I remember reading a story about Henry Ford some years ago. He got some of his employees to go through old Model Ts in junkyards and find the parts that had never worn out. If there was some component that was still intact in all those old cars, there was a problem with it. It was too perfect. There’s no point having an axel that’s still perfect after the rest of the car has worn out – that’s just wasteful. So he’d then set them to work to make a cheaper and less perfect axel.
The competitive market is a rather ruthless and cut-throat thing. It doesn’t tolerate waste. If you’re a supermarket and you have really short queues, that means you’re employing too many staff. Your competitor, with slightly longer queues, can undercut your prices and steal your customers. If you’re an airline and you offer seats with lots of legroom, you can’t fit as many passengers in and you can’t compete with the prices offered by other airlines.
In a competitive market, companies are always looking for ways to make products better and cheaper. When they do, they capture a momentary advantage. Then their competitors copy what they do or work a bit harder to capture the advantage back. That must be tiring. I’d like to take long lunches at work. I’d like to leave a bit earlier. I think we all would. But we’re in a competitive jobs market that won’t tolerate that wastefulness.
Unfortunately, we tend to like things that are wasteful, they’re the things that are really good. Short queues, lots of legroom, long lunches.
What made me think about this was reading this document (pdf) about the successes of salinity emissions trading in the Hunter River, north of Sydney. It proudly proclaimed "The scheme has resulted in a significant improvement in water quality in the Hunter river – it’s now fresher than most bottled mineral waters!" My first thought was "That’s not an indicator of success, it just means that they’ve set the allowed emissions at an inefficiently low level: you don’t need river water that’s fresher than bottled water and what’s the cost to industry of complying with standards that stringent?" Oh dear, I’m thinking like an economist.
I’m overstating this a bit. After all, markets have niches and these include niches for higher-priced, higher- quality products and services – and maybe lower-paid, longer-lunch jobs.
Nevertheless, I’d say this. I think that most industrial countries have done a very good job over the past few decades of promoting market reforms and removing inefficiencies, getting rid of monopolies, fostering competition. Ultimately, it’s made most of us materially better off. It’s a good thing.
But I understand people who get nostalgic for a world of, well, unjustifiable inefficiencies: short queues; legroom on flights; long lunches; cars made to be great, not made to be just good enough at the lowest price. It does sound pretty nice, doesn't it?
Tuesday, October 31, 2006
Monday, October 30, 2006
The Stern Review: The economics of climate change
Release the Hounds
We face all sorts of risks in our lives. As individuals, there’s risks to our health and safety, our businesses and our homes. We take sensible actions to deal with those risks. We weigh up the risks, their likelihood and potential impacts and look at what measures we can take to minimise or deal with the risks and what those measures cost. If we own a house, we’ll put decent locks on the windows and doors and take out insurance covering the risk of break-ins and theft. If we have a particularly valuable house or live in a particularly crime-prone area, we’ll consider more expensive protection – alarms, fences, maybe even some hounds.
One of the things that I think many people miss in the climate change debate is that it’s largely a debate about weighing risks and costs: the likelihood and possible impact of a changing climate and the measures we could take to deal with the problem - the likely costs of taking action compared to the likely costs of not taking action. It sounds obvious but it’s routinely ignored.
It follows that we need good scientific advice to tell us what the likely risks are, and good economic or financial advice to tell us what they will cost, what measures we can take to mitigate or adapt to climate change and what they will cost.
What are the risks? What will it cost?
It annoys me when I hear people say that we must do whatever it takes to avoid climate change. It also annoys me when I hear people say that we should do nothing about climate change until we really know for sure that it’s a big problem. Does the first group have security guards at their homes and surround them with barbed wire fences? Would the second group leave their house open when they go away for a weekend unless I can prove to them that someone will steal their stuff while they’re away?
What probably annoys me most is the disingenuous conservatives who claim that the market economy is so marvellous at adapting to shocks that we don’t need to worry about a changing climate – we’ll just adapt and it will all be very efficient and painless – but God forbid we should sign the Kyoto Protocol or aim to reduce emissions or do anything to increase the cost of energy, because that’s a shock we just can’t cope with.
Some guidance is on the way
An important document relating to the economics of climate change will be released tonight (Australian time). It will help inform the debate about the risks and costs of climate change and the risks and costs of taking action to reduce climate change impacts - by putting some numbers on these costs.
In July last year, the UK government commissioned a review, headed by development economist and former World Bank chief economist Sir Nicholas Stern, to review the economic, social and environmental consequences of climate change, as well as possible actions to adapt to the changing climate and the costs associated with them, and the costs and benefits of actions to reduce the net global balance of greenhouse gas emissions. The Stern Review on the Economics of Climate Change will be published tonight.
Stabilising emissions costs money…
From what’s been released so far about the Review, it has estimated that effective measures to stabilise greenhouse gas concentrations will knock about 1% per year off global economic output. That apparently means it will take an extra two years for global wealth to double. Although it sounds small in the scheme of things, that’s not a trivial cost. It is, for example, in the same ballpark as estimates of what a global pandemic would likely cost the world.
…Not stabilising emissions costs much more
But the flipside is big. Very big. The Review estimates that “business as usual” would leave to a reduction in global economic output of at least 5% - ignoring health impacts, assigning zero value to the non-economic benefits of the environment and assuming no feedback effects that result in the atmosphere warming faster and faster as greenhouse gas concentrations rise. Factoring these in, the level of climate change in the next century based on continuing current trends would reduce output by as much as 20% per year. That’s an impact, according to reports on the Review, “on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century”.
The bottom line is that spending money on strong, early measures to reduce emissions is a very good investment. It’s insurance against what is looking like a very serious risk to the world that seems expensive now but, according to the Review, will seem in hindsight to be an absolute bargain.
No doubt there will be plenty of analysis of the Stern Report in the coming days and weeks. Hopefully this will help inform the debate about how we should respond to the climate change threat.
Other reports:
Reuters
BBC
Observer
Guardian
New Economist blog
We face all sorts of risks in our lives. As individuals, there’s risks to our health and safety, our businesses and our homes. We take sensible actions to deal with those risks. We weigh up the risks, their likelihood and potential impacts and look at what measures we can take to minimise or deal with the risks and what those measures cost. If we own a house, we’ll put decent locks on the windows and doors and take out insurance covering the risk of break-ins and theft. If we have a particularly valuable house or live in a particularly crime-prone area, we’ll consider more expensive protection – alarms, fences, maybe even some hounds.
One of the things that I think many people miss in the climate change debate is that it’s largely a debate about weighing risks and costs: the likelihood and possible impact of a changing climate and the measures we could take to deal with the problem - the likely costs of taking action compared to the likely costs of not taking action. It sounds obvious but it’s routinely ignored.
It follows that we need good scientific advice to tell us what the likely risks are, and good economic or financial advice to tell us what they will cost, what measures we can take to mitigate or adapt to climate change and what they will cost.
What are the risks? What will it cost?
It annoys me when I hear people say that we must do whatever it takes to avoid climate change. It also annoys me when I hear people say that we should do nothing about climate change until we really know for sure that it’s a big problem. Does the first group have security guards at their homes and surround them with barbed wire fences? Would the second group leave their house open when they go away for a weekend unless I can prove to them that someone will steal their stuff while they’re away?
What probably annoys me most is the disingenuous conservatives who claim that the market economy is so marvellous at adapting to shocks that we don’t need to worry about a changing climate – we’ll just adapt and it will all be very efficient and painless – but God forbid we should sign the Kyoto Protocol or aim to reduce emissions or do anything to increase the cost of energy, because that’s a shock we just can’t cope with.
Some guidance is on the way
An important document relating to the economics of climate change will be released tonight (Australian time). It will help inform the debate about the risks and costs of climate change and the risks and costs of taking action to reduce climate change impacts - by putting some numbers on these costs.
In July last year, the UK government commissioned a review, headed by development economist and former World Bank chief economist Sir Nicholas Stern, to review the economic, social and environmental consequences of climate change, as well as possible actions to adapt to the changing climate and the costs associated with them, and the costs and benefits of actions to reduce the net global balance of greenhouse gas emissions. The Stern Review on the Economics of Climate Change will be published tonight.
