One policy to rule them all

Warwick McKibbin has a very sensible op-ed in the AFR this morning talking about emission reduction targets.

The debate that should be the focus of this election campaign is not the size of the emission target but the comprehensive set of policies that will be implemented.

Well yes. I suppose so. The challenge being that there is a huge gulf between what economists can imagine and what politicians can or want to deliver.

The important paragraph is this:

Australia needs a comprehensive policy to deal with climate change. Piecemeal symbolic announcements do not make a comprehensive policy. An emissions target is an essential element to guide expectations, but it is not the most important part of climate policy. What is most important are the actual policies. These need to be economy-wide because greenhouse gas emissions are economy wide. To be low cost, they need to have a clear carbon price. They need to have wide support because as shown in the failure of energy and climate policy over the past decade, the cost of political uncertainty is likely to be larger than the costs of a well-designed climate policy. The policies also need to be scalable. If the global community pursues even deeper cuts, then the Australian policy may need to ramp-up. Piecemeal policy will collapse under pressure.

Commentary follows.

Australia needs a comprehensive policy to deal with climate change.

This is code for a carbon tax or emissions trading scheme.

Piecemeal symbolic announcements do not make a comprehensive policy.

Yes.

An emissions target is an essential element to guide expectations, but it is not the most important part of climate policy.

Yes.

What is most important are the actual policies.

Very much so.

These need to be economy-wide because greenhouse gas emissions are economy wide.

Hmmmmmmmm. I suppose so, but not entirely convinced. By economy-wide do we mean Australian economy-wide, global  economy-wide?

To be low cost, they need to have a clear carbon price.

That’s a definite maybe. Now here is the thing – we have many, many carbon prices in the economy. At the moment all of them are non-transparent and could be described as being ‘unclear’. The claim being made here is that a transparent and clear carbon price (established either as a tax or by an emissions trading scheme) would be the lowest cost option to meet a given target. Yes – the very target that we were just told is less important than the actual policies being adopted.

They need to have wide support because as shown in the failure of energy and climate policy over the past decade, the cost of political uncertainty is likely to be larger than the costs of a well-designed climate policy.

This is a serious political challenge.  It turns out that voters don’t like carbon taxes. Elites do.

The policies also need to be scalable.

In principle, yes. Yet ow does that compare with it being ‘a comprehensive policy’?

If the global community pursues even deeper cuts, then the Australian policy may need to ramp-up. 

Deeper that what? Doesn’t this point simply demonstrate that Australia should not go it alone but rather cooperate in actual international and coordinated policy efforts?

Piecemeal policy will collapse under pressure.

Yes. Indeed. Australia going it alone is, by definition, piecemeal policy.

It seems to me that the challenge for anyone wanting to propose a carbon tax or ETS needs to explain what happened last time. The Gillard government introduced a carbon tax (that would evolve into an ETS). This we were told was the low cost option to deal with greenhouse gasses, etc. etc. etc. That is what the theory tells us, and what Warwick McKibbin is suggesting in this op-ed.

But we now know that the ‘low cost’ option is pretty expensive.  That doesn’t necessarily mean that we should do nothing, but it does suggest that those proposing this policy response need to do a much better job at justifying their policy proposals.

We also know that all the other carbon prices – the implicit prices – do not get repealed and/or replaced. The carbon tax is an add-on, not a replacement. As such it becomes hard to justify as the low-cost policy that economists tend to support.

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45 Responses to One policy to rule them all

  1. stackja

    ‘Carbon tax’ will reduce temperature in India and Red China allowing them to continue burning fossil fuels.

  2. Tim Neilson

    Sensible?

    Australia needs a comprehensive policy to deal with climate change.

    Well, maybe, ie. to consider how we’d mitigate the effects of whatever climate change occurs naturally (or otherwise) – but “let the free market handle it” may be the best.

    An emissions target is an essential element to guide expectations, …

    How about “whatever emissions arise from normal exercise of a free market economy”?

    To be low cost, they need to have a clear carbon price.

    The lowest cost carbon price is zero.

    If the global community pursues even deeper cuts, then the Australian policy may need to ramp-up.

    If the global community continues to do nothing (except virtue signal) can we ramp down? (I think Sinc was getting at this in his commentary.)

