Monday, April 30, 2007

A crude analogy

Today I’d like to pose a scenario to think about. Imagine you live with your family in an enormous 5 bedroom house in a small, mostly self-sufficient development. There are 3 other properties in the development. There’s an apartment block with 12 small apartments. There’s a little complex of 12 luxury townhouse villas. And there’s 20 families living in a commune, growing their own food. It’s an eclectic community but everyone gets on well.

As part of its self-sufficient nature, the development isn’t connected to town sewerage. Instead there’s a large septic tank that breaks down sewage so it can be safely used as fertiliser on the farm and water for gardens.

But there’s a looming problem. The septic tank is almost at capacity. Within a couple of years at current usage, it’s going to reach capacity and regularly start overflowing raw sewage, mainly onto your property and the commune. A new tank is prohibitively expensive. And usage is set to increase: a couple of new villas are being built and the commune has plans to expand.

The residents convene a meeting and start by looking at everyone’s sewage levels. The 12 families in the luxury villas use an enormous amount of water and contribute correspondingly enormous amounts of sewage to the tank. The 12 families in the apartment block contribute only about half as much and the 20 families in the commune even less. Your family doesn’t contribute very much in the scheme of things, but with a huge house and garden, still contributes more than any other family in the whole place – even the rapacious villa dwellers.

The residents agree that, to start with, the two biggest contributors – the luxury villas and the apartments – will reduce their contributions by 10%. Your family won’t have to reduce its sewage but you agree not to increase it by more than a very small amount. Everyone agrees that the commune, which doesn’t produce much sewage anyway and is considerably poorer than everyone else, won’t have to do anything just yet but will monitor its sewage.

No doubt you can see where I’m going with this, but let’s continue.

You don’t want to be wallowing in sewage within the next couple of years, so you sit down with your family and work out a plan.

One member of the family has talked to a plumber and reckons that total sewage inflows have to be cut by at least 60% to keep the tank operating pretty much within capacity with only maybe an occasional spill. She suggests that the family aims to get its sewage down to 60% below its current level, by taking shorter showers, diverting some of the shower water to use on the garden and getting more efficient appliances.

Another family member reckons this will be way too hard and way too expensive. He’s had a chat to the owners of the luxury villas and they reckon it’s too expensive too. He reckons the best option is to go along with the villa owners and not do anything right now.

Now, it’s obvious that neither of these is going to solve the problem we face. Both will lead to our backyard being inundated with sewage in short time.

Of course, what we’re really talking about in this crude allegory is climate change. Australia is the wealthy family with a big house. The US is the complex of luxury villas. Europe is the apartment block and the developing countries are the commune. The two family members’ approaches represent the dominant approaches from political parties (and green groups) in Australia. Green groups focus way too much on domestic emission reductions and ignore Prime Minister Howard’s valid point that our domestic emissions are but a small part of the problem. The Liberal Government though has been grossly irresponsible: it has done its best to undermine any international solution to the problem and has let the US off the hook. This, rather than failing to set a domestic target or not doing enough to reduce emissions, is its biggest policy failing in my view. It hasn't recognised the precarious position that we’re in, as both a wealthy contributor to the problem but also (unlike the US and Europe) a country that is going to be disproportionately affected by climate change.

Australia should be forcibly arguing for action in the international sphere. And we should take substantial action domestically: not because that will itself make a huge dent in the problem but because it’s the right thing to do and, perhaps more importantly, it’s an absolute prerequisite to arguing strongly (as we must) for other, bigger, countries to take action that will make a big impact.

Most of our neighbours are showing a remarkable level of neighbourliness in being prepared to make big sacrifices for a problem that affects us a lot more than it affects them. It’s time to get on board and get the neighbours all pulling in the same direction.


Thursday, April 26, 2007

Environment, economy and climate change

I was part of a discussion panel on this issue on Triple J’s current affairs show Hack on Tuesday night, concentrating particularly on the economic implications of setting a target for reducing greenhouse gas emissions. There were some interesting perspectives.

You can listen to it here on the Hack website (and I’m on about 21 and a half minutes into the show, if you’re interested!).

