LP Reports, Policy makers listen! By way of a follow up to this post, I attended an ‘Energy White Paper Consultation’ workshop and can report that the Dept of RET facilitator stated that “the composition of the High Level Consultative Committee is a mistake!” They actually intended to have some token renewable energy representatives to lend an air of legitimacy to the whole exercise. Unfortunately, when said CEO realised what they were getting themselves into, they pulled out quick smart, leaving the poor RET exposed.
The disconnect between the assumptions of the discussion paper – a 45% increase in energy demand to 2020 (Why?!?!?) – and the reality of both the climate change response required here and the one actually unfolding in the US and UK was just startling. The ever energetic Fiona Wain was a joy to watch, coming up with bold suggestions at every turn. But of course the harumphing response from RET was, where do we get the capital in these GFC-ish times? Who pays? Funnily enough, this is the flipside of the CC Emo response to the first ‘Energy [R]evolution’ paper at the height of the resource boom: ie. where are the staff in this ‘skills shortage-ish times? And to all those who think public engagement should be quarantined from climate change strategy, watch this space for more ‘regulatory capture’ – a term coined by one participant to sum up the perversely self-referential logic by which the stationary energy market is regulated.
Elsewhere: Mark Gamble reviews Third Way progenitor Anthony Giddens’ new book on the Politics of Climate Change
[A]lthough Giddens is sympathetic to green values, he is very critical of the means that are often advocated to achieve them, because they ignore politics. Radical decentralisation will not deliver the co-ordinated action that is required; the precautionary principle is deeply flawed because it can justify radically opposed courses of action; and the idea of sustainable development is simply incoherent. Giddens favours instead using the percentages principle, accepting that all action involves risks and that the task is to analyse the scale of the risk and make the best choice possible in conditions of uncertainty. This means, for example, accepting the need for new nuclear power stations.
For Giddens, any possible solutions to the climate crisis have to involve a big role for government and the return of planning. In his writings on the Third Way, Giddens was a strong advocate of markets and of the state performing an enabling rather than a command role.
He continues to stress the importance of markets and is very critical of those currents of green thought that reject markets altogether. But Giddens is also keenly aware of the shortcomings of markets in the face of a problem such as climate change, and although he thinks markets are still crucial in any solution (the financial services industry, particularly insurance, has an essential part to play), he thinks they will not participate fully unless governments take a much more active role. What is needed is not just an enabling but an “ensuring” state, a state that can actually deliver outcomes.
Realigning the ostensibly social democratic goals of Kevin Rudd with Energy policy more generally is going to be one hell of a challenge.
Speaking of self-referential…
At the Consultation Workshops in Australia’s mining capital, Melbourne, the following gems of proposals were trotted out;
. the Australian Minerals Council wants to export BROWN COAL from Victoria!
. Coal power stations want more compensation (too much, ain’t enough love to satisfaaar me!)
. coal seam gas is ready for big growth,
. importing more petrol because we’re fast running out is fine
Sure is a parallel universe out there in greenhouse mafia land.
“stationery energy market”
Oh noes, do we has to burn our scrap office paper and huddle over the fires of our old wooden pencils, typewriter ribbons, …???
He he! I has a lot of paper that’s serving no other purpose in life.
@1 Thanks – v. interesting.
– fixed.
@2 Very droll
Markets are all very well when the “risk” is proportional to the ability to recover from failure. ie a loss has to be manageable within a cash flow that generally has to be many times higher than the potential loss, and the potential gains have to reflect the risk undertaken. So when you are talking about investement in the tens to hundreds of billions of dollars for energy infrastucture you have to be either a global mega industry player, or be a serious player operating with guaranteed returns (no longer a market situation). Throughout the alternative energy debate prospective investors have been expected to deliver solutions that are completely unsubsidised, face additional costs that no other energy infrastructure investor has ever had to face, and deliver prices to compete with fully subsidised cost written down energy infrastructure.
