Posted 24 November 2009
Letter and AGW/ETS briefing paper for business, by Geoffrey Travers
Nov. 16, 2009
A very unpleasant political correctness is descending over Australia in the debate over the Rudd Government’s proposed Emissions Trading Scheme.
In a recent address to the Lowy Institute, Kevin Rudd spent the whole of his speech on climate change policy not in attacking the arguments of those who oppose his policies but in attacking them personally, describing climate sceptics as “cowards” who “are prepared to destroy our children’s future” and “reckless gamblers”.
Rudd attempted to use the authority of the office of the Australian Prime Minister to tell the sceptics, whose views on climate science are, allegedly, in a minority, to shut up and go away. Unfortunately, I have already found that this has emboldened some people in the alarmist camp to become quite intolerant. Most unattractive.
A sceptic is a person “indisposed to accept popularity or authority as proving the truth of opinions”. In the stockmarket, which is my game, I have repeatedly observed that the majority is often, spectacularly, wrong.
So let me, on behalf of us all, respond to Kevin in “Rudd Speak”: “Let me just say one thing, I am a sceptic and I make absolutely no apology for that.”
In my opinion, the proposed CPRS legislation is the most ill-considered, economically and socially damaging legislation I have seen in my lifetime. It must be blocked at all costs.
If it is passed before Copenhagen and there is no global agreement by all other countries to follow suit on the same terms, Australia will face certain economic pain for absolutely no climate gain. It is Rudd who is the reckless gambler, based on this bet.
This is a really complicated issue and many people feel they are not qualified to understand it nor have the time to spend on it.
So I have prepared a response to Kevin Rudd in an effort to explain to my friends what I believe is going on and what would be a better way to go.
Kevin is determined to act, regardless of the consequences, when this is one of those times when doing nothing is better than doing something stupid.
Here are my reasons why.Sorry they are a bit long but, as I said, this is a complicated issue.
Public Policy and the Global Warming “Threat”
A response to Kevin Rudd’s Speech to the Lowy Institute
I am not a scientist but I’m not a fool, either. I have been given a university education in both economics and law and I have majored in government. My training in government and economics gives me some expertise to consider what is appropriate public policy. My legal training gives me some experience in logically analysing a problem and applying the rules of evidence. Over 20 years experience as a stockbroker analysing the claims of company promoters and directors in relation to their company’s likely performance has taught me to be sceptical about what I’m told—not to accept anything at face value. My whole education and experience has taught me to use my brain rationally when analysing the facts, to be highly wary of exaggerations, to question assumptions, to ignore emotions such as fear and greed and to be aware of the incentive biases of those people who are presenting their case to me. I have been taught to stand up for rationality over dogma based on religion, ideology, witchcraft or the madness of crowds and to be prepared to resist a majority view if it is wrong on rational grounds.
It actually takes a fair bit of courage to stand up against a majority view.
I began researching about climate science as an agnostic ready to be convinced. The first book I read was Tim Flannery’s “The Weather Makers”. However I soon discovered that some of the proponents of the Anthropogenic Global Warming (AGW) theory were manipulating data (e.g. the Intergovernmental Panel on Climate Change’s (IPCC’s) “hockey stick”), exaggerating the potential for catastrophe (Al Gore’s “An Inconvenient Truth”, “Unless we announce disasters, no one will listen,” Sir John Houghton, first chairman of the IPCC), and ignoring or silencing dissenting scientific views and corrupting the peer review process (the IPCC, the Royal Society and the CSIRO).
If the AGW theory is solid science, why is there a need to be dishonest about it?
This sort of behaviour is relevant when assessing the reliability of a witness.
It seems to me that a number of climate scientists have devoted their careers to supporting the theory of catastrophic man-made global warming. They have a lot to lose if the theory which they have embraced turns out to be wrong or not as important as they think.
The same observation can be made, with more certainty, in respect of those politicians who have climbed aboard the climate catastrophe bandwagon.
This makes me all the more sceptical of their claims when there is not clear evidence to back them up.
I wouldn’t give two hoots about the AGW theory if it wasn’t being used to justify the introduction of foolish and extremely costly legislation now which will bring about virtually no discernible temperature change.
