Harry Clarke » climate change

Levy on carbon emissions is lawful

hc — Wed, 11 Jan 2012 23:12:24 +0000

The European Court of Justice has ruled that the European decision to include in the European ETS carbon emissions generated by non-European aircraft flying to or from Europe is legal. This type of levy is a border “tax” adjustment of the type I have often discussed on this blog. It isn’t a discriminatory levy at all since it merely prevents carbon leakages and competitive disadvantage to European carriers who are subject to the tax. This decision is a very good outcome and effectively rebuts the disgraceful hypocrisy of both China and the United States in seeking to escape this levy. If the levy comes into play then the incentives are for China, the US and other country carriers which fly to China to impose the levy themselves since then they get the revenue not the Europeans. It is precisely this latter effect that makes me such a strong supporter of border tax adjustments – they provide a mechanism for unilateral measures to become more global and that’s what is needed.

China to implement carbon tax by 2015

hc — Sat, 07 Jan 2012 23:14:13 +0000

This is important news. China to implement a rather low (10 yuan=$1-55A/tonne) carbon tax. Officials say it will be “increased gradually”. The tax is tiny but that it is being planned is most important (and welcome) news. For the most part China is employing quantitative restrictions and direct interventions to limit its rapidly growing emissions. Its switch to include economic instruments shows it has a better understanding of market efficiencies than many Western market economies. Certainly a better understanding than Tony Abbott.

Here’s the official message in China – a bit softer than the Western media report since it suggests “plans to” rather than “will introduce” a carbon tax.

Update: An even morecautious response from a key official - no decision on whether to introduce a carbon tax has yet been taken.

Worth quoting in full

hc — Tue, 29 Nov 2011 11:21:16 +0000

13 of last 15 years warmest on record
From: AFP November 29, 2011 8:36PM

THIRTEEN of the warmest years recorded have occurred within the last decade and a half, the UN’s World Meteorological Organisation said today.

The year 2011 caps a decade that ties the record as the hottest ever measured, the WMO said in its annual report on climate trends and extreme weather events, unveiled at UN climate talks in Durban, South Africa.

“Our science is solid and it proves unequivocally that the world is warming and that this warming is due to human activities,” WMO Secretary-General Michel Jarraud said in a statement, adding that policymakers should take note of the findings.

“Concentrations of greenhouse gases in the atmosphere have reached new highs and are very rapidly approaching levels consistent with a 2 to 2.4 Celsius rise in average global temperatures.”

Scientists believe that any rise above the 2.0 threshold could trigger far-reaching and irreversible changes on Earth over land and in the seas.

The 2002-2011 period equals 2001-2010 as the warmest decade since 1850, the report said.

2011 ranks as the 10th warmest year since 1850, when accurate measurements began.

This was true despite a La Nina event – one of the strongest in 60 years – that developed in the tropical Pacific in the second half of 2010 and continued until May 2011.

The report noted that the cyclical climate phenomenon, which strikes every three to seven years, helped drive extreme weather events including drought in east Africa, islands in the central equatorial Pacific and the southern United States.

It also aggravated flooding in southern Africa, eastern Australia and southern Asia.

While La Nina, and its meteorological cousin El Nino, are not caused by climate change, rising ocean temperatures caused by global warming may affect their intensity and frequency, scientists say.

Here’s the original report. Worth reading.

Climate sensitivities & probabilities of catastrophic climate change

hc — Sat, 26 Nov 2011 08:49:30 +0000

Climate sensitivity measures the sensitivity of mean global surface temperatures to a doubling of atmospheric CO₂.

The work of Andreas Schmittner and colleagues uses paleoclimatic data and temperature reconstructions from the Last Glacial Maximum (19-23,000 years ago) with climate model simulations to recompute climate sensitivities. Their preferred estimated climate sensitivity is 2.3 degrees C which is significantly lower than earlier estimates of 3 degrees C. Moreover the wide confidence limits around earlier estimates are replaced by tighter confidence limits around the Schmittner et al. estimate. This has the welcome interpretation that the probability of extreme warming – to 10 degrees C and even beyond – is lower than previously thought.