  3. Mark M

    No offence, Mr McKibbin, but your plan for a comprehensive policy to deal with failed doomsday global warming is a sign your nurse has over medicated you, or you are hopelessly ignorant …

    China’s power industry calls for hundreds of new coal power plants by 2030

    Under the proposal, the country could add a large coal power plant every 2 weeks for the next 12 years

    https://unearthed.greenpeace.org/2019/03/28/china-new-coal-plants-2030-climate/

    Happy carbon (sic) tax day, Mr McKibbin. Idiot.

  4. C.L.

    Australia needs a comprehensive policy to deal with climate change.

    We don’t need any policy on “climate change” whatsoever.

  5. BoyfromTottenham

    “Warwick McKibbin had a very sensible op-ed in the AFR this morning…” Sorry, Sinc – I beg to disagree. The first premise: ‘Australia needs a comprehensive policy to deal with climate change’
    is B0ll0ck$. Nothing that Australia does to reduce ’emissions (of CO2)’ will have any effect on the world’s climate, whilst China and India are growing their emissions as fast as they can to bring cheap and reliable electricity to their poorest. Thus everything that follows in the op-ed is irrelevant.
    The real issue is that the Australian voters are not stupid – they won’t vote to have their hard-earned money used to pay for fairy dust and unicorns. I predict that the ALP will pay for this nonsense at the ballot box.

  6. Robber Baron

    Lower world populations equal reductions in carbon emissions.

    Do we really need all those people in say, China or India or Pakistan or Africa or the Middle East or Germany for example? Stalin had a good 5 year plan for the Ukraine, perhaps McKibbon could write a similar one for the UN to mandate.

  7. mem

    When Mr McKibben is able to tell me by how much the temperature will change as a result of his comprehensive policy then I might consider whether it is a good thing to do (or not). In the meantime let’s spend this money on productive and worthwhile activities that benefit the country and its citizens.

  8. wal1957

    I agree with everything that BoyfromTottenham wrote except…”The real issue is that the Australian voters are not stupid – they won’t vote to have their hard-earned money used to pay for fairy dust and unicorns. I predict that the ALP will pay for this nonsense at the ballot box.

    There are plenty of stupid voters in lala land. They will be the first to squeal when the electricity prices go thru the roof if Liebors policies are implemented.

  9. Biota

    It turns out that voters don’t like carbon taxes. Elites do.

    Can’t we do better than this description? What about, Ignorant scumbags do?

  10. Karabar

    How long will this charade persist?
    “If you wish to converse with me,” said Voltaire, “define your terms.”
    Define “Global Warming”. In terms of an “average suface air temperature” (which is meaningless anyhow as it is not possible to compute) it has increased about 1.6 degrees from 1850 to 1998. It has decreased the same amount since 1998. The UHI is 1.7 degrees C, so it is now cooler than it has been since the end of the little ice age, and in all likelihood 7 to 10 degrees lower than the Holcene optimum about 9000 years ago. Does that about sum it up?
    Define “climate change”. A nonsensical term with no more meaning than “flying pigs”. Climate is a REGIONAL parameter used to compare weather in one region to another, using a classification system based on typical weather over a period of years. “Global climate” is nonsense like the phrase “global language”.
    Define “Greenhouse effect”. There is no such thing. Like any other planet with an atmosphere, the surface temperature is determined by solar radiative inputs and radiative outputs to space, and the adiabatic lapse rate. The composition of the atmosphere is immaterial other than in determining the lapse rate.
    The entire loony scam is no more and no less nonsense than the witch hunts of the 17th century base on King James I treatise “Daemonology”. That scam lasted for over a hundred years.
    When can we see an end to the current gibberish?

  11. Beachcomber

    BoyfromTottenham, mem, wal1957, Karabar and others have all said it better than I could.
    I admire Sinclair and I can understand that he thinks it is necessary to engage in debate with fellow economists. But McKibbin’s op-ed is not ‘sensible’, it is another contribution to the circle-jerk climate change fraud which is suppressing the economy.

    When can we see an end to the current gibberish?

    It’s not going to end; not while the establishment academia, media and political ruling class continue enforcing it. We live in a brave new world that has abandoned reason and common sense.

