Tuesday, July 25, 2006
To be pragmatic and rational in this debate, the starting point is that if the scientists are right, then global warming implies colossal risks for mankind, and policies should actively try to minimise them.
Then the task is to achieve the most effective response at the minimum cost. Governments can help foster technology development, as the Howard and Bracks governments are doing - but the real job is to put in place a structure that will see those technologies used...
Suppose we test the technology, we find it works, but (inevitably) at a higher cost than doing things the old way. What happens then?
With the policies we have now, nothing would happen. Companies will not make philanthropic gestures by choosing new expensive technologies over old cheap ones. Without a price mechanism to give firms an incentive to choose (and retrofit) new low-emission technologies, they won't be used.
By harnessing market forces, a broad carbon tax gives you more bang for your buck than alternative policies: it's cheaper, more effective and - I would argue - fairer.
It's cheaper than, say, subsidising renewable energy or research into 'clean coal' because, by simply setting a price on carbon emissions and letting industry take whatever measures they like to respond to that price incentive, industry will take the cheapest measures. As Colebatch says:
[A report commisioned by the Victorian government] ranked renewable energy as the most expensive option apart from carbon capture and storage(!). Far more cost-effective are improving the efficiency of energy use, making existing generators more energy-efficient, switching from coal to gas, and shutting down heavily polluting plants (such as Hazelwood) to install energy-efficient ones.
Instead, we have Hazelwood given an extended lease of life, with no retrofit to use clean coal technologies, while Victorians will subsidise the development of a wind industry here.
It's more effective because you're providing an incentive to reduce emissions whatever their source. Setting a minimum target for the use of renewable energy is good but promoting renewable energy is only one part of the equation. Using our existing energy more efficiently is at least as important.
And it's fairer because it looks at all sources and equally penalises emissions from all industries. Rather than targeting renewables or coal, it provides a price incentive that applies to all energy sources and all energy uses.
Essentially it allows people to make their own choices about how best to reduce their emissions. If carbon is priced equally across different energy sources, sectors and industries, consumers and businesses can ultimately choose how to respond without the costs of those choices being distorted by different policies applied to different sectors.
Monday, July 17, 2006
The aim of the ozelaw blog is to bring news, commentary and analysis on environmental law in Australia.
I've set up the ozelaw blog because there doesn't seem to be much in the way of online sources of up-to-date information and, in particular, discussion and comment on trends in Australian environmental law.
Hopefully the ozelaw blog will become a forum for those interested in environmental law and environmental policy in Australia to learn and share their thoughts and experience. Hopefully it will also be a useful resource for people looking for general information on Australian environmental law.
The blog is in its early days and we're just starting to get a few contributors together but there's a few posts up including one on Friday's decision by the Australian Federal Court to allow the Humane Society International to bring an action challenging Japanese whaling in Australia's Antarctic waters.
I don't intend to do much writing there as I'm already pretty busy with this blog, work and uni (and, you know, having a life and stuff). So hopefully the blog will gather some good contributors and some momentum of its own.
Anyway, if you're interested in environmental law, have a look.
Friday, July 14, 2006
In NSW, the government is achieving its environmental aims of returning environmental flows by purchasing these flows directly in the market:
The New South Wales Government has begun buying water from the Macquarie and Lachlan valleys to return to the Macquarie Marshes. The Riverbank program will see $105 million spent on buying back water from licence holders over the next four years to replenish the state's wetlands. Environment Minister Bob Debus will visit Dubbo today and says expressions of interest are being sought from licence holders wishing to sell their water.
Meanwhile in Victoria, farmers are complaining that water trading is "destroying local farms":
The Parliamentary Secretary responsible for water, Malcolm Turnbull, has met farmers in Shepparton. They have told him they cannot compete for local water which is being sent down the Murray to irrigate vineyards and almond farms, and that they enjoy tax breaks through managed investment schemes (MIS).
This second story illustrates one of the limitations of markets: as I’ve observed before in relation to water markets, they only deliver the most efficient allocation if the economic system in which they operate does not include other inefficiencies (such as unequal tax treatment). If that is not the case, introducing trading can actually lead to a less efficient allocation than before.
Wednesday, July 12, 2006
- suggests that the US is in breach of its World Trade Organisation (WTO) obligations by unfairly subsidising energy; and
- proposes a global carbon tax as an alternative to the global emissions trading system in the Kyoto Protocol.
The global carbon tax idea is not new but it’s nice to see its exposition by an economist with Stiglitz’s profile.
Tuesday, July 11, 2006
The main messages I took away:
- Global oil production will inevitably peak and start declining in the coming years or few decades at the most;
- There is still plenty of oil but what remains is getting more and more expensive to extract;
Some of that increased expense will be offset by improving technologies as higher oil prices encourage investment in oil production;
- Oil consumption is rising;
- Oil prices will rise;
- Rising oil prices will make alternatives commercially viable. These alternatives include biofuels, tar shales and coal liquefaction (renewable energy and nuclear didn’t get much of a mention). These alternatives all have disadvantages, including serious environmental impacts.
- There is a substantial lead time in developing alternative liquid energy sources. This leads many analysts to fear that we won’t respond quickly enough to the peak oil problem, possibly leading to large and sudden price hikes, shortages and economic dislocations like those seen in the 1970s oil shocks, but potentially on a larger scale.
- Working on the demand side of the issue – ie, reducing our need for oil consumption through more efficient technologies and urban planning – is necessary to reduce the likelihood and severity of economic shocks.
Nevertheless, there’s certainly a lot of commonality to the peak oil and global warming issues. And I think that a carbon tax – which will encourage investment in energy efficiency and renewable energies – and discourage consumption of fossil fuels and greenhouse gas emissions – is looking more and more sensible from an energy security perspective as well as an environmental one. The single most effective way to position ourselves for a future where energy is more expensive must be to price it more appropriately now.