Stabilising emissions costs money…
From what’s been released so far about the Review, it has estimated that effective measures to stabilise greenhouse gas concentrations will knock about 1% per year off global economic output. That apparently means it will take an extra two years for global wealth to double. Although it sounds small in the scheme of things, that’s not a trivial cost. It is, for example, in the same ballpark as estimates of what a global pandemic would likely cost the world.
…Not stabilising emissions costs much more
But the flipside is big. Very big. The Review estimates that “business as usual” would leave to a reduction in global economic output of at least 5% - ignoring health impacts, assigning zero value to the non-economic benefits of the environment and assuming no feedback effects that result in the atmosphere warming faster and faster as greenhouse gas concentrations rise. Factoring these in, the level of climate change in the next century based on continuing current trends would reduce output by as much as 20% per year. That’s an impact, according to reports on the Review, “on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century”.
The bottom line is that spending money on strong, early measures to reduce emissions is a very good investment. It’s insurance against what is looking like a very serious risk to the world that seems expensive now but, according to the Review, will seem in hindsight to be an absolute bargain.
No doubt there will be plenty of analysis of the Stern Report in the coming days and weeks. Hopefully this will help inform the debate about how we should respond to the climate change threat.
Other reports:
Reuters
BBC
Observer
Guardian
New Economist blog
Monday, October 23, 2006
Removing market distortions: A prerequisite for sustainable development
I'll be attending a lecture with this catchy title in Sydney next week, to be presented by Jean-Philippe Barde, Visiting Professor of Law at Macquarie Uni and former Head of the National Policies Division in the OECD Environment Directorate. It sounds interesting.
It's on at the State Library of NSW in Macquarie Street in the city at 6pm on Thursday 2 November.
It's free but bookings are essential.
More details here.
It's on at the State Library of NSW in Macquarie Street in the city at 6pm on Thursday 2 November.
It's free but bookings are essential.
More details here.
Thursday, October 19, 2006
Become Al Gore!
Ever wanted to be Al Gore?!
OK, probably not, but this sounds like an exciting opportunity:
Al Gore will be travelling to Australia in November to personally train 75 special people in delivering his climate change presentation, as featured in the documentary An Inconvenient Truth.More details and FAQs here. Application forms here.
Successful applicants will attend a two and a half day training seminar with Al Gore, eminent Australian scientists and expert public speaking trainers. Participants will receive the training and materials free of charge but will be required to fund their own travel and accommodation expenses. The training will be held in Sydney between November 18 - 20, 2006.
Some previous experience in public speaking and presenting would be an advantage. Applicants will also need knowledge of Keynote or PowerPoint programs and access to a laptop computer and data projector. Applicants MUST be willing to commit to delivering at least 10 public presentations in the year following their training.
Applications close at 9am, 30 October 2006.
Tuesday, October 17, 2006
The expanding scope of economics
I enjoyed reading Freakonomics but it wasn’t really what I expected. For a start, most of it wasn’t really about economics. I’m not sure exactly what to call it other than social science. It was a bit sociology, a bit epidemiology, a bit social psychology, a bit cultural studies maybe. It was essentially using statistical techniques developed in economics and applying them to other fields.
It seems to be a growing trend. Joshua Gans talked today about economists doing medical research and Andrew Leigh’s blog today mentions some recent economic studies from the National Bureau of Economic Research – at least two of which I wouldn’t really say are economics at all.
I’m not sure what’s driving this foray from economists into areas that other social scientists would traditionally hold. Do economists’ methods and training allow them to answer these questions better than others? Are there just more economists out there? Are economists bored with traditional economics? Is it easier to get funding to study something if you’re an ‘economist’ than, say, a ‘sociologist’?
This was one of the topics I first talked about in this blog (Economists should stick to economics). I think it’s a good thing when economist apply their tools to other areas. But I do worry that economists often carry, along with those tools, a particular suite of theoretical or ideological baggage that means studies of social phenomena shouldn’t just be left to economists.
It seems to be a growing trend. Joshua Gans talked today about economists doing medical research and Andrew Leigh’s blog today mentions some recent economic studies from the National Bureau of Economic Research – at least two of which I wouldn’t really say are economics at all.
I’m not sure what’s driving this foray from economists into areas that other social scientists would traditionally hold. Do economists’ methods and training allow them to answer these questions better than others? Are there just more economists out there? Are economists bored with traditional economics? Is it easier to get funding to study something if you’re an ‘economist’ than, say, a ‘sociologist’?
This was one of the topics I first talked about in this blog (Economists should stick to economics). I think it’s a good thing when economist apply their tools to other areas. But I do worry that economists often carry, along with those tools, a particular suite of theoretical or ideological baggage that means studies of social phenomena shouldn’t just be left to economists.
Wednesday, October 11, 2006
A Convenient Truth
Here's a convenient truth: you can see Al Gore's climate change doco An Inconvenient Truth for free.
According to the Australian Conservation Foundation, travel agency Intrepid Travel will refund the cost of your ticket if you send them the stub. Details here.
And speaking of ACF, climate change and free stuff, you can also get a free 'climate change action kit' from ACF, containing such goodies as:
According to the Australian Conservation Foundation, travel agency Intrepid Travel will refund the cost of your ticket if you send them the stub. Details here.
And speaking of ACF, climate change and free stuff, you can also get a free 'climate change action kit' from ACF, containing such goodies as:
- Fridge Magnet with GreenHome tips for making simple changes in your life to reduce your greenhouse pollution
- 'Act now on Climate Change' sticker
- ‘Australia’s Inconvenient Truth’ – this booklet provides an overview of climate change, its impact on Australia and solutions we can adopt today
- A letter for you to send to your Federal MP urging greater Government action on climate change
- Ways for you to become part of a growing community of Australians committed to tackling climate change.
Monday, October 09, 2006
There's no such thing as a free park
The Age on Friday had an article entitled ‘Inner-city parking wars’ about the competing demands for scarce parking spots in inner city suburbs of Melbourne such as Richmond:
The article also talks about the advent of new inner-city apartment developments designed to be car-free.Ted Woodruff has a daily parking dilemma that many other inner-city residents could relate to - the Richmond resident arrives home from work on most days to find every park on the street taken. Vehicles are even parked on the footpath and nature strip.
Mr Woodruff has been slugged with some hefty parking fines in the past year, despite the fact that he has a parking permit.
"The problem is there are so few parks you end up having to park up on the curb or,
alternatively, park three or four streets away and it's not in your zone," he explains.This scene is repeated throughout Melbourne's inner suburbs. Residents in heritage properties without driveways fight for on-street parking spaces with apartment dwellers and other residents who may have a garage but own more than one car.
Nearby businesses and entertainment venues also attract visitors searching for that elusive spot, adding to residents' parking woes.
Harry Clarke has an interesting discussion of the economics of free parking on his blog over the weekend, reviewing a recent US book: The High Cost of Free Parking. The average parking spot is worth a lot more than the car occupying it and the high availability of ‘free’ workplace parking in the US effectively represents an average 22c per mile subsidy to commuters. This distorts a range of economic decisions, affecting public transport, land-use and planning and the cost of housing. An interesting argument is that so much congestion is caused by people driving slowly looking for a parking spot that an optimal policy would set the price of parking spots high enough so that there's always one available without a search. (Ie, lots of empty spots).
Interesting stuff.
Friday, October 06, 2006
Crazy water audit plans
I don't want to be too scathing, because ABC Online news reports rarely provide sufficient context to get a proper idea of what they're about - but this plan from a Professor of water policy sounds crazy to me:
Is he for real? He wants someone (ie, the government) to check on every single water user to check if they're using it properly, efficiently, and really truly need the water they're using?
Here's an idea - how about we just charge people appropriately for water and let them figure out themselves how much to use and how to use it? The farmers who he states "have been forced to improve their efficiency" weren't forced because they submitted detailed water plans to government and government came up with some great ideas on how they could all make their water use more efficient. They were forced to, as Pigram himself suggests, because the financial pressure from "low commodity prices" made them figure out their own ways of saving water (and therefore money). How about we just stop subsidising water, let people pay the price for it that reflects its increasing scarcity, and let them figure this stuff out themselves?
