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Democracy in operation or irresponsible politicking?

Quadrant has outdone itself this time with a forum of views encouraging the Senate over the next week to reject the proposed ETS. It is in the main – not entirely – the same old denialist nonsense – the science is wrong, all due to the sun, the earth is cooling, the earth hasn’t heated over the last decade though CO2 levels have risen, its all too complex, Australia’s contributions to GGEs are small so we should do nothing, the economy will collapse with an ETS,  we shouldn’t lead the world, unemployment will increase etc etc.   The different authors repeat a core of time-worn fallacies. It is interesting that Quadrant launches a political campaign to defeat the bill when it is primarily a conservative cultural magazine.

I have noticed too other pieces of nonsense in the press.  Robert Gottleibsen’s piece in Business Spectator was probably the silliest. Gottleibsen sees the introduction of an ETS in Australia as bankrupting heavily-indebted brown coal power stations and lead to brownouts.  The claim is exaggerated. Electrical power for most customers is a non-internationally traded power source so having power stations compelled to charge carbon levies would mean that increased prices could be passed onto customers whose demands are relatively inelastic. Yes we will pay more for electricity. The objective is to get us to economise on carbon-based secondary energy. Talk of brownouts will appeal only to hysterics. The hysterics are raving now over at Catallaxy

It might be that this asinine piece from Terry McCrann in The Australia beats Gottleibsen for silliness.  Ominously to McCrann  an ETS “will be the beginning of the end of Australia as we know it” and “Anyone who votes for the ETS next week — or indeed any week — is betraying both common sense and their basic duty to the national interest and every Australian”.

The Senate vote is important and those with views opposing the ETS have the right to represent their viewpoints.  The tone of alarmism and the repetition of arguments that have been repeatedly rejected on the basis of sustained arguments without even reference to the opposing views however does make me wonder.  There is a viciousness and social irresponsibility to this concerted campaign that ultimately stems from (i) the rejection of the accepted science on climate change and (ii) from the rejection of the well-understood principle that tradeable emissions permits enable a sought level of cleanup to be achieved at minimum cost.

There are details of the ETS I oppose – I would seek firm 25% CO2E cuts by 2020 unconditionally and I would only hand out transitional free permits to those firms in the tradeable goods sector of the economy for whom energy costs comprise more than 5% of total costs.  I would also favour more comprehensive border tax measures on imports of any country that does not by 2025 mitigate its emissions comparably to Australia.  In 10 years all countries – developing and developed must be cutting their emissions not only restricting their growth. 

In addition, we need to think broadly about policy by encouraging innovative carbon-free supply options, developing a nuclear engineering capacity, providing foreign assistance and technology transfer packages.  We need a comprehensive energy policy package not only an ETS.   But I would, of course, unconditionally support the current proposals in lieu of no ETS at all.

19 comments to Democracy in operation or irresponsible politicking?

  • Sinclair Davidson

    the earth hasn’t heated over the last decade though CO2 levels have written

    written should be risen.

    Actually Harry I’ve been telling people that the Liberals should vote for the ETS without any amendments and let the ALP take full responsibility for the consequences be they good or bad. For the Liberals that is a no-lose proposition.

  • hc

    What you actually say Sinc is:

    ” Previous Australian governments had proposed to make the economy more efficient. This government proposes policies that will make the economy less efficient.”

    As GGEs are an externality this statement is false.

    The Coalition should vote for the ETS rather than reject it outright because the science tells us that climate change will cause us huge costs which can be mitigated at relatively low cost.

  • Sinclair Davidson

    To the extent that GGEs are an externality (something I do not deny) we have no clear analysis of the size of those externalities. You claim they are large; while I claim they are small (others claim their mere existence are grounds enough for intervention). It is only through careful analysis that a policy response can be fashioned. The options are (1) do nothing, (2) let the market handle it, (3) let the government handle it. If (3) should the government use (a) market mechanisms or (b) command and control. If (3a) should it be (i) taxation, (ii) cap and trade, or (iii) some hybrid. Furthermore, if (3) should Australia participate in a global solution or go it alone? The Rudd government has chosen to go it alone. If our legislation is in place before Copenhagen we have not participated in the global solution. Any Australian legislation will have to be amended to comply. So the question is why pass legislation that you know will be redundant within months of it being introduced?

