Like most parliamentarians, Penny Wong, the Minister for Climate Change, is a climate sceptic. Of course she prefers to use that term to describe those who ignore the overwhelming science about the causes of climate change, but yet she ignores those same scientists when it comes to deciding what to do about climate change.

The science says that we need to reduce emissions by about 40% by 2020 if we want even a 50% chance of avoiding dangerous climate change. Wong has ignored that advice in setting the targets for her so-called Carbon Pollution Reduction Scheme (CPRS) and in developing Australia’s negotiating position for the upcoming talks at Copenhagen.

Imagine the following situation. You observe increasingly worrying changes in your body’s behaviour so you consult a doctor. The doctor diagnoses a serious illness, but assures you that with a long dose of drugs with some nasty side effects, you have a 90% chance of pulling through. You seek a second opinion, which confirms the diagnosis and the prescribed course of treatment. Both doctors remind you that there is some chance that their diagnosis might be wrong and that there is no guarantee that the cure will work. What would you do?

Those with an interest in evidence-based medicine would most likely take the pills, wear the side effects and hope for the best.

But the sceptics have got two options: ignore the diagnosis or ignore the prescription. When it comes to climate change, Wong is clearly the second kind of sceptic.

Imagine walking out of the doctor’s surgery and calling your accountant to help you decide whether to undertake the course of treatment. How much will the treatment cost? How long will you have to spend in hospital? How much money could you earn if you were working instead? What discount rate shall we apply? No doubt some people make decisions in that way, but would you?

But Penny Wong isn’t just a science sceptic, she is an economics sceptic. There is no economic case for the billions of taxpayers’ dollars that are to be given to the polluters and arguments about the need to protect our polluters are inconsistent with our longstanding strategy of lowering our trade protection to encourage other countries to follow suit.

But the economics of the minister’s approach to climate change are much worse than her generosity with taxpayers’ money when it comes to silencing the polluters. Does anybody remember Sir Nicholas Stern? Stern made it quite clear that the economic costs of doing nothing to tackle climate change are much bigger than the costs of decisive policies to solve it.

Of course, some jobs and profits will be lost in the emission-intensive sectors of the economy if we are serious about reducing emissions. That is, supposedly, the whole point. We now find ourselves in the farcical situation of trying to transform ourselves into a low carbon economy without actually changing the behaviour, or the profits, of the biggest polluters.

Despite the fact that the climate change minister is ignoring the scientists and ignoring the economists, she does appear to be winning. Recent polls showing a reduction in concern for climate change will have been music to her ears. The strategy of boring everybody to tears with the byzantine detail of the flawed CPRS seems to be working.

Rather than being grilled about why her targets ignore the science, why her compensation package ignores the economics and why her scheme design ignores common sense, she has simply been able to talk about the sceptics in the Opposition and her commitment to the passage of the CPRS. Neither of those issues is in doubt, but neither of them is terribly relevant.

Fortunately for Penny Wong, the sceptics in the ALP are only influential in cabinet rather than noisy in parliament. But unfortunately for the atmosphere, the political pain of the Opposition is no substitute for a science-based approach to tackling climate change.

The Australia Institute has recommended that the unemployment benefit be increased in line with community standards, which basically means providing for the unemployed as we do our pensioners and disabled. Another way of approaching this issue is to consider arrangements in other countries and how their unemployment benefits compare with their wages.

In Australia, when individuals on average weekly earnings lose their jobs and wind up on the dole, they will find that they replace only 24 per cent of their after-tax income. A worker on an average wage moves from an income of $1,196 a week to an NSA of $228 a week. A couple will receive $412 a week, but only if neither partner is working.

An international study (using a different definition of the average wage) suggests that single people in Australia who go on unemployment benefits replace 31 per cent of their income.

Of the 29 OECD countries in the study, none had a lower replacement rate for singles. The next lowest was Greece with a replacement rate of 36 per cent. In the UK, the replacement rate was 40 per cent, in the US 56 per cent, in Germany 59 per cent, while in France it was 66 per cent. However, if you become unemployed in Luxembourg, 87 per cent of your income is replaced. Just to keep pace with the average of the other 28 countries, Australia would require an increase in the dole of more than 80 per cent.

