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Big deal: Rudd repeals carbon tax one year early

Given that Kevin Rudd faces a tight electoral battle I suppose introducing an ETS a year early seemed like a good idea to him.  The opinion polls are ambiguous  – most Australians favour the tax – hardly surprising given its minuscule influence on living costs and industry profitability despite the frantic bleating of The Australian’s trash economics commentators – Ergas, Sloan etc. Since the ETS is linked to the European scheme its main effect of is to cut the charge on carbon one year early.  That is it.   One hopes that when the European economies recover that there will not be a frantic clamouring to “protect” Australian industry from higher charges.

Carbon charging is intended to get people to reduce their use of fossil fuel based electricity  – it has been somewhat effective in doing this – and to encourage supply switches to less polluting fuels such as natural gas.  Liberal Party lies and stupidity, the lies spread in the Murdoch-dominated media, the fact that politicians like Kevin Rudd exist and the low charges that will now prevail make these supply changes unlikely.  Eventually they will need to be made and the abrupt upward shifts in future carbon prices required to achieve this in the future will now hurt more.  But that is modern politics – never do today what you can leave as a tougher problem for your successor.

We live in unprincipled times.  It is important that cynicism does not take over and that the urgency of dealing with the most significant environmental issue of the modern age is not forgotten about.

6 comments to Big deal: Rudd repeals carbon tax one year early

  • “Eventually they will need to be made ”

    I assume your unstated assumption is that CO2 emissions have large net negative externalities. It is a widely accepted view, but I have yet to see any good argument for it.

    Since climate change will have large and uncertain external effect positive and negative, it’s easy to fudge the argument to show that the net is negative–or positive. Earth’s climate was not designed for us, nor we for it, so there is no a priori reason to expect that a change of a few degrees will make us worse (or better) off.

    The one reason to expect negative effects is that we are currently optimized against our current environment. That would be a serious argument with regard to rapid change, but much less for a change of about a third of a degree C per decade, which is roughly what the IPCC projections suggest–and so far the IPCC has consistently over predicted, not under predicted.

    There are two reasons to expect positive effects. One is that human habitation is currently limited by cold not by heat–the equator is inhabited, the poles are not. The other is that warming due to CO2 can be expected to be larger in cold places and cold times of year than in warm, due to the fact that water vapor is a greenhouse gas, hence the more of it in the air, the less the effect of adding CO2.

    You can find longer discussions of this on my blog and of the general problem of externality arguments along such lines in a talk I gave at Oxford earlier this year:

    http://oxlib.org.uk/2013/01/video-of-david-friedmans-lecture/

  • hc

    The evidence from the IPCC and all other groups that I am aware of rejects your claims David. There is strong evidence of net losses that could be catastrophic. Where is the evidence that climate change will be harmless?

    Even for agriculture 3 degrees C warming will provide losses everywhere. Comparatively rapid climate change – a 1/3 of a degree per decade is very high – would be devastating for human populations and for biodiversity.

  • crocodile

    David, you seem to be considering only the human population and it’s ability to adjust. The very things we eat and drink and shelter ourselves with may be affected too. It may not be possible to adjust everything. I don’t know what CO2 will or will not do to us all but in terms of simple risk assessment it appears reasonable to act. The cost so far has not been that painful.

    Harry, I get the impression that you are not a fan of Kevin Rudd. I don’t believe he is wonderful either but I’mk prepared to give him a chance, especially considering what else is on offer. At the very least he is trying to do something, not much but a start. The one that thing that puzzles me is why commentators continue with the line that Australia’s involvement, being small, will have no effect on emmissions or temperature abatement. Surely, when the costs of “dirty” power, even with compensation programmes, reach a point where investment in the development of alternatives becomes attractive it should open up new business opportunities. The first ones out of the starting blocks would naturally reap the greatest rewards. The commentry seems silent on this point. Why are we waiting.

  • “The cost so far has not been that painful.”

    And all that has been done so far has had a negligible effect. I may be mistaken, but I think the only country that is within its Kyoto limits is the U.S., and that has nothing to do with policy–it’s because fracking made natural gas cheap, and natural gas produces considerably less CO2 for a given power output than coal.

    So far as the IPCC, their expertise is climate, not economics–and reporting on their results is heavily filtered by media bias. In any case, if readers are interested in a more detailed presentation of my arguments I pointed at where to find it in my previous comment.

    One final point. I don’t know how many readers are old enough to remember the population hysteria of the 1960’s. It had very much the feel of the present global warming dispute–with confident predictions of catastrophes, none of which happened. Indeed, the actual events were the opposite of the prediction–standards of living and nutrition moving gradually up in the third world instead of catastrophically down. In that case too, we were told that all the experts agreed.

    My first piece of published economics was a pamphlet I did for the Population Council in the early 70’s, trying to estimate the net externalities from one more child. I concluded that I could not sign the sum–could not tell whether the net was positive or negative. That was at a time when the conventional wisdom was that the sum was obviously large and negative, and something drastic needed to be done about it immediately if not sooner.

  • Jim Rose

    it is an election promises.

    remember that rudd has to win seats from the liberals to return to government, and not lose more inner city seats to the greens because of recent sell-outs. in a narrow election, the greens could hold the balance of power

    anthony green’s blog is yet to discuss the green’s chances of picking up more seats in the house on liberal preferences.

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