My research reveals that a slightly warmer world with a higher CO2 content in the atmosphere is mostly a natural phenomenon and will not be a dangerous place to live.
I am appalled that people like the Prime Minister of Australia and the U.K. author of the Stern Review declare that “if you care little about future generations, you will care little about climate change.” The Australian Prime Minister says that climate sceptics are “quite literally holding the world to ransom”. “The agenda of the climate change sceptics …. is to destroy the CPRS at home, and it is to destroy agreed global action on climate change abroad, and our children’s fate – and our grandchildren’s fate – will lie entirely with them.”
“The clock is ticking for the planet, but the climate change sceptics simply do not care”…. “Attempts by politicians in this country and others to present what is an overwhelming global scientific consensus as little more than an unfolding debate, with two sides evenly represented in a legitimate scientific argument, are nothing short of intellectually dishonest”….. “These do-nothing climate change sceptics are prepared to destroy our children’s future. By deliberately undermining and eroding the capacity to achieve both domestic and international action on climate change the sceptics are attempting to force the world to take the single most reckless bet in our long history”…..“They are betting our future, the future of our children and our grandchildren, and they are doing so based on their own personal intuitions, their personal prejudices and their deeply ingrained political prejudices”.
“…. they are doing so in the total absence of any genuine body of evidence”.
“Climate change deniers are small in number, but they are too dangerous to be ignored…. they are driven by a narrowly defined self interest of the present and are utterly contemptuous towards our children’s interest in the future”.
To the extent that the PM’s comments imply that there will be a climate catastrophe if we do not reduce CO2 emissions, they are out of line with the IPCC scientific view.
Let’s be clear about what the IPCC is predicting. The IPCC has 6 scenarios each estimating the amount of CO2 in the atmosphere over the next 90 years based on population growth and economic growth projections. Based on these projections the best estimates of the 6 scenarios is for temperature to rise by between 1.8 degrees C and 4.0 degrees C over the next 90 years. 4 of the 6 scenarios have a best estimate temperature rise ranging from 1.8 degrees to 2.8 degrees. This is without mankind doing anything at all about CO2 emissions.
The 6 scenarios also predict sea level rises of between 18cm and 59cm by 2100. That is, between 7 inches and 23 inches over the century with a midpoint average of 36cm or 14 inches.
Let’s put these figures into some perspective. The rapid temperature changes between day and night, between summer and winter and between different parts of the globe are far greater than these projections. If man can cope with living in Helsinki where the average temperature is 5 degrees C and Singapore where the average temperature is 27 degrees C, it is not apparent why man should not be able to adapt to a change of 3 degrees C (the midpoint of the best estimates) if he has 100 years to do so.
If these figures are right (which, as we shall see, may well not be the case), they are not that startling, nor do they indicate catastrophic climate change. But they do reveal that the PM’s fearmongering is not justified by the IPCC projections.
In answer to the PM’s slurs about those of us who challenge the science and the policies enacted as a result of it, I say that I care about the welfare of my children and my grandchildren, but I do not lose sleep over the welfare of my grandchildren’s putative grandchildren, nor do I make financial provision for them. To say that we ought to make a big sacrifice now in order to confer a trivial benefit on each distant and better off generation is absurd.
Indeed, to care more about the possible problems of remote future generations than the acute problems of those alive today is immoral, in my opinion. It is not that we do not care about distant generations, it is that we do care about the present generation, and indeed about our children’s generation, who will pay a high price if the world is to slash CO2 emissions to the extent we are told is required.
There are a large number of unlikely but possible catastrophes waiting to happen at some time in the future – a nuclear holocaust, a disease pandemic, a devastating asteroid collision with the earth, the onset of a new ice age. If, in the name of risk aversion and the precautionary principle, we were to sacrifice 5% of today’s GDP to try and guard against each of these, this would mean sacrificing up to 25% of today’s GDP in the hope of avoiding all of them even though their combined likelihood is still very small. This would be plainly absurd.
