Some thoughts on global warming

First, if anyone needed reminding that environmental issues are economic issues, two of today’s news reports underline that fact. Researchers are worried that salinity is going to have large impacts on Australia’s premier wine region, the Barossa Valley, and a report of large-scale coral deaths from warming waters in the Caribbean reminds us that this is what could lie in store for the Great Barrier Reef. Besides their natural value, these two areas represent two of Australia's biggest and most profitable exports (agriculture and tourism).

Secondly, I talk quite a bit on this site about the power of markets and I often make the assumption that if governments re-jig incentives (eg, try and make consumers or businesses face the full economic costs of their decisions) markets will respond and come up with solutions (renewable energy, more energy-efficient products, etc) – governments don’t need to engineer the solutions themselves. But incentives work with or against existing consumer preferences and these I think drives markets much more powerfully. What’s made hybrid cars much more popular and 4-wheel-drives (SUVs) less popular over the last few years is not really increased taxes or oil prices (see this post from the Environmental Economics Blog): it’s that they’re seen as green and cool. So we can try to change institutions but changing popular perceptions is more important.

Where I’m going with this is I see it as an incredibly positive step that – from what I can see people (and businesses) are taking personal responsibility for the global warming issue and doing what they can to help in small ways. There seem to be a variety of personal emissions offsets businesses where you can offset your personal or business’s contributions to greenhouse emissions by buying ‘credits’ from a business that they will use to invest in renewable energy or carbon sink projects. In this vein, Kate from the Veggie Friendly Blog reports that she recently attended a ‘carbon neutral wedding’! The demand from consumers for greenhouse-friendly products will really move markets for renewables in the coming years I think.

Solar power can make you very, very rich

Australian environmentalists have been claiming for years that the Australian Government’s failure to support solar power research and development (and, more particularly, its commercialisation and adoption) has led to commercial solar opportunities moving overseas, with Australia missing out on being part of a large and profitable industry. The argument is that Australia is particuarly well-placed to be leading the solar industry, with bounteous sunshine, plenty of remote locations (where solar power would be the cheapest source of electricity) and undisputed research expertise in this area.

I have to admit I’ve thought of these claims largely as green rhetoric: ‘you won’t listen to our environmental concerns so we’ll throw in a line about money and hopefully you’ll listen to that’. But as of last weekend, I’m much more convinced.

On the plane back from Thailand on the weekend I flicked through Forbes Asia. The cover story was ‘The World’s Richest People’. The first person featured was the richest man in China, Zhengrong Shi. What I read astounded me.

First, he’s an Australian citizen. Second, he has made his fortune in less than five years. Third, it’s from solar cells. Fourth, he developed his expertise at the University of New South Wales (where I’m studying economics) – the photovoltaics lab there is an absolute world leader in the technology and has been for years.

His story is remarkable and suggests to me exactly what the greens have been saying - that Australia is not converting its research expertise into the commercial opportunities because of a lack of government vision and support. Check this out:

Shi grew up in Jiangsu Province, on an island in the Yangtze River, and received a master’s degree in laser physics before leaving home for Australia in 1988. There he studied under Martin Green, whose laboratory at the University of New South Wales set a string of efficiency records for solar cells, raising the amount of sunlight energy that can be converted into electricity from 18% in 1983 to 24% in 2004. For the moment that attainment is a phenomenon of the lab only; commercial cells typically deliver 16% to 17%.

In 1995, three years after finishing his Ph.D., Shi went to Pacific Solar, a joint venture between the university and an Australian utility, Pacific Power, that specialized in a new variety of lower-cost photovoltaics called thin-film solar cells. Shi became an Australian citizen but was lured back to his homeland in 2001 by $6 million in seed capital offered by the city of Wuxi, 80 miles northeast of Shanghai.

Shi’s company Suntech Power, listed on the New York Stock Exchange, has a market value of US$5.5 billion, with revenues of US$226 million last year. Shi predicts that sales will triple in the next three years and puts the company’s success down to “being in a good industry”:

Worldwide demand for solar cells has been growing 30% a year for the past three years, and the good times will likely continue. Solarbuzz, a research firm in San Francisco, predicts that the industry’s sales will climb from $10 billion this year to $19 billion in 2010.