The authors emphasis that their work remains incomplete since it does not account for variations in ice sheet and vegetation cover between the LGM and now, It is however, conditionally, some good news from climate science. The Economist has a cautious short review. The following remarks are worth keeping in mind:

“….it is worth bearing in mind that this is only one study, and, like all such, it has its flaws. The computer model used is of only middling sophistication, Dr Schmittner admits. That may be one reason for the narrow range of his team’s results. And although the study’s geographical coverage is the most comprehensive so far for work of this type, there are still blank areas—notably in Australia, Central Asia, South America and the northern Pacific Ocean. Moreover, some sceptics complain about the way ancient data of this type were used to construct a different but related piece of climate science: the so-called hockey-stick model, which suggests that temperatures have risen suddenly since the beginning of the industrial revolution. It will be interesting to see if such sceptics are willing to be equally sceptical about ancient data when they support their point of view”. (my bold)

It is important to be clear that Schmittner et al. are not saying there will not be serious climate change. Within the limitations of a fairly low scale model – they are saying the probability of extreme events is reduced. The anti-science right have already left on the study and inaccurately suggested in supports climate science scepticism. It does not.

Update: Steve from Brisbane draws attention to this careful critical review of these claims on Real Climate.David Friedman (in comments) draws attention to the defensiveness of climate scientists to these sort of claims. That is not my perception of the Real Climate critique. Worth a read.

Update: A furious response from the productive Joe Romm.

Update: An unexpectedly reasonable review at the libertarian Reason. Not rabid.

The Australian – more climate science inaccuracies

hc — Sat, 19 Nov 2011 07:00:55 +0000

The Australian quotes Bjorn Lomborg as saying:

“….carbon taxes are hugely inefficient: for every dollar of tax, they reduce climate damage by the equivalent of 2c.

…. the best “bang for your buck” is to be had in spending public money on research and development on reducing the cost of renewable energies to the point where they can compete in a free market with fossil fuels”.

What does the first part of this two-part claim mean? That $1 of tax reduces carbon emissions that are worth at the prevailing carbon price 2 cents worth of carbon emissions? That is clearly wrong.

How does Lomborg know that the second claim concerning the effectiveness of R&D is corrects? How does he know such investments will have the greatest productivity? How can one energy source compete with another when the alternative gives rise to unpriced external costs. That is the point of pricing.

OK I am being perhaps a bit finicky but The Australian writes these claims up as if they have some substance. I cannot see that they do. Its important toy set these issues out clearly.

The Australian also suggests that the recent IPPC report on extreme weather events shows that there is too much uncertainty to draw links between global warming and increased likelihood of extreme events. Quote from the same link:

“In essence, the draft report challenges assertions that climate change is clearly responsible for recent extreme weather events. A comprehensive review of the science has concluded that because of the variability in weather patterns, a climate change signal will not become clear for many decades. This is not to underplay the potential impact. But the timing and extent is still up for debate”.

Its true that the connection is difficult to firm up given a limited number of sample observations of climate but a more balanced picture is presented by the World Resources Institute. They make 5 observations:

1. Extreme weather is on the rise around the world.

2. Extreme weather and climate disasters are deadly and expensive, and losses are increasing.

3. A warming world will likely be a more extreme world.

4. Greenhouse gas pollution is likely driving some of these trends.

5. Adaptation and disaster risk management can enhance resilience in a changing climate; differences in vulnerability and exposure must be considered in the design of such initiatives.

To sum up:

“We have introduced five specific takeaways, but the most important message is this: We can no longer ignore the link between climate change and extreme weather events. The time for decisive action to reduce emissions, advance adaptation, and move toward a better future climate is now”.

Its a different slant and a better summary of the general direction of this important IPCC report.

Long term trends in global CO2 emissions

hc — Mon, 14 Nov 2011 09:21:25 +0000

This excellent EU reports tells us – up to 2010 – where the world is in terms of carbon emission trajectories. Over 2009 to 2010 there was a rapid switch back to trend in global carbon emissions. World emissions fell by 1% in 2009 but rose by more than 5% in 2010, an unprecedented increase over the past 2 decades but comparable to what happened when the world economy recovered in 1976 from the effects of the first oil crisis. The emissions growth in 2010 was dominated by India and China whose emissions grew by 9 and 10% respectively. The world is returning to high rates of overall CO2 emissions after a brief respite offered by the financial crisis.

