Environmental impact assessment: is it efficient?

For anyone who's still interested, some more thoughts on whether it's worthwhile to carry out environmental impact assessment for large projects that make a relatively minor contribution to a large problem...

Following last week's discussion on EIA, I think it’s useful to look at the economics of EIA, that is, compare the economic costs and benefits of assessing projects, granting or refusing consent and imposing conditions.

The costs are:

• the cost of the assessment process: the cost to the project proponent of engaging consultants to do an initial assessment of the environmental impact and prepare an environmental impact assessment; the cost to government of considering the impacts, making its own enquiries where necessary and making a decision about consent and conditions; and the cost to third parties of informing themselves about impacts and making submissions to government.
  
• the cost to the proponent of the project being refused or the cost of taking extra measures to comply with conditions of consent.

The benefits are the reduction in external environmental costs imposed on the community by the proposed development. Those benefits arise either because (in extreme cases) the development is refused consent or because conditions are imposed which ameliorate negative impacts of the development.

EIA is therefore efficient from a cost-benefit point of view when the negative externalities that are removed because of conditions (or consent being refused) are greater than the cost to the proponent of complying with the conditions plus the cost to government, the proponent and other interested parties of going through the EIA process.

The benefits are therefore likely to outweigh the costs when the negative impacts of the development are easily identified and can be reduced at a reasonable cost. The EIA process for the bald hills windfarm (see my earlier post) was a classic case where the EIA process could have been efficient but where the decision in my opinion was not. The relevant environmental impacts were the impacts on the orange-bellied parrot and could be estimated as the death of one bird on average every 109 years. I don’t know the cost of the assessment process but the cost of the decision was very substantial: the Minister refused consent to a substantial and otherwise commercially viable energy development. Whether the benefits of that decision outweigh the costs can be debated but, as Harry Clarke has pointed out, the costs of the decision are certainly far higher than the costs of imposing conditions on the development that could have had a far greater benefit for the survival of the parrot: the parrot can be bred in captivity and returned successfully into the wild at a quite modest cost: one that the windfarm could certainly have afforded. This measure could quite cheaply have benefited the parrot population by two or three individuals per year. Compare that to an expensive decision that benefits the population by, on average, one individual every 109 years.

When the environmental impact that you’re worried about is greenhouse emissions from downstream use of a product, I doubt that EIA is an efficient way to attempt to reduce those impacts. First, as discussed last time, the impacts from this particular development are difficult to assess so the assessment process is likely to be difficult and costly. Secondly, the conditions that can be imposed are unlikely to deal with the problem. The only substantive way to reduce emissions from burning the coal from a mine is not to mine it (other than – perhaps - placing some conditions on how it’s processed to, say, reduce the fuel’s moisture content). So the only effective decision the government can make is to approve or not approve the mine. Conditions about how the fuel is used etc really need to be placed on the user of the fuel. As discussed yesterday, since power stations can source their coal from anywhere, it is questionable whether refusing consent for a mine would reduce greenhouse emissions in any case.

Cumulative impacts

A closely related issue is that of ‘cumulative impacts’. This is the ‘death by a thousand cuts’ problem: each development has only a small, possibly trivial, impact on its own but collectively the impact is serious. Assessment of each project on its own fails to protect us from these serious cumulative impacts.

The solution, according to the applicants in the Isaac Plains case, is that the ‘cumulative impacts’ contributed to by a proposed development should be considered by the decision-maker. As I’ve discussed before, this is the basis on which the federal Environment Minister made a decision earlier this year to refuse consent to a windfarm: it would have an impact on the orange-bellied parrot that is trivial on its own. But the impact, in combination with existing and under-construction windfarms, was so serious that the proposed development should be refused: enough was enough and the Minister had to draw a line somewhere.

I’m not sure about this. In principle, a project should be assessed on its own merits. You should compare the costs of this project with the benefits of this project and determine whether the project should go ahead or what conditions should be attached. It seems inappropriate to compare the costs of this project and others like it with the benefits of this project and others like it and then determine whether the project should go ahead or what conditions should be attached – it just seems to be asking the wrong question.

That said, the alternative is not particularly attractive either. Consider a threatened plant affected by development. There are 100 hectares of the plant left. A development proposes to clear 1 hectare of it for some modestly beneficial community infrastructure. The modest community benefits are deemed to outweigh the environmental costs (it’s only one hectare) so the development is approved. Similar developments are proposed again and again and the equation is the same. Imagine that soon there’s only 30 hectares left. Suddenly a project that will bring enormous benefits to the community is proposed but it will involve clearing 10 hectares: a third of the entire distribution of a now critically endangered species. The choice is now difficult: miss out on huge community benefits or push a species to the brink of extinction. Perhaps the choice could have been avoided if, earlier on when 100 hectares were still left, a decision had been made that the cumulative pressures on this plant were likely to be huge over the next few years and so only projects that had either very large benefits or negligible impacts on the plant would be considered.

