Emissions Task Group squibbed its challenge

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Emissions Task Group squibbed its challengeLast week the Prime Minister’s Task Group [sic] on Emissions Trading released its Report. Given that even Malcom Turnbull has described climate change as "the great economic challenge of our times", the Report’s 200-plus pages are decidedly thin on substance. In particular, for a document that recommends policy actions now, it squibbed the key issues.

First the science. The Report repeated the mantra that scientific consensus supports climate change, although qualifying this with a comment about uncertainty in precise scale and consequences. There is no doubt that most climate models forecast significant warming and adverse environmental and economic impacts. The key question is: are the models of any value? This is not trivial because climate — like economies, markets and organisations — is a chaotic system and quite unpredictable.

The book Ice, published as recently as 1981 by the eminent astronomer Sir Fred Hoyle warned of an imminent ice age. It is a sobering reminder that we probably do not even know the direction of future climate change. That is not to say there are no reasons for concern over global warming. The latest issue of National Geographic magazine, for instance, contains a sobering article about melting of glaciers and other ice packs.

Just as the 'facts' of climate change are quite uncertain, so are the proper actions. The Report should have had a considered position on how we can decide what to do about such a critical issue when it is surrounded by so much uncertainty. A second key issue that is glossed over in the Report is the philosophical approach to limiting carbon emissions.

It has been consistently shown that the most effective environmental policies are controls and taxes. The car, perhaps the most environmentally damaging technology of all time has had its externalities slashed using controls and taxes. The same is true for smokestack emissions, oil spills, pollution and a dozen other environmental problems.

Emissions Task Group squibbed its challengeThe Report, however, came down firmly in favour of market mechanisms, particularly trading in carbon emissions. This is surprising as one of the few conclusions that most economists share is that markets have failed to protect natural resources. Climate change, depleted fisheries, salinity and other environmental problems are all said to be due to markets’ failure to incorporate the costs of their externalities, or damaging by-products. Now, though, economists are advocating trading in emissions of carbon: markets have suddenly become the solution to climate change.

A third issue relates to the effectiveness of the proposed solution. Emissions trading has been tried already in Europe where it failed miserably, largely due to bureaucratic incompetence. This is not surprising as establishing an effective trading scheme requires a whole new supporting infrastructure. The security to be traded needs to be designed; their volume needs to be fixed, and scams such as carbon havens need to be policed. Then a market must be set up, administered and so on.

Emissions trading was popularised by the Kyoto Agreement, even though it merited only a few fairly limp lines. Subsequent discussions propose that the United Nations would set up a global market for emissions trading (of which Australia would be a part) that will be run by committees of diplomats, duly including representatives of small states and the like. These are the same officials who presided over the oil-for-food scandal in Iraq, ongoing massive wastage at the United Nations, and glacial progress in facilitating world trade. Who in their right mind believes that the UN could run a global emissions trading system?

If an emissions trading regime is likely to prove wasteful, why would anyone support it? The answer comes from looking at submissions to the Task Group. The strongest advocates of emissions trading include financial markets groups who profit from the new market and coal interests who have spent decades lobbying intensively in favour of emissions- as-usual.

Emissions Task Group squibbed its challengeA fourth issue is why act now? The Report and many submissions point to deficiencies in other countries’ trading schemes and detrimental impacts from unilateral actions. The Report also notes Australia is one of the few countries that will meet its greenhouse gas reduction targets. However, with little justification the Report says there are net benefits in early adoption of an appropriate emissions constraint and recommends action now. Anyone involved in making tough decisions in a rapidly changing environment knows the benefits of being a fast finishing second. Industry pioneers — even those with good products — who got too far ahead of their constituencies know the disadvantages of moving too far, too fast.

If Australia is serious about reducing carbon emissions, there is a low cost proven technique that can be easily implemented: a carbon tax. The impracticality and huge potential waste from an emissions trading scheme invite scepticism about its effectiveness, and demand a good deal more detail and justification before it can even be considered as worthy of consideration. More fundamentally the uncertainty surrounding this complex challenging issue requires a lot more than glib political, charades to justify action. Sadly it seems that symbols are becoming the preferred response to climate change, and there are no limits on funds available to waste on them.