The industrialised countries who ratified the Kyoto Protocol cut their emissions in 201o to a level 7.5% below year 1990 levels. The picture however is being blurred by the emerging countries such as India and China which increased their fraction of total emissions over this period from 1/3 to 1/2. In 2010 33 billion tons of CO2 were poured into the atmosphere, the highest level in world history. Industrialised countries will, overall, hit their Kyoto targets though there is considerable variation in national responses.

Converging per capita emissions levels are becoming very interesting. China now emits 6.8t/capita CO2 compared to the EU-27′s 8.1t and the US’s 16.9t. China is catching up to the low carbon developing countries. The enormous sleeper whose emissions have the potential to expand enormously is India whose per capita emissions at 1.7t/capita – a tiny fraction of developed country levels. Both India and China have relatively high levels of CO2 emissions per dollar of output - they have high emissions intensities – indicating huge potential for ‘no regrets’ energy conservation policies of the type currently comprising much of their CO2 mitigation response.

An excellent report and well worth reading.

An influential but fallacious argument on climate

hc — Mon, 14 Nov 2011 03:32:33 +0000

I have been following a thread at John Quiggin’s blog where a standard argument used by climate policy sceptics is raised in comments yet once again. Again, again & again this same argument appears.

The sceptic claim is this: A country like Australia contributes less than 2% of the world’s emissions so that measures to cut emissions here by between 5 and 25% by using a carbon tax will only decrease global emissions by from 0.1% -0.5% which is seen as negligible (and which will therefore have a negligible effect in reducing temperature increase) whereas the cost of implementing such policies is not negligible and perhaps up to 1% of GDP – my own work suggests a lower figure than this but for the sake of argument accept 1%. Hence on the basis of benefit-cost analysis the carbon tax measure – even if it is the most cost efficient way of reducing emissions – is unwarranted. On this basis any less cost-efficient measure that achieves the same outcome is even less likely to pass a benefit-cost test so, no policy of mitigating emissions should be introduced.

In various forms this argument gets repeated by right-wing, shock-jocks such as Andrew Bolt and by clowns at sites, such as Catallaxy. I think it gets repeated so much that it comes to be seen as a consensus argument against addressing climate change. It is no such thing.

The climate change policy problem involves preventing the delivery of a global public ‘bad’ (here take climate science as correct so only the economics of control is being discussed) and there is an extensive economic theory of how markets fail to deliver adequate responses to such ‘bads’. To consider an example from another field consider vehicle-caused air pollution. Here individual motorists might take some measures to reduce the air pollution they release but, when they come to think about the level of emissions they create, they will, unless they are altruistic, consider only impacts of this pollution on themselves not on other citizens. Its a simple externality. Motorists are collectively better-off controlling their emissions using regulations or taxes though there is little incentive here for individual non-altruistic motorists to do so. By the way I have never heard raised in this setting the argument that because individual motorists contribute only a negligible amount of the aggregate air pollution in a city it makes no sense for an individual motorist to be subject to pollution controls.

The analogy with the greenhouse gas problem is obvious here – other analogies could be introduced in terms of other socially bad forms of behaviour such as ‘littering’. Indeed a commenter on John Quiggin’s blog attributes the ‘littering’ analogy to a commenter at Deltoid. Again should individuals be induced to control their littering if their own actions constitute only a negligible part of the overall litter problem?

An objection to these analogies is that littering and vehicle pollution issues are typically concerns of individual countries so that a measure of compliance can – perhaps with some difficulty – be achieved among all those generating the public bad on the basis of a central government vote. The climate change issue, however, is a global ‘public bad’ problem and might be more difficult to address because of increased difficulty of negotiating, designing and enforcing agreements. That is true. There are difficulties of negotiating a coordinated international agreement. However most countries are addressing climate change although the difficult issue is to gain agreement on who should do what. That Australia and the EU have taken actions to address their emissions unilaterally suggests that we do not act in a pure “Prisoner’s Dilemma” world where selfishness alone with respect to single issues drives outcomes.

