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42 responses to “Garnaut Review 2011 Update”

  1. murph the surf.

    a few typos – the price will be in the $20-30 range , the tax free threshold will be raised to $25,000.The proposed price is $26 etc.
    Is this a glitch from the new format though?

  2. wilful

    Peter martin has a very long excerpt: http://www.petermartin.com.au/2011/05/garnaut-final-report.html

    how do you like the Age’s headline “we’re not pissants!” Now I’m going to have to check the etymology of that word,

  3. Fine

    I do like Garnaut’s line of; “We’re not a pissant country”.

    I find absolutely repugnant the line that we should do nothing because we are only responsible for about 1.4% of emissions. I think it was Garnaut, although I’m not sure, who’s pointed out that id every country in that range pulled its weight, there would be a considerable change in emissions.

    Abbott was desperately dishonest in picking out one line. He absolutely refuses to debate in an honest and rational way. What a disgrace.

    Now, will the government actually put forward a meaningful price, or will they squib it? My feeling is that they have to do the former because of the Greens and the Independents. If they can actually introduce a carbon price by July 2012, then a lot of the heat from the issue will have dissipated by the 2013 election, imo.

  4. wilful

    Reading the comments on the two Age articles was an exercise in depression.

  5. kymbos

    Reading the first linked Australian article was an exercise in blatant denial.

  6. Grigory M

    @5 wilful & @6 kymbos

    Reading the comments on the two Age articles was an exercise in depression.

    Reading the first linked Australian article was an exercise in blatant denial.

    Not reading either of them was an exercise in good common sense. I will read the actual review and form my own conclusions.

  7. David Irving (no relation)

    Unless I’ve completely misunderstood it, the bit you quote from Paul Kelly is the most sensible thing he’s written in about the last 25 years. Maybe there’s some hope for him after all.

  8. Lefty E

    “If they can actually introduce a carbon price by July 2012, then a lot of the heat from the issue will have dissipated by the 2013 election, imo.”

    Agree. If they hold their nerve, Abbott will lose this issue. Then he will discover he should have been working on plan B all along – ie, developing some policy.

  9. Fine

    Oh noes, Lefty. You can’t expect Abbott to develop policy. The PMship should just fall into his waiting arms.

  10. John

    Tony should have said that his quote was from page 77, not 17.

  11. Roger Jones

    David @8,

    yes, Paul Kelly’s piece was the best I’ve read from him for a long time. The other Australian piece Brian linked to was from their environment reporter and he said international reactions from France, Japan and Canada at the G8 meeting had sidelined Garnaut’s report. Not so – he was spinning madly.

  12. Robert Merkel

    Nice post, Brian.

    I think what Garnaut’s review illustrates is that very little of importance to Australian public policy on this has changed since the original review – indeed, since 2005 or so. The world needs to reduce emissions substantially. Australia needs to play its part. The most sensible primary policy response is carbon pricing.

    I have to admire those who manage to keep making the same points in these debates, year after year, in response to the same self-serving rubbish and deluded crap, long after any sane person would consider the questions settled and would have hoped that we could move on to the many other pressing problems the world faces.

  13. Occam's Blunt Razor

    No mention of compensation for small business.

  14. John D

    It is worth asking what the effect of a top of the range $30/tonne carbon tax would be:
    - the price of power would go up by an average of 3 cents/kWh
    - The per capita tax take would be $15/week if all emissions were included. (@26 tonnes CO2/yr)
    - In the short term the total fuel consumed by cars would drop by by 1,4% in the short term rising to 3.4% after a number of years. These figures correspond to a tax per tonne CO2 abatement of $2100 dropping to $900/tonne. The effect of this on total emissions would be negligible.
    - In the short term power consumption would drop by 4.5% in the short term rising to 9% after a number of years. These figures correspond to a tax per tonne CO2 abatement of $444 dropping to $222/tonne. The effect on total emissions would be half the reduction in power consumption.
    In theory, the tax would be high enough to spur the replacement of coal fired power with gas fired (CCGT) power. However, potential investors in gas would be concerned that Abbott might drop the tax or the tax (or ETS permit price) may rise to levels that are high enough to drive the replacement of gas with renewables long before their investment has paid for itself – probable outcome is little serious investment above what is already being achieved by the MRET system.
    Can anyone identify tangible, significant action that may result from the Garnaut plan?
    As things look at the moment, Gillard will go into the next election with less tangible climate action for two terms of Labor government compared with what the coalition achieved in the last two terms of the Howard government.
    The irony is that lifting the MRET target to 50% would go close to achieving the 2020 target with no tax and power prices ramping up by about 2 cents/kWh by 2020. But I guess the government would prefer all the pain of the Garnaut system to using a Howard initiative?