It is difficult to do this when approving individual projects though. At which stage do you decide that although the benefits of this project exceed the costs of this project, you’ll nevertheless reject the project because, if projects like this keeping being approved, in a couple of years we’ll reach a stage where it’s too costly to approve any more?

The cumulative impacts problem is a big one and EIA is one way of dealing with it. A better way in my opinion is to deal with it at more strategically: either through planning law (eg, zoning certain areas to protect threatened species so that these conflicts don’t emerge) or economic instruments (providing economic incentives to protect and rehabilitate threatened species sites).

And those instruments are a discussion for another day...

Save the whales

The International Whaling Commission wrapped up yesterday and Vincenze and Harry Clarke have good pieces on the issues behind the debate.

Climate change litigation in Australia

Last post I presented the factual scenario underlying a Federal Court decision that was handed down last week. To recap, the federal government is empowered by the Environment Protection and Biodiversity Conservation Act to consider the environmental effect of proposed developments. Specifically, it is required to consider whether a proposed development is likely to have a significant impact on a matter of national environmental significance (which includes world heritage areas among others – see my EPBC Act primer).

Two coal mines were proposed in Northern Queensland, near a World Heritage area containing rainforests and coral reefs. The coal mined from these new mines is mostly intended to be exported and its burning will create annual greenhouse emissions equivalent to one-quarter of Australia’s current annual emissions. Emissions lead to climate change which are predicted to have a devastating impact on tropical rainforests and coral reefs in Australia.

Blake Dawson Waldron has a good summary of what is not a terribly well-written judgment. The applicant in the case argued:

• the Minister’s delegate had not properly considered the ‘downstream’ indirect impacts, ie, damage from climate change from emissions from burning the coal;
• the delegate had not applied the precautionary principle; and
• the delegate had not properly assessed the ‘cumulative impacts’ of coal mining.

As far as I can tell from the judgment, the judge decided that:

• the delegate had considered downstream impacts and he probably didn’t have to anyway;
  
• the precautionary principle isn’t relevant to this decision;
  
• the delegate was not required to look at the cumulative impacts.

Today I’d like to make a few comments and observations about the role of environmental impact assessment (EIA). Tomorrow I’ll look a the economic efficiency of EIA, the use of the precautionary principle and how to look at cumulative impacts.

Environmental impact assessment

As an environmental lawyer, one of the reasons I’m so interested in economic instruments for environmental policy is that environmental law (and traditional environmental impact assessment) does a pretty lousy job at resolving environmental conflicts in many cases. Often it’s just not the right tool.

The reason is that most resource and environmental conflicts involve many players - many sources of a problem, many people affected by those sources: many potential winners and losers. Environmental impact assessment tends to work well when there's one big project that has one or two big impacts that are well defined and understood.

Should governments assess the environmental impacts of projects before approving them? Well, sometimes. Should it assess the greenhouse implications of proposed developments? I’m less sure.

Consider the analytical process of assessing the environmental impact of greenhouse emissions from the burning of coal produced at a proposed coal mine. It’s extremely difficult. What additional emissions will be produced because of this mine? It’s hard to say. If the coal is to be exported, presumably it is to satisfy existing demand. It’s quite likely that the coal burnt would simply have been sourced from some other supplier. If the proposed mine is very large, it’s possible that the additional supply could reduce the world market price of coal, encouraging more to be burnt. But the world market for coal is enormous.

What impact will those additional emissions have on global climate change? What impact will any such increased climate change have on Australia?

Look, it’s not hard to draw conclusions that burning coal produces disproportionately large greenhouse emissions that aggravate climate change causing harm to environments in Australia and around the world, and that burning coal should therefore be discouraged. But the role project-by-project environmental impact assessment is to examine the environmental impact of a particular project. It’s relatively easy to examine impacts on a local environment from a new coal mine, but it’s extremely difficult to examine impacts (locally or globally) from downstream greenhouse gas emissions.

Does that mean we should ignore greenhouse emissions when assessing large projects of this nature? No. But I think we should do it modestly. And it may be that coal mines are not a good target. If it was coal-fired power station, it would be a little different. We could compare its emissions to alternative projects: If we refuse consent to a new coal-fired power station would a lower-emission gas-fired station be built instead? That’s a relevant consideration. We could examine the technology it uses and its likely emissions compared with other new plants being built. We could place conditions on it that require cost-effective measures to be undertaken to reduce its emissions or perhaps even offset them.

