agents are homo economicus and the resource cannot be privatised, it is necessary for an external coercive power (i.e the state) to take action and ensure each person takes into account the costs of their decisions.

Now lets move to the international sphere. Instead of individual people as agents, we have sovereign states. When we assume that these states are acting only in regard to their own self interest (as civitas economicus, to coin a barbarism) we get something very similar to the assumptions of Realism. In realism the international system is anarchy because of the absence of a global state to enforce laws. The atmosphere cannot be taken under the ownership of a single sovereign state. Self interested states will free ride, and there is nothing to force them to do otherwise. Thus under the basic assumptions of rational choice/realism, the global commons will be depleted. (Continued)

Sinclair Davidson at Catallaxy has a post musing about whether carbon emissions trading permits would be regarded as property rights which would entitle the holder to compensation if abolished by a future federal government. The obvious context is the fact that Tony Abbott has promised that the Coalition would “roll back” Labor’s carbon pricing regime if elected. Apparently there’s been a debate about it in the AFR (to which I don’t subscribe).

Frankly, I think any such debate is misconceived at least to the extent that some (e.g. Labor’s Assistant Climate Change Minister Mark Dreyfus QC) seem to be suggesting that Abbott could not abolish carbon pricing without running the risk of incurring a large compensation bill to emitters whose permits were cancelled. My understanding of Labor’s proposal is that a tradeable carbon permits regime would not commence until at least 2015. The regime to commence next year as an interim measure is simply a carbon tax levied at a fixed price per tonne on particular emitters. It isn’t transferable nor does it set any specific limit on permitted emissions. The designated emitters simply pay the fixed price for whatever they emit. On no sensible view could that be regarded as a property right. It would be like suggesting that one’s income tax liability was a property right!

The carbon permits regime to be introduced in 2015 may well be a different matter, but if Abbott wins the next election (which currently looks long odds-on) it will never see the light of day. As far as I know the legislation to be introduced this year will not itself create the tradeable permits regime. In that situation I don’t see any constitutional impediments to Abbott abolishing Labor’s scheme following a 2013 election win.

Nevertheless, the question of whether carbon permits would be property for constitutional purposes is quite an interesting one in a purely abstract sense. I copy a relevant extract from my constitutional law study guide over the fold, followed by my tentative view about the constitutional status of carbon permits.

(Continued)

Disappointed Troppo readers everywhere have gradually come to a realisation – upon which I came clean on in a recent thread.  Troppo is really an ‘eyeballs’ play as we say in the trade and things haven’t been this good for eyeballs since Tim Blair sent some brownshirts our way a long while ago.  Anyway, it turns out that economic development has a surprisingly robust relationship with penis size. As this paper shows. Discuss with relation to any rocks you would like to get off. Baseless accusations are encouraged – though participants are reminded about our point of difference here at Club Pony – they’re not compusory.

A major component of the government’s clean energy plan is a package of assistance measures to compensate households for higher prices. The government will provide assistance through increases in pensions, allowances and family payments, as well as through income tax cuts. From a political and social perspective, the adequacy and credibility of this compensation will be of crucial importance.

(Continued)

I reckon this is the most succinct, accurate and balanced summary I’ve read of the current state of the carbon pricing debate:

Pricing carbon in Australia is about pricing carbon, not saving the planet. As an insurance policy, we need to have a soft mechanism in place that can be ramped up in the future if it needs to be, if the rest of the world joins Europe in getting serious about it.

It won’t do much and it won’t hurt much either. Capitalism as we know it is not about to come to an end, despite the rantings of the Alan Jones/Chris Monckton side show. The coalition’s crazy promise to spend billions burying charcoal, that too will pass.

And the Greens will have a new bureaucracy to play with as they try to forget their big mistake. A national propeller hat roll out can’t be far away.

Abbott’s Direct Action policies, not to mention the Greens’ equally silly plans that Gillard has been forced to embrace despite being debunked by the Productivity Commission, are peas in a pod.  At least judging by the leaks to date,  Gillard’s  carbon pricing scheme is modest, sound and sensible policy.  It’s a miracle of political negotiation and constructive compromise that she managed to get the Greens to accept it.  Julia’s skills at public communication aren’t as great as I’d hoped but she must be an awesome behind-the-scenes deal-maker, possibly the best Australia has seen.   Moreover, given the disparate interests and personalities among the Greens and cross-bench Independents, the only way she would have achieved such an outcome is to have impressed all of them as a leader of great strength, integrity and fundamental decency.  You don’t  hold together people like Windsor, Oakeshott, Wilkie or the Greens by being mean and tricky. But that assessment doesn’t fit the current MSM hive mind narrative so it’s probably not what you’ll hear and read.