I am appalled that any reasoned questioning of the AGW theory is now being regarded as little short of sacrilege by those in our society who have proclaimed themselves the saviours of the planet. Their attitude breeds an intolerance of dissent and reasoned argument that is both unattractive and dangerous.
I am determined to exercise my intellect so as not to be bullied into living in fear of threats which may never materialise or over which I have no control. I am also determined that my children shall not be bullied into growing up in fear. It angers me that our children are being frightened at school and by our Prime Minister into believing that they have no future or a bleak future due to climate change.
Reasons I object to the proposed Rudd Government Emissions Trading Scheme
My reasons are based, firstly, on scientific grounds and, secondly, on public policy grounds.
The science of global warming is not settled. There may be a majority view of climate scientists in favour of the alarmist position at the moment but the scope for uncertainty in this relatively new and highly complex branch of science is considerable. This is acknowledged by the IPCC and in the Garnaut report.
I do not dispute that the climate is changing nor that global warming occurred over the 20th century. I do not dispute that mankind can have an impact on local or regional climate due to the clearing of forests or the building of cities.
However, proof of global warming is not proof that human CO2 emissions caused that warming.
Professor Ian Plimer’s book “Heaven And Earth” discusses in great detail all the forces which affect the earth’s climate over long and short timeframes. These are many and varied. But just consider recent history over the last 3500 years. It was warmer in the Minoan Warming, the Roman Warming and the Mediaeval Warming than in the current Late 20th-Century Warming. There were no human CO2 emissions in the earlier warmings.
The proponents of the AGW theory are asking us to accept that whatever forces changed the climate in these past warmings are no longer operating in the current one but, instead, the main driver of climate is now human emissions of CO2. In the absence of hard evidence in support of this, I find this inherently implausible.
I do dispute that global warming is all bad. I do dispute that CO2 is pollution. I agree with the IPCC that a slightly warmer world will actually have significant benefits.
Real world observations contradict the AGW Theory
Some very basic pieces of empirically observed data contradict the theory of man-made global warming.
The globe has not warmed over the last 10 years. Given the fact that the temperature has not risen over the last 10 years whilst CO2 emissions have risen approximately 5% over this time, it seems, prima facie, that rising human CO2 emissions do not cause or are not the main cause of global warming. This data suggests that something else other than CO2 has a more powerful effect on the climate.
Prima facie, ice cores reveal that CO2 levels rise hundreds of years after temperature rises.
If the theory does not fit the observations, then the theory is wrong.
The AGW Theory has two legs-one scientific, one economic
A lot of the claims of global warming science are based on computer models. Computer models are not evidence and are not strictly “science” because they rely heavily on economic projections and assumptions rather than on observations and measurements in the real world.
It always amazes me that people I regard as intelligent and who ought to be questioning the science of AGW and the policies based upon it, always preface their remarks with the comment, “Of course, I am not a scientist” with the inference being that they are not qualified to question any of “the Science”. It is almost as if this absolves them from having any responsibility about this issue. If a disastrous policy result stems from the science and the science turns out to be wrong, they can just fob off responsibility on to the scientists.
But the AGW theory stands on two legs: one, a scientific argument which postulates that increases in man made CO2 cause the global temperature to rise (and are, indeed, the main cause) and the other, economic projections which seek to estimate the amount of CO2 emitted into the atmosphere by man over the next 100 years. The overall theory requires that both legs stand up to scrutiny. If the scientific leg is wrong, the whole theory fails. But if the scientific leg is right and the economic leg is wrong, the temperature effect predicted by the IPCC will be wrong.
You do not have to be a scientist to be qualified to criticise the AGW theory! Indeed, economists are better qualified than scientists to evaluate the economic leg of the AGW theory.
Anyone with an economic background is perfectly qualified to dispute the IPCC’s economic forecasts and assumptions. If these are overstated, the IPCC’s temperature predictions will be overstated even if the scientific leg turns out to be correct.
The first point to make is that the predictions of the climate models have been contradicted by evidence in the real world.
Deficiencies with the scientific “leg”
Let’s consider, first, how this could be due to the scientific leg of the climate models.
The computer models appear to be programmed in such a way that exaggerates the effect that rises in CO2 will have on temperature.