It’s also partly Shi’s Australian-gained expertise in cutting edge technologies that allow production at lower costs and higher sunlight-conversion efficiencies than competitors.

Annual revenues of $226 million less than 5 years after starting with just $6 million seed capital, some Australian expertise and some Chinese entrepreneurial spirit? It makes you wonder: just what share of the global solar industry pie is Australia missing out on?

Around the blogosphere

I’m back from a very relaxing holiday in southern Thailand with my girlfriend Cat. Some posts of note I’ve come back to:

• Pedaller discusses news of trials of bicycle taxis in Sydney and Melbourne.
  

• Doug at courting disaster wonders why law firms are so female-unfriendly.
  

• Daniel O’Connor talks about the importance of scale in arguments about the economy and sustainability at the Ecological Economics Blog.

• John Quiggin has a sensible piece on Peak Oil.

Holiday!

I'm taking a little break so probably no posts for the next week or so.
Catch you all soon.

David

A friendly blog for Sydney and Canberra vegetarians

My former housemate and vegetarian chef extraordinaire Kate has been busily reviewing Sydney restaurants for their vegetarian offerings over the past few months. She's just expanded her snazzy blog and moved it to vits own domain: veggiefriendly.com.au. It will also contain reviews of Canberra veggie friendly places. It's well worth a look.

Whacking Day in the Northern Territory?

This sounds a little familiar:

MORE than 500 people will take part in a giant toad-busting operation in Darwin, Palmerston and the rural area this week. The all-out community attack on cane toads will take part in at least 12 locations in a bid to stop the poisonous pest's march into Darwin.

Community and residential groups, LandCare groups, the Humpty Doo and Palmerston Golf Clubs, most Top End schools, MLAs and other people will be among those out collecting every toad they can find. Every school in the Top End has been sent toad forms for distribution to students to report the numbers of toads found in their local areas. The toad busts will begin tomorrow and hop right through up to and including next Sunday...

MLA's Matthew Bonson and Minister Chris Burns will lead toad-busts in the Rapid Creek area, while Palmerston MLA Terry Mills will head up a hunt at Marlow Lagoon. Other MLAs are expected to take part in their electorates.

Labor’s climate change blueprint: some analysis

Following on from Tuesday's post, here are some of my thoughts on the first few ideas in the opposition Climate Change Blueprint. I’ll try and deal with all the proposals in there eventually!

Ratifying the Kyoto protocol

A lot has been written about this elsewhere and this is just a restatement of an existing policy so I’m not going to do any sort of complete analysis of the pros and cons for Australia of ratifying the Protocol. I’ll just make a few comments relevant to Labor’s policy to ratify if elected at the next election:

The timing is awkward. The next federal election will take place sometime around the end of 2007. The first commitment period under the Protocol begins in 2008. Basically, the beginning of 2008 is not the best time to ratify – we’ll have to meet the targets but we won’t get much benefit of investment in carbon offset measures because these are happening now so they’re up and running in time for the commitment period. It’s also a bit awkward for the opposition to commit now to meeting Kyoto targets that it doesn’t have control over.

That said, it does seem that Australia is on track (PDF) to meet its generous Kyoto targets, and I certainly think ratification is better late than never. What’s really important is what happens after the first commitment period (which must really be deeper cuts plus some obligations on developing countries) and I think Australia’s position in the negotiations for this would be strengthened considerably if it’s shown some good faith by committing to cuts in the first round by ratifying Kyoto. I think that’s important and no-one seems to have talked about it.

Working towards 60% emissions cuts by 2050

A target is good. This target is ambitious but achievable, about what’s needed (for Australia to do its part). I guess the question is, what does committing to this figure mean? Governments will come and go between now and 2050 – who’s responsible? The South Australian government has recently committed to the same target – 60% reduction by 2050 – and to the Environment Minister reporting annually to Parliament on progress against this goal. I guess this is what is envisaged and it’s a good thing. In reality each successive government will blame its predecessor for not doing enough so I don’t know whether setting this target implies that it will be met, but it’s still good to enunciate a concrete long-term policy goal.