The author of a new book on ways to better manage water says all users should have to account for the way they use the resource.
John Pigram, a Professor of water policy at the University of New England in New South Wales, says farmers have already been forced to improve their efficiency to make the most of low commodity prices.
He is calling for a national audit system to force users to justify their water allocations.
"Whether that be for irrigation, for industry, for a wetland, or a brewery, [they have] ... to be accountable for its use," he said.
"They have to specify what they want the water for, how they're going to use it and manage it and eventually audit their performance, and if it doesn't come up to scratch they either lose the water or they have to adjust their management protocols."
Is he for real? He wants someone (ie, the government) to check on every single water user to check if they're using it properly, efficiently, and really truly need the water they're using?
Here's an idea - how about we just charge people appropriately for water and let them figure out themselves how much to use and how to use it? The farmers who he states "have been forced to improve their efficiency" weren't forced because they submitted detailed water plans to government and government came up with some great ideas on how they could all make their water use more efficient. They were forced to, as Pigram himself suggests, because the financial pressure from "low commodity prices" made them figure out their own ways of saving water (and therefore money). How about we just stop subsidising water, let people pay the price for it that reflects its increasing scarcity, and let them figure this stuff out themselves?
Thursday, October 05, 2006
Valuing environmental benefits
Natural environments and ecosystems provide a range of valuable economic services to communities. One of the contributions of environmental economics is in the field of environmental valuation: attempting to put a monetary value on the services that ecosystems provide.
"Putting a dollar value on nature" inevitably attracts criticism as it seems to represent the worst of the economic way of thinking: something that’s sacred and priceless is reduced to a dollar figure. But the reality is that people make decisions about natural resources based on an assessment of the value of different uses and when the value of ecosystem services is not known, it tends to be ignored or at least underestimated. For example, the decision to clear fell an area of forest is much less likely to be approved by a government forest management agency if you can demonstrate that the value of a standing forest in purifying water entering a catchment approaches the value you could obtain by harvesting the trees.
There’s good news for Australian economists and policy-makers with an interest in this area: Australia has just joined the international Environmental Valuation Reference Inventory (EVRI), which means that all Australians can access the inventory for free. (The United States, France, the United Kingdom and Canada are already members).
The inventory contains details of about 1,700 international studies providing values, methodologies, techniques and theories on environmental valuation. It’s intended primarily as a tool to assist policy analysts in estimating economic values for changes in environmental goods and services. The idea is that the results of the previous studies in the EVRI can be applied, with appropriate modifications, to estimate the economic value of changes stemming from new programs or policies. This should be easier (and cheaper) than setting up a valuation study from scratch.
I haven’t checked it out yet (it looks a bit technical for me!) but it should be a useful resource for any environmental economists out there. The NSW Department of Environment and Conservation has more information on the inventory and Australian data in this area.
"Putting a dollar value on nature" inevitably attracts criticism as it seems to represent the worst of the economic way of thinking: something that’s sacred and priceless is reduced to a dollar figure. But the reality is that people make decisions about natural resources based on an assessment of the value of different uses and when the value of ecosystem services is not known, it tends to be ignored or at least underestimated. For example, the decision to clear fell an area of forest is much less likely to be approved by a government forest management agency if you can demonstrate that the value of a standing forest in purifying water entering a catchment approaches the value you could obtain by harvesting the trees.
There’s good news for Australian economists and policy-makers with an interest in this area: Australia has just joined the international Environmental Valuation Reference Inventory (EVRI), which means that all Australians can access the inventory for free. (The United States, France, the United Kingdom and Canada are already members).
The inventory contains details of about 1,700 international studies providing values, methodologies, techniques and theories on environmental valuation. It’s intended primarily as a tool to assist policy analysts in estimating economic values for changes in environmental goods and services. The idea is that the results of the previous studies in the EVRI can be applied, with appropriate modifications, to estimate the economic value of changes stemming from new programs or policies. This should be easier (and cheaper) than setting up a valuation study from scratch.
I haven’t checked it out yet (it looks a bit technical for me!) but it should be a useful resource for any environmental economists out there. The NSW Department of Environment and Conservation has more information on the inventory and Australian data in this area.
Monday, September 11, 2006
An Inconvenient Truth: My thoughts
Well it was an unseasonably cold September evening in Sydney as we shivered and shuffled our way up Oxford St to the cinema and I couldn’t help but think "Bring on global warming".
Just kidding.
We had booked tickets for the sneak preview but we needn’t have – there were not a lot of people there. But then again, it was cold, it was a Friday night and we were there to watch a documentary on climate change. Anyway, we were excited. We purchased our choc tops, which seemed to be melting faster than when I was a kid, and settled in to enjoy – if that’s the right word – An Inconvenient Truth.
Ninety minutes later, our reactions were mixed. I found it pretty riveting, but of course I’m very interested in climate change and - more importantly - I'm a sucker for diagrams, charts and graphs. My girlfriend, Cat, found the presentation staid and she almost nodded off a couple of times. The presentation was unusual, even for a documentary. It really is a talk by Al Gore on climate change, albeit mixed with some spectacular footage and some very convincing and illuminating visual explanations of the science. No-one else gets interviewed or really speaks in the movie. That does give it a kind of one-sided feeling, even though the facts that Gore is presenting are mostly indisputable.
Gore is engaging though and he lays out a convincing argument. He explains the link between carbon dioxide concentrations and global temperatures, shows that current carbon dioxide concentrations are unprecedented and tells us the impacts that that will have. He gives the opponents’ arguments short shrift and I sometimes think this is a problem.
For example, I watched the ABC’s At the Movies show (for those of you unfamiliar with it, it’s a chatty film review show usually in the form of a discussion between the two engaging hosts, and they had this to say after watching the film:
That discussion riled me when I saw it because, of course, exactly such a body does exist – the Intergovernmental Panel on Climate Change – and it has answered most of the big questions. But after seeing the movie, I can understand why Margaret said this.
I think the problem is this. The science behind climate change is not highly disputed. There’s a lot of uncertainty at the margins about exactly what’s likely to occur, what the impacts will be, etc, but the basic concept has essentially unanimous support among serious climate scientists. (If I can attempt to summarise that basic concept, it’s that we are substantially increasing the concentration of greenhouse gases in the atmosphere above historical levels and that this will result in a rise in average global temperatures and a massive range of impacts on climate (that will vary from place to place) including higher temperatures in some places, lower temperatures in others, more rainfall in some places, lower rainfall in others and an increase in the frequency and intensity of extreme weather events – droughts, floods, fires – pretty much everywhere.)
The science behind climate change is not highly disputed, so Gore doesn't present a dispute, but climate change is highly disputed in the popular media. So when Al Gore presents one version of a debate which rages in the media, the natural question is ‘Well, what’s the other side of the story?’. That question is asked, I think, because people are used to social documentaries that concentrate on conflict – where people from two very different viewpoints are interviewed and their opposing views and stories presented. Documentaries do this because they want to appear to be balanced (though they rarely are) and perhaps more so because playing up the conflict creates drama and interest.
When that format is absent from a movie, I think people naturally ask whether they’re being told the whole truth. I guess it’s also because climate change science is presented popularly as much more controversial than it truly is. I would have liked to see Gore engage some of the main opposing arguments a little more - even if they don't truly deserve airtime.
Anyway, I think this is an important and compelling film. I’d recommend you see it – and take any sceptical friends with you. It certainly gets people thinking and talking about the issues. Our Saturday night was spent talking climate change, Kyoto and politics until the early hours of Sunday morning – not the usual Saturday night fare.
By the way, Al Gore is being interviewed tonight (Monday) on Enough Rope on ABC.
Just kidding.
We had booked tickets for the sneak preview but we needn’t have – there were not a lot of people there. But then again, it was cold, it was a Friday night and we were there to watch a documentary on climate change. Anyway, we were excited. We purchased our choc tops, which seemed to be melting faster than when I was a kid, and settled in to enjoy – if that’s the right word – An Inconvenient Truth.
