The pragmatic climate policy for Australia?

What should Australia do about a slowly warming world? Join a small group of European countries who have more permits to sell than their own industry can manage to use? Join hands with a coalition of the desperate in enacting one of the front-runner geo-engineering solutions, such as emitting tiny reflective particles high in the atmosphere in the hope of reflecting enough sunlight? Or just do nothing for the time being, perhaps researching this or that option and simply slowly adapting to the changes as they happen?

A world-wide Emission Trading Scheme that truly measures all the relevant forms of emissions and enforces a price high enough to truly bring back the stock of CO2 in the atmosphere to pre-industrial revolution levels is not on the cards. It would require a political commitment that lasts for decades, if not hundreds of years. It by necessity should involve all major countries, lest one would start to free-ride on the others and attract all the industry that is emission-intensive. It should stand firm globally, election after election in each of the countries. Within countries, the political will would have to be strong enough to overcome the temptation of provinces and councils to free-ride. To get the kind of reduction of carbon usage one would need, all things involving fossil fuels or equivalents in terms of emissions and uses (such as cooking oil!) would have to become prohibitively expensive: easily 100 to even 1000 dollars per litre at present estimates of demand elasticity. Imagine policing that in every home everywhere in the world!

In short, there would have to be a world-wide consensus on a level of emissions, a universal monitoring agency, and an international enforcement mechanism with enormous coercive powers. And don’t underestimate the needed coercive powers: if one is to keep 200 countries in line for thousands of election cycles, one really needs to be able to threaten with nothing less than a take-over. Whoever polices this scheme would thus need the power to invade large countries and to sanction all politicians at any level who might subvert the process for local gain.

If you reflect on this minimum package an ETS needs to have to ‘do the job’, you quickly realise it is a fantasy. An ETS on this scale only makes sense in an imaginary world where measurement and enforcement are easy, and political will indeed can be kept up at a worldwide level for generations. It is the sort of fantasy that underlay the communist project and, once again, reality will prove economists like Von Mises right: there are limits to what can be monitored and enforced. Indeed, I find it a little sad that so many economists and scientists allow themselves to be seduced by such command-and-control fantasies. I am yet to meet a senior politician who is naive enough to believe he could organise such a thing. Of course politicians play along -‘we, the population’ demand that they play along – but meanwhile they are simply building more coal-fired power stations, signing more coal export permits, and putting up import barriers against cheap Chinese solar panels.

What about geo-engineering, then? We do not yet know which forms of geo-engineering are the safest and most cost-effective. There is also no coalition of the desperate to join. Worse, one should expect other countries to heavily sanction us if we tried to geo-engineer on our own, and they would laugh us out of the room if we tried to set up such a coalition. We are simply too small to credibly start in that direction ourselves whilst the bigger players are not really worried.

Why are the bigger players not worried enough about this, you may ask, despite UN climate marketers using natural disaster that come along to preach us about the upcoming doom and gloom and how we are now paying the price for our wicked ways? Well, the world is not worried because the world as a whole is doing great. The world economy is projected to grow another 3% this year, heavily concentrated in the poorer regions of this world. This growth is accompanied by less poverty, longer life, better public services, and, yes, greater usage of fossil fuels. Humanity is slowly rising out of centuries of poverty and warfare, and part of that rise involves burning off our fossil fuel heritage as fast as we can dig it up. One might say we are un-sequestering our coal fields and shale oil/gas at an unprecedented pace!

Compared to the immediate benefits of economic growth, long-run environmental worries are always going to come second, politically speaking. Indeed, Australia’s last election was once again fought with both parties first and foremost promising more economic growth. This focus on growth-above-all shows you what politicians think we actually value most!

So if an ETS is a fantasy and there is as yet no coalition of the desperate in sight on geo-engineering, what should we do?

We should simply adapt to the changes as they emerge and meanwhile resist the temptation to join in the expensive symbolism of an ETS. We should hope that the huge incentives already in place for coming up with cheap non-carbon energy will deliver something useful (solar perhaps?). We should let the individual government departments worry about how they should adapt to a changing climate, hence allowing the town planners to worry about ensuring there is enough shade and high enough dikes, and the health planners to worry about air conditioning in old people’s homes, etc.

Meanwhile, we should join the Royal Society, the EU, the Gates Foundation, and others who are researching forms of geo-engineering so that we know what to try if we become desperate enough. The ‘something must be done about the coming apocalyse’ brigade will keep making noises but until they wake up to the fact that an ETS is just expensive symbolism leading nowhere, wise policy makers should ignore them as much as possible.

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59 Responses to The pragmatic climate policy for Australia?

  1. Pappinbarra Fox says:

    How do you pronounce your last name Paul?

  2. Phil says:

    You could possibly do some enforcement by taxing import from and exports to countries who do not reducing CO2 emissions would still end up paying a price for their emissions. They would have a choice to fix their own problem or pay the rest of the world to do it for them. I would suggest that there would be ways of monitoring a countries emissions by remote means.