Empirical experiments show that, as atmospheric concentrations of CO2 increase, the impact on temperature reduces rapidly in a logarithmic curve. The climate models assume a temperature sensitivity to CO2 that is 5 to 10 times greater than measures based on observation and experiment support.
The forcing effect of CO2 cannot be proved from first principles (by formal theoretical arguments). The climate models assume a relatively high CO2 forcing effect and a relatively low solar forcing effect. A relatively higher solar forcing assumption would mean a commensurately lower CO2 forcing assumption with the result that you would get a much lower temperature rise for increases in CO2. Arguably, the assumptions in the climate models for solar forcing are too low as they contradict the observed rate of warming in the earlier part of the 20th century before there were a lot of human emissions of CO2 but when there was a good correlation with solar activity. If the assumptions are wrong, the climate model predictions for temperature increases for an increase in CO2 would be much lower.
The AGW computer models predict we would see global warming in the troposphere in the patch of air 10 km above the tropics. Weather balloons measuring the atmosphere cannot find any sign of the predicted “hotspot”.
There is a large disagreement between the predictions of the climate models in relation to clouds and rain and what has been measured and observed in real life.
When the models have been tested by looking backwards and trying to reproduce past climate which we know, they fail miserably. The observed 20th-century temperature increase was 0.6° C. However, the UN climate models predict a 20th-century increase of 1.6° C to 3.75°C – more than 2.5 to 6.3 times the observed rate of change.
On the face of it, the prima facie evidence from nature suggests that something else affects our climate more than man-made emissions of CO2.
Deficiencies with the economic “leg”
Now let’s consider the deficiencies of the economic leg of the climate models.
The models predict the amount of CO2 in the atmosphere by estimating the population growth and economic growth of every country in the world and then the energy each country will use. This is not science, this is long-range economic forecasting. I feel as qualified as any scientist to assess these estimates.
My experience as a stockbroker has taught me how difficult it is for analysts to successfully model the results of a single company even one or two years into the future. Trying to predict the growth in the whole world’s economy over 100 years is fraught with difficulty. No one can infallibly predict the future. The slightest error in any assumption can produce a totally ridiculous result especially when the error is extrapolated over 100 years. Each of the 6 economic scenarios used in the models could easily be totally wrong and unrealistic. The level of uncertainty is huge which is why we should be very careful about placing too much faith in climate models.
The models are programmed to exaggerate economic growth which, in turn, results in excessive future warming estimates.
For example, the models assume in one scenario that population will rise to 15 billion by 2100 whereas most demographers predict population should peak at 9 billion by 2050, followed by a rapid decline.
The models use the going market exchange rate to convert each country’s GDP into a universal standard This is a faulty technique which leads to unrealistic future growth rates for developing countries, in many cases far greater than has ever been observed in any country in history. In one scenario countries such as Libya, Algeria, Tunisia and Israel are projected to have higher per capita GDP than the US in 2100. Does this sound likely?
Some of the 35 different levels of potential man-made CO2 emissions which are put through the climate models by the IPCC are extremely high and extremely improbable and result in high temperature predictions. The result is 245 temperature predictions. The IPCC treats all predictions as equally sound. There is no preference for any prediction and they are not assigned probabilities of occurrence.
This is presented to us as consensus!
Because it is too difficult to estimate the impact, the IPCC also assumes that man has no adaptive capacity to react to climate change. The IPCC assumes that there will be no further technological development over the next 100 years. This is a highly unrealistic assumption. It greatly increases the IPCC’s estimates of the cost of climate change.
In summary, the scientific and economic assumptions used in the climate models exaggerate the temperature effect for a rise in CO2. If more realistic assumptions are used, the climate models suggest a warming of a modest 1.5°C by 2100, representing a warming rate of 0.15°C per decade. This amount of warming was the opinion of the scientific guru of global warming alarmists, James Hansen, in 2007. This is in line with the satellite observations from 1979 to 2005 which indicate that temperature is rising at the rate of 0.12°C per decade.
Man has adapted to temperature swings throughout time. A 1.5°C change over 100 years is neither unprecedented nor catastrophic.