Ninety minutes later, our reactions were mixed. I found it pretty riveting, but of course I’m very interested in climate change and - more importantly - I'm a sucker for diagrams, charts and graphs. My girlfriend, Cat, found the presentation staid and she almost nodded off a couple of times. The presentation was unusual, even for a documentary. It really is a talk by Al Gore on climate change, albeit mixed with some spectacular footage and some very convincing and illuminating visual explanations of the science. No-one else gets interviewed or really speaks in the movie. That does give it a kind of one-sided feeling, even though the facts that Gore is presenting are mostly indisputable.
Gore is engaging though and he lays out a convincing argument. He explains the link between carbon dioxide concentrations and global temperatures, shows that current carbon dioxide concentrations are unprecedented and tells us the impacts that that will have. He gives the opponents’ arguments short shrift and I sometimes think this is a problem.
For example, I watched the ABC’s At the Movies show (for those of you unfamiliar with it, it’s a chatty film review show usually in the form of a discussion between the two engaging hosts, and they had this to say after watching the film:
MARGARET: David, it's done very lucidly, the graphics are great, you know, if this is fact, then it's pretty scary. But what I want to know is, you know, if there is doubt about what Gore is claiming...
DAVID: Well, some people have attacked the film.
MARGARET: Right, well, I mean surely it's possible to set up a body that doesn't have any vested interest in either outcome, you know, that just wants to know the truth and finding out what the truth is. I mean, it can't be a scientific stretch to discover whether we're losing the polar ice caps…I actually think we owe it to our kids and our grandkids to find out the truth, and, you know, I mean a lot of money ought to be put into finding out the truth of this situation. I mean, it's very easy to get people's gander up with a documentary like this, and I think it's been very well done, but, the truth of the situation is significant, and that's what this documentary ought to do. It ought to galvanise people in power to discovering the truth.
That discussion riled me when I saw it because, of course, exactly such a body does exist – the Intergovernmental Panel on Climate Change – and it has answered most of the big questions. But after seeing the movie, I can understand why Margaret said this.
I think the problem is this. The science behind climate change is not highly disputed. There’s a lot of uncertainty at the margins about exactly what’s likely to occur, what the impacts will be, etc, but the basic concept has essentially unanimous support among serious climate scientists. (If I can attempt to summarise that basic concept, it’s that we are substantially increasing the concentration of greenhouse gases in the atmosphere above historical levels and that this will result in a rise in average global temperatures and a massive range of impacts on climate (that will vary from place to place) including higher temperatures in some places, lower temperatures in others, more rainfall in some places, lower rainfall in others and an increase in the frequency and intensity of extreme weather events – droughts, floods, fires – pretty much everywhere.)
The science behind climate change is not highly disputed, so Gore doesn't present a dispute, but climate change is highly disputed in the popular media. So when Al Gore presents one version of a debate which rages in the media, the natural question is ‘Well, what’s the other side of the story?’. That question is asked, I think, because people are used to social documentaries that concentrate on conflict – where people from two very different viewpoints are interviewed and their opposing views and stories presented. Documentaries do this because they want to appear to be balanced (though they rarely are) and perhaps more so because playing up the conflict creates drama and interest.
When that format is absent from a movie, I think people naturally ask whether they’re being told the whole truth. I guess it’s also because climate change science is presented popularly as much more controversial than it truly is. I would have liked to see Gore engage some of the main opposing arguments a little more - even if they don't truly deserve airtime.
Anyway, I think this is an important and compelling film. I’d recommend you see it – and take any sceptical friends with you. It certainly gets people thinking and talking about the issues. Our Saturday night was spent talking climate change, Kyoto and politics until the early hours of Sunday morning – not the usual Saturday night fare.
By the way, Al Gore is being interviewed tonight (Monday) on Enough Rope on ABC.
Tuesday, September 05, 2006
Greenhouse update
I've been meaning to post some stuff on carbon emissions trading as I've been slowly wading through the Australian States' and Territories' discussion paper on a national emissions trading scheme.
Meanwhile, California is going it alone in the US with a bold-sounding scheme to cut emissions to 1990 levels by 2020. It doesn't seem that there's much detail in the scheme just yet so it will be interesting to see how it develops and how it affects other jurisdictions.
In the meantime, I can recommend two new Australian blogs that are examining these issues: carbonsink and Burrows: Reduce CO2 emissions. They have some good pieces on the Australian politician posturing on climate change, Peak Oil, the power of markets, Tim Flannery, Al Gore, the California scheme, climate sceptics and using algae to capture CO2.
Law firm Blake Dawson Waldron produces a good regular update on Greenhouse issues from a legal and regulatory perspective and the August edition (pdf) has just come out. It includes a good summary of the main features of the proposed Australian national emissions trading scheme.
Tags: climate+change emissions+trading
Meanwhile, California is going it alone in the US with a bold-sounding scheme to cut emissions to 1990 levels by 2020. It doesn't seem that there's much detail in the scheme just yet so it will be interesting to see how it develops and how it affects other jurisdictions.
In the meantime, I can recommend two new Australian blogs that are examining these issues: carbonsink and Burrows: Reduce CO2 emissions. They have some good pieces on the Australian politician posturing on climate change, Peak Oil, the power of markets, Tim Flannery, Al Gore, the California scheme, climate sceptics and using algae to capture CO2.
Law firm Blake Dawson Waldron produces a good regular update on Greenhouse issues from a legal and regulatory perspective and the August edition (pdf) has just come out. It includes a good summary of the main features of the proposed Australian national emissions trading scheme.
Tags: climate+change emissions+trading
Thursday, August 24, 2006
Killing endangered animals to save them?
I’ve belatedly discovered YouTube and my girlfriend was showing me some very amusing Borat clips on the weekend. There’s one interview with a particularly ghastly big game hunter in the US whose comments are so offensive you can only laugh, or cry. In one scene he’s showing off the trophy heads of animals he’s shot. He points to one and says proudly "This one’s the most expensive. I had to pay $12,000 to shoot it. But it was worth it. [beaming] It’s extinct now!"
Hunters do not attract a lot of sympathy. But I’ve come across two thought-provoking articles this week on whether allowing hunting and trade in endangered animals and their products could actually help save them from extinction.
The first article* looked at recent efforts in China to commercialise tiger ‘production’:
Unfortunately, the article is long on free-market rhetoric and short on examples, theory or other information on how allowing trade promotes recovery. The argument seems to be that if trade was legal, farming would become cheap and widespread and there would be no incentive to hunt wild tigers. I’m not at all sure that’s right. Breeding or ‘farming’ tigers is no doubt difficult and expensive. I imagine it’s cheaper and easier to go into the jungle and just shoot one than breed and raise these animals from cubs.
It may well be that allowing trade in tiger products could assist wild populations, but it would have to be combined with well-resourced enforcement to prevent hunting of wild tigers, effective tracking of products to ensure the traded products didn’t include illegally hunted tigers and well-resourced reintroduction programs to re-establish wild populations. Simply legalising trade would only increase the demand for wild tigers and reduce the risks of prosecution and therefore costs of hunting them.
And, of course, this all ignores the objections that many people will have to the initially repulsive idea of commercially farming majestic wild animals like tigers to grind their claws into insomnia treatments.
The second article** (pdf), which is quite detailed and much more useful, examined elephant populations in Africa.
It found that countries where ‘ownership’ of elephants (ie, the power to make decisions about what to do with them and the right to the benefits of those decisions) was vested in local communities had elephant populations that grew much more than countries where ownership was vested in the government (eg, through wildlife reserves), was not vested in anyone (open access) or where hunting was banned. Bans were ineffective because the resources required for their enforcement were too high for governments which meant that poaching was rife (in effect the position was similar to if the elephants were an open access resource).
Communities in these successful countries could decide which of the elephants in the vicinity of their village would be killed for their products, which kept for tourism benefits and which licensed for hunting. The communities made the decisions and the economic costs and benefits of their decisions accrued to them in the form of fees from tourist operators or hunting licences and food and/or income from selling elephant products. These communities could also effectively monitor their local elephants and had enough information and resources to stop poaching.