  3. Is there an incantation I can recite to summons John Quiggin to smite this article?

    (I’ve never followed Paul’s writings, but I see from his website that his work in economics has been a million miles from this subject. My nose senses that there is much in this article that is ill informed, but we do need someone like JQ to take it apart.)

    • The Yeo says:

      @steve from brisbane

      Note that John Quiggin and Paul are colleagues in the UQ School of Economics. Don’t expect fireworks :)

  4. Gummo Trotsky says:

    …all things involving fossil fuels (including cooking oil!) would have to become prohibitively expensive…

    I’ve known for a while that my knowledge of biochemistry is out of date but I had no idea I was so woefully behind the times. So triglycerides are fossil fuels – who’d a thunk it?

    • :-)
      Gummo the production of palm oil in Indonesia (for ‘green’ Bio diesel) involves clearing and draining very large tracts of wet peat swamp rainforests, these peat swamps are now oxidising and releasing a lot of fossil carbon.

      • Alan says:

        Palm oil production has actually been found to be sustainable, but leaving that aside what does palm oil have to do with cooking oil and the more than faintly apocalyptic vision of a shattered nation staggering through an appalling future where the act of cooking is banned? (First they came for our spoons, then they came for our spatulas…

        I agree that JQ should come smite this article, but the article’s own author has not done a complete ineffective job of making himself ridiculous. You’d almost think he has some religious imperative that forces him to post this stuff.

        • oh Alan, what a loss!

          What outcomes do you need to see to agree? 30 years of emission reduction plans during an almost continuous emission increase? The next 10 elections in Australia or around the world fought on the basis of economic growth? Just tell me, what future scenario needs to unfold for you to start agreeing?

        • The emissions from the oxidizing of the peat UNDERNEATH the forests that were cleared to grow the palm oil , are very large and essentially fossil in nature.

      • Gummo Trotsky says:


        well thanks to a bit of googling, I now know that as well as soap manufacture, palm oil is also used in food manufacture. And apparently, as a substitute for fossil-fuel derived diesel oil.
        That still doesn’t make palm-oil a fossil fuel, just as ethanol derived from cane sugar (e.g. Bundy Rum), sugar beets (vodka), potatoes (vodka again) or various grains (saki, blended and single malt scotch, Bushmills, Jim Beam etc.) ain’t a fossil fuel. The howler remains a howler.

        • Alan says:

          Hey, at least any company that wants to drill for cooking oil drilling knows where to get economic advice, right?

        • Patrick says:

          Palm oil can be sustainable, but is very very often not.

        • Alan says:

          Sustainability is ntos tacitly relevant to ether or not cooking oil is a fossil rule. Nor is it tremendously relevant as an absolute to an argument that nothing should be done about climate change because it’s all frightfully difficult.

          If you can show a page that indicates that growing palm oil is less sustainable than both (1) drilling for cooking oil and (2) ignoring climate change, then both you, and the original poster, may have a case.

        • Patrick says:

          I disagree. You claim that the environmental devastation and deforestation associated with the vast majority of palm oil production is beside the point of saving the world from climate change (obviously leaving aside the logical implication of the deforestation).

          I think climate change policy needs to be subject to a cost benefit analysis, as should any policy. Of course, costs are not always purely monetary. I’m a fan of free speech or freedom of religion or other basic civil rights without extrapolating to any economic benefit, for example.

          But cost benefit analysis is a real thorn in the side of the climate change hydra. As I understand it, we have very few policies available (i.e. vaguely likely to be enacted this century) that have any material measurable benefit in terms of impact on medium-term climate change models.

          Yet most of these have quite stark and measurable costs. So absent a leap of faith, they are non-starters. And if we are going to make leaps of faith, we should be rational about them too, and history suggests that the most rational leap of faith would be to make a leap of faith in the next generation’s technological power and wealth.

          Which I think is broadly Paul’s point too.

        • Alan says:


          Claiming there have been no cost benefit analyses is simply untrue. If you google ‘cost benefit analysis’ and ‘climate change’ you will find reading to keep you going for the next 6 months at least. I suspect that all the cost-benefit analysis in the world will not stop people claiming there has been no cost-benefit analysis, so let’s just look at a very concrete example:

          Most of us have learned this lesson the hard way at some point, summed up in the tag line of an old commercial about the wisdom of getting a regular, inexpensive oil change for your car instead of delaying and creating a bigger, more expensive engine problem: “You can pay me now, or you can pay me later.”

          New York proves this in buckets. They saved US$19.5 billion in climate change outlays. Pity it cost them US$60 billion in storm repairs after Sandy. That is only federal civil outlays. It does not include federal military, state, municipal or private repairs.

          Once upon a time conservatives believed in putting a little aside to guard against future disaster. Now they believe in ‘Don’t worry, be happy’.

        • Patrick says:

          So there’s an alternate reality in which NY could have spent $19.5bn on shifting the climate change curve by 0.5ºC 50 years hence, and magically prevented Sandy??