  12. Ubique

    Nonsensical contribution more like it. McKibben needs to reset his thinking, into terms of cost -benefit. And no, the benefit has nothing to do with emissions; it’s to do with modifying the climate. The equation works out to be stupendous, economy-crippling cost for an immeasurably small benefit. Full stop.

  13. Sinclair Davidson

    sensible

    Here I’m thinking: circumspect, balanced, sober, …, level-headed, serious-minded, thoughtful, … , mature

  14. John Barr

    Having a Carbon Price smacks of someone making a Profit off Carbon, rather than reducing the Carbon Output.

    Surely there are better ways of reducing the Carbon Output without a Penalizing Tax which trickles down to Low Paid. As someone said, “Follow the money.”

  15. Sinclair Davidson

    “Follow the money.”

    Yes. I think so. There will have to be very strong “know your carbon credit supplier” rules.

  16. JC

    Surely there are better ways of reducing the Carbon Output without a Penalizing Tax which trickles down to Low Paid.

    Yes there is, scalable 4th gen nuclear. You don’t even require to put a pwice-on-carbin to do it.

  17. Roger

    The challenge being that there is a huge gulf between what economists can imagine and what politicians can or want to deliver.

    Not to mention the gulf between what electrical engineers can do maintain grid stability and the price energy consumers are willing and able to pay.

    And all for next to zero impact upon carbon emissions (assuming they are the culprit merely for argument’s sake).

  18. Natural Instinct

    An emissions target is an essential element to guide expectations, but it is not the most important part of climate policy.

    I am calling bullsh!t. Nice try to get out of holding someone/something accountable.
    No, the target is the most important thing because then you say….

    When Australia has reached this emisions’ target we will have contributed xyz to the world’s cooling, and compared to nations abc this is a good or a bad thing, and it has been achieved at $q / tonne of co2 equivalent.

    Without that target, and the impact of that target, then what is being done is just meaningless activity.

  19. David Brewer

    Good reading, Sinc. McKibben wants an economy-wide carbon price enforced through a tax or emissions trading. “Scalable” just means being able to fiddle with the price.

    If one accepts the premise – that there is a non-negligible risk of disaster from CO2 emissions – and that global problems like this can only be met with proportional national policies, then an economy-wide carbon tax, starting small, does indeed make sense.

    It also makes sense for every other country, but it has never happened. Nowhere do you find an economy-wide carbon price, and no other policy to reduce CO2. Everywhere, at least in industrial countries, you find scores of piecemeal measures scattered across every sector of the economy. Renewable energy subsidies, mandates, regulations and penalties; insulation subsidies; fuel taxes; cash for clunkers schemes; restrictions on land use, water use, and mining; airline and airport taxes; restrictions on burning garbage; corporate sustainability reporting; state-sponsored propaganda in schools… and so on. These measures are mostly incredibly inefficient in reducing carbon dioxide emissions, with huge implied per-tonne costs of “abatement”. Most of them were never even assessed for their cost-effectiveness before they were implemented.

    The only economically rational option is a single, economy-wide carbon tax, and nothing else… with the rate to be adjusted as evidence narrows down the sensitivity of climate to CO2 concentrations. Yet no country has ever done this. Why?

    Lots of possible answers. My first one is that public policy is determined by the politically interested sections of society, and that for these people global warming is a psychological state akin to religious belief, rather than a practical issue to be approached with reason. The majority of these people simply “believe in” climate change, and that we must “do something” about it, and the more things we do the better. As long as this mentality persists, McKibben’s suggestion will get nowhere; or rather, it will simply be added to all the other “climate action” we already have, just as it was last time under RGR.

  20. Squirrel

    “If the global community pursues even deeper cuts, then the Australian policy may need to ramp-up. ”

    As a relatively small, and highly-trade dependent nation, we are obviously vulnerable to “do as I say, not as I do” sanctions – including from countries which were busily populating while we were industrialising, and which now see it as their entitlement to have advanced world living standards for their huge populations.

    I suppose we could hope that any push for deeper cuts by the “global community” would be met by somewhat more robust methodologies for measuring what is actually being done (rather than claimed) by the big players.