It should be pointed out that the IPCC does not state that the global warming it predicts will lead to catastrophes. Neither the scientific theory nor the hard evidence on the ground nor the considered views of reputable climate scientists supports the Gore-style views of the alarmists that we are on the road to catastrophe, as a result of the planet reaching some “irreversible tipping point”. Catastrophic climate views and concepts such as irreversible tipping points are at the extreme end of the alarmist camp, exemplified by the Stern Review, Al Gore, Tim Flannery, the Greens and, lately, the Rudd Government. This is not the majority view of the science of global warming as expressed by the IPCC.
The conventional scientific wisdom, spelled out by the 2007 report of the IPCC is that the world will warm by the year 2100 between 1.8°C and 4°C. The notion that if this were to occur there would be a disaster which justifies us taking radical action now to cut back on CO2 emissions in order to “save the planet” is without foundation.
Public policy grounds
Basis for sound policy making
Governments are frequently faced with the task of deciding rationally the most sensible policy course to take against a background of fundamental uncertainty. We need to avoid being paralysed into complete inactivity. But we also need to avoid being panicked into what could be disastrously damaging action.
There has been no independent enquiry by the Australian Government, based on sworn evidence and after cross-examination, to determine the accuracy of the claims made by the IPCC and other alarmists. The Rudd Government (and the Howard Government before it) has failed to carry out adequate due diligence before proposing to introduce drastic legislation.
In the light of evidence of manipulation of data and suppression of dissenting views, it is all the more incumbent upon a government to hold an enquiry to try to determine the actual state of the science and the nature and likelihood of the potential threat we face from climate change. The findings of such an enquiry would then provide the basis for constructing a suitable policy response.
The Key Policy Question
Using the most pessimistic of the IPCC is scenarios of economic growth, Sir Nigel Lawson (former Chancellor in Margaret Thatcher’s U.K. Government) has calculated that, using a cost of global warming 3% of GDP in the developed world and 10% in the developing world, in a hundred years time people in the developed world will be 2.6 times as well off as they are today instead of 2.7 times. People in the developing world would be 8.5 times as well off as they are today instead of 9.5 times.
Household consumption expenditure per person is the most appropriate indicator of wealth. The Garnaut report concluded that, in Australia, household consumption expenditure in 2100 with unmitigated growth in global CO2 emissions will be $102,000 per person in today’s dollars instead of $108,000 per person which it would otherwise be without growth in global CO2 emissions. This compares with today’s household consumption expenditure of $29,000 per person. This means that our descendants will have 3 .5 times our wealth if we do nothing about reducing CO2 emissions.
Even on the basis of the IPCC’s flawed economic assumptions as to the threat facing the planet, the key policy question is: how great a sacrifice is it either reasonable or realistic to ask the present generation, particularly the present generation in the developing world, to make in the hope of avoiding this outcome? How big a sacrifice should the present generation and their children be asked to make in order to make it more likely that the generation 100 years hence, instead of being many times as well off as we are today, will be even better off?
Ethical and Moral Considerations
The Prime Minister accuses deniers of not caring about the future of their children and grandchildren. But the ethical issue is not just about how much we care for our children and more distant generations but also how much we care about the present generation and especially those in the developing world and their children.
The key to the vast improvements in our standard of living over the last century has been widespread affordable energy. A permanent flow of electricity has powered an explosion in wealth that has enabled millions to live long and fulfilling lives free from crushing hardship. Indeed, the world suffers from an energy shortage, not too much energy.
World energy demand should triple by 2050.
Are we to tell the 2 billion people who don’t have electricity in the world today that they can’t have it? Or the 3 billion people who will build the earth’s population from 6 billion to 9 billion by 2050 that they can’t have the advantages that electricity brings? Don’t these people deserve a fair shake at life?
There is no turning back the clock- we cannot uninvent electricity. We cannot revert to a lifestyle of circa 1900 with no cars, where people lived within walking distance of work and men and women endured lives of drudgery and backbreaking toil. The poorest people in the world want to escape poverty by gaining the benefits that affordable electricity brings - heating, cooling, cooking, refrigeration, lighting, clean water, labour saving devices and mobility. These are all things we, in developed nations, take for granted.
