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August 01st 2014 print

Alan Moran

A Modest Sceptic Boasts…and Frets

Way back in 1991, I questioned the physics of what was then called "global warming" and wondered just how bad would be the economic impact of efforts to make weather patterns behave themselves. Now that climate careerists and hysterics are in retreat, their costly legacy remains a huge burden

polar bear blows raspberrySenator Cory Bernardi, in the latest edition of his wonderful “weekly dose of common sense”, recalls all the political scalps that climate-change regulations have claimed, reminding us that he wrote his first piece on the subject seven years ago.  At the time he was widely vilified as a heretic. My own first tiptoe into that water was in 1991, when I wrote a chapter, The Enhanced Greenhouse Effect, for a Tasman Institute book, Markets, Resources and the Environment.  While noting that many countries, including Australia, had already taken mitigatory steps on carbon dioxide emissions, the chapter questioned whether the alleged warming was actually taking place and, if it was, whether the net effects would be unfavourable.

My contribution concluded, “Within the next 10 years satellite data will have begun to either corroborate or refute the global warming hypothesis”. Since then I must have written hundreds of articles, submissions and book chapters, largely on the economics of doing nothing and the costs of doing something.

We now know (because even the IPCC acknowledges it) that the economic cost of doing nothing might cause an unexceptional couple of degrees of warming, and that such an approach might amount, at most, to the loss of half a year’s global economic growth over the next 100 years.

The costs of doing something, according to IPCC’  rose-hued view of imminent technological breakthroughs in wind, carbon storage and the like, would be even less.  But even according to naïve enthusiasts like Ross Garnaut, a carbon tax of at least $250 per tonne would be necessary to achieve the emission-staunching that Australia would need to achieve.  This would raise the wholesale cost of electricity sixfold.  Nobody can provide a persuasive economic model delineating the full effects of such a price rise on energy, the fundamental foundation of all economic activity. But we have seen the effects from price changes of only a fraction of this.

The sea of scientific fabrications and economic mendacity covering human-induced climate change over the past quarter of a century has undermined the credibility of both the science and economics professions.  For economists it was a Heaven-sent opportunity to become the socialist planners many of them aspired to be.  They would devise taxes and incentives to nudge supply and demand in directions that the market was incapable of bringing about; and only they, examining the economy from a great height, were armed with the right tools for the job.  For their part, scientists were converted from the cardigan-clad Cinderellas of the public service to international jet-setters, men and women whose words and oracular pronouncements were translated by politicians translated into actions.

But right now their game is unravelling. This is due, in part, to those pesky satellite readings, which have failed for more than 17 years to provide evidence of the warming that was so confidently predicted to accompany increases in atmospheric CO2, which we have very definitely seen. Mainly, though, it is because the costs of mitigatory action are too great and the possibility of achieving necessary universal compliance remote. Meanwhile, the empirical evidence has undermined alarmist claims of heatwaves, droughts, hurricanes and floods resulting from human-induced climate change.

Only three years ago, Treasury Secretary and climate-change zealot Martin Parkinson claimed that countries producing 83% of global emissions had all pledged to undertake climate-change action.  He also said, “unless we all act, we all lose in the end.” The claim that we have pledges from 83% of emitters represents a severe salting of the sample.  It includes India, cited as having a carbon tax which, as it turns out, is a revenue-raising royalty of about $2 per tonne.  It includes Japan, where the carbon tax is $3.30 per tonne.  It includes Switzerland, with a $61 per tonne carbon tax but where 95% of electricity is nuclear or hydro.  It includes Canada, which simply walked away from commitments when they became painful, and New Zealand, where two-thirds of electricity is hydro/geothermal and where the nominal $11-per-tonne carbon tax comes on the basis of ‘buy one get four free’.

And in the US, though the Obama Administration is using regulatory measures to impede coal plants, the Senate voted 95-0 against climate-abatement action.  Even the much vaunted California system has priced carbon at only half the level of the repealed Australian measure.

That leaves the sick man of Europe, the EU, where the carbon price is currently around $8 per tonne, having been at times as high as $30 per tonne.

Parkinson and other spokesmen for the warmist crusade also embroidered their case for action with data that Australia’s per capita emissions are among the highest in the world, implying that we are therefore bad people.  But the measure he used is misleading.  Australia’s emissions are higher than those of most other countries because we export (at least for the present) emission-intensive goods, while other rich countries are net importers.  In terms of consumption per capita we are at similar levels to Switzerland, Germany, Japan, and the Netherlands, but rather lower than the US and Canada.

The unravelling of costly carbon-emission measures is underway, but their toxic legacy will be with us for some time.  Australia still has the Renewable Target (RET), under which we are all being forced to use renewables for a growing proportion of our electricity, currently planned to be 27% by 2020. This form of electricity generation comes at three times the cost of that available from commercial sources, and the cash thrown around by rent-seeking outfits has undermined political processes. With the Dick Warburton-led review report imminent, they are gearing up to spend even more on lobbying.

The repeal of the carbon tax means RET costs will rise.  This is because removal of support for renewable energy, through a tax-inflated electricity price, will require an offsetting price increase for the renewable energy certificates all electricity retailers must buy.

The repeal of the carbon tax means RET costs rise.  This is because removal of support for renewable energy, through a tax-inflated electricity price, will require an offsetting price increase for the renewable energy certificates all electricity retailers must buy.  The cost of this, according to Deloittes, is an impost on consumers of at least $29 billion.

There is, in addition, the vast sums available to carbon-lite energy through the $2 billion a year “Clean Energy Finance Corporation” and direct budgetary spending – the Commonwealth’s Direct Action program, the Emissions Reduction Fund replaces some of that favoured by the ALP/Green coalition with measures favoured by Environment Minister Greg Hunt.

The repeal of the carbon tax still leaves us with much to do in removing the burden imposed on us as consumers and taxpayers, and in redressing the critical impact of regulatory-induced excessive energy costs that are plaguing business competitiveness.

Alan Moran is the Director of the Deregulation Unit of the Institute of Public Affairs