  15. Incurious and Unread

    John D,

    Didn’t the Rudd government implement the MRET 2020 target (raising the target for renewables from 10% to 20%)? So that, by itself, would be pretty similar in magnitude to what the Howard government achieved?

    How are you working out the cost of moving from a 20% to a 50% MRET target? I would have thought 50% renewables by 2020 would be all but unachievable. Certainly, it would be very expensive.

  16. Incurious and Unread

    Brian,

    “Garnaut rejects the political view that Gillard Labor is “weak and lacks long time horizons” and finds instead that it is cast in heroic mode and “has taken on the most difficult and long-dated policy reform that has ever been attempted”.

    That accords with my view that Gillard is more strategic than people (notably on this blog) give her credit for. Not just on carbon pricing but also on education and (to give her the benefit of the doubt) on welfare reform.

  17. Fran Barlow

    Gillard’s comments at the Minerals Council do yesterday were cringeworthy. Moments like these remind me how happy I am that I declined to preference either party.

  18. Robert Merkel

    Incurious and unread: it’s at the very edge of technical feasibility, let alone political.

  19. Incurious and Unread

    Brian,

    Agreed. It’s gonna take 3 terms, so she has to win the next election.

    So, Fran, cringe all you like. It’s not about you. It’s not about the mining plutocrats or even about Gillard. It’s about Labor staying in power and seeing the policies through.

  20. Fran Barlow

    I&U said:

    So, Fran, cringe all you like. It’s not about you. It’s not about the mining plutocrats or even about Gillard. It’s about Labor staying in power and seeing the policies through.

    I’m not sure that it contributes to that. It simply emboldens them to fight harder. It cost them just $22 million to remove Rudd and he had more authority than Gillard.

  21. Incurious and Unread

    Fran,

    An iron fist in a velvet glove.

    It is not about how the miners perceive Gillard (which I don’t think will be changed by a bit of insincere fawning anyway); it is how the voters perceive the miners and Gillard’s treatment of the miners. The miners cannot buy votes; all that they can seek to buy is persuasion.

    Notwithstanding the merits of the RSPT, Rudd’s treatment of the miners was pretty shabby: springing a new tax on them with no consultation in the hope of diverting attention from his other failures (ie CPRS) and gaining some cheap popularity by attacking rich foreigners. I think the electorate saw through this opportunism which was why the tactic backfired (of course, the $22m helped too).

    Rudd vs Gillard: tactics vs strategy. I know which I would back.

  22. Occam's Blunt Razor

    @25 – the sum of the outcomes of the tactics make the strategic outcome.

    I have a long term strategy of being a billionaire – haven’t quite got the tactics working yet.

  23. Incurious and Unread

    Razor @26,

    I don’t think you have a strategy. You might have an objective or goal, but those are not at all the same thing.

    Your wording gives you away: one does not have a strategy of being something, one has a strategy for becoming something.

  24. Fran Barlow

    I’m aware of Sun Tzu’s dictum, I&U:

    Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.

    I don’t see Rudd or Gillard as possessed of anything but tactics, more’s the pity.

    Notwithstanding the merits of the RSPT, Rudd’s treatment of the miners was pretty shabby: springing a new tax on them with no consultation in the hope of diverting attention from his other failures (ie CPRS) and gaining some cheap popularity by attacking rich foreigners.

    I’ll concede the substantive point, without shedding a tear for the mining thugs, who have no claim at all on fair dealing. It would have been far better for Rudd to have released Henry as “food for thought” in December, and foreshadowed “a dialog with all the stakeholders with a view to establishing a framework for all Australians to share the anomalous and windfall revenues associated with the drawdown of Australia’s limited reserves of mineral wealth“. That, he could have specified as a 2nd term project (when the senate would have been friendlier). Without a clear object to fire at, and everyone tied up in complex negotiation, the broader issue could have faded to grey, punctuated only by motherhood-style statements.