  21. Nob

    Translation: “if democracy doesn’t give us what we want, bring on totalitarianism”
    Except they always think they will be the ones in charge.

  22. Ms Smith

    ” I predict that the ALP will pay for this nonsense at the ballot box.” Yes we can only pray and hope. Voters, let us follow the example and vote like the intelligent Canadians have done within the last 12 months, ditching the evidently deceptive climate change propaganda.

  23. Jock

    So a Carbon Price, (or Tax), A Big Tax Policy and a Non Neutral Industrial Relations Policy.

    All through the One Bill Ring.

    And in the Darkness (of Canberra and the Press Gallery) bind us.

    Apologies to Tolkien.

    Then again didnt Gollum go down with the Ring in Mt Doom?

  24. The purpose of putting a price on “carbon” is to reduce the amount of emissions per person (reduce the use of modern amenities).
    We emit CO2 because we have industrialised. Cement production – for example – is a high CO2 emitting process. Travel, is a high CO2 emitting process, etc etc.
    Therefore….putting a price on emissions is asking us TO DE FUCKING INDUSTRIALISE.
    Nothing more, nothing less.

    We know what that means. Lower life expectancy, lower living standards ( North Korea and Cuba have nice low per capita emissions eh?).
    So no, this is not sensible (able to be made sense of), this is fucking madness.

  25. Entropy

    My first one is that public policy is determined by the politically interested sections of society, and that for these people global warming is a psychological state akin to religious belief, rather than a practical issue to be approached with reason. The majority of these people simply “believe in” climate change, and that we must “do something” about it, and the more things we do the better.

    Quite so. It is always amusing to me that for people like McKibbon, they hold dear the assumption is that is irrational to do nothing; but do not accept it is possible it can be just as, if not more irrational to do something.

    And for the mob described above, “something” is never enough anyway. They never do a proper CBA with any sensitivity analysis at all. It’s unprofessional. In fact, the CPRS modelling back in the day was explicitly not allowed to have any sensitivity on the presence or absence of a global carbon price, outcomes in the modelling actually required a global scheme in place by 2016. It’s political. Always.

    And don’t get me started on their approach to discounting future costs and benefits.

    “If the global community pursues even deeper cuts, then the Australian policy may need to ramp-up. ”

    This of course assumes other nations actually do these things. Which evidence to date is they don’t. At least in the form of a rational, stand alone carbon tax. It is always associated with myriad opportunities to ticket clip, establish regulatory armies, subsidy farm, tariff impose and any other measure that is an opportunity for expanded government, to the profit of associated elites and the detriment of little people.

    These actual behaviours suggest to me that people like McKibbon should stop trying to repeat the failed centralised systemic change they seek, as it hasn’t worked all the times it has been tried before, in the hope it will work next time. It won’t. Just like socialism hasn’t worked before, and won’t next time.

    And all these layers of subsidies, regulation armies, tariffs and taxes just mean in the end the Cure Will Be Worse Than The Disease. Particularly if we are the only numbats to take these plans seriously.

    Far better to do these things
    *kill offall market manipulations in the energy markets. They are too complex, not transparent and cost too much to the economy, for realistically no benefit in the end
    *Invest in adaptation strategies because we accept we are going to get the effects of AGW regardless of how much we tax ourselves out of production. This may be too practical for those who believe we should be punished for our carbon sins, and could involve politically hard choices like GMO production and new dams.
    * grow our economy as fast as we can so we can afford to deal with future AGW costs when it happens anyway. Definitely don’t do the opposite.
    *Invest in basic technology research to reduce emissions per MW from current and future energy sources (sacrilege I know, just call me Lomborg)
    *Go nuclear in the meantime to quickly reduce emissions and have a chance of preserving industry
    *Accept that creating global artificial markets to manage real market externalities are academic wankery that should never leave the whiteboard, or the late night circle around the port and cheese platter.
    *rcognise there are people that actually daily operate in real markets who will run rings around you in any market you can dream up. Including my new colonel friend in Nigeria with a large carbon credit plantation. Very cheap. Actually any competent businessman will work out how to game the system faster than you can work out how they did it and impose an additional layer of rules to regulate out the manipulation.