It may be that the government can and should consider some of these measures with a coal mine. But it’s more difficult to say 'what is the impact of this project?'.

The difficulty with using project approval to carry out this function is it’s just not very efficient. Hundreds of developments are referred to the federal government each month. Should proponents detail greenhouse emissions for each project and suggest measures to minimise them? Well it’s certainly arguable that they should.

But much more efficient is simply to price greenhouse emissions appropriately, via a carbon tax or emissions trading scheme. Give developers and incentive to reduce emissions themselves. Let them come up with ways to reduce emissions, rather than the government imposing them as conditions.

Of course, this argument is a little trite. It’s all very well to advocate pricing mechanisms, but we don’t have them yet. Isn’t environmental assessment of emissions better than nothing, which is our current alternative? Well yes, I’ll certainly admit that – and that’s why environmentalists are bringing cases like this one. But it’s far from perfect.

What do you think?

Should government project approvals consider greenhouse emissions?

I’m interested in getting readers’ thoughts on the following scenario:

Two coal mines are proposed in Northern Queensland, near a World Heritage area containing rainforests and coral reefs. The coal mined from these new mines is mostly intended to be exported and its burning will create annual greenhouse emissions equivalent to one-quarter of Australia’s current annual emissions. Emissions lead to climate change which are predicted to have a devastating impact on tropical rainforests and coral reefs in Australia.

The federal government is empowered to consider the environmental effect of proposed developments. Specifically, it is required to consider whether a proposed development is likely to have a significant impact on a matter of national environmental significance (which includes world heritage areas among others – see my EPBC Act primer).

Should the government consider the possible environmental impact of emissions from the burning of coal mined from these projects? More generally, should governments be approving or not approving very large coal mines and similar projects based on their greenhouse emissions (or emissions from use of the products they produce)?

The Australian Federal Court on Thursday handed down its decision on this in Wildlife Preservation Society of Queensland v Minister for the Environment. ABC online and Sydney Morning Herald have reports on the decision. The decision itself isn’t very illuminating but I think the issues behind it are fascinating and important.

I’ll give you some of my thoughts in the next couple of days, but I’d really appreciate any of your thoughts in the meantime.

Climate change: the jury is still out?!

I’ve been thinking lately about the disconnect between the available climate science, which strongly indicates that global warming is happening and is dangerous, and the many people who still believe and proclaim that global warming is an environmentalist conspiracy.

The Washington Post recently had an excellent article about the public’s relationship with the science of global warming – it’s a long one but definitely worth a read. And it’s a common theme at the RealClimate climate science blog.

Obviously there’s a lot of reasons (Vincenze suggests a few) but I just want to look at one today: the incentives many people have to engineer – or at least overstate – conflict.

Imagine you’re a climate scientist. Lucky you: you’re an expert in one of the most important fields for the future of this planet. But there are thousands of other scientists just like you and you want to stand out and be known and respected for your ideas. You’re 99% sure that global warming is happening and likely to get worse – because 99% of the data you’ve seen and papers you’ve read point in that direction. But you think there’s a 1% chance that everyone’s wrong. Isn’t it your duty to test the majority thinking? If it is true, it will stand up to some scrutiny. And maybe - just maybe - it’s all wrong. Or at least a bit wrong. You could be boring and go along with everyone else. You could be one of the many faces at a climate conference. Or you could be controversial. And interesting. Maybe a little infamous even. And have journalists seek out your unorthodox views. And maybe be the person getting flown to those conferences to give the wacky dissenting talk.

Now imagine you’re a journalist. You’re writing a story about climate science. You want to be accurate but you also need to be entertaining. So you want some conflict. You also want to be balanced. You could interview two climate scientists from the 99.9% that agree that global warming is a serious threat. That’s a bit dull. Or you could interview one scientist from the majority and one wacky contrarian. That will spice things up. And you’re being balanced by getting all the opposing viewpoints, right?

Now imagine you’re a government Minister. You could accept and publicise the global warming threat. You could introduce measures that will cost taxpayers and industry to reduce a danger that will mostly affect people who haven’t yet been born or live in other countries. Or you could downplay the global warming threat and suggest that the jury is still out. After all, it’s irresponsible to hit taxpayers and industry when we’re not even totally, absolutely 100% certain that there’s even a problem, right? Then you could reduce taxes and spend your revenue on more popular things like new roads.

Now imagine you’re having dinner with some friends. They’re all blah blah-ing about climate change. "It’s so important". It’s so terrible". It’s so boring. You could just go along with them all and nod seriously. Or you could liven things up a bit. You could point out that while everyone’s talking about ice caps melting, snowfall has increased in central Antarctica over the past decade. You could mention that everyone was worried about global cooling in the 1970s. You could make insightful sociological observations: environmental worries are a lot like fashion – it’s a constant obsession but the environmental fad of the day is always changing.