    Rudd’s tactics sandbagged the government and handed these voracious parasites an ill-deserved victory –$60bn over a decade, and they actually went within a few votes of total rout and $100bn down the tubes.

    This is the repulsive coterie to which Gillard is sidling up as supplicant in the run up to negotiation over a CO2 price. Now there is whispering over a price $8 below Garnaut.

    There are worse things than this wretched government being defeated in 2013. There’s always the possibility that good policy could be sandbagged a second time. It would have been better if she’d been plain and simply made clear that while the government would evaluate their “input” in the light of wider policy, they, no more than any other privileged sector of Australian society, could not expect favourable treatment. In the end, it was, after all, the government, rather than organisations such as theirs, who were responsible for ensuring that policy served the Australian people.

  25. Adelaide Climate News

    A couple of accounts of Ross Garnaut in Adelaide last night, both from the same source.

    The first is from a (sane) parallel Earth
    http://adelaideclimatenews.wordpress.com/2011/06/01/garnaut-sparks-riot-on-parallel-earth/

    The second is a more straightforward what-was-said.
    http://adelaideclimatenews.wordpress.com/2011/06/02/garnaut-in-adelaide-the-straight-dope/

    Comments and questions welcome

  26. jusme

    i like garnaut. seems to have a sense of humour and is always happy.
    to the business industries offer of $10/tonne, he should have replied: “tell ‘em they’re dreamin’”
    i’m not sure the gov will go with his suggested $26/tonne, i’ve heard rumblings of $17-$23, so maybe they also won’t go the full $25k tax free threshold either… something like $16k?

  27. derrida derider

    I dunno – I reckon the real cultural clash between the government and opposition is between those whose culture demands that they do something in the hopes of retaining government, and those whose culture demands that they try to stop that something – whatever it is – in the hope of becoming government. Both are united in a common ideology of “whatever it takes to get/keep our bums on the Treasury benches”.

    As it happens the “something” in this case is a Good Thing. But it is not always so.

  28. derrida derider

    Brian @16, that $34b is about right for the GROSS cost to revenue of lifting the tax free threshold by another $19000 (the rule of thumb is roughly $2b per thousand).
    But as the lift would replace the Low Income Tax Offset and would massively reduce expenditure on other tax lurks credits available for low-to-middle income taxpayers (Senior Australians Tax Offset, Beneficiary Tax Offset, superannuation co-contribution, etc) the NET cost will be far less than that (sorry, I haven’t got the info to hand that would let me guesstimate how much less). Plus you will get some behavioural effects (ie people not being so keen to minimise their income) that will further reduce the net cost.

  29. John D

    I&U @18: I used the 1/6 LREC credit price ($40/tonne) to estimate the MRET price. May actually be on the pessimistic side given the speed at which the cost of renewables is dropping. I can see no reason at all why 50% renewables could not be reached by 2020 if we got off our butts and got on with it.
    The point I was really trying to make that the MRET is an emission trading scheme that is just as effective as the CPRS at driving investment in clean electricity while requiring much much lower price increases. (This doesn’t mean I dont think contracts for the supply of clean electricity make even more sense.)
    If we had a vaguely competent opposition they would be crying the advantages of MRET (or a more direct approach) over the carbon price for driving investment in clean elecrticty.

  30. John D

    Brian @31: Part of the problem with using clumsy systems such as carbon taxes and emission trading schemes to drive changes to the power industry is that they do not provide the mechanisms required to manage the transitions. As the market for dirty power decreases there will be a price war that may force some power companies to bankruptcy before there is enough clean power available to take over the lost capacity. There is an additional risk that the generators that go out of business will be the ones with the best response to rapid changes in demand while the slow response base power generators remain viable.

    Contracts for the supply of dirty electricity and standby may be required to help manage some of the transitions. Most of all we need a transition plan in areas as complex as power generation.

  31. BilB

    And this is the 21st Century, Brian.

    Can you imagine how products would turn out if engineering and technology was performed with the same logic as politics and commerce.