Wednesday, April 25, 2007


Via the new Ecocene blog, I’ve been alerted to an ‘ecolibertarian’ blog authored by David Reevely, a Canadian journalist with the Ottawa Citizen. David is “working out how to be a libertarian and an environmentalist at the same time” and has some great posts about environmental economics and environmental policy from a libertarian / small government perspective.

Two recent posts that caught my eye: commentary on the proposal to introduce a congestion charge for driving in Manhattan and the difficulties in trying to value a tree.

It’s well worth a look.

Tuesday, April 24, 2007

Water water everywhere… except the catchments

Rain has been bucketing down in Sydney over the last couple of days but it has been a different story in the catchments that receive the water for Sydney’s water supply. According to the Sydney Morning Herald, 80 millimetres has fallen in the city’s north and 40-50 mm in the east, but only 10-20 mm in the west and less than 10 in the catchment areas.

While emergency services in the city have been battling overflowing drains, gutters and leaking roofs, dam levels have fallen by 0.3% in the last week.

This underlines the problem with having Sydney’s water supply piped from areas that are much drier than Sydney is.

Some possible solutions? Catching some of the stormwater and diverting it for industrial uses is one. Rainwater tanks for homes are another. A report last week commissioned by the Australian Conservation Foundation, Nature Conservation Council (NSW) and Environment Victoria examined The economics of rainwater tanks and alternative water supply options (pdf).

The findings are not very surprising: water tanks are most cost effective in areas where there are high rainfalls and for houses with large roofs (where they can collect more water). There are plenty of those areas in Sydney. The cost per kilolitre for large tanks in high rainfall areas is less than a small desalination plant and not much higher than a larger plant. When you factor in the reduced pressure on stormwater systems and emergency services that comes from diverting some rainfall during storms into household water tanks, it’s a fair bet that the social cost of water tanks is lower than desalination. When you factor in environmental costs, rainwater tanks become cheaper again: a desalination plant powered entirely from green power, as has been promised by the NSW Government, is a fairly expensive proposition.

However, there’s another very cheap measure that doesn’t get much attention: you can divert rainwater from your downpipes directly onto your garden – or your pool, if you have one. You can buy a diverter for less than $40 (I found a few websites from distributors) and your rainwater can go straight into a hose and out onto the garden. (‘Raingardens’ are popular in the USA).

Now, I don’t know how much this would reduce your water consumption by – after all, gardens are getting watered anyway when it rains – but it’s essentially zero cost and reduces pressure on stormwater systems. And it means your garden gets a thorough soaking when it rains. I lived in a house in Sydney a couple of years ago where the downpipes diverted directly into two garden beds and they rarely needed watering.

For backyard pools, it makes no sense to fill them from mains water when this option is available: an added advantage is that rainwater is much warmer than mains water.

Industrial water recycling and desalination may well be attractive measures as the drought continues: but household level measures can make an important contribution at a modest cost.

Monday, April 23, 2007

Should women be taxed at a lower rate than men?

A fascinating article by economics writer John Garnaut in the Sydney Morning Herald today argues that women should be taxed at lower rates than men.

The reason is that women are more responsive to tax rates than men. If we assume that markets generally work pretty efficiently to allocate goods and services to where they are most useful and valued, then ‘good’ taxes are those that distort market outcomes the least (and those which compensate for market failures and actually help markets operate more efficiently). We should tax things in a way that minimises the extent to which people change their behaviour as a result of the tax.

One of the criticisms of high income tax rates is that it can change people’s behaviour in that it becomes less rewarding to go and work and produce socially useful things. But if, as Garnaut suggests, men tend to go off to work without much regard to the tax rate, whereas women’s decisions on how much to work depend more on the financial rewards, then you can afford to tax men more than women. A 10% increase on income tax that women pay will reduce their incentives to work substantially more than a 10% increase on income tax for men.