Thankfully, Australia no longer has the worst replacement rate when children are involved. For example, an Australian lone parent on average weekly earnings would replace 52 per cent of their income if they had to rely on unemployment benefits, a replacement rate that is better than in Turkey (40 per cent), in Greece (45 per cent) and in Korea (50 per cent). But the Australian replacement rate falls behind all of the other countries.

National averages in Australia can conceal a good deal. Someone on the retail-industry-average wage who loses their job will find that the dole replaces 31 per cent of their after-tax earnings. But someone in the mining industry on average earnings will replace only 15 per cent of their wage when they go on the dole. In between there is

• manufacturing at 26 per cent
• construction at 23 per cent
• finance and insurance at 20 per cent.

These are just a few examples. But they show dramatically that Australia’s dole is woefully inadequate when it comes to making up for the income that people used to earn before they lost their jobs.

“A number of banks, corporations and different levels of government have donated a million dollars each, but a lot of the money collected came from the pockets of ordinary Australians, reinforcing the maxim ‘if you want charity, go to the poor’. Of course, wealthy people don’t get wealthy by giving their money away. But many who achieve wealth are keen to give back to the community, and research shows that those with greater financial capacity give more and more often. However, rather than making spontaneous one-off contributions, they like to plan their giving.”

(my emphasis) The piece then goes on to explain how ‘Prescribed Private Funds’ have been used to structure giving by the wealthy, which then prime minister, John Howard, “announced ‘would have the object of channelling funds … to isolated acts of relief, including public funds for the relief of one individual or family or a community adversely affected by a natural disaster.” Of course, in case you haven’t realised by now, the impetus for the op-ed was the Victorian Bushfires and concern that “as the severity and frequency of bushfires in Australia appears to be increasing, a more focused and long-term approach to philanthropy in bushfire relief is warranted …”

In other words, the role of the state in this case is quite explicitly one of harnessing monies – the commodity produced from ‘alienated production’ as Marx might call it – and channeling it into programs that will strengthen social bonds. The process of giving doesn’t compute in a neoclassical economic framework without some attention to the politics of exchange. The fact that giving to registered charities is ‘tax deductible’ suggests that states are agnostic about the optimum level of charitable giving because the moral difficulties in asserting a level of ‘optimal’ giving run counter to the basic ideals of liberal government.

One can only imagine the cries of ‘Communism’ and ‘Central Planning’ if the government were to set a cap and/or floor on the level of charity.

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This is all a very roundabout way of saying that the underlying logic of the Federal Government’s emissions target – as opposed to a ‘cap’ – is completely anathema to government as we know it.

We’ve some robust discussions about this in the past, including accusations that I want public engagement for the sake of it. But essentially, the way emissions trading permits are going to be allocated, central planners in Canberra have determined our optimal response to climate change. If you haven’t read Richard Denniss’s discussion paper from November last year [pdf] and/or you’ve been living under a rock since then, you may not realise this.

Richard’s motivation for writing it was quite simple: the targets proposed in the White Paper are not just counter to the commitments required for a safe climate, they spit in the face of what international negotiations have been leading towards over the past decade and a half. We’d effectively be putting a 5 bullets in the revolver and taking it for a spin if such targets were adopted globally (instead of, say, 2 with a target more consistent with the science), putting the welfare of those living on coastlines at tremendous risk, and ensuring the destruction of countless ecosystems.

Everywhere along this chain of reason are questions of value, such as how much should we value our present welfare at the expense of future generations (quite a lot, if public apathy is any gauge)? There is of course a place for economists in determining ways to minimize wasteful expenditure. Waste is, after all, the zero degree of value: which is why the ‘lowest hanging’ abatement fruit should get attention like energy efficiency and solar thermal research. Indeed, economists have an important role as expert gatekeepers of welfare rationality and ensuring that our climate response is maximized.