          Again, I think that’s Paul’s point even better illustrated.

        • Alan says:


          Neither I nor the linked article said anything about reducing climate change by storm protection measures. I am forced to ask in what possible alternate reality is it intellectually honest to say an article speaks about climate change when it speaks about storm protection.

          The more general point is the new and strange pretension of the right that any prophylactic measure is wrong.

        • Patrick says:

          Alan, I’m not trying to be a prick, but what else do you think any reasonable reader could take your comment about NY and Sandy to mean?

          You linked to article about Hurricane Sandy titled “pay now or pay later” and then directly compared the climate change emissions reductions costs savings to the cost of dealing with the hurricane. Judging by your reaction, you meant something like:

          The additional climate change that might be expected to arise due to the reduction in climate change reduction expenditure by NYC will make storms like Sandy so much more frequent in the future that the net present value of the additional clean-up costs that NYC may be expected to incur as a result of the increased amount and power of storms above the baseline is greater than the net present value of NYC’s planned cuts in emissions reduction expenditure.

          But then one starts to wonder if that is really right, and the cuts go ahead…!

        • Alan says:


          You succeeded more than admirably. I wish you well in your future endeavours.

  5. Michael says:

    Very Panglossian. The best of all possible worlds eh? I think it’s time to admit that economics (mainstream economists anyway) have infected the world with a moronic relativism that arbitrarily celebrates miscalculated economic growth and ignores declines in ecological services because it’s not your field to notice or understand. If technology doesn’t find ways of adapting or mitigating the effects of climate change then I think we will see expensive conflicts ahead that will cost much more than early mitigation would have.

    • Economists attempt to describe and explain the narrative of human behavior in this area, would be surprised if any (apart from the really vain) think that they really create/cause the behavior they see.

      • Michael says:

        Of course, silly me. Mainstream economics is a purely objective science that is free of ideology. What’s ideology anyway, an expression of revealed preference? Certainly if the twentieth century has taught us anything it is that ideas don’t change peoples behaviours, right?

        • It sure wasn’t economic rationalism that started WWI, or was it liberalism that caused quite a few Germans to march toward Stalingrad for winter.

          And if you really think that economics causes human behavior, and/or fear greed and ignorance, you are giving ‘it’ far too much credit.

  6. There is a really good, lengthy review by Paul Krugman on a new book out by William Nordhaus.

    It is well worth reading…

  7. phil,

    the post links to long treatises on the monitoring and measurement required. The ability of the Gatt or WTO to influence incentives should not be over-stated. Countries ignore them constantly over minor issues. Australian banana imports, for instance. If they cant even get us to abide by a fair-trade rule that is in our consumer’s interest, well…..

    why dont you follow the links in the post to see how long I have been arguing this? Indeed, I have in the past, here on Troppo, challenged all and sundry to take up bets on the outcomes of these things, with zero takers (JQ wasnt game either to take up the bet that countries were going to meet their Kytoto targets, which tells you what he truly believed….in the event, man small countries do look like meeting their targets because of the prolonged European recession, though the world as a whole has been happily increasing its emissions). I guess I would be willing to resurrect a new bet on, say, whether Australia is actually going to meet its 2020 emission commitment, which there is no chance of meeting if we measure those emissions properly (and our main strategy for meeting the emission has so far been to not measure properly). So….find me a senior Australian economist man enough to put some money where his\her mouth is in terms of Australian climate emissions and I am game!

    “If technology doesn’t find ways of adapting or mitigating the effects of climate change then I think we will see expensive conflicts ahead that will cost much more than early mitigation would have.” Quite possibly true. Indeed, sounds very likely. Technology indeed must be our hope on this.

  8. Jim Rose says:

    I found the best writer on global warming to be Thomas Schelling. he has been involved with the global warming debate since chairing a commission on the subject for President Carter in 1980.

    He is an economist who specialises in strategy so he focuses on climate change as a bargaining problem. Schelling drew in his experiences with the negotiation of the Marshall Plan and NATO.

    International agreements rarely work if they talk in terms of results. They work better if signatories promise to supply specific inputs – to perform specific actions now.

    Individual NATO members did not, for example, promise to slow the Soviet invasion by 90 minutes if it happened after 1962.

    NATO members promised to raise and train troops, procure equipment and supplies, and deploy these assets geographically. All of these actions can be observed, estimated and compared quickly. The NATO treaty was a few pages long.

    The Kyoto Protocol commitments were made not about actions but to results that were to be measured after more than a decade.

  9. conrad says:

    “Meanwhile, we should join the Royal Society, the EU, the Gates Foundation, and others who are researching forms of geo-engineering so that we know what to try if we become desperate enough.”

    If we were desperate, we could just start building rather expensive large nuclear plants (as could many countries which have stable geological conditions and lots of space, which is most countries that matter), and supplement those with alternative energy sources which constantly get cheaper. This seems preferable to generally untested geo-engineering solutions to me.