Garnaut refers to a study by economists Alberto Alesina, of Harvard University, and Andrea Ichino, of the University of Bologna, which finds that the "optimal" tax rate is much lower for women than for men. It varies from country to country because of different participation rates and cultural factors, but they suggest that women should be taxed at between 60-90% of the rate for men.
[Alesina] and Ichino argue governments could get away with reducing the female tax rate by a lot, and increasing the male rate by only a little, without affecting the budget bottom line, because taxpaying women would storm into the labour force but taxpaying men would be reluctant to retire. Governments would reduce the amount of tax-driven distortion in the economy per unit of revenue.

Another interesting aspect of this argument is that it would have other benefits too:

Men would spend a little more time with their kids. Women would improve their bargaining power within the home.

It would help overcome all kinds of gender discrimination in the workplace, as women would be prepared to work for lower pre-tax wages (because they would still receive more after-tax pay). It would help compensate women for bearing the brunt of maternity and child-rearing.

"From an employer point of view it would then become cheaper to hire women, therefore favouring women employment and their promotion to higher paid jobs," they say.
What an interesting idea. What do you think?

Friday, April 20, 2007

Lawyers leading the way on climate change?

People around the world are starting to sue each other over climate change. There have been some interesting cases and there are more in the pipeline: probably the biggest is California's action against car manufacturers.

There's an article by Richard Ackland in today's Sydney Morning Herald that's worth a read:

It stands to reason that if governments, or their pals in business, don't fix things up, lawyers will enter the void and sue the pants off anyone they can get their hands on. We see it all the time with litigation against cigarette manufacturers, the miners and purveyors of asbestos, and the pushers of fatty foodstuffs ("cheeseburger litigation")...

So it's only a matter of time before a global warming litigation industry builds up a decent head of steam. One would think the scientific evidence is sufficiently in to meet a civil standard of proof.

I've written before about climate change litigation, both here and at the now-dormant Australian environmental law blog, ozelaw.

I have two main thoughts on climate change litigation:

  • It's a lousy way to influence climate change policy or to do anything about climate change;

  • Climate change cases will become less common, not more common.

Litigation, if it's good for resolving any disputes, is good for resolving simple disputes between two parties. Climate change is a big, global, complicated problem, where everyone in the world is a potential plaintiff (we'll all be affected to some extent by climate change) and everyone is a potential defendant (we all contribute to it). Attributing blame and working out damages is fraught to say the least.

In my view, climate change litigation will not do much to prompt good policy. And I think there's a danger if sympathetic judges overreach and these cases are successful.

Take the California vs car-makers case, for example. California argues that it will incur costs due to global warming contributed to by people driving cars made by car-makers. I don't doubt that's true. But should car-makers compensate the Californian government for that?

I'm sure the Californian government itself has undertaken a lot of action and made a lot of decisions over the last century that has contributed to global warming. Should the government of Tuvalu, low-lying Pacific island that's greatly affected by climate change, sue the US for the industry support it has provided to car manufacturers in the past? Should it sue the State of California for not banning cars as soon as global warming hit everyone's radar? Would California then seek a contribution from Brazil or Indonesia or Australia for allowing forests to be felled?

This is a problem that requires global co-operative solutions and I don't think legal blame games are going to help.

Climate change cases have been a good way to get climate change on the agenda, because the media seems to love a good legal stoush: where big global dramas get played out in the microcosm of a courtroom, reduced to some bite sized legal arguments and decided neatly by a judge. (If you ever actually read these cases though, they tend to come down to something arid like whether section 35ZZ requires a consideration of all "relevant" factors or only all "pertinent" factors and whether there's a difference between "pertinent" and "relevant". The big issues of principle are notably absent). Anyway, there's no doubt that climate change is on the agenda now - I'm not sure what more these cases will achieve.

Still, I'll be watching with interest...

Thursday, April 12, 2007

Hot rocks: a cheap and clean energy solution?

There’s been a flurry of media reports in recent weeks about the promise of geothermal energy in Australia:

PEOPLE could be using "green nuclear" energy in their homes within three years as entrepreneurs rush to produce zero-emissions electricity. Geodynamics Ltd told the Australian Stock Exchange yesterday it had sped up plans to harness the heat generated by natural nuclear activity deep beneath the central Australian desert. The company plans to pipe high-pressure hot water from the granite bedrock four kilometres beneath the Queensland-South Australia border, where the slow decay of potassium, thorium and uranium generates temperatures as high as 300 degrees...