Now imagine you’re concerned about climate change. You want to find out more and you want to do your bit. You read the newspaper and notice that the two scientists interviewed disagree on whether it’s happening and how bad it will be. You watch the news and notice the politicians disagree on whether it’s happening and what if anything to do about it. You go to dinner with your friends and one of them makes some interesting arguments about Antarctica getting snowier and environmental worries always being there and never amounting to anything. You weigh up the information you have and – well, the debate seems pretty evenly balanced – doesn’t it? It seems like the jury is still out.

'An Inconvenient Truth' coming to Australia

Al Gore's film about global warming, An Inconvenient Truth, has made quite a splash in the States and will be screening in Australia.

It's showing this weekend as part of the Sydney Film Festival and then at the Melbourne and Brisbane Film Festivals. In Sydney it's showing at the State Theatre on Saturday 10 June at 12:10pm. More details here. (I'll miss it as I'm in Canberra this weekend).

Its general release is unfortunately not scheduled until 14 September. (Why are we still four months behind other countries for cinema releases?)

Another environmental film showing at the Sydney Film Festival is The Last Valley, a doco about the struggle to save the last old-growth rainforest in East Gippsland, told from the point of view of protestors and loggers. Sounds interesting and the director will be there for a question session afterwards. Check it out on Wednesday 21 June at 5 pm at the State Theatre.


Update 9/11/06: I saw the film and my thoughts are here: An Inconvenient Truth: My thoughts

"Killers for conservation"

Earlier this year I wrote about the new trials to allow hunting of feral animals in NSW State Forests. Yesterday I watched a report on the Sunday program looking at the trials so far. The full transcript is on the show's website.

It was a fairly balanced piece, considering the reporter started (in a 'by the way' kind of manner) with the following disclosures:

These men are part of a campaign being waged in more than 100 state forests across NSW. The targets are carefully selected, no native fauna will die today, but ferals are fair game. These men are killers for conservation... Robbie Lynn manages this territory for the Game Council... Lynn and I go back thirty years. As teenagers we hunted pigs, rabbits, foxes and kangaroo, anything we could get our sights on. The places we roamed back then are now all but closed to shooting, such is the poor image of the hunter... There are now 1000 hunters who are venturing into the forest for the first time. Our groups are townies. Kym’s a vision editor for the Sunday program, Larry’s a landscape gardener and Dick owns his own business...

The program played up the political elements of hunters vs greens, the hunters-as-tourists angle and the safety issues. But it didn't delve very far into what I think are some of the crucial issues: Do hunters actually assist with the feral problem? What other activities are restricted when forests are closed for hunting?

My impression is that allowing hunters into forests will have extremely modest benefits. According to the program:

there is still another [feral pig] for every man woman and child in Australia [ie, about 20 million]. Here in the safe haven of state forests, there are 18 million wild cats and countless dogs, deer and foxes. Conservation hunting is the latest tactic in a battle to control these booming populations...

Robbie Lynn: "they’re going to have to do a few trips and start working hard before they get a good result, but we’ve got 31 forests and it’s only been open 8 weeks I think and there’s been over 50 pigs shot through the forest so far"...

After three days in Nundle our hunters have each spent more than $300 in the town on accommodation and food. It’s been modest return in hunting terms, a pig, a few foxes, some rabbits.

Clearly hunting is going to have very little impact on the feral problem. One of the farmers interviewed has a property adjoining a State Forest and summed it up:

Shooting is probably the least effective form of broad scale control that we have. But saying that, it’s better than nothing. Probably one step above no control. It will have an impact but it will not have a major impact on the overall population, but it will help.

Given the minor benefits it brings, I think the questions we need to consider are:

• Is there any net conservation benefit at all? Hunting reduces numbers slightly, but land managers have commented that it interferes with other more strategic control measures (eg, it disperses animals). Some environmentalists suspect that if hunters can't find ferals they'll shoot native animals instead and there are reports of hunters bringing ferals into forests in order to hunt them. (It's irrelevant now but of course most of these animals were brought into the country by hunters in the first place - which puts hunting as the solution in an interesting light).
• What other activities are displaced by allowing hunting in forests? I understand that the forest is closed during hunting (for obvious safety reasons) meaning that other recreational activities such as fishing, walking, etc are not available. What is the cost of that?
• Given that the conservation benefit is limited at best and there are costs on other users of the forests, should we admit that this is a recreational activity, not a conservation activity, and charge hunting fees or auction hunting permits - the revenue from which could be used for feral control activities that are actually effective?
• Given the limited benefits, the costs and the risks to safety, should we allow it at all?