    If we’re luckier, we’ll get really cheap alternative energy sooner rather than later, so we are probably better off subsidizing their development rather than using direct implementation until they are cheap enough (or perhaps this is unlucky, because presumably they will cut into coal exports as you could just run gas in the low cycles). I’m a bit more optimistic than you about this as there’s vast money to be made (and people are piling back into solar shares).

    If we’re even luckier, we’ll get nuclear fusion, and presumably then we won’t need to worry too much. Who knows how far in the future this is, but there’s also mega-piles of money to made, so let’s hope human ingenuity can win out on that one.

  10. ChrisB says:

    “So if an ETS is a fantasy and there is as yet no coalition of the desperate in sight on geo-engineering, what should we do?”
    All the evidence would seem to say “Die in the billions.” That’s why it’s known as a ‘problem’. An increase of six degrees over the next few hundred years is barely survivable, and cheerily plugging on in the hope that someone will think of something is not really a ‘plan’.

  11. murph the surf. says:

    What is the reverse to cheerily plugging along though?
    Angrily or despondently ? With a gun in one hand and an attitude that anarchy may work?

  12. Persse says:

    Not slow. Fast.

  13. John Quiggin says:

    The factual premise of this article is false. The US, EU and China are all doing more than Australia’s current unconditional 5 per cent commitment. And the idea that, in these circumstances, small countries can act as free riders is (leaving aside questions of morality) highly dubious.

    • Jim Rose says:

      Has the US congress passed that climate change bill that Obama dropped like a hot potato in 2010? is the EU carbon price out of the toilet?

      The 2008 Republican Party presidential nominee supported cap-and-trade. In 2007, McCain reintroduced his 2003 bill with bipartisan co-sponsorship. Obama missed the June 2008 vote on this Climate Security Bill of 2008.

      In January 2010, the Pew Research Center asked Americans to rank the importance of twenty-one issues. Climate change came in last.

      After winning the fight over health care, another issue for which polling showed weak support, Obama moved on to the safer issue of financial regulatory reform. There were 5 republican senators who would have voted for cap and trade in April 2010: Lindsey Graham, Susan Collins, Olympia Snowe, Scott Brown, and George LeMieux.

      Many other republicans including McCain soon soften or reversed positions as median voter support waned as the great recession deepened.

      Blame Obama. He lacked the political skills to build coalitions even in his own party to deliver on the great moral issue of our time.

    • Tel says:

      If China is doing more than us to help fix Global Warming, then I’ll have the power stations they are building. Come to think of it, I’ll have the electricity prices they are paying (about 8c per kWh or one third what they average Australian pays).

      • conrad says:

        Maybe you haven’t been to China, but you’d probably have to take the soot/particulates/VOCs/Ozone etc. as well. This is a great advantage of nuclear over coal most people don’t think about in Australia. It is also why solving global warming is in China’s own interest, even excluding the warming part (and they know it as it becomes more of a political issue as people get sick of inhaling what passes for air there).

        • Tel says:

          I would even pay a few cents extra per kWh for the very well known and established technology of particulate filters. I mean, of all the irrelevant straw men, right now I’m paying triple the price… admittedly not all of that due to Green initiatives, but a lot of it is. At least the Chinese understand that electricity drives industry. No electricity, no industry.

        • murph the surf. says:

          Approaching a more serious attitude to environmental degradation including CO2 levels comes after the economic miracle doesn’t it ?
          First get wealthier then spend your funds cleaning up the mess- I’ve heard this over and over in China.Look at Hong Kong they say – except now the air there is unbreathable ,the waters lifeless but the parks have nice walkways everywhere.
          I also have to take with a shovel of salt any assertion that China is doing something concrete- the extent of control from the central leaders to the regions is so tenuous that the facts will always trail the propaganda.
          It is part of Paul’s argument though – there are hundreds of millions living better lives directly as a result of the power generation developed since 1991.

  14. hc says:

    Most of the claims by Paul are false or unsubstantiated.

    How do you know that the world will continue to warm gradually? Positive threshold effects might trigger methane releases in the Tundra, catastrophic fires in the Amazon and so on. There are reasonable stories that suggestive these outcomes are plausible with enough heating and drying.

    Yes climate policies are for the long haul. They need to be anticipatory not reactive because of the long half-life of GGEs such as CO2. We can’t just wait to see what happens since that MAY be too late. Yes MAY – no assurance but again plausible that things could change abruptly towards rapid climate change.

    All countries don’t need to pursue an ETS – enough countries need to cut their emissions vin one way or another. Regardless of what other countries do the most efficient approach is to cut emissions using a market.

    I agree geo-engineering should be retained as a last ditch policy to use in the event of impending catastrophe. But it is dangerous.

    You say larger countries (US, China) are not conceded about climate change but they are. China has long experienced an erratic climate and it is well aware of the consequences. The US is limiting its emissions though not using a national ETS.

    It is wrong to say the benefits of growth always exceed environmental worries. Indeed as someone who works in the happiness economics area you should know that current rates of high emissions accomplish nothing for wealthy countries. We don’t increase our happiness and only impose costs on future generations. No tradeoff between now and the future. We are not better off now and future generations care worse off.