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The following remarks firstly add context to Dr Coleman’s reference to Fred Hoyle’s 1981 book, Ice, then corrct Dr Coleman’s scepticism regarding the direction and magnitude of clkimate change. Finally, I agree with Dr Coleman’s preference for carbon taxes over emissions trading, and propose an economically efficient carbon taxation regime.
Dr Coleman begins by expressing doubt about the magnitude and direction of climate change, a reasonable a priori position from the perspective of risk analysis; that is, in the absence of any knowledge, what would be a prudent course of action?
Dr Coleman refers to a 1981 book by Fred Hoyle, a scientist who was on occasion spectacularly wrong and just as frequently spectacularly right. Hoyle is one of my heroes. He was not content to analyse the corpus of observations; he had the creativity and bravery to go much further, to synthesise hypotheses based upon them, and broadcast these hypotheses widely. Scientific progress would be made in Hoyle’s wake by testing his hypotheses by further observation, and either confirming or refuting them; progress is made by both confirmation and refutation.
However, Hoyle was writing in 1981, at the start of the Reagan era, at the start of the end of the Cold War, when global population was perhaps 5000 million, when global GDP was perhaps half what it now is, when global rates of deforestation were less than they now are, when rates of fossil fuel combustion were perhaps half of what they now are, when the future of electricity generation was still imagined to be from non-fossil fuel nuclear power, when atmospheric carbon dioxide concentration was perhaps 350 ppm rather than 383 ppm (pre-industrial carbon dioxide concentration, 280 ppm, is the standard against which all elevated levels could be considered).
The economic progress, and hence fossil fuel use, for half of humanity was still being constrained by the yolk of a discredited economic system, Stalinism. (This, of course, says nothing of the inhumanity of that discredited system).
Hoyle was writing about a decade before the effects of anthropic enhancement of the greenhouse effect was unambiguously positive. To judge from Dr Coleman’s remarks, Hoyle was writing at least a quarter century before intelligent laymen such as Dr Coleman came to understand the very simple physics that underlie the global warming that is presently underway.
If Dr Coleman’s understanding of anthropic enhancement of the greenhouse effect is based upon what Fred Hoyle wrote in 1981, then he substantially misunderstands the background to the present debate. The following paragraphs describe that very simple physics.
The earth is irradiated by solar radiation. Because the surface of the sun is at a temperature of about 4000 Kelvin (K), the spectral distribution of this radiation is approximated by the Boltzmann distribution for a black body radiator at 4000 K; the peak of this spectrum is at about the energy of yellow light. However, the atmosphere filters out the vast bulk of higher energy ultra-violet radiation, and virtually all X-ray and gamma radiation, by absorbing it, scattering it, and re-radiating it at lower, less lethal energies. We are thus alive to observe the blueness of our sky that result from this.
Now, in order to remain at thermal equilibrium, that is, to not change temperature, the earth must re-radiate as much energy as it receives. It does this, by radiating energy with Boltzmann spectra typical of its temperature. Energy radiated into the atmosphere and hence to space from Antarctica in June may have Boltzmann spectra for temperature of perhap 200-250 K, energy radiated from India in June may have a Boltzmann spectrum for temperature of 320 K.
If the earth, like the moon, had no atmosphere, its spectrum would be comparable to that of Antartica in June all the time. The reason that it is warmer than the moon is because of the insulating blanket that is the atmosphere. As well as absorbing high energy radiation from the sun, the atmosphere also lower energy radiation that the earth emits. All radiation absorbed by the atmosphere, both high and low energy, is re-radiated by the atmosphere at its own characteristic spectra equiprobably outwards into space and inwards to the surface.
Now, as atmospheric carbon dioxide levels increase, the amount of low energy radiation emitted from the earth that is absorbed by the atmosphere increases. Half of this is sent straight back to the earth’s surface, and temperatures rise as a consequence.
Thus, increasing atmospheric carbon dioxide has the same effect as putting an extra blanket on the bed; effectively, it retains more heat.
In the absence of the above, ‘first principle’ considerations, an a priori position is that climate may change by an as yet unknown amount in an as yet unknown direction. Inclusion of these simple first principle consideration requires that the position is modified to the conclusion that, in the absence of convincing evidence to the contrary, it is certain that temperature at the earth’s surface will rise with increasing atmospheric carbon dioxide levels.
In my view, Dr Coleman is right to be sceptical that emissions trading schemes are suitable regulatiory responses to the problem of net carbon dioxide emissions. Like him, I prefer taxes. They are an economically efficient mechanism for driving reduction in carbon emissions to a sustainable level; the only sustainable level of emissions is 0% net emission.
The tax I’d suggest is that rates of all existing taxes be reduced by, say, 1 part in 20. The 5% shortfall in tax revenues would be made up by taxing the carbon content of all combustible fuels at the appropriate rate that produces revenue neutrality. Tariffs would be imposed on all imports based upon the carbon emitted by producing them in their source countries and transporting them to Australia; the tariff rate would, obviously, be the same $ per tonne emitted carbon dioxide as the domestic carbon tax.
The following year, I’d repeat the process, decreasing the rates of direct taxes by 1 part in 20, and making back up to revenue neutrality by increasing tax on fuel carbon content.
The following year, I’d repeat the process, decreasing ...
These taxation changes continue as fossil fuel use is priced out of the system, and a range of renewable energy technlogies emerge. Direct taxes can then be phased back in.

David Arthur | 29 June 2007  


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