Update - further info

• The Game Council's information page on hunting in NSW State Forests. (Does anyone know of any good sources for the arguments from the other side?)
• Federal Department of Environment and Heritage report on options for managing feral pigs.
• The Pest Animal Control Co-operative Research Centre has lots of information at feral.org.au, including a report on management of feral animals.

Global warming: legislating for temperance

Last week I looked at Garrett Harding’s ‘tragedy of the commons’ idea. In an unregulated common, each individual gains all the benefit from intensifying his or her use or pollution of it, while only facing a portion of the cost of that intensification. So everyone has an incentive to use and pollute it more, to the eventual detriment of all.

The tragedy of the commons is an example of what game theorists call a prisoner’s dilemma. I won’t go into detail (check out the wikipedia entry for a good explanation) but the general idea is that the game is set up so that it is in each player’s individual interest to cheat, so they all do, but that ultimately leads to everyone being worse off than if they’d all co-operated.

It seems to me that the current international negotiations about climate change are the ultimate prisoner’s dilemma. It is in each nation’s best (economic) interests to have each other country do something about limiting greenhouse gas emissions, but not do something themselves. If you take on costly measures to reduce your emissions and everyone else does too, that’s good. But better is if you avoid the cost and let everyone else do the work. Worst is if you take on the cost and no-one else does – you cop the economic hit to your industries of emission costs and you still get hit with the costs of global warming. So, individually, it’s in each country’s best interests to do nothing. Of course, collectively, that spells disaster for us all.

The way around this is by not acting in our own selfish interests, but getting together and agreeing on measures for every country to reduce its emissions – as Harding said ‘mutual coercion mutually agreed upon’.

In the early 1990s, 189 countries came to this realisation and signed the United Nations Framework Convention on Climate Change, which came into force in 1994. This provided for general measures such as compiling and sharing data about emissions and climatic changes. In 1997 this was turned into more concrete obligations through the Kyoto Protocol, which 84 countries – including the US and Australia – signed. The Protocol came into effect last year when ratified by countries with more than 55% of global greenhouse emissions. It has now been ratified by 163 nations. The US and Australian governments have had a change of heart since signing the Protocol and have said they will not seek to ratify it, which means they are not bound by it. The only other countries which have signed and then failed to ratify are Croatia, Kazakhstan, and Zambia.

So Kyoto has a good coverage of countries with only very few dissenters. Nevertheless, I think it’s fair to say that Kyoto looks vulnerable. The Australian and US governments have not only not joined - they seem to want to undermine it. The have claimed that Kyoto is unfair and ineffective because it does not place emissions limits on developing countries. Developing countries say it would be unfair to do so because they need to emit more in order to develop. They suggest that if industrial countries want them to reduce their emissions, they should assist them in developing cleaner energy. (That is already part of how Kyoto works – countries can gain credits by investing in emissions reduction projects in developing countries.)

And this impasse might be getting even more entrenched. Few countries have yet taken strong steps to reduce emissions and the countries which look like they may not be going to meet their obligations are rethinking their commitment – not least because they see the US and Australia getting away with thumbing their noses at the Protocol. Canada’s new government has taken some pot shots at the Kyoto Protocol and says Canada will not meet its targets, although for now it has said it will remain in the Protocol for the next commitment period beginning in 2012. The first round of obligations has set a very modest target of a 5% reduction from 1990 levels among industrialised countries. Even that may not be met and when developing countries are considered, total global emissions will have increased since 1990.

Meetings have just taken place in Bonn to start talking about targets for the second period, starting in 2012. These will need to be much stricter targets and the political will to take these on might be waning with Australia, the US and developing countries not taking on targets and countries such as Canada, New Zealand and Japan having trouble meeting even their first round targets.

To speculate about the way forward, the glimmers of hope seem to me to be:

• National action will become less important as local, state and regional governments and communities take bolder measures;
  
• International aid will be increasingly targeted at clean energy, helping to restrain emissions growth in developing countries;
  
• There will be modest technological advances which help decouple economic growth from emissions growth.

But ultimately I think our biggest saviour may just be peak oil. Oil’s not going to run out any time soon but it seems like it will get gradually more expensive to produce as the cheapest sources are exhausted. I don’t know if oil prices will stay at current levels, go up or go down, but I doubt they’ll return quickly to less than US$30, where they were only a couple of years ago. At current levels, a whole range of alternative energy sources become commercially viable (see this article from The Economist).

Harding’s solution to the tragedy of the commons was to all agree to limit how many cattle we graze there. We’re having trouble doing that, so it might be a good thing that we seem to be slowly running out of cows.

Stay tuned...

Apologies for lack of action here this week: work and uni have been duopolising my time. (Getting a Playstation probably hasn't aided my productivity either.)