    I agree with John Quiggin that your policy position is immoral. You are essentially saying we should play the defect option in Prisoners’ Dilemma policy games. I teach my environmental economics students that this issue is a problem for deriving international agreements. You are not portraying it as a problem but as a reason to opt out. Think of Kant and his Categorical Imperative – do things that could work (countries could all mitigate) and do things where you would want to live in a world where everyone acts in accord with the principle (yes we would want to live in a world safe from climate change). Morality suggests we should not play the selfish defect option.

    • Jim Rose says:

      whatever happened to honmest disagreement?

      Global warming is part of a political theatre made up of the symbols we boo and cheer. People gain pleasure, excitement and self-definition for cheering for particular parties and worthy causes in the same way as they cheer and boo for sports teams.

      Geoffrey Brennan in ‘Climate Change: A Rational Choice Politics View’, Australian Journal of Agricultural and Resource Economics, July 2009 argues that we see many countries acting unilaterally to introduce carbon emission policies because expressive voters cheer for such policies.

      Brennan argues that the nature of expressive concerns is such that significant reductions in real GDP are probably not politically sustainable in the long term. This suggests that much of the CO reduction action will be limited to modest reductions of a largely token character.

      There are many expressive voting concerns that politicians must balance to stay in office and the environment is but one of these. Once climate change policies start to actually become costly, expressive voting support for these policies will fall away.

      what is the optimal global warming policy in the world as it is?

  15. hc says:

    Emotivism is a branch of ethics that, I assume, either Geoffrey is endorsing selectively on this occasion (or perhaps you are misrepresenting him.) Geoffrey is too smart to endorse this ratbag ethical position unconditionally. People are not endorsing actively climate policies to give them a “cheer” Jim, don’t be a dill. There are substantive issues involving the perceived welfare of future generations, biodiversity values etc etc…. Its not only an emotional statement you clot.

    There won’t be substantive reductions in GDP Jim – it will be a yawn as are many of your views on (climate) economics. Give us a break. Make a contribution or shut up.

    • Jim Rose says:

      HC, the abstract of Brennan’s paper is this:

      Reduction in carbon dioxide emissions constitutes a global public good; and hence there will be strong incentives for countries to free ride in the provision of CO2 emission reductions.

      In the absence of more or less binding international agreements, we would expect carbon emissions to be seriously excessive, and climate change problems to be unsolvable.

      Against this obvious general point, we observe many countries acting unilaterally to introduce carbon emission policies. That is itself an explanatory puzzle, and a source of possible hope. Both aspects are matters of ‘how politics works’– i.e. ‘public choice’ problems are central.

      The object of this paper is to explain the phenomenon of unilateral policy action and to evaluate the grounds for ‘hope’.

      One aspect of the explanation lies in the construction of policy instruments that redistribute strategically in favour of relevant interests.

      Another is the ‘expressive’ nature of voting and the expressive value of environmental concerns.

      Both elements – elite interests and popular (expressive) opinion – are quasi-constraints on politically viable policy.

      However, the nature of expressive concerns is such that significant reductions in real GDP are probably not sustainable in the long term – which suggests that much of the CO2 reduction action will be limited to modest reductions of a largely token character. In that sense, the grounds for hope are, although not non-existent, decidedly thin.

      I do not think Brennan was endorsing anything. expressive voting is a good explanation of token unilateral action.

      Rather than blaming vast right-wing conspiracies, using Google searches for “unemployment” and “global warming” in Kahn and Kotchen’s found:
      • Recessions increase concerns about unemployment at the expense of public interest in climate change.
      • the decline in global-warming searches is larger in more Democratic leaning states.
      • An increase in a state’s unemployment rate decreases in the probability that Americans think global warming is happening, and reduces the certainty of those who think it is.

      There are many expressive voting concerns that politicians must balance to stay in office. the environment is but one of these. Once climate change policies start to become costly, expressive voting support for these policies will fall away. what are you going to do if that happens, as it has already?

  16. Paul Frijters says:

    John, Harry,

    I agree with Jim’s replies. You are simply not engaging with the political realities of this world. The world political system is not yours to dictate. Put simply, the rest of humanity is looking forward to travel half as much as both of you already do!

    You might also ponder this: we have just gone through a mining investment boom, and are still witnessing massive investments in shale oil/gas exploration and devopment. What energy future are those billions of dollars betting on, you should ask? And isn’t your own pension fund in fact part of that bet? So to see my point, simply look at your own frequent flier choices and the way university pension money talks.

    • conrad says:

      I think I sit somewhere in between you and Harry/JQ, in that I think its is easy for us to do something, but this is quite unlike China and India, although China at least is certainly wanting to move to a cleaner existence. They’re also happy to use nuclear which is contentious in other countries, and you can look at the difference that makes if you compare the use of energy in, say, France vs. the US.