Even China and India are taking steps to substantially reduce their emissions over what they would be without policy action. The point then is to encourage a multilateral responds and particularly to increase the engagement of developing countries. There are moral suasion effects of developed countries taking decisive action and negative dissuasion effects of them not doing anything. Moves such as Australia’s carbon tax have an impact on global emissions that is component of the global mitigation impact. There are also moral suasion impacts on countries who are currently not engaged in substantial mitigation effort to increase the scale of their efforts. We should tax vehicle emissions and introduce laws prohibiting littering even if these measures are imperfectly successful. We should also, along with most other countries address the very urgent climate change issues we face as a community and encourage those reticent to mitigate to follow our example.

Australian Carbon Pricing

hc — Tue, 06 Sep 2011 03:49:12 +0000

I attended the meeting “Australia’s Carbon Price: Good Policy or Not?” at the Crawford School, the Australian National University, yesterday. Despite some valuable papers it was a somewhat disappointing meeting for me as I was really interested in assessing the form of the current carbon tax proposal while the discussion seemed to sometimes get sidetracked to the issue of whether we should have a carbon tax at all.

Mark Dreyfus provided the Government position and at least gave a clear (if humdrum) exposition of the character of the tax. These types of workshops need to establish theoretical clarity initially on the major issues and I am unsure politicians are the best people to deliver this. The Liberal’s Simon Birmingham gave a well-presented but ultimately unsatisfactory account of the Coalition ‘direct action’ plan. He seemed to suggest that carbon pricing was ruled out by the failure of the rest of the world to price carbon and seemed oblivious to arguments about border taxes and the compensatory role of tradeable free quotas given to EITES*. Birmingham claimed that because those direct actions were to be monitored on the basis of effectiveness and cost that the Liberal approach was market-related but missed totally the core point about the informational efficiency of prices in a setting where you want to change the behaviour of millions of agents. Certainly an army of bureaucrats will be needed to implement the Liberal policy which ironically seeks to make cuts in the climate-related bureaucracy.

Trevor Breusch gave a valuable, straightforward account of the time series evidence concerning the case for statistically significant warming. He demolished the case for the ‘warming has stopped in 1988′ story, one the ongoing untruths spread by sceptics.

Warwick McKibben argued that the policy resembled the policies he had advocated but would be perfected if his policy package was fully implemented – I’ve heard it before and tiring a bit of the overly complex schemes Warwick is interested in when Australia is trying desparately to get something really basic off the ground. John Freebairn gave a typically lucid account of the impact of the compensations on income tax scales as well as impacts of the tax as an externality tax. He provided a good discussion of the role of double-dividend and related arguments. Michelle Grattan and Paul Kelly gave a pessimistic account of the politics of climate change after 2003. They are assuming that Tony Abbott will act to repeal the tax even if it takes him two terms of office. Kelly argued that Rudd should have acted in 2009 while there was public support. Kelly looked amused when asked what the media’s role in climate debates should be – he works for the alledgedly anti-science Australian newspaper. I enjoyed these two talks.

Despite these papers I was much more interested in other issues. For example, the initial size of the tax, its assigned rate of increase and its consistency with stock and flow emission targets. I was also interested in what the effective tax base ended up looking like. Basic stuff that was ignored at this meeting in favour of discussions of realpolitik.

The last session seemed to be even less convincing than the earlier presentations with unsupported claims by Henry Ergas (e.g. that the carbon tax would provide a crushing impost of the mining sector – it won’t even in the coal sector) and Paul Frijters (e.g. let’s just adapt because the rest of the world will not do anything) and (somewhat strangely) what I thought was an overly critical analysis of the carbon tax outcome achieved by the Australia Institute’s Richard Denniss. Only Steve Hatfield -Dodds provided some balance. In my view – and I think that of Steve – the carbon tax policy is a remarkably successful first attempt by government to come to grips with the issue of climate change. It prices carbon and compensates EITES and (regrettably) some other firms that might not deserve compensation but the inefficiencies are a small price to pay for buying the requisite level of political support – they are after all lump-sum transfers of income together with a payment to reduce carbon pollution. Perhaps the renewable RETs are excessive – you certainly do want an experimental program being maintained – but again a relatively small price to pay. Again it would have been better, in my view, to concentrate on these issues. it would have been useful too to have a couple of papers setting out the basic theory of the tax – politicians are not the people to do this.

