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Promoting reasonably good inefficient climate policy

It now seems certain that when Tony Abbott is elected Prime Minister of Australia next year that we will not have a carbon tax.  The forces of darkness and stupidity have won with their lies and misrepresentations on climate change.  At best we will have an inefficient “direct action plan” than puts massively increased costs on the community and which will not (unless revised) be particularly effective.  But should we not try to back this stupid policy since at least it gives us something? The fear of course is that the truly crazy IPA types and/or climate deniers will move to prevent any action at all on climate change.

The Coalition do support the MRET renewable energy targets and the rural CFI policies.  Indeed they do have a rudimentary carbon-pricing scheme in place that will pay polluters to cut back their emissions.  This scheme is equivalent to pricing carbon emissions but it is a tax-cum-lump-sum transfer policy to all polluters not just those that are trade exposed.

This latter scheme has many difficulties associated with it but it is a start.  The price set for paying for carbon cutbacks ($15/tonne) is somewhat too low to secure serious mitigation effort but, in principle, these payments could be increased – indeed they must be if the Coalition is to meet its objective of securing a 5% reduction in carbon emissions by 2020 over 1990 levels – the same target as Labor.  In addition, instead of earning $10b in revenues this scheme would cost the government around that amount (plus excess burdens of at least another $5b) to achieve the same mitigation as Labor’s current scheme. I assume too that the army of bureaucrats needed to implement the scheme would add substantially to these costs.

But the advantage of the Coalition scheme is that its tax cost is either effectively hidden in an array of other taxes or necessarily funded through reduced spending on schools, hospitals and social welfare.  Indeed, perhaps such an inefficient scheme should have been advanced by Labor. The tax is probably well hidden and if the Coalition had successfully (though hypocritically) objected to it on the grounds of inefficiency, the pressure would be towards a more efficient scheme of the type currently proposed by Labor and implemented either by Labor and the Coalition.

In short I wonder whether successful policy in Australia today should not primarily target efficiency.  The key objective in policy is to somehow promote the social welfare without having your policy deliberately misrepresented by liars in the Coalition, the IPA and the media (Channel 10 and The Australian).  An explicit carbon pricing policy has been known for decades to be the cheapest way to address a pollution problem but this is irrelevant if the policy is unsaleable given rampant political dishonesty. Free carbon quotas have also been recognized as a way of insulating emissions exposed trade sectors, such as aluminum, from loss of competitiveness associated with carbon leakages. But such policies too are easily represented – we are “taxing our major carbon exporters but compensating them for the tax, clearly a confusion”. No, it isn’t but that lie is easily sold by unscrupulous politicians and IPA types who are deluded on the issue of climate.

To a point should Australia not accept and improve inefficient policies that do something? Acting to improve such policies may be a better strategy than living with the silly hope that Labor will turn its fortunes around and survive to implement carbon pricing.  Nor is such a stance inconsistent with a longer-term rejigging of the scheme towards a more rational explicit pricing policy – longer-term it is most reasonable to assume carbon will be priced.

16 comments to Promoting reasonably good inefficient climate policy

  • Uncle Milton

    “The Coalition do support the MRET renewable energy targets”

    This is the great irony. They all voted for it in the Parliament. And what is it MRET? A cap and trade system for carbon emissions, but confined to emissions from the electricity industry.

  • I maintain my theory that a hot summer at the end of this year (and that seems a distinct possibility) will be significant for public attitudes towards climate change policies, as may be the case in the US with its unseasonably hot 2012. It would at least make it easier for Abbott to resist the continual call from the likes of Bolt – still far too influential with Coalition voters – for the Coalition to drop all CO2 mitigation policies.

    So, assuming Abbott has to talk continuously about how direct action is better, a bedded down ETS should (one would hope) start getting some more outright public support from economists and companies than is happening presently. (Or even if they do support it, people are shrugging their shoulders about the need for it, given that it’s winter.) We know that the strong weight of economic opinion is against Abbott – it is just that this is getting no traction presently.