What???…no takers. Of course there are no takers. The entire market argument is a lie, always was a lie, and always will be a lie, where massive public interest infrastructure is involved.
It was becoming clear even before the last election that Labour were moving towards dishonesty on environmental matters. It is now plainly obvious. The public concern for the environment is being “managed”, and I find that fully offensive.
That’s precisely the feeling I get everytime Penny Wong opens her mouth. She is there to manage the climate change issue away. Appear calm and measured, sensible at all times, say just enough to keep the sheeple happy, but don’t actually do anything that might offend the Greenhouse Mafia.
I have been looking at the disjunct between climate risk and the economic risk of climate policy and how they are being managed for the last couple of years. The gulf in the current policy setting and in government rhetoric is miles wide. If these aren’t bridged we’re toast. Good post, dk.au
On a more scurrilous note, I was boarding a plane from Brisbane last week and heard and felt a flu-ridden cough and splutter. Turned around and it was Marn Ferson trying to give me the swine!!
As if infecting us with black lung from his coal mines and dark satanic mills wasn’t enough.
Thanks Roger. It seems like the further I get into the serious scientific research on the issue the angrier I get at Economists, particularly Nordhaus. The ego of that guy is just astounding – he seriously seems to believe he’s the Newton of Environmental Economics, the difference being that DICE has failed every time….
All of that is just a sideshow to the politicians’ hubris. Do they honestly believe their approach (lax, poorly coordinated regulation) is satisfactory??
and great comment BilB
I presented my take on risk and the benefits of avoided damages at an OECD meeting a couple of years ago. Nordhaus was there and didn’t like it – he is actually a quietly spoken New England gentleman who believes strongly in classical economics. So his models monetise all damages then treat them as cost-benefit. His approach was “innovative” because he attempted to quantify total economic value, not just market values.
However, cost-benefit analysis has also been captured by Lomborg and the Copenhagen consensus, who used a multi-model Nordhaus type approach to suggest that a very low carbon price was sufficient.
The problem is that both approaches to managing dangerous climate change and cap and trade are linear predict and respond models. This is a complex system with feedbacks and multiple unknowns. It requires a systems approach to policy – very difficult to pull off.
Regarding our current policy. If an initial price of A$25 CO2e is set in 2010-11, then this equates to A$7 per tonne of carbon. When a survey was done for the Stern Review in 2005, the median from a wide range of cost-benefit studies, which were under-estimating damages (from first principles of what can be put into such models) was €7. In 2000 prices, I think from memory.
Therefore, the starting price in Australia’s carbon market is less than a cost we know to be under-estimated. Since climate change is caused by market failure, then a carbon price of A$7 in 2010 is way under the external costs not factored in by the market. Given the large compensation to “price sensitive” polluters also being allowed, the current scheme embeds that market failure in the CPRS. It is a very complex scheme, trying to do a simple thing. We need a complex scheme that factors in both financial and climate risk, and that can build new knowledge into changing caps and targets. Voluntary actions reducing intensity can be used to ratchet the cap back and keep the price stable.
In one sense, the Treasury modelling was heartening – we could go much harder and it would not cost the Earth.
dk.au
On the subject of Nordhaus and his DICE model, you might like to check out this youtube video of Nicholas Stern at the Copenhagen Climate Conference. You may especially like the bit from about 3:15 onwards where he tears DICE to shreds.
I wouldn’t judge economists because of Nordhaus though. There are some good ones out there.
Stop Press:
AHAHAHAHAHAHA.. because Kyoto has been so successful right???
*cries*
Great comment Roger, thanks. What do you make of the EU ETS idea of, what are essentially, a rolling series of experiments (Phases)? I’m with Michael Grubb (and against Quiggin) that we need a price floor reflecting the social goals of the scheme
Thanks Peter. I’m not judging all economists harshly. They’re an innovative lot with a great bunch of very useful tools. But what they’re doing isn’t maths or classical physics. It’s part of a social enterprise – something Stern realises much better than Nordhaus (whose dismal recommendations had far too great an influence on US policy).