However, failure to recognise – or indeed an active disavowal of – the underlying social impulses for climate change action (concern for ecosystems, climate refugees, damage to land values etc.) is not just a recipe for apathy, but disempowering; as the growing list of organisations concerned about the Federal Government’s response suggests. Another line of enquiry into waste and utility could be traced back to Thorstein Veblen, who saw the social bonds of an emerging ‘leisure class’ as those driven by ‘rivalrous emulation’ of those wasting desired objects. The point was not, for Veblen, the distinction between waste and value as neoclassical economics understood it (optimal efficiency) but about who was allowed to waste. His was a political critique from someone alienated by the emergent middle classes of the late 19th Century; however, the ‘invidious distinctions’ (between the working and leisure classes) he saw reverberates from the McMansions in Campbelltown to the outskirts of Brazil. The underlying social logic is the same with both ‘battlers’ and ‘developing country’ residents: the role of government is ensure more people have more income to ‘waste’ in this way.

The point is not so much, in a puritanical manner Veblen might approve of – and one followed by Clive Hamilton – to argue for new ways of policing this boundary for moral reasons. Instead, it is to recognise that climate change brings up these problems of waste in a new way: via the values we place on the world-at-risk by climate change. It strikes me that all the table thumping about the political realities of climate change needs to recognize, above all, that if politics is indeed the art of the possible, then ensuring that community groups, local governments, businesses and others with an interest in promoting collective action should have incentives for doing so. And, more importantly, that they may need to do so by harnessing objects that may seem ‘wasteful’ to Martin Parkinson or anyone else gazing from the other side of their desk. Of course, none of this should preclude assessments about the utility each activity plays in the national effort – ie. every project should still be commensurable; but ffs let people who take the risks of climate change seriously make their contribution count above our Federal Government’s politically impotent efforts.

So as the Victorian State government is the latest organisation forced to rethink forced to rethink policies

“… including subsidies for solar farms and panels and a shift to a hybrid car fleet, arguing that they will not contribute to any additional greenhouse gas cuts under Prime Minister Kevin Rudd’s proposed Carbon Pollution Reduction Scheme…”

… I’ll leave it to the Victorians to assess whether those policies should be recognized on the national carbon accounts as contributing to our Kyoto target in some form or another.

I’d like to have that same right as a New South Welshman and Sydney-sider, which is why I signed the GetUp petition.

Elsewhere: John Quiggin comments:

…in the CPRS as it is, and in any alternative that might plausibly exist, the target is bound to be too weak. So, it is important to allow scope for voluntary action to improve on the mandatory targets.

The line I repeatedly hear from economists is that behaviour can only be modified by getting incentives right. Whether we’re talking about businesses, politicians or Grandma the answer is the same: with the right assumptions (perfect competition, access to information), you only need to structure the incentives correctly and you get an optimal outcome. Adam Curtis has documented the roots of the calculating, autistic homo economicus in Cold War game theoretic logic with great force.

The Australia Institute knows this history and its permeation into the logic of business all too well. Denniss merely extrapolates these assumptions to the public writ large. This phantom public, it is assumed:
- act rationally: they will not change their behaviour without appropriate monetary incentives in place.
- have (more or less) perfect access to information: they know the supply and demand of emissions permits

Joshua Gans operates from the same assumptions, but arrives at a different conclusion:

The only behaviour we could possibly be worried here is environmentally conscious consumers as others don’t currently have an incentive to save. Currently, when those consumers reduce emissions that helps the environment. After the ETS, if they want, consumers could say, consume less electricity, buy emissions permits with the saved money (now more because of the ETS) and tear them up. How exactly is that not better?

The Australia Institute is coming up with some hypothetical scenario that requires environmentally conscious consumers to avoid buying permits. Why should that happen? Indeed, with the ETS, they can buy permits and not actually reduce their consumption. Surely that will increase the supply of environmentally conscious behaviour?

There are two problems main with this. The first is that price is, historically, a poor explanation of environmentally conscious behaviour. If economists were more willing to get their hands dirty and engage with the social logic of consumption a little more, we might be able to get beyond a debate that operates with such loony formalisms. Denniss’ suggestion that caps act as implicit floors takes the pervasion of neoliberalism (or economic liberalism if you prefer) at face value. This also shows up their limits, begging the question of where the line between ‘social/environmental’ and ‘economic’ should stand.

The second related problem is that buying up emissions permits will not just be a sign of ‘environmentally conscious behaviour’ as in the dream world of economists, but will also be a declaration of war on the coal-eating surrender monkey business lobby. As the Climate Institute notes, the unwillingness of business leaders to speak out on appropriate caps whilst accepting the science is the most insidious form of denialism.