Establishing a national emissions trading system

Hm, this is a big one that really warrants a separate post. So all I’ll say for now is that my opinion for what it’s worth is that emissions trading is a good idea and a national system is obviously desirable. I think an effective national greenhouse strategy has to contain either a national carbon tax or a national emissions trading system.

Inserting a climate change trigger in the federal Environment Protection and Biodiversity Conservation Act

Currently, under the EPBC Act, projects and developments that have a significant effect on a matter on national environmental significance must be approved by the federal Environment Minister. This proposal would make climate change one of these matters of national environmental significance.

In practical terms, this would mean that large energy-intensive projects – such as power plants or desalination plants – would require federal government approval. The same would also probably apply to large projects that threaten carbon sinks (perhaps large-scale clearing or the damming of a forest valley?).

This idea has been kicking around for a while – my understanding is that it was first proposed by the Howard government in 2000 (via then Minister for Environment Senator Hill) but was knocked on the head by industry opposition.

I’m mildly supportive of the idea. The better way to deal with problems like greenhouse emissions that mostly come from a wide range of small sources is to implement broad policies such as a carbon tax or trading scheme. But in the absence of those schemes, or perhaps to complement them, it doesn’t hurt to have large sources subject to some environmental impact assessment.

As far as I know, the Minister has only refused consent for two projects in the 6 year history of the EPBC Act. But it has imposed conditions that reduce the adverse environmental impacts of many others. It seems to me that a ‘greenhouse trigger’ would be a good way to ensure that energy-intensive projects take all practical steps to minimise their greenhouse impacts. Its overall effect on Australia’s emissions, however, would be modest. In particular, this would only deal with new sources of emissions - not existing sources.

Labor’s climate change vision

Kim Beazley (Australian federal opposition leader) this afternoon released Labor’s Climate Change Blueprint (PDF) for the next election. From an initial reading, I think it’s very very good.

In summary, its key elements are:

• Ratifying the Kyoto Protocol,
  

• ‘Working towards’ 60% emission cuts by 2050,
  

• Establishing a national emissions trading system,
  

• Including a ‘climate change trigger’ in the federal Environment Protection and Biodiversity Conservation Act. (Currently, under the EPBC Act, projects and developments that have a significant effect on a matter on national environmental significance must be approved by the federal Environment Minister. This would make climate change such a matter of national environmental significance and, in practical terms, would mean that large energy-intensive projects – such as power plants or desalination plants – would require federal government approval),
  

• Increasing the national mandatory renewable energy target,
  

• Investment in clean coal and renewable technologies,
  

• No nuclear power,
  

• Reviewing incentives and disincentives in the tax system (including research and development and depreciation),
  

• ‘Rebuilding’ the national scientific research organisation CSIRO,
  

• Introducing additional first home owners grants for energy efficiency measures,
  

• ‘Assisting States and local governments’ to put in place mandatory energy efficiency ratings for new homes (these are already in place in NSW, Victoria and the ACT),
  

• Making all schools solar powered by earmarking capital works funding for solar and energy efficiency measures,
  

• Purchasing ‘green’ cars for the government fleet if and when there’s an Australian-made value-for-money option, and assisting State government and private fleets to do the same,
  

• Establishing a National Sustainability Council to oversee progress on the nation’s sustainability.

I’ll try and give a more detailed analysis of what these measures mean in the next couple of days, but on first view, this looks to me to be an excellent mix of policies: comprehensive, sensible, flexible, harnessing market forces, and likely in combination to be a reasonably effective response.

Manufacturing controversy

A great Doonesbury cartoon (via the RealClimate blog).

Should public transport be free?

An economist advocating free public transport, or even that we should be paying people to use it?

That’s what Professor Joshua Gans does in his blog. Professor Harry Clarke provides a response in his blog.

This debate was sparked by a front page article in Melbourne’s Age newspaper suggesting that Melbourne’s public transport could be made free at a cost of around $340 million a year, boosting usage by 30% and reducing pollution, greenhouse emissions, accidents and congestion in the city.

Interestingly enough, public transport advocates don’t necessarily support the idea, believing that the money could be better spent improving the service than making it free.

Update (Tues 7/3):

Joshua Gans has an op-ed piece on this in today's Age.