      The other thing about China is that they are also building fast-trains everywhere, and they seriously cut into plane-trips. No-one in Euroland would take a plane if they could take a train, and no-one in China will either. Metro trains are popping up too (it’s amazing how fast they build stuff!). So a lot of the stuff they are building will be electric and will cause power demand in peak in times you really can use alternative energy for. Given this, there really are possibilities for cutting carbon use without any real harm, and if they do this, I can imagine they’d happily tell other countries off for not doing so too.

      As for oil/shale, I imagine a lot of this is really just replacing what will either run-out or become more expensive due to the constant fighting in the places where it exists, or the huge destruction in getting it in places where it doesn’t (e.g. Canada). I also wonder about other energy sources. If alternative sources really do get cheaper, and I really can’t see why they won’t since their improvement is technologically driven with no obvious end in sight, it’s going to destroy the market for things like coal and more expensive energy sources.

  17. hc says:

    Paul are you are saying that you would agree with me (and maybe John) that in a world without political constraints in terms of lack of commitments to free ride and to longer-term policies you would pursue active policies? If so then an argument that would make us all happy is if we could convince you that the political constraints are less strong than you think. Two points:

    (i) It is a cliche but we do live in one world – fisheries depletion, intercontinental soot, climate change, ozone issues, non-proliferation all show this. We are stressing out the planet in numerous dimensions so there is a comprehensive need for action. There are issues about the role of existing international institutions and the need for new ones but there is a need. Where there’s a will….

    (ii) Climate change issues are not massively costly to address. The reason is that energy is a relatively small part of GDP. Solar cells can cut my household consumption of electricity in half at modest cost. New battery technologies will improve on this. Wind, gas and nuclear are viable technologies now – they are much less carbon intensive. Power stations last for 25 years or so – at $35 per tonne CO2 they can switch from coal to gas. This isn’t a huge shock.Even for emerging countries such as China where there are enormous concerns about climate in the north of the country because of severe persisting droughts.

    We can squander our current high incomes in ways that won’t enhance our happiness much. Or we can spend a small part of these large incomes living sustainably so future people have a decent future and the world’s biodiversity is not devastated.

    • Jim Rose says:

      So we are disagreeing over whether people are different to what Paul thinks they are. This leads to Robert and Zeckhauser‘s taxonomy of disagreement:

      Positive disagreements can be over questions of:
      1. Scope: what elements of the world one is trying to understand
      2. Model: what mechanisms explain the behaviour of the world
      3. Estimate: what estimates of the model’s parameters are thought to obtain in particular contexts

      Values disagreements can be over questions of:
      1. Standing: who counts
      2. Criteria: what counts
      3. Weights: how much different individuals and criteria count

      Any positive analysis will tend to include elements of scope, model, and estimation, though often these elements intertwine; they frequently feature in an implicit or undifferentiated manner.

      Likewise, normative analysis will also include elements of standing, criteria, and weights, whether or not these distinctions are recognized.

      All these differences can arise without moral failings intruding.

  18. rog says:

    Have to agree with everything that Harry and JQ said, and none of that by Paul Frijters.

    The argument that we should do nothing because other countries won’t is without precedent. As a sovereign nation Australia is free to develop its own policies and laws and should not be constrained by other sovereign nations. Human rights is one area in which developed nations have made significant progress without having to seek global agreement. Human rights is an ethical concept and economists are essentially ethicists – it was Adam Smith who said that without justice the whole moral fabric of society would crumble.

  19. John Goss says:

    The comments about free loaders and the difficulty of getting international compliance with actions to control climate change misses an important political reality. In 10 years time China will be the biggest economy in the world and will still be growing at a reasonably rapid rate. It will be a major player in all markets and a dominant player in most. If China in ten years decides that there needs to be global action on climate change, it will likely happen. If China and the USA together decide what they want to happen on climate change, it will happen. Currently they have 34% of the world GDP between them. (2012 IMF PPP numbers). In 2018 it will be 36% (China 18% USA 18.5%). When the big boys decide they want something to happen badly enough, it will happen.

    • Hi John,

      when the US and China get on board, there will certainly be a much greater impetus, for sure. But do not think that they are able to measure and enforce a world-wide reduction in emissions by 90% either. As an analogy to the limits of their control, think of drug use: the US was spectacularly unsuccesful 90 years ago when it tried to prevent its own population from drinking alcohol, and the current ‘war on drugs’ is proving similarly unsuccessful, at least from the point of view of getting usage down to minimal levels. From the point of view of making criminals rich, these attempts at preventing people from consuming things they wanted worked like a charm. Such schemes are a real bonanza for the criminals.

      So the most realistic hope I have to offer is that when China and the US become seriously worried (which they might well become), they will pragmatically push for some kind of geo-engineering and a mayor push on the non-carbon technology front. At which point in time Australia will probably swing right behind them.