Ultimately, it’s an empirical question (but also one of values) and it depends on the local conditions. I’ll try and track down some more empirical studies / articles. Does anyone know of any?
*Barun Mitra, The Value of wildlife: selling the tiger to save it (New York Times, 15 August 2006) via The Commons blog
** The Ivory Bandwagon:International Transmission of Interest-Group Politics
(Kaempfer and Lowenberg, 1999) via the Conservation Finance blog
technorati tags: environmental+economics endangered+species hunting tigers elephants borat
Hunters do not attract a lot of sympathy. But I’ve come across two thought-provoking articles this week on whether allowing hunting and trade in endangered animals and their products could actually help save them from extinction.
The first article* looked at recent efforts in China to commercialise tiger ‘production’:
like forests, animals are renewable resources. If you think of tigers as products, it becomes clear that demand provides opportunity, rather than posing a threat. For instance, there are perhaps 1.5 billion head of cattle and buffalo and 2 billion goats and sheep in the world today. These are among the most exploited of animals, yet they are not in danger of dying out; there is incentive, in these instances, for humans to conserve.
So it can be for the tiger. In pragmatic terms, this is an extremely valuable animal. Given the growing popularity of traditional Chinese medicines, which make use of everything from tiger claws (to treat insomnia) to tiger fat (leprosy and rheumatism), and the prices this kind of harvesting can bring (as much as $20 for claws, and $20,000 for a skin), the tiger can in effect pay for its own survival. A single farmed specimen might fetch as much as $40,000; the retail value of all the tiger products might be three to five times that amount.
Yet for the last 30 or so years, the tiger has been priced at zero, while millions of dollars have been spent to protect it and prohibit trade that might in fact help save the species...
If we truly value the tiger, this crisis presents an opportunity to help it buy its way out of the extinction it now faces. The tiger breeds easily, even in captivity; zoos in India are constantly told by the Central Zoo Authority not to breed tigers because they are expensive to maintain. In China, which has about 4,000 tigers in captivity, breeding has been perfected. According to senior officials I met in China, given a free hand, the country could produce 100,000 tigers in the next 10 to 15 years…
tiger-breeding facilities will ensure a supply of wildlife at an affordable price, and so eliminate the incentive for poachers and, consequently, the danger for tigers in the wild. With selective breeding and the development of reintroduction techniques, it might be possible to return the tiger to some of its remaining natural habitats...
Unfortunately, the article is long on free-market rhetoric and short on examples, theory or other information on how allowing trade promotes recovery. The argument seems to be that if trade was legal, farming would become cheap and widespread and there would be no incentive to hunt wild tigers. I’m not at all sure that’s right. Breeding or ‘farming’ tigers is no doubt difficult and expensive. I imagine it’s cheaper and easier to go into the jungle and just shoot one than breed and raise these animals from cubs.
It may well be that allowing trade in tiger products could assist wild populations, but it would have to be combined with well-resourced enforcement to prevent hunting of wild tigers, effective tracking of products to ensure the traded products didn’t include illegally hunted tigers and well-resourced reintroduction programs to re-establish wild populations. Simply legalising trade would only increase the demand for wild tigers and reduce the risks of prosecution and therefore costs of hunting them.
And, of course, this all ignores the objections that many people will have to the initially repulsive idea of commercially farming majestic wild animals like tigers to grind their claws into insomnia treatments.
The second article** (pdf), which is quite detailed and much more useful, examined elephant populations in Africa.
It found that countries where ‘ownership’ of elephants (ie, the power to make decisions about what to do with them and the right to the benefits of those decisions) was vested in local communities had elephant populations that grew much more than countries where ownership was vested in the government (eg, through wildlife reserves), was not vested in anyone (open access) or where hunting was banned. Bans were ineffective because the resources required for their enforcement were too high for governments which meant that poaching was rife (in effect the position was similar to if the elephants were an open access resource).
Communities in these successful countries could decide which of the elephants in the vicinity of their village would be killed for their products, which kept for tourism benefits and which licensed for hunting. The communities made the decisions and the economic costs and benefits of their decisions accrued to them in the form of fees from tourist operators or hunting licences and food and/or income from selling elephant products. These communities could also effectively monitor their local elephants and had enough information and resources to stop poaching.
This is an interesting topic and one I’d like to know more about. It seems to me that, in theory, allowing trade in endangered animals / animal products could improve their prospects of recovery but only under fairly limited conditions:
- The animals must be able to be either bred in captivity or their hunting regulated at a rate at which their wild populations will grow;
- Illegal hunting must be enforced at a level such that poaching is more expensive than legal breeding / harvesting;
- If we care about having the animals survive in the wild and not merely in zoos etc, captive bred individuals must be able to be returned to the wild and there must be some incentive or funding for that.
Ultimately, it’s an empirical question (but also one of values) and it depends on the local conditions. I’ll try and track down some more empirical studies / articles. Does anyone know of any?
*Barun Mitra, The Value of wildlife: selling the tiger to save it (New York Times, 15 August 2006) via The Commons blog
** The Ivory Bandwagon:International Transmission of Interest-Group Politics
(Kaempfer and Lowenberg, 1999) via the Conservation Finance blog
technorati tags: environmental+economics endangered+species hunting tigers elephants borat
Tuesday, August 22, 2006
The economic case for reducing emissions
As I’ve discussed before, debates about reducing greenhouse gas emissions in Australia often pit ethical arguments in favour of reducing emissions against economic arguments that support doing nothing.
However, increasingly, there are good national economic reasons for taking strong efforts to start reducing our emissions.
In April, the Australian Business Roundtable on Climate Change put forward ‘The Business Case for Early Action’ on emissions. The Roundtable is a group of large Australian companies representing a cross-section of the Australian economy (including financial, energy and manufacturing companies). A group of businesses asking to be regulated by government? Asking for government to cap or tax their emissions? Why?
The same thing has been happening overseas. Also in April, CEOs of large energy and other companies such as General Electric, Wal-Mart, Shell and Duke Energy made submissions to a US Senate Committee saying they would welcome or accept mandatory caps on their emissions.
The Australian State and Territory governments last week released a very detailed discussion paper proposing a national emissions trading scheme. It also outlines some of the economic advantages of instituting a national scheme that provides some long-term guidance on what Australia’s climate change policy will be – whether by a national trading scheme, a carbon tax, or a long-term emissions reduction target.
So, here are some of the economic benefits of instituting a national scheme to reduce emissions:
It’s likely that at some stage in the next few decades there will be a strong response (globally and/or domestically) and the ‘price’ of emissions may jump – perhaps strongly and suddenly. Taking action now reduces the risk of a shock in the future.
Encouraging action by other countries
Climate change will have substantial economic impacts on Australia. It’s in our interests that the world takes effective action to reduce its impacts. Taking active measures now gives us a more credible bargaining position later. Taking measures that help develop effective commercial technologies and institutions to reduce emissions will also make it easier for other countries (especially developing countries) to reduce their emissions. It also makes it more difficult for leaders of other countries to justify a lack of action on the basis that heavy emitters such as Australia are not taking action.
Encouraging commercialisation of technology
Australia is committing considerable funding to the politically uncontroversial route of supporting emissions reduction technologies. To get a return on these investments (in an environmental as well as economic sense), they need to be commercialised and adopted by industry. That is unlikely to happen (domestically at least) in the absence of measures that put a price on emissions and hence provide an incentive to adopt these technologies.
Until we have a strong international agreement to reduce global emissions, the economics for going it alone with a domestic scheme are unlikely to be compelling. But it is important to acknowledge that there are economic benefits of a strong domestic reductions scheme, the economic costs are more modest than is often assumed and there are strong ethical and political reasons for taking a national stand on this issue. Australia’s environment and economy are going to be heavily affected by climate change. In coming years, Australia may be pleading with other countries to take a stronger stand. We’ll be in a better position if we’ve taken a stand ourselves.
tags: emissions+trading climate+change global+warming environmental+economics
However, increasingly, there are good national economic reasons for taking strong efforts to start reducing our emissions.