Who is going to prevent the poor of the world from having electricity? And, if they get it, does that mean the rest of us will have to reduce our CO2 emissions even further?
In the absence of some technology breakthrough or the widespread use of nuclear power to generate electricity, the only way to reduce CO2 emissions is to reduce energy use. How much of a reduction in energy use should we demand from ourselves and our children in order to pass on a negligible temperature impact to our much wealthier, more distant descendants? If a warmer world is not going to result in a climate catastrophe, what serious lifestyle degradations should we impose upon ourselves and our kids now in favour of our great grandkids?
People tell me that they don’t mind paying an insurance policy to “save the planet”. Firstly, the majority view of the science of global warming says the planet is not threatened with catastrophe. Secondly, they have in mind that a 50 % reduction in CO2 emissions can be done at low cost and with no major impact on their lifestyle. Unfortunately, the change in lifestyle to achieve a 50% reduction would be extremely dramatic and extremely costly.
I wouldn’t be happy to pay a premium for house and contents insurance if it cost half my salary, the policy required me to stay at home 6 days a week and there was little likelihood that I would be reimbursed if the house burnt down. I would self-insure and come up with other solutions to the problem.
When people are confronted with the true cost of a 50% reduction in CO2 emissions and the likely impact on temperature they will assess them as an unfair price for the present generation and their kids to pay in order that their descendants in 100 years will be even better off than we already know they will be.
Mitigation and its Costs
Mitigation means seeking to control the world’s temperature by severely limiting CO2 emissions.
According to the Hadley Centre, a reduction of 70% in global CO2 emissions is needed to stabilise concentrations in the atmosphere. This is not a sensible course to take.
What temperature effects would these cuts have? It has been demonstrated by numerous scientists that the Kyoto Protocol, if it had been adhered to by every signatory including the US, would only reduce surface temperature by only 0.07 degrees C in 50 years. In other words, a negligible temperature decline.
The IPCC says that to stabilise CO2 in the atmosphere at 550 ppm by 2050 would cause a loss of between 1% and 5% of that year’s global GDP. This is a huge sum. In practice the costs would be borne entirely by the people of the developed world. The IPCC also says that the costs and benefits of this mitigation are broadly comparable in magnitude.
Suppressing CO2 emissions by 70% will seriously damage any economy. Aggressive action to cut Australia’s domestic and global carbon emissions would destroy the competitive advantage our relatively cheaper coal-based electricity delivers industry. It would cause is our dollar to fall, increasing the price of crude and oil and petrol. It would encourage the rest of the world to stop buying Australian exports and it would increase our current account deficit by reducing our export income.
How much would this cost Australia? I cannot put a figure on the cost but it won’t be minor. Terry McCrann of “The Australian” newspaper has calculated that if a 3% per annum average growth rate in our economy is reduced to a 2.5% per annum average growth rate from 2007 up until 2050, by 2050, the cumulative costs over 43 years would be $10 trillion of lost income and around $4 trillion of lost tax revenues (in today’s dollars).
The Australian economy today is just over $1 trillion so the loss would be tantamount to closing the Australian economy down completely for 10 years.
For Australia, there are four scenarios. We cut along with the whole world. Nobody cuts. We cut but the rest of the world does not. The rest of the world cuts but we do not.
Since Australia contributes only 1.5% of global human CO2 emissions, in none of these scenarios does our cutting or not cutting make the slightest difference to the global greenhouse outcome.
Assuming that Rudd’s emissions trading schemed is successful in reducing CO2 emissions, is this vast cost a reasonable sacrifice to ask of the present generation in the hope of avoiding the prospect that our descendants in 100 years may have income of $108,000 per person instead of income of $102,000 per person in today’s dollars? I don’t think so.
The Stern Review, in contrast to the IPCC, argues that earlier and more stringent mitigation is more economically justified. However, the Stern Review inflates the damages of global warming to a figure substantially greater than the IPCC’s range of 1% to 5% of global GDP by assuming a discount rate of, at most, 2%. The World Bank customarily uses a discount rate of some 8% to 10% in evaluating long lived projects. With a higher, more normal discount rate such as that used by the World Bank, the argument for radical action over global warming now collapses completely on conventional cost benefit calculations.