  20. John Goss says:

    Hi Paul
    I used to think that we might be forced down the geoengineering route because governments and companies have been so slow in acting vigorously on this issue. But I no longer think that is likely for 2 reasons.
    1. Innovation is coming to the rescue again, and it is happening quicker than I expected with the plummeting price of solar, with cheap power storage options becoming available and a host of other innovations.
    2. The power of the economic machine humans have created is enormous, so only small changes need to be made in order to bring enormous resources to bear on any particular problem we might have. So there was an average annual 3.6% real growth in world GDP in the 5 years to 2012 (IMF October 2013), which is $2970 billion per year. If we take out the 1% population growth, this is an annual average growth of 2.5% or $2,100 billion of extra economic capacity every year.
    28% of the growth in the last 5 years was from China, and 18% of the growth was from the USA.
    There is a huge amount we can do with that extra annual $2100 billion of economic capacity. As John Quiggin tirelessly points out; Yes it is expensive to do what we need to do to reduce greenhouse gas emissions by 90% or so over the next 30 or so years, but because of the power of economic growth over time, we have the economic capacity to do this, and in the end GDP per person will barely suffer, and as your research shows Paul, effective action will have an even smaller effect on Total World Happiness.
    I am surprised there is not yet the political will to fix this problem as soon as possible, but given that the changes required are not enormous, I have no doubt that our political and economic masters will get around to it.

    • Paul Frijters says:

      Hi John,

      Agreed on solar and the general point that our hope lies in technologies that make carbon second best in terms of price for most uses.
      But disagreed about the idea that it matters that adjustment costs now are smaller than adjusting later: that point of view takes for granted that there is some kind of collective decision to be made here, ie a choice that is somehow on the table for ‘humanity’. It is pure fantasy to view decision making that way. As economists teach in first year, it’s about individual incentives and local property right, not some kind of world choice that the rest blindly follows. See the crime and drugs examples above: there is no group that can decide not to have crime.

      • Julie Thomas says:

        Paul, ” there is no group that can decide not to have crime.”

        Are you sure?

        It seems to me that every human group/community/society has ‘decided’ not to have ‘crime’; and we do pretty well when we ensure that every member of the group understands what ‘crime’ is. It is a individuals, within the group, who ‘choose’ to do crime.

        Surely what makes us humans is that as individuals we can and do, choose to co-operate and not do crime. We mostly choose to get along and do things all together for the good of the group. So, we could self-organise and work out how to respond in the most functional and ‘efficient’ way to this problem IF we can be less individualistic and more groupish through this crisis.

        The trick is for the ‘group’ to accept that the threat is real, and there is no way to be sure how dire it is and to make it clear what sort of responses or behaviours – individual and group – are required. And there are many and diverse ways that each individual, as an individual and as part of the many groups we form, could respond so that this crisis becomes just another challenge that will make us a better species or not, depending on how we get through it.

        I think that humans can do self-organising very well, despite our individuality, if we have a common ‘belief’ or aim and choose to take collective action.

        • Paul Frijters says:

          Hi Julie,

          for sure, groups define certain actions as ‘sins’ and police those social norms as best they can. It doesn’t eradicate crime completely though, so in that sense ‘we’ cannot decide not to have any crime. When the benefits of crime are local and the activity is hard to observe (such as drinking and producing alcohol at the time of the prohibition, or emission CO2 now) and the costs are to some grand vision far away, then ‘we’ are hard put to limit crime to small levels. You can see that when it concerns drugs today.

          Once one is talking about trying to change individual human behaviour to the extent asked for (the 90-95 % emission reductions that one would need to stabilise CO2 levels) one is in a very similar territory as trying to stop all crime: you would by design get a huge price differential between legal activities and illegal ones, meaning you need a level of monitoring and punishment potential that is mind-boggling. And when the temptation and rewards are local and the ‘damage’ is in terms of world climate decades later, well, you can guess how hard it would be just within Australia to keep the political will to battle against the free-riding incentives, let alone to keep a system for the whole world going for decades. That world includes countries that have far less organisational potential than us and will often not mind a much warmer climate.

          So if you reflect on it, the ‘mistake’ that adherent to the world emission system make is to grossly over-estimate our organisational potential, and to underestimate how easy and corrupting all the free-riding opportunities will be.


    • conrad says:

      Actually, I don’t even think it’s that expensive. If you wanted a “direct action” solution and replaced the power generating plants near Brisbane, Melbourne and Sydney with nuclear ones, it might cost $80 billion (the power for Melbourne still uses brown coal, so this really would save a lot of carbon). As a comparison, the cost of building bridges over Melbourne’s 172 level crossings was estimated at $17 billion. No doubt there are solutions too. So it isn’t really cost that matters, it’s that people think everything is a good idea until they have to pay, including rich people who wouldn’t even notice much of a difference if the cost was spread evenly, which agrees with a lot of what Paul is saying.