In April, the Australian Business Roundtable on Climate Change put forward ‘The Business Case for Early Action’ on emissions. The Roundtable is a group of large Australian companies representing a cross-section of the Australian economy (including financial, energy and manufacturing companies). A group of businesses asking to be regulated by government? Asking for government to cap or tax their emissions? Why?
The same thing has been happening overseas. Also in April, CEOs of large energy and other companies such as General Electric, Wal-Mart, Shell and Duke Energy made submissions to a US Senate Committee saying they would welcome or accept mandatory caps on their emissions.
The Australian State and Territory governments last week released a very detailed discussion paper proposing a national emissions trading scheme. It also outlines some of the economic advantages of instituting a national scheme that provides some long-term guidance on what Australia’s climate change policy will be – whether by a national trading scheme, a carbon tax, or a long-term emissions reduction target.
So, here are some of the economic benefits of instituting a national scheme to reduce emissions:
Certainty is important for business
In the energy sector in particular, decisions often have long lead-times and long pay-off times. It can take a decade from the decision to build a large power station to the time it becomes operational and the station can operate for half a century.Not knowing what rules will apply to greenhouse gas emissions in the future significantly increases the risks for investors, who are concerned about the risks of very expensive, long-lived assets. The current atmosphere of uncertainty can cause delays in investment until the policy position is clear. If this situation continues, it could mean higher electricity prices and less reliable supply than if the rules were clearly established in advance.
(NETS Discussion paper)
Delaying action could create economic shocks
The Roundtable’s ‘Business Case’ modelled the impacts of taking sustained action, starting in 2013, achieving 60% reductions by 2050 and also the impacts of the same reductions but starting in 2020. Under the ‘early action’ pathway, economic growth and employment growth would be higher, and the risk of recession and electricity prices lower than the ‘delayed action’ pathway. Of course, you can argue that the ‘no action’ pathway is best of all, but in a world where action is more and more likely to be demanded, adopting a ‘no action’ approach now increases the risk that the delayed action approach will be forced on us.It’s likely that at some stage in the next few decades there will be a strong response (globally and/or domestically) and the ‘price’ of emissions may jump – perhaps strongly and suddenly. Taking action now reduces the risk of a shock in the future.
Encouraging action by other countries
Climate change will have substantial economic impacts on Australia. It’s in our interests that the world takes effective action to reduce its impacts. Taking active measures now gives us a more credible bargaining position later. Taking measures that help develop effective commercial technologies and institutions to reduce emissions will also make it easier for other countries (especially developing countries) to reduce their emissions. It also makes it more difficult for leaders of other countries to justify a lack of action on the basis that heavy emitters such as Australia are not taking action.
Encouraging commercialisation of technology
Australia is committing considerable funding to the politically uncontroversial route of supporting emissions reduction technologies. To get a return on these investments (in an environmental as well as economic sense), they need to be commercialised and adopted by industry. That is unlikely to happen (domestically at least) in the absence of measures that put a price on emissions and hence provide an incentive to adopt these technologies.
Until we have a strong international agreement to reduce global emissions, the economics for going it alone with a domestic scheme are unlikely to be compelling. But it is important to acknowledge that there are economic benefits of a strong domestic reductions scheme, the economic costs are more modest than is often assumed and there are strong ethical and political reasons for taking a national stand on this issue. Australia’s environment and economy are going to be heavily affected by climate change. In coming years, Australia may be pleading with other countries to take a stronger stand. We’ll be in a better position if we’ve taken a stand ourselves.
tags: emissions+trading climate+change global+warming environmental+economics
Thursday, August 10, 2006
An inconvenient truth: Coming soon to a cinema near you
Al Gore's climate change movie An Inconvenient Truth opens in cinemas across Australia on 15 September.
In the meantime, WWF is hosting an advanced screening in Sydney at Dendy Opera Quays on Wednesday 6 September.
For more info about the film check out the Inconvenient Truth website.
(Thanks to Vincenze for the heads-up.)
Update 9/11/06: I saw the film and my thoughts are here: An Inconvenient Truth: My thoughts
technorati: an+inconvenient+truth inconvenient+truth al+gore climate+change global+warming
In the meantime, WWF is hosting an advanced screening in Sydney at Dendy Opera Quays on Wednesday 6 September.
For more info about the film check out the Inconvenient Truth website.
(Thanks to Vincenze for the heads-up.)
Update 9/11/06: I saw the film and my thoughts are here: An Inconvenient Truth: My thoughts
technorati: an+inconvenient+truth inconvenient+truth al+gore climate+change global+warming
Australian economics blogs
There's some excellent economics blogs in Australia, from academics and others.
Academics
Harry Clarke is Professor of Economics at La Trobe Uni. His blog examines environmental and urban transport economics and the economics of public health - in particular, alcohol, tobacco and other drugs.
Joshua Gans is Professor of Management (Information Economics) at Melbourne Business School (Uni of Melbourne). His blog mainly looks at economics of technology, strategy and public policy.
Andrew Leigh is an economics lecturer at the ANU's Research School of Social Sciences in Canberra. His blog focusses on public policy economics.
John Quiggin, an academic economist at the University of Queensland, is a long-time and well-known Australian blogger. He approaches economics from a 'social-democratic perspective' so his stuff is a bit more lefty than the usual neoclassical fare.
Other economists
Institutional economics is a blog by Stephen Kirchner, a financial market economist based in Sydney. It has a macro and international focus, looking at economies, capital markets, monetary policy and similar wacky stuff.
Others
Catallaxy and Club Troppo I guess you'd describe as broadly right-of-centre political group blogs but they have some good economic pieces in between the usual political, um, discourse.
technorati tags: economic-blogs economics-blogs australian-economic-blogs australian-economics economics
Academics
Harry Clarke is Professor of Economics at La Trobe Uni. His blog examines environmental and urban transport economics and the economics of public health - in particular, alcohol, tobacco and other drugs.
Joshua Gans is Professor of Management (Information Economics) at Melbourne Business School (Uni of Melbourne). His blog mainly looks at economics of technology, strategy and public policy.
Andrew Leigh is an economics lecturer at the ANU's Research School of Social Sciences in Canberra. His blog focusses on public policy economics.
John Quiggin, an academic economist at the University of Queensland, is a long-time and well-known Australian blogger. He approaches economics from a 'social-democratic perspective' so his stuff is a bit more lefty than the usual neoclassical fare.
Other economists
Institutional economics is a blog by Stephen Kirchner, a financial market economist based in Sydney. It has a macro and international focus, looking at economies, capital markets, monetary policy and similar wacky stuff.
Others
Catallaxy and Club Troppo I guess you'd describe as broadly right-of-centre political group blogs but they have some good economic pieces in between the usual political, um, discourse.
technorati tags: economic-blogs economics-blogs australian-economic-blogs australian-economics economics
Wednesday, August 09, 2006
Why won't someone do something about fuel prices?
Australia always seems to be a bit behind the US and so it is that the frantic whingeing about fuel prices has reached our shores.
After seeing our venerable politicians and wise TV commentators going on and on about this over the past few days (Beazley reckons Howard has 'taken his eye off the ball' in letting fuel prices get so high) and getting that ridiculous chain email "Boycott Mobil, they'll HAVE to lower their petrol prices, then their competitors will have to lower theirs too", I thought I'd post something on this topic this morning. Then I noticed that the Sydney Morning Herald had done it for me with two good articles.
Brendan Bouffler in Heckler presents a blunt demand and supply analysis:
technorati: fuel+prices petrol+prices supply+and+demand traffic+congestion ross+gittins
After seeing our venerable politicians and wise TV commentators going on and on about this over the past few days (Beazley reckons Howard has 'taken his eye off the ball' in letting fuel prices get so high) and getting that ridiculous chain email "Boycott Mobil, they'll HAVE to lower their petrol prices, then their competitors will have to lower theirs too", I thought I'd post something on this topic this morning. Then I noticed that the Sydney Morning Herald had done it for me with two good articles.