    We are moving from low cost production technology to high cost production technology; that is a movement away from efficient production. To do this in response to a small externality will impose huge costs on the economy. The government wants to do that and I think they should be allowed to do so. The sooner they (unamibiguously) stuff up the economy the sooner they’ll be tossed out.

  • hc

    I don’t claim the costs of climate change are large – I just recite the accepted science. You claim that the Rudd governments ETS is ‘going it alone’. It isn’t since in terms of targets it is similar to the proposed Waxman-Markey Bill proposal and less ambitious than European policies. Having a strong policy in place helps to drive the difficult-to-obtain consensus in Copenhagen.

    The proposed technology is only high cost if you do not factor in the carbon pollution costs. Martin Weitzman estimates that with current policies we have 5% chance of 10oC warming and 1% chance of 20oC warming. This is not a ‘small externality’.

    This isn’t an academic game. It is very serious. The US is starting to think about the defence implications of severe climate change.

  • Sinclair Davidson

    I’m sorry Harry, I have to call ‘bullshit’ on that. If you don’t claim the externality is large then why are you calling for action?

    Yes, the Rudd government is going alone. The ETS legislation as it currently is formulated is not integrated into a world solution. It may well bear some similarity to foreign governments’ domestic policies – but it wouldn’t be the first time Rudd has copies someone else’s ideas. The government strategy is to reverse engineer a global solution to the Australian model – the sheer arrogance of that strategy is somewhat bemusing.

    Interesting link – the US left trying to round up US conservatives with a national security scare. Mind you, the US left are not normally interested in US national security so I’m still underwhelmed.

  • derrida derider

    Yep, and thermal fatigue acceptance tests for new commercial airliners have just been modified to take account of the stratosphere being measurably colder (the consequence of the troposphere trapping extra heat) than when the tests were devised in the 60s.

    But Harry IME its a waste of breath arguing with climate deniers. Their reasonong seems to be “lefties say the earth is warming, therefore it cannot be warming. Anyone who says it is warming must be part of the lefty conspiracy”. I suspect if Al Gore suddenly declared the earth is entering an Ice Age they’d turn around and say the earth is being saved from it by CO2-induced warming. Tribalism is a terrible thing – especially when, as in this case, it exposes all the tribes to a common catastrophe.

    And yet the costs of carbon abatement really are small beer in the scheme of things – certainly small compared to the costs of large-scale warming. As John Quiggin notes, economists who are against abatement measures are showing uncharacteristically little faith in the power of price signals to drive changed behaviour and innovation.

  • Sinclair Davidson

    The economic proponents of the scheme make arguments about incentives and price mechanism as if there is no distintion between artificial markets created by human design and markets that arise from human action.

  • Uncle Milton

    “as if there is no distintion between artificial markets created by human design and markets that arise from human action.”

    What is the difference between human design and human action? All markets are created by human design/action.

    Ah, but that the carbon emissions market will only exist because governments will restrict the supply of carbon emissions. True, but so what? Governments affect, restrict or expand, directly or indirectly, the supply of everything.

  • derrida derider

    Sincs, mate, that all markets arise from human institutions and are in that sense artificial is Hayek 101. The massive markets we have now are only possible because of Leviathan’s intervention in myriad ways. Do you really believe global-scale markets would exist without elaborate rules, enforced contracts, etc? Uncle Milton has it dead right.

  • Uncle Milton

    The Quadrant link is interesting in that it shows that when it comes to climate change denialism its always the same small number of people – Ray Evans, Des Moore, Bob Carter, Jennifer Marohasy and a few others. There are probably more active devil worshippers in Australia than active climate change denialists. (Admittedly the former don’t get the same access to The Australian’s opinion pages and not appear to have as much influence in the Liberal and National Parties.)

  • Sinclair Davidson

    The difference between human action and human design is the difference between the UK/US and the USSR. I agree the state can add value, see Riker and Sened (1991), but human action is more likely than not to give rise to efficient institutions – see Demstez (1967).

  • So are you also opposed to the market in intellectual property, Sinclair?

  • Uncle Milton

    Sinclair, markets that a more complex than a pie stall catering to passing trade, that is, 99.999% of them, are designed by humans all the time. Even virtually unregulated markets like those for financial derivatives have a list of design and trading rules as long as your arm. Yours is distinction with no practical meaning.

    Environmental markets, created by governments as a policy instrument, do exist and function very well. The market for SO2 emissions in the US is a good example. In
    I am sure that Harry could point you to a long literature on this.

  • hc

    I agree with Uncle Milton and Tim Lambert. One way of characterising and understanding the idea of ‘externality’ is to see it as a missing market. The market-oriented approach to externalities is to foster bargaining between the parties in accord with the Coase theorem or, the related idea, to create a new market. There was no natural market that traded rights to pollute the atmosphere with GGEs and so governments have created one. The benefit over regulating a fixed permissable level of emissions and then allocating such by administrative fiat is that you get cost efficiency with tradeable permits to pollute. You achieve cleanup at minimum cost.

  • Sinclair Davidson

    So are you also opposed to the market in intellectual property, Sinclair?

    Mostly yes. Also see here.

    Yes, Harry – I’ve heard all the arguments before. I don’t believe them neither do you believe my arguments. Time will resolve uncertainty. But in the meantime neither you nor Uncle Milton have responded to the references I left here on the merits of a tax over cap and trade.

  • hc

    Sinclair, This tax vs cap-and-trade aissue is largely an irrelevancy. If permits are auctioned then a cap-and-trade is equivalent to a tax though the tax is endogenously determined. Yes there are arguments about setting a tax and allowing quantities to be a random variable or setting quantities to allow prices to become random but these are again second-order issues in the current debate.

    Arguments about copyright duration are not the same thing as asserting there should be no property rights at all. Are you suggesting that there should be freedom to copy any book, film or DVD/CD? Are you asserting that from day one any firm can replicate a pharmaceutical discovery or industrial design?

    Are you aware of the implications of such a startling view for your free market position?

    I am not sure that, as a general matter, time will tell when I see denialists continuing to argue there has been no warming over the past decade or so despite repeated refutations of that view. I can’t help think that ideological priors bind commonsense.

  • Uncle Milton

    Sinclair, since the carbon price will be fixed at $10 per tonne for (at least) the first year of the ETS, and then it is likely to be capped after that, we’re going to get a quasi-tax anyway. It’s not a second order issue (sorry Harry) it’s a third order issue.

  • Sinclair Davidson

    Did I ever say ‘there should be no property rights at all’. You’re being a bit naughty – inventing a position, ascribing it to me and then criticising me for it. My position on intellectual property rights is one side of a current mainstream debate on the issue and is hardly extreme or unusual or even anti-free market. (Indeed at a presentation in 2006 some free-market types usggested I was a statist Stalinist for my very moderate views as expressed in the Agenda article). That, however, is a distraction from the point of the post. That government can add value is not in dispute (even Adam Smith thought so), when they can add value is in dispute (as the experience Malcolm Fraser and Gough Witlam suggest). Strong distintions between can, could and should are being drawn. In the specific case of carbon trading I am saying ‘cannot’. You are saying ‘can’. We shall see.

  • MAGB

    Best not to use the term denialist. It is unprofessional and it is wrong. If you continue to do so, you will be labelled as an emotional, irrational alarmist, and your opinions will be ignored at a time when we need informed and rational debate.

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