Necessity for Global Agreement if Mitigation is to be Effective
If the chosen policy for addressing global warming is to cut back on carbon dioxide emissions, the policy clearly has to be global to be effective. A global agreement is not likely.
A cutback of 70% is only theoretically possible if there is a global agreement in which the developing countries participate to a significant extent. The overriding priority of both China and India, soon to be the two greatest emitters in the world, is to continue along the path of rapid economic growth in order to alleviate the widespread poverty which affects their people.
Even if an agreement was signed in which the developing countries agreed to participate to a significant extent (and this is not going to happen), a cutback of this kind would require drastic changes in the way in which we produce and consume energy.
Going it Alone
Imposing a unilateral reduction of 60% of CO2 emissions, as the UK has, is of little point while other countries do not go along. It is a futile and conceited moral gesture. If reductions in CO2 emissions in one country are only replaced by increased CO2 emissions in another country as industry shifts to that country, there will be little if any net reduction in global emissions at all.
Rudd appears to be prepared to “go it alone” by insisting that his CPRS legislation is passed before any international agreement is signed. If the CPRS legislation is passed before Copenhagen, Australia will be locked in to mandatory CO2 cuts even if the rest of the world doesn’t follow suit or even commit to follow suit.
If we cut and nobody else does, the consequences will be punitively huge. The Australian Treasury has not even modelled the consequences of this option, even though it is the most likely outcome if we pass the CPRS before Copenhagen.
Conclusions on Mitigation as a Policy
Cutting CO2 emissions cost trillions of dollars for miniscule temperature effect late in the century. As the world-renowned Swedish “sceptical environmentalist” Bjorn Lomborg has quite clearly demonstrated, it is the least effective and most expensive way of dealing with the possible problems of global warming – heat deaths, sea level rise, more intense hurricanes, more flooding, more malaria, poverty and starvation.
These problems are much bigger problems for countries that are poor than for countries that are wealthy.
By staying wealthy, by concentrating on economic development and by adopting smarter solutions, we and our much wealthier descendants can deal with all these problems far more effectively and with far less cost.
The money being spent in mitigation would be considerably better employed helping the disadvantaged to adapt until there is more cogent and settled science.
Energy Alternatives to Coal
World energy demand should triple by 2050. Energy sources that can produce 100% to 300% of present world power without greenhouse gas emissions (apart from nuclear) do not exist. Alternative sources of electricity – solar, wind and biofuels cannot replace the existing amount of electricity we need. Carbon capture and storage technology means that “clean coal” will not be commercially viable for at least 20 to 30 years.
Nuclear energy can replace existing electricity sources but the Rudd government refuses to consider this option. All but four of the G20 nations use nuclear energy with the UK announcing last week an extra 10 nuclear power stations would be built there. The Rudd government refuses to have a debate about the role of nuclear energy as an alternative means of reducing CO2 emissions.
Rudd’s Mitigation Policy - the ETS.
Instead, the Rudd Government has introduced its Emissions Trading Scheme. It is essentially a government-controlled, administrative rationing system, in which the rations can subsequently be traded.
The policy aims at a 5% cut in Australia’s CO2 emissions by 2020. This sounds innocuous but the Garnaut Report says a 5% cut is actually a far more punishing 25% in per capita terms.
In both theory and practice, this scheme has little to commend it.
For those industries where it applies, it is anti-competitive, since permits are issued to existing emitters and not to new entrants who have to purchase them from the market.
In general the administrative allocation system scores badly on transparency and lends itself to lobbying, corruption, rent-seeking and abuse of one kind or another. For the market-makers and other middle men who trade in CO2 emissions permits, it presents a lucrative and growing business opportunity.
The ETS has huge administrative and bureaucratic costs. These make it almost impossible to reverse. It will be virtually impossible to unravel the financial instruments, the carbon rights, the hedging and derivative instruments that will be set up. The financial markets would resist vigorously to the point of lengthy litigation surrendering the established rights.