Brendan Bouffler in Heckler presents a blunt demand and supply analysis:
The rise in the price of fuel seems to be a worldwide phenomenon driven by a worldwide increase in demand for oil products. Think: China gets the FJ Holden craze.He thus suggests possible demand-side and supply-side solutions:
But given there is a somewhat fixed supply of oil, it pretty much follows (I learned about this "supply-and-demand" thing at high school) that the price goes up when people want to buy more of the stuff than there is to sell. Think: bananas.
Hence the best collective action we can take to bring prices down is to buy less of the stuff. Take the bus once a week, or walk to the shops every now and again instead of driving. God forbid, ride a bike to work if you don't live in Dee Why. If you do, car pool...
If you want supply to increase (to satisfy your apparently unrelenting demand), you probably only have two choices:Ross Gittins weighs in too:
- Write to councillors advocating that more oil refineries be constructed in your suburb or
- invade OPEC nations, and Russia.
He also makes some good observations about the related issue of traffic congestion:ONE thing I hate about politicians is the way they pretend to indulge us rather than level with us. They rarely tell us the unvarnished truth about what problems they can fix and what they can't, preferring to string us along. They act as though they can fix everything, which encourages a culture of complaint and a focus on the alleviation of symptoms rather than a search for fundamental solutions.
Take all the whingeing about the price of petrol. No pollie's prepared to tell us that since the problem is a global shortage of oil, the rise in price is a healthy development because, by encouraging both producers and consumers to adjust their behaviour accordingly, it offers the best solution to the problem.
I think some things are best handled by governments and some things left to markets. But if there's anything markets are good at, and governments bad at, it would have to be coming up with solutions to high energy prices....traffic congestion isn't the problem. Actually, it's the solution to the problem - the only solution the public finds acceptable.
The real problem is that we all want to live together in big cities and travel to and from work or school at pretty much the same time of day. Now, it makes economic sense for us to live in cities and it makes social as well as economic sense for us to want to work when others are working.But the problem is greatly compounded by our desire to live in low-density suburbs and to travel in our own cars - by ourselves.
So the demand for road space at peak times of the day greatly exceeds the supply of space available. The result is traffic congestion, which is merely a way of rationing the space on a first come, first served basis. It's a queue, in other words...
When demand exceeds supply we have to ration. And when you won't ration by price (which is what economists advocate) you have to ration by queue. So congestion isn't the problem, it's the solution to the problem - the only solution we're prepared to accept, our unending complaints notwithstanding.
technorati: fuel+prices petrol+prices supply+and+demand traffic+congestion ross+gittins
Tuesday, August 08, 2006
Environmental economics blogs
I'm updating my list of links to other blogs and thought I'd take the opportunity to highlight some that I enjoy.
Today: environmental economics blogs. When I started blogging only late last year, there were only a couple of blogs devoted to this area (as far as I'm aware). Now there's a handful.
Environmental Economics
These guys have the self-confidence to call their blog simply 'Environmental Economics', and rightly so. It's authored by US academic environmental economists John Whitehead from Appalachian State University and Tim Haab from Ohio State University (with contributions from other US economists) and provides relevant, regular and very readable articles.
Ecological Economics
I'm an occasional contributor to this international group blog with the aim of providing a somewhat greener alternative to the mainstream (and, dare I say, conservative) Environmental Economics.
Environmental and Urban Economics
A more serious academic-style blog by Matthew Kahn of Tufts University (Massachusetts), it contains the full text of interesting articles with some brief commentary.
The Commons
Devoted to 'free market environmentalism', this blog is a bit hit-and-miss. The 'property rights are the answer to everything' perspective is interesting but the posts are more likely to be rants about how global warming is a myth than discussions of markets, property rights and environmental protection.
Robert Metcalfe (UK)
Robert is a student at London School of Economics and provides a UK perspective on environmental economic issues.
Brad Ewing (Ohio)
Brad is an economics and ecology student at Ohio State University. He posts some interesting articles and has a useful list of resources.
Conservation Finance
Lots of food for thought on the 'business' of biodiversity conservation.
Harry Clarke
I'm going to put Harry's blog 'Kalimna' in the 'Australian economics blogs' category, but worth mentioning here as he has a focus on environmental (and urban transport) economics.
Tomorrow: Australian economics blogs.
technorati: environmental+economics
Today: environmental economics blogs. When I started blogging only late last year, there were only a couple of blogs devoted to this area (as far as I'm aware). Now there's a handful.
Environmental Economics
These guys have the self-confidence to call their blog simply 'Environmental Economics', and rightly so. It's authored by US academic environmental economists John Whitehead from Appalachian State University and Tim Haab from Ohio State University (with contributions from other US economists) and provides relevant, regular and very readable articles.
Ecological Economics
I'm an occasional contributor to this international group blog with the aim of providing a somewhat greener alternative to the mainstream (and, dare I say, conservative) Environmental Economics.
Environmental and Urban Economics
A more serious academic-style blog by Matthew Kahn of Tufts University (Massachusetts), it contains the full text of interesting articles with some brief commentary.
The Commons
Devoted to 'free market environmentalism', this blog is a bit hit-and-miss. The 'property rights are the answer to everything' perspective is interesting but the posts are more likely to be rants about how global warming is a myth than discussions of markets, property rights and environmental protection.
Robert Metcalfe (UK)
Robert is a student at London School of Economics and provides a UK perspective on environmental economic issues.
Brad Ewing (Ohio)
Brad is an economics and ecology student at Ohio State University. He posts some interesting articles and has a useful list of resources.
Conservation Finance
Lots of food for thought on the 'business' of biodiversity conservation.
Harry Clarke
I'm going to put Harry's blog 'Kalimna' in the 'Australian economics blogs' category, but worth mentioning here as he has a focus on environmental (and urban transport) economics.
Tomorrow: Australian economics blogs.
technorati: environmental+economics
Friday, August 04, 2006
The rise of the electric car?
Cars have transformed history, lives and cities in the past century. Cars have allowed people to travel further, more easily, comfortably and cheaply than previous modes of transport. They have also transformed landscapes, with substantial amounts of land devoted to roads and cities that are larger and more spread-out. Cars inspire passion. The fact that they are inherently individualistic - you travel in them alone or with your family and you can buy one that expresses your tastes and tells people who you think you are – I think does a lot to polarise opinions about them. They are often portrayed as being symbolic of freedom – go where you want to go, but to detractors they can represent a selfish individualism where people enter little metal boxes and disengage with their communities.
The connections between cars and other modes of transport, urban planning, economics, productivity and the environment are strong and complicated. Posts about urban transport policy invariably elicit strong debates on this blog. But some environmental impacts of cars are relatively straightforward, In particular, they are large contributors to urban air and noise pollution and global greenhouse gas emissions.
Electric cars promise to reduce some of these environmental impacts. They can be quieter, more efficient and less polluting. And with high petroleum prices, they have been attracting attention lately.
Pure electric cars run on a rechargeable battery than can be recharged just by plugging them into a power point in your garage. (note we’re not talking here about hybrids – they run on petrol but have a battery that’s recharged from the engine and from braking and they can be thought of just as a much more efficient petrol vehicle). From a consumer point of view, electric powered cars have two main advantages: they’re pretty cheap and they have a much lower running cost (about 1 – 2 cents per kilometre, less than 20% of the cost of petrol vehicles). But they have had two major limitations: low range between recharges and low speed. They’ve been kind of souped-up golf carts.
But new models can go further and longer between recharges and can achieve much higher speeds. USA Today earlier this week looked at two models on the US market: a US$100,000 electric "high-performance" sports car and a US$9,000 "city car".
The sports car version has a range of over 400km (which would allow an easy Canberra – Sydney drive with some detours and a margin of error) and a top speed of over 200km an hour which is a great deal more than anyone should be thinking about doing anyway. The city car has a range of just over 60km and a top speed of just over 60km/hr. Other models to hit the market soon start at US$5,000 for a 40km/h 2-seater with a 50 km range. The technology is advancing rapidly, with speed and range increasing.
What about the environmental impacts?