Will try and make up for it over the weekend...

An anti-wind-power conspiracy?

Today's Sydney Morning Herald has an interesting article about the misinformation campaign to discredit windpower in Australia:

Leaked minutes from a meeting in the chilly confines of Canberra's political corridors show the Prime Minister had called on some of Australia's biggest contributors to global warming - including the coal and uranium miners Rio Tinto and BHP Billiton - to help the Government devise a way to pull the rug from under the wind industry, but still be seen to be tackling climate change.

It also contains a run-down on the myths and truth about windpower.

Does Australia need nuclear power?

Gary Sauer-Thompson forcefully argues the negative in the Public Opinion blog. Aside from the environmental and health risks, they're uneconomic without subsidies and they'd make only a marginal impact on our greenhouse emissions.

Global warming: A tragedy of the commons

Garrett Harding’s classic 1968 article The Tragedy of the Commons is well worth recounting when we think about the climate change problem:

The tragedy of the commons develops in this way. Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy.

As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of adding one more animal to my herd?" This utility has one negative and one positive component.
1. The positive component is a function of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly + 1.
2. The negative component is a function of the additional overgrazing created by one more animal. Since, however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision­making herdsman is only a fraction of - 1.

Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another.... But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit -- in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.

The tragedy of the commons idea is interesting in its (mis)appropriation by both the left and right. The left tend to use it to point out flaws in capitalism and markets, while the right use it to argue for private property and against public ownership. The tragedy of the commons certainly shows that unregulated or unfettered markets don’t always produce good outcomes, but not markets per se. On the other hand, the commons idea does not suggest that public ownership is a problem – only that unregulated common ownership is a problem. As Harding states in the article, there are several possible solutions, only one of which is private property:

What shall we do? We have several options. We might sell them off as private property. We might keep them as public property, but allocate the right to enter them. The allocation might be on the basis of wealth, by the use of an auction system. It might be on the basis of merit, as defined by some agreed-upon standards. It might be by lottery. Or it might be on a first-come, first-served basis, administered to long queues. These, I think, are all the reasonable possibilities. They are all objectionable. But we must choose--or acquiesce in the destruction of the commons...

The earth’s atmosphere is the ultimate common resource. And, of course, private property is not going to be an effective solution to this problem: how do you allocate and enforce property rights to a stable climate when the problem is suffered by and contributed to by the actions of every person on the planet?

As Harding says:

In a reverse way, the tragedy of the commons reappears in problems of pollution. Here it is not a question of taking something out of the commons, but of putting something in--sewage, or chemical, radioactive, and heat wastes into water; noxious and dangerous fumes into the air, and distracting and unpleasant advertising signs into the line of sight. The calculations of utility are much the same as before. The rational man finds that his share of the cost of the wastes he discharges into the commons is less than the cost of purifying his wastes before releasing them. Since this is true for everyone, we are locked into a system of "fouling our own nest," so long as we behave only as independent, rational, free-enterprisers.

The tragedy of the commons as a food basket is averted by private property, or something formally like it. But the air and waters surrounding us cannot readily be fenced, and so the tragedy of the commons as a cesspool must be prevented by different means, by coercive laws or taxing devices that make it cheaper for the polluter to treat his pollutants than to discharge them untreated. We have not progressed as far with the solution of this problem as we have with the first.

The solution as Harding describes it is "legislating for temperance" or "mutual coercion mutually agreed upon". In the next post I’ll look at how international agreements – notably the Kyoto Protocol – are measuring up to the need to legislate temperance in greenhouse gas emissions.

Sydney's water future: some other views

I wrote last week about the new Sydney Metropolitan Water Plan. For anyone who's following this, there have been another couple of articles in the paper this week, offering quite different views on the Plan.

Michael Duffy writes that politically savvy 'monopoly buster' company, Services Sydney, is dragging Sydney Water and the Government kicking and screaming toward greater deregulation of the metropolitan water and sewerage market and, with it, more recycling and better economic and environmental outcomes.

Former Sydney Water executive Charles Essery has a rather less sanguine view, suggesting that the recycling targets and measures in the Plan have not changed since the last version of the plan was issued in 2004, that the recycling plant announcements are window dressing and that desalination will be back on the agenda within a year.

It seems the desalination solution might be dead but it's definitely not buried.