But the Rudd Government politicians like the ETS because they can pretend it is not a tax.
So we are being landed with a poor policy which very few economists prefer and which has very obvious defects because this is the easiest political way out for the Rudd Government.
If you seriously wish to put in place a least cost means of genuinely reducing carbon dioxide emissions a simple carbon tax should be imposed across the board.
Introducing a carbon tax is the only practical means of discovering how expensive carbon dioxide needs to be in order to stimulate the change in behaviour necessary to stabilise emissions.
A carbon tax is more transparent and more flexible. Should the alarmists be right on the science, you can ramp up the tax but, should they be wrong, you can lower or eliminate the tax.
The reason why governments shy away from a carbon tax is that, for political reasons, a new tax will be unpopular. Disguising the tax through an emissions trading system is far more attractive to politicians. It also creates a business community with a vested interest in the trading system, even if it is largely a scam, which can be counted on to support government policy on that account. We are already witnessing business rent-seekers, who stand to make lucrative profits from an ETS, demanding that the CPRS be passed in order to give them “business certainty”.
These business people are not betting on global warming, but on global warming policies. Their idea is to position themselves to profit from government programs and then lobby for those government programs. Invest in something that is worthless (CO2 credits, ethanol, wind) and then lobby to make it mandatory.
Adaptation is a better Policy than Mitigation
Adaptation has not been adequately considered as an alternative response to the conventional wisdom of seeking to control the world’s temperature by severely limiting CO2 emissions.
Adaptation is much more cost-effective than mitigation. None of the adverse impacts identified by the IPCC are new ones. Directly addressing these problems will bring substantial benefits and will do so even if there is no further global warming at all or it turns out that the AGW theory has been greatly exaggerated.
Adaptation allows us to tailor our response to each impact in various regions. Warming brings benefits as well as costs. Adaptation enables us to pocket the benefits of global warming while diminishing the costs. The beneficial results of adaptation are far quicker to arise than the benefits from mitigation. Adaptation does not require an enforceable global agreement.
What we should do
The first and most essential thing to do is to block Rudd’s CPRS legislation.
This is bad policy being introduced in a dishonest fashion in order to make life easier for politicians.
It is a gross overreaction to the possible “threats” we may face from the climate warming 3 degrees C over 100 years, especially considering the uncertainty of the science and the lack of due diligence into it.
It is dishonest in that it is designed to disguise the true costs that consumers will pay if it is implemented and to create vested business interests who are, in effect, bribed to support the policy.
What possible justification could there be for Australia to embark on huge CO2 cuts knowing it could not make any difference to global CO2 outcomes because the main emitters refuse to follow?
Doing nothing is better than doing something stupid but there are a number of sensible things that could be done and are being done.
We should undertake a judicial inquiry, with evidence given on oath and subject to cross examination, to get a better understanding of the actual state of the science, the nature of any potential threats and the likelihood of them occurring. The result will help us to devise appropriate policy responses. We cannot continue to operate on the basis of treating as gospel what the faceless bureaucrats and 50 or so climate scientists at the IPCC tell us.
Funding serious research into climate science is the next step, especially funding for reputable climate scientists who are sceptical of the majority view.
Other areas include funding research into reduced carbon and non-carbon sources of energy, research into technologies that might assist the process of adaptation such as desalination and research into geo-engineering technologies that might enable mankind to cool the planet in relatively short order should the need to become pressing.
Introducing policies which discourages land clearing and increases tree planting seems an obvious solution to increased CO2 in the atmosphere.
We should also commence some adaption policies from which we will benefit even if the AGW theory turns out to be wrong. The main idea is to “waterproof” south eastern Australia which is expected to become drier, whether or not the IPCC predictions are right. This could be through pumping fresh water from sea-flowing northern rivers, recycled waste water or desalination plants into the Murray Darling Basin and through prevention of water wastage through evaporation and leakage from irrigation systems.
We must develop a role for nuclear energy in producing our energy needs if it is proved to be needed.
Finally, if the global temperature begins to rise again, we can consider the implementation of a carbon tax.