PS And, for schadenfreude afficionadoes, that treacherous prick Rudd will know in his guts that a bloke with his personality and skillset could never have pulled it off in a million years. And so will the rest of the Labor Caucus who’ve had to deal with his prima donna antics on a daily basis.

Update – The actual program is if anything a bit more ambitious and substantive than I’d expected.  A modestly progressive redistributive taxation alement is a positive feature.  And the independent Climate Change Authority is a definite plus, a transparency/accountability check and balance along similar lines to Nicholas Gruen’s long-advocated fiscal probity authority and the enhanced Infrastructure Australia that I’ve been writing about for a while.  In other areas, Gillard was right to steal the Coalition’s proposal to call for tenders for closing down or scaling back the dirtiest coal-fired power stations.  It was the only sensible part of Abbott’s Direct Action policies.  OTOH the renewable energy and soil carbon funds are no worse than Abbott’s policies and the unavoidable cost of getting the Greens, Windsor and Oakeshott onside.  All in all, better than I expected.  Whether Julia can sell it successfully in the face of Abbott’s willingness to mislead and deceive in every possible way is another question.  But having a solid product to sell is a damn good start.

ALAN JONES: Look, it’s a harsh thing to say on these matters of carbon tax and global warming and carbon dioxide that your national government is telling you lies.

But The Australian newspaper leads today with a story that no major coal-producing country currently imposes a direct charge on greenhouse gas emissions from coal mines. Yet there was Wayne Swan announcing that a Productivity Commission report into international climate regimes would show that seven of Australia’s top 10 trading partners had adopted major policies to reduce pollution.

Well, the Australian Coal Association have had a gutful. They’re going to raise money to attack all of this argument by the government. And they are saying that not one of Australia’s top four competitors in the 13 key commodities – we’re talking about iron ore, gold, nickel, aluminium, coal – not one of them has a carbon pricing scheme except Poland which exempts emissions from coal mining processes.

But, you see, these people simply tell lies in order to try to win their case. They’re desperate.
Only the other night on television Wayne Swan was asked, what was the government’s greatest investment in productivity. He was rabbiting on about productivity. His answer: the National Broadband Network.
[Laughter]

It’ll be obsolete – yeah, people are just laughing here. It is laughable isn’t it? It’s laughable. It’ll be obsolete before it’s built. It’s a bureaucratic nightmare. It’s costing taxpayers a fortune. It’s become a gravy train to be exploited by greedy unions. It’ll hardly improve business efficiency beyond what could have been done for a fraction of the cost. And this is his greatest productivity reform. (Continued)

When I floated the idea of an infographic wiki the other day I said this.

The problem of course is that infographics are created by graphic designers, who are trained to do what they do. Someone in the policy crowd might want to offer their knowledge on an issue in an infographic but they wouldn’t be able to create one easily. Just a few weeks ago I was trying to give a plain English explanation on why compensation was possible with a carbon price to submit to The Drum. Miraculously as I was struggling with the final draft Jess Irvine did a great job on the same topic, but the ability to do an infographic would have been a blessing.

Which brings me to the placard at right by Martin Jones at the SayYes rally on Sunday. I think is clever, very insightful and full of applied knowledge. I also suspect it’s completely and utterly impenetrable to anyone who doesn’t know the subject matter.

But I have no idea how I’d improve it so it would inform rather than bewilder.

This is important since confusion about compensation is rife, despite the importance of the issue. Take this example in the Australian. I’ll give PvO the benefit of the doubt and assuming he’s merely ignorant rather than actively disingenuous (though this distinction is distressingly difficult to make in the News Ltd press). A sincere commentator would benefit greatly by infographics that provide access to specialist knowledge, and subsequently their non specialist readers who aren’t prone to access the wiki themselves.

Does anyone have any ideas how something that is easy to explain given time – such as the distinction between income and substitution effects – can be expressed concisely and graphically to the majority whom have no sat through Microeconomics lectures? Because the alternative seems to be schoolboy errors echoed and magnified.

(Continued)

Amongst developed countries, we’re nothing special, ranking 51st. This is from the Yale Environmental Performance Index. Though plenty of caveats need to be kept in mind, and the report itself is full of the implicit assumption that everything is always and everywhere better when it’s quantitatively measured (something that isn’t true), it seems to be about as thorough as these things can reasonably be.

Here’s their map of the world. If you’re keen on the environment head to Scandinavia (with France being an honorary Scandinavian for these purposes)  and better still North West Scandinavia (Iceland), which also seems to be making a better fist of recovering from it’s GFC meltdown than other countries (hint: if things get too bad, default). Antarctica and Greenland are also in pretty good shape, though I hear they can get quite cold.