    Just stop it.

  26. yackman

    A visit last week with a US cousin with TDS and Obama Adoration Syndrome elicited the question “why dont you folk go nuclear”. answer “We own 30% winnable U and export same as Yellowcake but wont use U to produce electricity due to politics”

  27. Bruce

    Biota posted:

    “Can’t we do better than this description? What about, Ignorant scumbags do?

    It’s NOT “ignorance”, it is pure, unmitigated MALICE and MEGALOMANIA.

  28. So what was the problem that we are paying through the nose to fix?

  29. Deplorable

    “If it had not, CO2, which had already been drawn down for the first time in Earth’s history to levels similar to today’s, would have continued to decline until CO2 approached the threshold of 150 ppm below which plants begin first to starve, then stop growing altogether, and then die. Not just woody plants but all plants. This would bring about the extinction of most, if not all, terrestrial species, as animals, insects, and other invertebrates starved for lack of food. And that would be that. The human species would never have existed. This was merely the first time that there was a distinct possibility that life would come close to extinguishing itself due to a shortage of CO2.”

    How stupid can the alarmists be.

  30. Rohan

    Yes. I think so. There will have to be very strong “know your carbon credit supplier” rules.

    So more government Sinc?

  31. Ƶĩppʯ (ȊꞪꞨV)

    Australia needs a comprehensive policy to deal with climate changeprosperity. Piecemeal symbolic announcements do not make a comprehensive policy. An emissionsequality target is an essential element to guide expectations, but it is not the most important part of climatecommunist policy. What is most important are the actual policies. These need to be economy-wide because greenhouse gas emissionswealth creation are economy wide. To be low cost, they need to have a clear carbon price. They need to have wide support because as shown in the failure of energy and climatecommunist policy over the past decade, the cost of political uncertainty is likely to be larger than the costs of a well-designed climatecommunist policy. The policies also need to be scalable. If the global community pursues even deeper cuts, then the Australian policy may need to ramp-up. Piecemeal policy will collapse under pressure.

    fixing!!

  32. Beachcomber

    So more government Sinc?

    Good question.

    climate communist policy

    Exactly!

  33. Mak Siccar

    I am in a group that has been in China for the last week, from Xi’an to Beijing and tomorrow Shanghai. In all that time, I have seen the Sun for about 15 seconds. The rest of the time the sky has been an impenetrable Grey that has caused many of our group to have serious respiratory problems, headaches etc. Therefore, forget about demonising CO2 and spend the time and money on cleaning up the real pollutants.

  34. Rob MW

    Warwick McKibbin has a very sensible op-ed in the AFR this morning talking about emission reduction targets.

    The sensible thing to do is recognise that global warming was never a thing, climate change is forever and kicking cans is more cost effective than trying to redesign the wheel on the taxpayers dime and to face reality, we are all going to die in 12 years time so what difference does it make anyway.

  35. Mak Siccar

    Furthermore. Prof Sinc, fight against demonising CO2 rather than entertaining the thought of ‘carbon’ trading etc etc. Read this, please?

    https://www.spectator.com.au/2019/04/if-one-scientist-was-enough-for-einstein/

  36. Ian MacCulloch

    Posted in the last day or so is the summary of CO2 equilibrium by Dr Roy Spencer. The arguments make sense. Therefore the basis for McKibbins’ arguments are removed therefore there is no need for a CO2 trading scheme so beloved of economists. And dare I mention it Bill Gunn’s Wool floor pricing scheme.
    A Simple Model of the Atmospheric CO2 Budget

    April 11th, 2019 by Roy W. Spencer, Ph. D.