I was amused by the organiser’s attempt to engineer ‘balance’ in the debate over the carbon tax by providing two speakers supporting it and two against. I would have preferred four speakers who could intelligently appraise the tax as it is. Those who reject the case for a tax at all should be left out of the loop – we should have moved beyond this.

Surely after all this time we don’t have to rehash the economic arguments for using pricing to address externalities. Surely, too, our analysis of the problem of achieving international cooperation to deliver public goods goes beyond the ‘defect’ option and the Prisoner’s Dilemma. Yet these things came up again-and-again. Disappointing – I have been to better Crawford School workshops although I learnt a bit from this one.

*EITES= emissions intensive trade exposed sectors.

Australia’s carbon pricing strategies in a global context

hc — Wed, 03 Aug 2011 01:40:53 +0000

This paper (here) written with Rob Waschik looks at the impacts of unilateral carbon pricing moves by Australia on Australian industry accounting for the effects of carbon leakages and international competitiveness losses. It was presented at the recent 40^th Australian Conference of Economists 10-14 July, 2011 in Canberra. There are strong potential theoretical reasons for exempting import-competing and export industries from carbon taxes but – with the exception of the alumina sector – much weaker reasons once the empirical evidence is examined. The main effect of offering exemptions is not generally to address competitiveness concerns but to raise the required carbon charges necessary to hit desired emission control targets.

Abstract: The impact of international carbon control measures – and the absence of such measures – on Australian carbon pricing policies are analyzed both at a theoretical and empirical level. While theory and interest group advocacy suggest a potential case for destination accounting of carbon emissions and border tax adjustments and/or export exemptions, this case is sometimes exaggerated. For example, in the ferrous metals sector, empirical analysis suggests that gains from such refinements are low since carbon leakages and adverse competitiveness effects are small. In other sectors – such as non-ferrous metals – the effects are more pronounced. Exaggerating the competitiveness costs of carbon pricing runs the risk of policy overreaction and unintended protectionism, dramatically increasing the costs of Australian carbon pricing policies. Providing free and tradable emission quotas to exporters and import competing sectors is a ‘second best’ policy but one with practicality in sectors where adverse competitiveness effects do need to be addressed.

China & carbon control – some arithmetic drama

hc — Wed, 20 Jul 2011 12:31:43 +0000

China emits about 5 MT of CO2E for each person per year. Although this is low by developed country standards (less than 1/4 of both Australian and US emissions) it is high by international standards and must be more than halved by 2050 if carbon emissions are to be at the average global level consistent with a temperature increase of 2 degrees C. This sounds like dramatic arithmetic but the worst of it has not yet been told. Over the 39 years to 2050 the Chinese economy will grow to be between 10-16X its current size as Chinese growth ranges between 6.5-7.5%. So far China has committed to at least 40% emission intensity cuts to 2020 which is a dramatic objective but by no means enough. Decarbonisation of the largest carbon-emitting economy on earth is a must. Current proposals to introduce market based schemes are an important adjunct to this endeavours. They need to supplement an active CCS program and a major move towards decarbonisation of transport and better building design for energy conservation.

Am I selectively picking on China? Not at all. The US and Australia must cut their per capita emissions from 21+MT to around 2MT by 2050. The developed country task is even more dramatic in terms of reducing carbon emissions although we have the luxury of comparative affluence. We also face an additional moral imperative that affluence suggests – the sacrifices as a consequence of required adjustments cost us less.

What no-one has is time to fiddle around finding a path to act. Time is now very scarce. All countries must act now to address the problem of climate change or face potentially catastrophic consequences. The science is clear and those clear-headed individuals who can think and who understand the situation need to advance their views now.

In later posts I’ll justify the specific arithmetic I use above.