  21. Julie Thomas says:

    Nope Paul you are choosing to look at the issue through your worldview – and of course so am I – but your worldview focuses on the individual and individual behaviour as the important factor. Old age has smacked me and my belief in the sanctity and worth of individuality around. I’ve been living in a village for 10 years now, I also spent around 10 years living in hippie collectives and share houses on the Gold Coast – that was before I got to go to University – and I am impressed with the power that gossip and group disapproval have to moderate the behaviour of people in all of these circumstances – so in all circumstances it is possible surely?

    I believe in the ‘collective’ as a force for good as well as well as a force for real badness of course.

    I think you are too innocent? of the power of gossip and group disapproval as a force for restraining free-riding behaviour. We love to tell on people who disobey the rules and with the internet we now have the means. And also you are too dismissive of the intelligence of the ordinary person and their ability to see the logic of a plan when there is a clear consensus – by the group – that we do have a problem and that our behaviour is the cause of the problem. People can and will do this.

    So to get everyone on the same page people should stfu about their ‘instincts’ that it isn’t happening – is a man’s instinct better than a woman’s intuition? – and play by the rules of western civilization since the enlightenment that says that science is the way we find truth. Even if it is a bit wrong at the moment it will find it’s way if we just hang in there and support the effort.

    • Paul Frijters says:

      Hi Julie,

      coming from the Netherlands, where social disapproval is the main enforcement mechanism for lots of behaviours (in particular drug use and unhealthy behaviour of all sorts), I well know the power of gossip and social disapproval.

      But you are not talking here of village life. You are talking about whether it is possible to ‘come together’ as a whole world. Many adherents of the ‘its possible’ campaign seem to think like you: the world is a small village. In this respect though, it is not: it is 7 billion people, 200+ countries with thousands of political parties, tens of thousands of local rulers, millions of businesses and villages, etc. Do you really believe that they will all coordinate, for decades on end, to go against their own local incentives to free-ride on the world climate of decades to come? Its a comforting idealistic vision, but would you trust the future of your own children to it?

      If you want to see the eroding forces at work in your current location, think of some social norm had by the rest of Australia that the people in your village dont happen to care so much about. Perhaps internet piracy, or gun control, or being nice to kangaroos, or the importance of having a beach life, whatever. Local politicians and gossip will then work against that larger social norm: they will work to rationalise their own position and interests, damned the rest of the world.

      • Julie Thomas says:

        Paul ” Many adherents of the ‘its possible’ campaign seem to think like you: the world is a small village”

        I don’t think the world is a small village; but I do think that humans are capable of re-creating a world of small villages while living in and loving, a global world. It is in our nature to be groupish when necessary.

        “Do you really believe that they will all coordinate, for decades on end, to go against their own local incentives to free-ride on the world climate of decades to come? Its a comforting idealistic vision, but would you trust the future of your own children to it?”

        Yep, Paul I do believe that enough of us will want to do this to make it work at first, and be highly motivated, and then I believe that the benefits of working together and being co-operative will produce other benefits that will have huge benefits for societies and individuals – like health benefits. And so the task will become easier over the decades.

        And what other choice do I have for ensuring that my children will have a future – actually it’s my grandson that I worry about – my kids will be okay, except to encourage people to take responsibility for their actions? What are you doing for your kids?

        Are you suggesting that, even though we are the richest people who have ever lived on this planet (and the fattest and ugliest, greediest and most selfish) we ‘should’ just carry on and hope that somebody will invent a solution that allows us to keep on consuming stuff?

        Will prayer help us find this person? Or perhaps we do need a breeding program to find a high IQ individual who can solve all our problems for us?

        And, I don’t see the problems you describe in the last paragraph happening in local events or ‘politics’; for example, the local landcare association are very efficient at compromising and getting stuff done. There is no ideology in this group of both greenies and farmers and everyone accepts that the land needs care so they work it out and the land gets cared for.

        It is a very complex process, this negotiating for good of the group but, if people have the same ‘aim’ or are on the same page with what the problem is – and this is the part that is really really important – they actually are very good at negotiating a solution.

        The only thing that makes voluntary action impossible is that some of us think that climate change is a trick by the left to force them to be socialist.

        But you go on being an individual, feel free to be a big wet blanket and dismiss optimists as hopeless romantics and irrational idealists :) It would be creepy, after all, if we all agreed about what to do.

        • conrad says:

          I think part of the problem is that it doesn’t even matter if there are big group effects (e.g., all of Europe plus many smaller places). The reason for this is that even if a few of the big players (e.g., China, the US) don’t do anything, then these guys will still presumably be producing enough pollution by themselves to keep warming going (albeit with reduced speed if others co-operate, which might be useful depending on the speed of technological change). So unless you have a really big stick (and it’s never going to be big enough for the US or China), it doesn’t really matter. That’s why I think that technology is really going to be the main thing that could work.

  22. ChrisB says:

    “Do you expect me to join a small group of European countries who have more permits to sell than their own industry can manage to use? Or join hands with a coalition of the desperate in enacting one of the front-runner geo-engineering solutions, such as emitting tiny reflective particles high in the atmosphere in the hope of reflecting enough sunlight?”
    “No, Mr. Bond, I expect you to die.”

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