New ecological economics blog

I’m going to be a contributor to a new ecological economics blog. The idea of the blog is to present some alternative views to more conventional environmental economics blogs (notably the Environmental Economics Blog) which, I should say, themselves do a good job presenting alternative views to conventional economic blogs and free market blogs (such as the Commons Blog).

Ecological economics differs from environmental economics in its emphasis on the economic system operating within an ecological system and the need for multi-disciplinary approaches to the issues that this throws up. Environmental economics, on the other hand, is really a branch of conventional neoclassical economics and tends to take as a given the assumptions inherent in neoclassical economics – including seeing the environment as a source of goods and services, rather than a system within which the economy operates. There’s a lot of common ground between environmental and ecological economics but the different approaches come to a head when you examine macroeconomic issues such as physical limits to economic growth. Environmental economics tends to assume that economic growth can and should continue indefinitely. Ecological economics suggests that economic growth has finite limits because eventually you reach limits to natural capital that human capital can’t necessarily substitute for.

If you’re interested in this area, check out the International Society of Ecological Economics' online encyclopaedia, which has some interesting articles on these issues.

Does the US Endangered Species Act work?

The US Center for Biological Diversity has just released an important study assessing the success of the US Endangered Species Act: the primary piece of legislation to protect biological diversity in the US.

As the report states, the purpose of the Act is "to prevent the extinction of America’s most imperiled plants and animals, increase their numbers, and eventually effect their full recovery and removal from the endangered list. Currently 1,312 species in the United States are entrusted to its protection".

The report goes on to point out that:

Opinions abound on whether and to what degree the Act has accomplished its goals. Most are politically driven, some are anecdotal, and a few attempt to wring long-term implications out of short-term data which are simply not adequate to answer the most basic questions about the effectiveness of the Endangered Species Act. Are species population numbers increasing or decreasing in response to being placed on the endangered list? Is progress toward recovery consistent with or slower than the recovery period outlined in federal recovery plans? … while the Endangered Species Act has existed for 32 years, long-term population trend data have never been systematically gatherer and analyzed for a large, unbiased sample of species.

The study attempts to rectify that by presenting population trend data and narrative accounts for all endangered species that historically or currently occur in eight northeastern states.

The study's timing is good as the future of the Act is being debated and critics seem to take it as a given that it hasn't achieved its aims.

Their results suggest that the Act has been successful in achieving its objectives:

• No species has become extinct after listing.
• Most species have improved since listing, with 93% of species increasing or maintaining a stable population since listing.
• Seven of the 11 species whose recovery plans aimed for recovery by 2005 had been delisted or at least ‘downlisted’ (ie, downgraded from ‘endangered’ to ‘threatened’).

One limitation of the study in my view is the lack of a control group with which to compare these species. It would be very interesting to see how the recovery of listed species compares with the recovery of species which, while threatened, have not been considered sufficiently endangered to warrant protection under the Act. This would go some way to assessing whether protection under the Act in itself aids recovery or whether, for example, general environmental improvement from other causes has been more important in the recovery of these species. Similarly, it would be interesting to see data on how these populations were progressing before they were listed (presumably they weren't preforming well if listing was required).

Of course, a control group would add its own difficulties in interpreting the results as measures stemming from recovery plans under the Act (eg, habitat protection) could have spillover benefits for other (non-listed) species. And data on species whose position is less precarious may be harder to come by as these species have not been the focus of conservation and research attention.

As far as I’m aware, no similar study has been done to assess the success of the similar threatened species legislation that exists in each of the Australian states and territories. There have been assessments but they’ve been more the type that the report describes as politically-driven, anecdotal or short term. Such a study would be of great value in Australia.

Physical limits to economic growth?

There's an excellent summary at Daniel O'Connor's Catallaxis blog of the physical limits to environmental growth debate. Daniel makes the often-overlooked point that economic growth can arise from physical or non-physical sources (for example, the consumption of more resources or the more efficient use of existing resources). So, to the extent that economists ignore physical limits to the consumption of resources, their analysis is is flawed. But equally, environmentalists who claim that sustainable growth is an oxymoron are not necessarily right because economic growth can occur without additional consumption of physical resources.

Anyway, Daniel explains it much more lucidly than me, so check it out.