    We would have cars that went backwards rather than forward, accelerators that operated the brakes at the same time, speedos that required a complex calculation to determine what the indicator actually meant, products that the consumer would get the components for over a 5 or 10 year period, and same products where different brands had to be the exact opposite of the others…just because.

  32. Scranbag

    Gregory on carbon pricing/ETS job losses, SMH this day

    “THE impact of the carbon tax on the mining industry will be “trivial” – so small that for practical purposes it will be “invisible,” according to one of Australia’s leading labour market economists.

    Professor Bruce Chapman is president of the Economics Society of Australia and director of policy at the Australian National University’s Crawford school of government.

    In a report released this morning entitled How Many Jobs is 23,510 Really? he attempts to put into perspective a claim by the Minerals Council that a carbon trading system would cut by about 24,000 people the number who would be employed in the mining industry.

    “Something like 370,000 people every month go from not having a job to having a job, and something like 365,000 people every month do the opposite,” he said. “That’s the change every month. The Minerals Council has projected its change over a period of 10 years.

    “The additional outflow would be five people for every 10,000 who would have left in the month anyway. I am happy to call that invisible. I was going to draw it for the report but I couldn’t – you can’t draw a graph because the effect is too tiny.

    “What it says is the carbon price debate should have nothing to do with job-loss figures. The labour market issue should be seen to be irrelevant. It is not interesting, it is not something we should spend any further effort analysing.”
    http://www.smh.com.au/environment/energy-smart/only-tiny-carbon-tax-effect-on-mining-jobs-20110605-1fnj5.html#ixzz1OR8FVj2D

  33. Incurious and Unread

    John D @34,

    If you assume that 50% renewables can be delivered for $40/tonne, then surely a carbon price need be no higher than $40/tonne also, implying an electricity price increase of just 4c/kWh (versus your 2c/kWh). So neither mechanism causes substantial electricity price increases (and, remember, there will also be compensation payable under a carbon price).

    In practice, your assumption is ridiculous. If a 50% 2020 MRET target were announced tomorrow, I would expect REC prices to increase to $100/tonne at least.

  34. Incurious and Unread

    John D @35,

    This is a furphy that Garnaut addresses and dismisses in his electricity paper. I wish you would read Garnaut, so you could avoid making such silly, fallacious statements, or at least intelligently critique Garnaut’s dismissal of them.

    “Bankrupt” means taken over by the banks who lent to the company. So, the generating capacity of a bankrupt company doesn’t just disappear. Control of it is simply handed to the banks, who will continue to operate it so long as it generates cashflow. And if there is the threat of blackouts, there will be plenty of cashflow.

  35. Elizabeth Hart

    Is anybody alarmed by these comments in the Garnaut Review 2011 Update?:

    Seventy per cent of global emissions by 2030 would come from developing economies that are home to 80 per cent of the global population. Under business as usual, China’s annual emissions per person would reach those in the United States by 2030 (at around 15 tonnes of carbon dioxide per person from fossil fuel combustion only). Across the developing countries, however, emissions per person would still only amount to 38 per cent of those in the United States (or China), with obvious strong potential for further growth.. (My emphasis.)
    One important driver of emissions—global population growth—has been gradually easing over the past several decades in response to rising living standards in the developing world—reinforced or compounded in China by strong anti-natal policies. The acceleration of economic growth in developing countries in the early 21st century holds the prospect for further reductions in fertility and population growth.

    I think Garnaut is being hopelessly optimistic about the impact of a growing population. A recent report in the New York Times notes that the world population is expected to pass 7 billion in late October, only a dozen years after it surpassed 6 billion. The UN forecasts 10.1 billion by the end of the century: http://www.nytimes.com/2011/05/04/world/04population.html?_r=1

    The NYT articles notes that “fertility is not declining as rapidly as expected in some poor countries”. The population projections for countries in Africa are mind-boggling. While the developed world has to work on decreasing emissions, we’re still not really facing up to how the world is going to adapt to the elephant in the room…

  36. Robert Merkel

    Elizabeth, I’m not so worried about this issue, at least in terms of CO2 emissions.

    High birth rates are very strongly associated with being very poor. Secondly, very poor people are responsible for SFA greenhouse emissions.