The economics of Kyoto and the business of ideas

The Australia Institute ('TAI') has just released a paper suggesting that the economic costs to Australia of ratifying the Kyoto Protocol and implementing carbon-pricing measures such as a carbon tax or domestic emissions trading scheme have been massively overstated and the economic benefits overlooked:

The current policy of staying outside Kyoto and not pricing carbon carries substantial economic risks. First, it locks us out of the emerging carbon markets, limiting both foreign investment in Australian clean technologies and plantations (through the Joint Implementation mechanism of the Kyoto Protocol) and participation by Australian companies in developing country projects (through the Protocol’s Clean Development Mechanism). Second, by insulating our economy from a carbon price, it retards the development of new clean industries and increases our future dependence on imported technology and expertise. Third, it fails to preserve the competitiveness of Australia’s coal exports (considerably greater in both export earnings and jobs than aluminium production), which will be subject to the emissions
policies and taxes of importing countries. Fourth, it exposes our exports of coal and emissions-intensive products to likely consumer and government preferences against climate ‘free-riders’.

It suggests a carbon tax or emissions scheme be introduced, together with tax rebates for energy-intensive exporters:

How could the competitiveness problem best be deal with? The Australian Government has claimed for some years that seeking legally binding emissions limits for the major developing countries is the best response. This strategy failed in Kyoto and has not borne fruit since. It has seen the Government backed into a corner where Australia now, alone with the United States, refuses to ratify the Kyoto Protocol. This paper proposes a different approach: that Australia ratify the Kyoto Protocol and implement a carbon tax or emissions trading, incorporating offsets that preserve the competitiveness of the industries at risk. Ideally, the offsets would be designed so that they might form the basis of a future multi-lateral solution to carbon leakage. As a full and more respected participant in the international climate negotiations, Australia would be better placed to pursue a multi-lateral approach.

It's an intriguing idea. I can't tell you the assumptions the paper's based on or really examine its conclusions, because the paper costs $21 and I'm debating with myself whether to fork out the cash and read it! It does sound interesting but there's so much material on the economics of climate change which is free and which I haven't found time to read!

Which brings me to the second part of this blog - and I'll admit this is essentially a rant prompted by being asked to pay for something I'm used to getting for free.

There's been some interesting articles and discussions recently on think tanks in Australia and how political groups sell their policy ideas. The gist of these has been that progressive groups and think tanks in Australia need to do better at selling their ideas.

I don't know how many people will read the Australia Institute paper for $21. I suspect not a whole lot. I don't know how many people would read it if it was free - but my guess would be substantially more. Obviously TAI needs to raise money to fund its works, but my question to TAI, the Climate Action Network, the big green groups and other sympathetic business and lobby groups is this: If this report makes a useful contribution to the Australian climate change policy debate, shouldn't you be trying to get it maximum exposure? Surely someone can commission or sponsor TAI to produce reports like this and make them available for free? I could be wrong, but I suspect a few thousand dollars would raise more money for TAI than they'll get from selling copies of the report for $21 each.

The press release has been picked up by some of the media, which perhaps is the main thing, but if you want to influence the debate I would have thought you'd want your primary source as widely read as possible.

The economics of biofuels

The Wall Street Journal yesterday had an excellent article on the technological and economic prospects of biofuels. At today's oil prices, a number of biofuel technologies are competitive with oil.

The article suggests that biofuels could replace about 10 - 20% of US oil needs in the next couple of decades - a modest but still important contribution.

The article is subscirbers-only but luckily for us the Ecological Economics Blog has reprinted some of the really interesting bits.

Water, water everywhere

There’s been a flood of news stories about water in Australia in the past few days. The federal budget has dedicated $500 million to assist the Murray-Darling basin, there’s been debate about a new large dam in Queensland, and changes to Canberra’s water management regime.

The NSW government has also been selling its new Metropolitan Water Plan, with the announcement of two new water recycling plants and the opening of water recycling in NSW to competition.

One new water recycling plant, to be built in western Sydney, will treat waste water from sewage treatment plants and use it for irrigation, environmental flows and dual reticulation use in new housing estates. The proposed plant will apparently be five times bigger than the recycling plant at Rouse Hill, which is currently Australia's largest residential recycling project. The other will, interestingly, be built in Kurnell (where the desalinisation plant was to be built) and supply recycled water for industrial uses on the Kurnell peninsula.

The other ‘announcement’ is that the metropolitan water industry in NSW will be opened up to competition to try to encourage water recycling. This was actually originally announced back in December following an inquiry into water and wastewater in Sydney (good summary here) but the Government has now released new draft rules which will bring the changes into effect. The new rules for water supply and treating waste water will take the current duopoly away from Sydney Water and Hunter Water. Private competitors will have access to pipes mains and sewers to treat and supply recycled water. The result should be cheaper industrial water for business and less consumption of drinking water by industrial users.

I’d welcome comments from anyone who knows a bit more about this area, but it seems to me that these are very positive developments. It seems sensible to open water supply infrastructure not only to users of water but also to potential recyclers and suppliers of water – in the same way that third parties have access to the electricity grid to supply electricity.