    As wildly optimistic as this sounds, I think that the carbon tax will calm down as an issue for these reasons. Of course, a second round with a GFC could also spell the end of an ETS here, but no one here can control that.

    Labor just has to accept that they have to wait another 8 months or so to see the issue die down in their favour. Changing leaders is not going to help.

  • JB Cairns

    let me quote the Piping Shrike
    “In September last year, Essential Research carried out a poll asking voters whether they supported the government’s plan to introduce a carbon pricing scheme on 1 July this year. Given the government’s deep unpopularity, the answer is as you would expect, they were against it (48% against, 35% for).
    They were then asked, “Would you support or oppose this carbon pricing scheme if the money paid by big polluting industries was used to compensate low and middle income earners for increased prices and to invest in renewable energy?” Given the electorate generally supports doing something about climate change, the answer was again as would be expected – a strong level of support (50% for, 37% against).

    The fact that numbers were switched around for what was basically the same thing could be taken two ways. Either there has been a disinformation campaign by the media and the Coalition of Goebbels-like proportions which has fooled the electorate – or that this government could propose Christmas and the voters would be against it.”

    Ad that to the fact only 35% of Australians, again according to Essential research, realise interest rates are lower now than when the Government won office.

    I agree with Steve that El Nino will change attitudes as it did last time however unless something drastically changes most people are living in lah lah land.

    Either the Liberals will change immediately to a floating rate ETS instead of a fixed price ( This way they can claim to have gotten rid of the ‘carbon ‘tax’) or they will simply deny AGW is happening and do nothing.

    Direct action causes too many budgetary problems.

    I favour the latter.

  • John Bignucolo

    Malcolm Turnbull has noted that the great virtue of the Direct Action plan is that it can be easily and quickly dismantled.

    Since becoming leader he has consistently said that now (pick a time ‘t’) isn’t the right time for a GBNT.

    Post election we can look forward to Tony Abbott asserting that now isn’t the right time to add such an impost to the budget and/or industry and it will be shelved.

    Why not take him at his word, and who is going to argue with a Liberal leader who has just enjoyed such a crushing victory?

    I expect it to be the basis of his Agenda for Day 2. He doesn’t even have to admit that he thinks climate science is crap. Peta Credlin will craft a “more in sorrow than in anger” press release and the Canberra Press Gallery will report it as a sound economic decision and clever politics.

  • John Bignucolo

    Sigh. The “he” in the second paragraph is meant to be Tony Abbott.

  • Jim Rose

    right-wing think-tanks are not necessary to explain the rising opposition to a carbon tax.

    Stigler contended that economists exert a minor and scarcely detectable influence on the societies in which they live.

    He said that if Richard Cobden had spoken only Yiddish, and with a stammer, and Robert Peel had been a narrow, stupid man, England would have still moved toward free trade in grain as its agricultural classes declined and its manufacturing and commercial classes grew in the 1840s onwards

    VOTING PATTERNS ON CALIFORNIA INITIATIVES, , MATTHEW E. KAHN and JOHN G. MATSUSAKA studied voting behaviour on 16 environmental ballot propositions in California to characterize the demand for environmental goods:

    • The environment was found was to be a normal good for people with mean incomes, but some environmental goods are inferior for people with high incomes.

    • An important price of environmental goods is reduced income in the construction, farming, forestry, and manufacturing industries.

    • In most cases, income and price can explain most of the variation in voting; it is not essential to introduce non-economic concepts such as ideology and politics.

    Geoffrey Brennan in ‘Climate Change: A Rational Choice Politics View’, argues that we will 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 because of carbon taxes and carbon emissions trading 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 voter support will fall away.

    matthew kahn studies public choice and environmental policy because he want to understand what makes voters tick. what will induce them vote more often for environmmetal policies?

    Self-interested politicians who represent conservative voters, poor communities, and districts whose per capita emissions are high are least likely to vote for carbon mitigation.

    policy makers will need to address these constraints if they want to design climate legislation that will have a meaningful effect on controlling carbon emissions and be passed into law.


  • The politics is fascinating.

    That a campaign like Abbott’s, that is so devoid of logic, facts or honesty can be so successful is very instructive.

    I am not convinced that an Abbott government will find overturning the Carbon Price an easy task.

    As long as Labor does not go to water it is unlikely that repeal legislation will pass until the end of 2014 at the earliest.

    If Abbott does not get control of the Senate he will have to wait for a double dissolution election in the Winter of 2015.

    In either option, the Carbon Price will have been in operation for more than two years, and as with the GST, it is likely that people will become reconciled to it.

    Further just as Abbott repeals the legislation the World will likely be placing the finishing touches to global treaty under the UNFCCC, as started at Durban. Coalition climate hysteria might play well with the least informed in our electorate, but it will be interesting to see how Abbott explains Australian policy to the rest of the world.

    Finally, this is a complex piece of legislation, that will be difficult to unravel.


  • Jim Rose

    who plans to sign this new global treaty under the UNFCCC. President Mitt? would a republican senate ratify it?

    the U.S. senate under democratic control (60 votes) would not bring a climate change bill to the floor for a vote

    In June 2009, the House approved the Waxman-Markey bill, which would have imposed a nationwide cap on emissions. the majority was 219-212, 48 Democrats voted against the bill; eight Republicans backed it.

    Waxman-Markey was too demanding for the Senate.

    After months of posturing and concessions, Senate Democrats failed to come up with a bill that they were willing to bring to the floor.

    President Obama did little to rally public opinion. 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 lukewarm support, Obama moved on to the safer issue of financial regulaton.

    Read more

  • Jim, your posts point out many obstacles to developing effective climate policy. There is no doubt that reducing carbon emissions to the levels required by the science will be extremely difficult.

    I mentioned the treaty as a complication that an Abbott government would have to face. It is likely that the treaty will be weak and not ratified by some countries, but it would still be an embarrassment for Australia to be repealing climate legislation just at the time when the rest of the world will be moving in the other direction.

    It will be interesting to observe the arguments developed by an Abbott government about Climate Policy. I expect that the messages directed to international audiences will be quite different to those aimed at the Australian electorate.

  • Jim Rose

    who is moving in the other direction? a republican congress and white house?

    The chances of India, China and the rest of the devloping world agreeing for forego or even slow economic development to fight global warming is zero. This is before you consider the international collective action, verification and free rider problems.

    the best writer on global warming is Tom Schelling. He has been involved with the global warming debate since chairing a commission on the subject for President Carter in 1980.

    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 be able to slow the Soviet invasion by 90 minutes if it happened after 1962. they promised to train troops, procure equipment and supplies, and deploy these tropps and other assets geographically.

    All of these actions can be observed and compared quickly. The NATO treaty was a few pages long.

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

    Climate treaties should promise to do certain actions now such as invest in R&D and develop carbon taxes that return the revenue as tax cuts.

  • rog

    “Climate treaties should promise to do certain actions now such as invest in R&D and develop carbon taxes that return the revenue as tax cuts.”

    A neat summary of present carbon tax.

    I get a bit tired of this constant comparison with what other countries are doing and how what they do should guide what we do. If the same principle was applied to all law we would still be hanging people for stealing handkerchiefs or having sex.

  • Jim Rose

    I agree with you Rog, the fact that others might be taxing carbon emmisions is not reason for australia to act. The only reason to act is a threat of green tariffs.

  • rog

    There is always principle Jim Rose. Like “queue jumpers” “green tariffs” is another one of those easy political pejoratives employed by the predictably expedient.

  • Jim Rose

    Rog, I agree with you. anything prefaced with the word green should be treated with great suspicion.

    People do queue for refugee visas beacuse there is an annual cap.

    By entering Australia illegally, these refugee applicants move to another queue because they now have access to the Australian courts. They can stay in Australia for some time through litigation and appeals.

  • Estela Hillwig

    Renewable energy must be our focus these days because fossil fuels are getting more scarce. We must also not depend on Oil exporting countries. :*,”‘

    Warm regards“>

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