Dr Williams expects the company to send electricity to the national power grid by 2010 and later directly to western Sydney. By 2015, it could produce as much electricity as the Snowy Mountains hydro scheme. Some scientists say hot-rocks technology could soon deliver huge volumes of economically viable power, thanks to the continent having the hottest and most geologically favourable granite deposits on earth.
The extent to which this technology is exploited comes down to its economics, relative to other energy sources:

The greatest impediment to the renewable energy industry is that the nation's electricity is among the cheapest in the world, thanks to huge deposits of high-grade coal. But geothermal energy is expected to be economically viable after a moderate cost is imposed on greenhouse gas emissions.

Geodynamic, assisted by $11.8 million in federal grants, said it would produce one megawatt of electricity for about $45 an hour - compared with coal power of about $35. The Prime Minister's taskforce on nuclear energy estimated the cost of nuclear energy at $40-$65, "clean coal" at $50-$100 and photovoltaic solar energy as high as $120.
So what should we do about geothermal power? Should we be investing in it? Or in solar and wind? Or in clean coal?

A low risk strategy would seem to be to start putting a price on greenhouse emissions, through some kind of carbon tax or emissions trading scheme, and letting investors put their money into what they assess to be the technologies that offer the best opportunities for power that’s relatively cheap and low-emission. These could be kick-started, where appropriate, by modest grants.

Of course, you don’t actually need to put a price on emissions to encourage investors to put money into researching and commercialising these technologies. There’s no price on emissions at the moment – coal power stations can emit all the carbon dioxide they like and they don’t have to pay a cent – but investment is occurring. The reason is that everyone realises there will be a price on emissions in the future and it’s time to start investing accordingly.

I suspect this is one of the reasons we’ve seen the apparent paradox of industries that stand to lose from carbon taxes and the like actually advocating that governments introduce a clear carbon price. If they have a good idea what the price on emissions will be over the coming decades, they can plan how much to stick with coal or oil and how much to invest in alternatives. At the moment, all they can do is speculate.

Monday, April 02, 2007

Earth Hour: The wrap up

On Friday I posted about why I’d be turning off the lights for Earth Hour. Cat and I celebrated Sydney’s Earth Hour on Saturday night at our place with some friends and candlelit drinks and nibbles. It was very pleasant.

It seems to have been quite a success. According to Energy Australia, electricity use in the CBD fell by 10%, saving emissions equivalent to taking 50,000 cars off the road for an hour. 60,000 households and businesses signed up officially and I’ve read one estimate of 2.2 million people taking part (which sounds unrealistically high to me, but it was pretty big). I didn’t see the city but some of the pictures I’ve seen are quite impressive. And it attracted attention around the world (eg, this CNN report).

The big outcome to my mind is to re-energise people about what they can do in their homes and businesses.

I had meant to go for a walk to check out the neighbourhood response, but I got too caught up in conversation. By the time we thought of checking whether earth hour was over, it was 9 pm. But it was pretty encouraging from our balcony. We’ve got a good view of three other apartment blocks. There were very few lights on in any of them, although a large part of that might have just been people out on a Saturday night. I could see at least half a dozen apartments though where people were home and which were lit only by candles and a couple of others with only the TV on.

Listed below are some other blog reports on people’s Earth Hour experiences (pretty much a random selection from Google BlogSearch of people who devoted more than a couple of sentences to their own experiences). There’s quite few!

I’m pretty encouraged by the whole thing. I think the climate change debate is often dominated by extreme positions: acopalypse versus myth. The public policy debate is important but it would be nice if the shrill voices on both sides could be sidelined by a sensible majority taking the steps that they can take personally and easily to start to deal with this issue. Yes, difficult decisions will need to be made but there’s a whole lot of easy ones that can be made right now: by businesses and individuals and not by governments. Lots of people on Saturday night showed they’re keen.

Other Earth Hour experiences: