Where are the economists?
For those who didn’t catch it, during the week an op-ed of mine was Climate Policy will Stay a Mystery until Silent Specialists Join the Debate was published in The Age. It was based on an earlier post where I detailed the benefits of Australia’s climate policy and the tricks used by opponents to make it look more ineffective than it is likely to be. In the op-ed I ask where are the barefoot economists who will challenge untrue statements about climate and the economy? Text reproduced below (with small edits for clarity).
Climate Policy will Stay a Mystery until Silent Specialists Join the Debate
Uninformed comment prevails when the facts aren’t explained.
A LIE can travel the world before the truth can get its boots on. Where are the barefoot economists who will challenge untrue statements about climate and the economy?
At the 41st Australian Conference of Economists earlier this month, federation fellow John Quiggin, climate economist Frank Jotzo and I criticised Australian economists for not properly explaining the economics of climate change policy. One of the most important policy initiatives ever and economists have gone missing. The slack has been taken up by uninformed comment, self-interested propaganda and misinformation.
Some of this misinformation surrounds a number I calculated for The Age/Our Say 10 questions on climate last year (The Age, 4/9/2011). One question asked then was how much would Australian policy reduce global temperatures? Using a simple model, and assuming that Australian greenhouse gas emissions were reduced by 5 per cent from 2000 levels by 2020 and this reduction was maintained through to 2100, the resulting global benefit would be a reduction of 0.0038 degrees in 2100. If emission reductions continued beyond 2020, reducing by 80 per cent in 2050, then the reduction in warming would be 0.02 degrees.
This question is worth asking even though the resulting number is very small. Commentators such as Andrew Bolt jumped on the number, claiming the benefit was too small for the cost. The Age‘s John Spooner (7/7) suggested the Prime Minister would be disappointed by the result – but is he sure?
If people accept the 0.0038 and 0.02 degree benefits as valid, then they also accept the science behind a 5.3 degrees warming for business as usual (as in the emission scenario created by Treasury for the 2008 Garnaut review). Who wants to live in a world warming by 5 degrees or more? Major food crops could not be grown in many parts of the world, projected sea level rise would be tens of metres, most shelled species in the ocean would not survive, ecosystems would be disrupted and millions to billions of people would lose environmental security, leading to mass migrations. It would make some of our political issues seem like a Sunday picnic.
The good news is that this scenario is already outdated by actions around the world and warming in the pipeline is around 4 degrees by 2100. That’s a step forward – perhaps the difference between utter catastrophe and disaster.
Assessing the benefits of a price on carbon is a task involving science and economics. Science can estimate the size of the reductions and the benefits of the damages avoided in ecosystems, farming and health. Economics provides tools for comparing long-term benefits with the upfront costs. The psychology of risk tells us that people have some powerful biases that count against reconciling long-term benefits with perceived short-term costs. These are easy to exploit.
For example, if I give you two numbers, 10 billion and 0.0038 and say the first is a cost and the second is a benefit, then you would say (justifiably), ”that looks too small.” If I gave you the numbers 0.0038 and 0.02 and said we can get to the first with 8 years’ effort and the second with 38 years’ effort, then you might say ”that’s not too bad.” This is called the contrast effect as is used all the time to frame messages.
The approximate first year take from the carbon tax is $10 billion. Except it’s not a net cost – it gets redistributed through the economy as tax cuts, social security, free permits to energy producers and industries. The actual cost is the flow-through from a one-off inflationary effect of somewhere between 0.7 and 1.0 per cent, and changes in efficiency in some areas that will be compensated for in others. Given that Australia survived an impact of 2.6 per cent from the GST, that net cost is hard to quantify, but much less than $10 billion. In fact, $10 billion is roughly the cost of climate damages in Australia over the past three years and warming has played a big part in that.
So what do we get from Australian policy as part of a global effort? Reductions of 0.0038 and 0.02 degrees translate into avoiding critical bleaching on the Great Barrier Reef, about nine and 50 square kilometres respectively if the world is 2 degrees warmer. Above 4 degrees global warming there would be no benefit because there would be no live coral communities. The benefits globally would be roughly 130 and 700 square kilometres of coral reef spared. This is the good neighbour effect; what we do benefits our neighbours and what they do benefits us.
So is Australia going alone? Certainly not. Limited trading or tax schemes exist in the US, Canada, the EU and Japan and are soon to start up in regions of China, India and South Korea. The world is watching to see how good a neighbour we are.