    SUMMARY: A simple model of the CO2 concentration of the atmosphere is presented which fairly accurately reproduces the Mauna Loa observations 1959 through 2018. The model assumes the surface removes CO2 at a rate proportional to the excess of atmospheric CO2 above some equilibrium value. It is forced with estimates of yearly CO2 emissions since 1750, as well as El Nino and La Nina effects. The residual effects of major volcanic eruptions (not included in the model) are clearly seen. Two interesting finding are that (1) the natural equilibrium level of CO2 in the atmosphere inplied by the model is about 295 ppm, rather than 265 or 270 ppm as is often assumed, and (2) if CO2 emissions were stabilized and kept constant at 2018 levels, the atmospheric CO2 concentration would eventually stabilize at close to 500 ppm, even with continued emissions.

    http://www.drroyspencer.com/2019/04/a-simple-model-of-the-atmospheric-co2-budget/

  37. mem

    I have just spent two days comparing quotes for fences. Then discussing these quotes with neighbours and working through what we get for our money. If Mr McKibben can’t tell me or my neighbours what we will get in terms of climate change ( ie how much will the temperature change) for our money, then he can go begging. When will people wake-up? It is a huge scam!

  38. Sinclair Davidson

    So more government Sinc?

    Of course – that’s why they always propose a tax and never propose that other taxes will be repealed.

  39. jupes

    sensible

    Here I’m thinking: circumspect, balanced, sober, …, level-headed, serious-minded, thoughtful, … , mature

    As opposed to “climate change“.

  40. Colonel Crispin Berka

    Australia needs a comprehensive policy to deal with climate change.

    If I’m generous and use the plain English interpretation of “climate change”, then Yes.
    Bob Carter got it right first time. There is only one sensible policy on climate change: to adapt to all changes in climate, warming or cooling, and proportional to the amount, and only where and when they occur.
    This policy worked in 10,000BC. It can work in the 21st century too.

    As always, rich people will be mainly unaffected, and the rest will put their hand out for some Green Climate Fund “adaptation capacity building projects”. How global sea level rise equal to the diameter of 1 blu-ray disc per century is supposed to cause catastrophe I do not know, but someone is being paid to figure out how.

  41. PeteD

    Therefore, forget about demonising CO2 and spend the time and money on cleaning up the real pollutants.

    Yes. You’ll never hear how many millions die prematurely due to particulate pollution.

  42. Beachcomber

    Sinclair Davidson on April 23, 2019 at 4:31 pm

    sensible

    Here I’m thinking: circumspect, balanced, sober, …, level-headed, serious-minded, thoughtful, … , mature

    Lets look at the definitions for sensible rather than the synonyms.

    1. done or chosen in accordance with wisdom or prudence; likely to be of benefit.

    McKibbin’s op-ed is an epic FAIL in this regard. It is based on catastrophic AGM nonsense and recklessly proposes an economy-wide totalitarian tax regime. Ordinary taxpayers will be very big losers as they pay for the benefits to the dirigiste governing elites, green rent-seekers and scammers, and of course academic tax hoovers like McKibbin’s Centre for Applied Macroeconomic Analysis. (surely about as useful as one of the many Çentres for Gender Studies etc .)

    2. (of an object) practical and functional rather than decorative.
    McKibbin’s climate change tax has no practical or functional value to anyone other than the Marxist dirigistes, the green scammers, and academic tax hoovers. It is polished economist’s blather to provide a decorative veneer for repressive taxation. A polished turd is still a turd.

    McKibbin’s op-ed is the very opposite of ‘very sensible’.

  43. Habib

    Australia needs a battery of low-carbon trebuchets to hurl every one of these rent-seekers, spivs, racketeers and outright loons into a well-Berley’d Spencer Gulf.

  44. Pyrmonter

    What McKibbin contends is commonsense. Before surrendering to the ‘but it’s unpopular, so nerr’, do tell how popular were:

    -quota reform
    – tariff reform
    – indirect taxation reform
    – labour market reform (such as is left of it after nearly 20 years of reversing the improvements 1983-1998)
    – the modest cuts to above median income taxation that have occurred over the past 15 years
    – international petroleum parity pricing
    – electricity privatisation

    All of which I think most Cats (certainly the Cats who progressed further than intermediate microeconomics) would think desirable policy.

    Invoking the Gillard ‘Carbon Tax’ is a straw woman: the plan there was, transparently, to increase transfers to labour-inclined voters. It left the rest of the cumbersom, opaue, rent-seeking driven matrix of ‘climate policy measures’ untouched. Tear that house down – and the excessive costs it must be taken to impose – and replace it with a single, transparent market-based measure and one might have an economically and politically viable platform.

  45. So no one can tell me what the problem is that we’re trying to fix?

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