The announcements over the last few months of ‘newly discovered’ groundwater supplies and the tapping of deep water in Sydney’s dams has given Sydney some breathing space for its drinking water supply. This means that we can avoid the excessively expensive, energy intensive and environmentally damaging option of a desalinisation plant. But we should use this breathing space to develop water (and stormwater) recycling and water saving measures to ensure that desalinisation doesn’t return to the agenda.

The peak oil transition: difficult but not deadly

There's an excellent article from the Economist on 'peak oil' reprinted at the Ecological Economics Blog.

The gist is that the peak is coming, but not here yet, and that it should be a fairly slow process rather than a crash: oil will become gradually more and more expensive as existing reserves slowly decline and become more expensive to extract. This means that adjustments, while not being easy, should be smooth: peak oil shouldn't create economic chaos.

What are those adjustments? As the price of oil rises, new, more expensive oil sources (eg, tar sands) will become economic, as will alternative fuel sources such as biofuels. On the demand side, more energy efficient technologies and practices will cushion some of the blow.

The ethics, politics and economics of climate change

I have a concern that as environmentalists operating in a capitalist system and a very pro-market political environment, we sometimes tend to tack rather half-baked business arguments onto ethical arguments. We say ‘You should do this, it’s good for the environment. Oh, and it will also save you money’, but we don’t necessarily think through the second part of our claim.

I see this most often in climate change debates. People say things like "It is (economically) crazy for Australia to continue to rely on fossil fuels / have such high per capita emissions / refuse to ratify the Kyoto protocol when climate change will decimate the Great Barrier Reef / Australia’s agricultural industries". I disagree. It is unethical and immoral for a small country like Australia to emit disproportionately high levels of greenhouse gases when climate change will cause such huge global problems. It is hypocritical for a country like Australia to say it won’t agree to binding targets until developing countries with much, much lower per capita emissions also agree to reduce their emissions. And it is politically unwise to white-ant international solutions like Kyoto when Australia has so much to lose from climate change and needs international co-operation. But it’s not economically crazy to continue to emit high levels of greenhouse gases.

The reason is simple: this is a global issue of which Australia presents about 1.5% of the problem (ie, emissions). We capture the full benefit of mining and burning fossil fuels here and now, while the cost in terms of climate change is spread throughout the world and over the coming centuries. On the flipside, if we decided unilaterally to, say, halve our greenhouse gas emissions, we’d face the cost of that, while making very little difference to scale of the problem in the coming decades.

Now please don’t misunderstand my argument. I’m not saying we shouldn’t unilaterally cut our emissions. On the contrary, I believe we should – for moral, ethical and political reasons. In my view, these massively outweigh the short-term economic considerations. (I also believe it would ultimately and indirectly be in Australia’s economic interests, because the enhanced credibility we’d gain by taking a principled stand will assist our ability to pursue international solutions to get other countries to reduce their emissions, and because reducing our emissions will have some spin-off economic benefits that mean it won’t be as expensive as we think). But it is economically naïve to suggest that there’s a direct and immediate economic benefit to Australia from reducing its greenhouse emissions. There isn’t.

That isn’t to suggest that environmental advocates should shy away from economic arguments. The head-in-the-sand crowd drastically overstates the costs of doing something about climate change and ignores the spin-off economic benefits. It’s our job to point out where they’re wrong. But let’s not pretend that environmental solutions are always win-win-win. They usually involve trade-offs.

Environmental advocates have a responsibility to present the ethical, moral, political and economic arguments for improving our economic performance. But we should also recognise when one of those arguments is weak. In my opinion, some of the purely economic arguments for reducing emissions – at a national level – are weak. We should recognise that, and present the other arguments (including the argument that narrow economic self-interest shouldn’t always win), rather than pretending that there’s no debate. After all, the other arguments are overwhelmingly in favour of acting now and acting decisively.

What does sustainability mean to you?

If you live in NSW and have an opinion that you can express in 50 words or less, go here and win some quite cool prizes.

More on fuel prices

Yesterday I briefly adverted to the political realities that make environment groups hesitant to call for tax increases on fuel. Those realities are highlighted in this story from the US:

NPR's Morning Edition had an interesting story this morning ("High Gas Prices Quietly Welcomed by Environmentalists") about whether gasoline consumption can be better curbed through regulation or through high prices (particularly a tax). Economists feel that gasoline prices would need to double and remain there (i.e. $7-8/gallon) before behavior would really change, and advocate a gas tax to get us there. The externalities (accidents, smog, global warming, etc.) are simply not reflected in the current price of gasoline. Environmentalists, however, feel that a gas tax is a complete political dead-horse, fearing that it would be extremely unpopular with most Americans, and advocated regulations...