The biggest environmental benefits compared to regular petrol cars is in local noise and air pollution. These cars are much quieter and cause no particulate pollution in the city because they run on electricity. Of course, there’s air pollution created in generating the electricity that they run on (particularly in Australia where it’s likely to be generated by coal) but there’s still a substantial net benefit in terms of health etc because Australia’s power plants tend to be located in sparsely populated areas and where the particulates disperse before damaging people’s health (as opposed to cities where people breathe within metres of a car’s exhaust).
In terms of greenhouse emissions, electricity’s no better than petrol (unless it’s from low-emission sources such as wind or solar) so electric cars are only beneficial if they’re much more efficient (or if consumers choose to power them from ‘green’ electricity – which I guess is a real possibility for the segment of the market who’d be interested in these vehicles).
So are they much more efficient?
Well yes they are – much more. The typical electric vehicle today uses 0.3 to 0.5 kilowatt-hours per mile (0.2–0.3 kWh/km) while the average car in the US is equivalent to 1.58 kilowatt-hours per mile.
But will people buy these cars? And if so, who?
Well it doesn’t take a marketing genius to figure out people aren’t going to sell their Commodores and buy a zippy electric car that can do 60km at 60kph before the battery dies. But they’re cheap and getting cheaper and really cheap to run. So I can imagine a family getting one as their second car to drive the kids to school and soccer, go to the supermarket, maybe drive to work. The sportscars are going to have a limited market, but they’re pretty cool. They accelerate and handle better than a petrol car and there’s got to be some status in having an electric car, particularly if you sign up to green power with your power company. Very green chic, very sci fi - or something. If only DeLorean made one. That would be cool.
technorati: electric+car
The connections between cars and other modes of transport, urban planning, economics, productivity and the environment are strong and complicated. Posts about urban transport policy invariably elicit strong debates on this blog. But some environmental impacts of cars are relatively straightforward, In particular, they are large contributors to urban air and noise pollution and global greenhouse gas emissions.
Electric cars promise to reduce some of these environmental impacts. They can be quieter, more efficient and less polluting. And with high petroleum prices, they have been attracting attention lately.
Pure electric cars run on a rechargeable battery than can be recharged just by plugging them into a power point in your garage. (note we’re not talking here about hybrids – they run on petrol but have a battery that’s recharged from the engine and from braking and they can be thought of just as a much more efficient petrol vehicle). From a consumer point of view, electric powered cars have two main advantages: they’re pretty cheap and they have a much lower running cost (about 1 – 2 cents per kilometre, less than 20% of the cost of petrol vehicles). But they have had two major limitations: low range between recharges and low speed. They’ve been kind of souped-up golf carts.
But new models can go further and longer between recharges and can achieve much higher speeds. USA Today earlier this week looked at two models on the US market: a US$100,000 electric "high-performance" sports car and a US$9,000 "city car".
The sports car version has a range of over 400km (which would allow an easy Canberra – Sydney drive with some detours and a margin of error) and a top speed of over 200km an hour which is a great deal more than anyone should be thinking about doing anyway. The city car has a range of just over 60km and a top speed of just over 60km/hr. Other models to hit the market soon start at US$5,000 for a 40km/h 2-seater with a 50 km range. The technology is advancing rapidly, with speed and range increasing.
What about the environmental impacts?
The biggest environmental benefits compared to regular petrol cars is in local noise and air pollution. These cars are much quieter and cause no particulate pollution in the city because they run on electricity. Of course, there’s air pollution created in generating the electricity that they run on (particularly in Australia where it’s likely to be generated by coal) but there’s still a substantial net benefit in terms of health etc because Australia’s power plants tend to be located in sparsely populated areas and where the particulates disperse before damaging people’s health (as opposed to cities where people breathe within metres of a car’s exhaust).
In terms of greenhouse emissions, electricity’s no better than petrol (unless it’s from low-emission sources such as wind or solar) so electric cars are only beneficial if they’re much more efficient (or if consumers choose to power them from ‘green’ electricity – which I guess is a real possibility for the segment of the market who’d be interested in these vehicles).
So are they much more efficient?
Well yes they are – much more. The typical electric vehicle today uses 0.3 to 0.5 kilowatt-hours per mile (0.2–0.3 kWh/km) while the average car in the US is equivalent to 1.58 kilowatt-hours per mile.
But will people buy these cars? And if so, who?
Well it doesn’t take a marketing genius to figure out people aren’t going to sell their Commodores and buy a zippy electric car that can do 60km at 60kph before the battery dies. But they’re cheap and getting cheaper and really cheap to run. So I can imagine a family getting one as their second car to drive the kids to school and soccer, go to the supermarket, maybe drive to work. The sportscars are going to have a limited market, but they’re pretty cool. They accelerate and handle better than a petrol car and there’s got to be some status in having an electric car, particularly if you sign up to green power with your power company. Very green chic, very sci fi - or something. If only DeLorean made one. That would be cool.
technorati: electric+car
Friday, July 28, 2006
Tuesday, July 25, 2006
Carbon tax: the cheapest way to reduce greenhouse emissions
Tim Colebatch has a good opinion piece in this morning's Age, advocating a carbon tax for Australia:
By harnessing market forces, a broad carbon tax gives you more bang for your buck than alternative policies: it's cheaper, more effective and - I would argue - fairer.
It's cheaper than, say, subsidising renewable energy or research into 'clean coal' because, by simply setting a price on carbon emissions and letting industry take whatever measures they like to respond to that price incentive, industry will take the cheapest measures. As Colebatch says:
It's more effective because you're providing an incentive to reduce emissions whatever their source. Setting a minimum target for the use of renewable energy is good but promoting renewable energy is only one part of the equation. Using our existing energy more efficiently is at least as important.
And it's fairer because it looks at all sources and equally penalises emissions from all industries. Rather than targeting renewables or coal, it provides a price incentive that applies to all energy sources and all energy uses.
Essentially it allows people to make their own choices about how best to reduce their emissions. If carbon is priced equally across different energy sources, sectors and industries, consumers and businesses can ultimately choose how to respond without the costs of those choices being distorted by different policies applied to different sectors.
To be pragmatic and rational in this debate, the starting point is that if the scientists are right, then global warming implies colossal risks for mankind, and policies should actively try to minimise them.
Then the task is to achieve the most effective response at the minimum cost. Governments can help foster technology development, as the Howard and Bracks governments are doing - but the real job is to put in place a structure that will see those technologies used...
Suppose we test the technology, we find it works, but (inevitably) at a higher cost than doing things the old way. What happens then?
With the policies we have now, nothing would happen. Companies will not make philanthropic gestures by choosing new expensive technologies over old cheap ones. Without a price mechanism to give firms an incentive to choose (and retrofit) new low-emission technologies, they won't be used.
By harnessing market forces, a broad carbon tax gives you more bang for your buck than alternative policies: it's cheaper, more effective and - I would argue - fairer.
It's cheaper than, say, subsidising renewable energy or research into 'clean coal' because, by simply setting a price on carbon emissions and letting industry take whatever measures they like to respond to that price incentive, industry will take the cheapest measures. As Colebatch says:
[A report commisioned by the Victorian government] ranked renewable energy as the most expensive option apart from carbon capture and storage(!). Far more cost-effective are improving the efficiency of energy use, making existing generators more energy-efficient, switching from coal to gas, and shutting down heavily polluting plants (such as Hazelwood) to install energy-efficient ones.
Instead, we have Hazelwood given an extended lease of life, with no retrofit to use clean coal technologies, while Victorians will subsidise the development of a wind industry here.
It's more effective because you're providing an incentive to reduce emissions whatever their source. Setting a minimum target for the use of renewable energy is good but promoting renewable energy is only one part of the equation. Using our existing energy more efficiently is at least as important.
And it's fairer because it looks at all sources and equally penalises emissions from all industries. Rather than targeting renewables or coal, it provides a price incentive that applies to all energy sources and all energy uses.
Essentially it allows people to make their own choices about how best to reduce their emissions. If carbon is priced equally across different energy sources, sectors and industries, consumers and businesses can ultimately choose how to respond without the costs of those choices being distorted by different policies applied to different sectors.
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