Wednesday, June 1st 2011, 2:53 AM EDT
The science of climate change has been subjected to intense scrutiny and has come through with its credibility intact. The findings continue to be sobering. Unfortunately, new data and analysis generally are confirming the likelihood that outcomes will be near the midpoints or closer to the bad end of what had earlier been identified as the range of possibilities for human-induced climate change.
Global average temperatures have continued to track a warming trend. The year 2010 ranked with 2005 and 1998 as the warmest on record, with global average temperatures 0.53°C above the 1961–90 mean. For Australia, 2009 was the second-warmest year on record and the decade ending in 2010 has easily been Australia’s warmest since record keeping began.
I noted in the 2008 Review the curious Australian tendency for dissenters from the mainstream science to assert that there is no upward trend in temperatures, or that if there had been a warming trend it has ceased or moved into reverse. Such assertions were prominent in some newspapers and blogs, but also appeared in serious policy discussions. The assertions were curious because the question of whether the earth is warming or not is amenable to statistical analysis.
It so happens that answering questions of this kind comes with the professional kitbag of economists who work on statistical analysis of series of data that cover periods of time. For the 2008 Review, I asked two leading Australian econometricians who are specialists in this area, Trevor Breusch and Fashid Vahid, to analyse the data on temperature. Their conclusion was clear. There is a statistically significant warming trend, and it did not end in 1998 or in any other year. I had the analysis repeated with three more years of data for this book, with the same conclusions.
New observations of a changing climate include an increase in extreme weather events. The Black Saturday fires in Victoria in 2009 and recent major cyclones in Queensland are both consistent with expected outcomes in a warming world, although we cannot draw conclusions about direct cause and effect. Other studies since 2008 have confirmed that Australia is also seeing historically unprecedented periods of wet and of dry in different areas of the continent.
Globally, rising sea levels continue to track the upper levels of modelling. Considerable debate is under way about the causes and potential extent of sea-level rise. The latest research suggests that, beyond the effects of thermal expansion, the melting of the great icesheets of Greenland and West Antarctica may contribute much more than was previously thought to sea-level rise. The debate is unresolved but oriented towards higher not lower outcomes.
New research has also contributed to our understanding of ‘tipping points’ in the climate system. These are points at which warming of the climate triggers irreversible damage and a feedback loop for further warming. The new research has focused on identifying and testing potential early warning indicators of an approaching tipping point.
Progress has also been made on ruling out other possible causes of warming, such as changes in the amount of solar radiation reaching the earth. Scientists have identified ‘fingerprints’ of warming that confirm human influence. A primary example is the pattern of warming in the layers of the atmosphere. Under increased greenhouse gas scenarios, climate models predict that the lowest layer of the atmosphere (the troposphere) should warm, while the next layer up (the stratosphere) should cool. This has been confirmed by recent observation. If increased output from the sun were the cause, both layers could be expected to warm.
Since 2008, advances in climate change science have therefore broadly confirmed that the earth is warming, that human activity is the cause of it and that the changes in the physical world are likely, if anything, to be more harmful than the earlier science had suggested. This has led me to shift my judgment about the reputable science from being right ‘on a balance of probabilities’ to ‘beyond reasonable doubt’.
Developments in science, global emissions profiles and shifts in the structure of global climate change agreements have all strengthened the national interest case for a stronger Australian mitigation effort.
What domestic policy response should we take? Once we know what our fair share is in the global effort to reduce greenhouse gas emissions, we can work out how to do it at lowest cost. This exercise was undertaken in detail and with great care for the 2008 Review. There are two basic approaches to achieving the required emissions reduction: a market-based approach, built around putting a price on carbon emissions; and a regulatory approach, or direct action.
In the market-based approach, carbon can be priced in two ways. Fixed price schemes, or carbon taxes, set the price and the market decides how much it will reduce the quantity of emissions. Floating price schemes set the quantity of emissions and permits to emit are issued up to that amount. The permits are tradeable between businesses and so the market sets the price. There are various hybrid approaches that combine fixed prices for a period with floating later on, and floating prices at some price levels with a price floor or a price ceiling or both.
In the alternative route, regulation or direct action, there are many ways that government can intervene to direct firms and households to go about their business and their lives. The Chinese Government’s direct action includes issuing instructions for factories with high emissions to close, subsidising consumers who buy low-emissions products like solar electricity panels and electric cars, and restricting new investment in industries judged to have undesirably high emissions.
A three-year fixed carbon price followed by a carbon trading scheme with a floating price is Australia’s best path forward towards full and effective participation in humanity’s efforts to reduce the dangers of climate change without damaging Australian prosperity.
One distinct advantage of addressing climate change mitigation through a market-based carbon price is that it raises considerable revenues. These can be used to buffer the transition to a low-carbon economy for Australian households on low and middle incomes, as well as to offer security to the most vulnerable low-income households.
A carbon price of $26 will raise approximately $11.5 billion in the first year and rise over time. Efficiency and equity objectives would be best served by allocating the majority of this revenue to households, perhaps modelled on the kind of tax and social security reforms envisioned in the Henry review.
At the same time, slices of this revenue should also be used to support innovation in low-emissions industries, provide incentives for biosequestration in rural Australia and prevent export industries from being placed at a disadvantage against international competitors that are not yet subject to comparable carbon constraints.
Yet, as clear as the case for carbon pricing may seem, the political basis for such policies has weakened since 2008. Alongside the central discussion of climate policy, this book is a guide to another struggle that is deeply colouring the climate change debate—the struggle between special interests and the national interest.
This conflict is not new. Indeed, it is always with us, and always will be. But there are periods when the special interests have had the strongest hold on policy, and others in which policy making is strongly grounded in the national interest.
It is salutary to recall that Australia, with New Zealand, had the poorest productivity performance of all the countries that are now developed through the 20th century to the mid-1980s. The long period of underperformance had its origins in the domination of policy by business and union vested interests. Political leaders responded to democratic pressures with protection and regulation. There was little competition to prompt firms to seek new, more productive ways of doing business.
From the beginning of the 21st century, Australian policy making has reverted to type. Business and union organisations refocused on securing sectional gains. Governments responded. There could be no policy change if there were any losers, so there could be no productivity-raising change at all.
This is the problematic political context of the climate change policy discussion.
Some business leaders have recently drawn attention to the need for long views and hard decisions in policy making. They say that the minority Labor government elected by the Australian people in 2010 is weak and lacks long time horizons.
A more accurate accounting would recognise that the current government has taken on the most difficult and long-dated policy reform that has ever been attempted. It has taken on a reform in the national interest that must overcome stronger pressures from sectional interests than any since the contests over protection in the 1980s and early 1990s. That part of big business that is active in the debate has taken on the role of spoiler.
In confronting the spoiling voices, we must remember that rejection of current proposals for carbon pricing would not end the debate over climate change policy. It might, however, end the possibility of action at relatively low cost.
The increasing impact of climate change as well as policy developments abroad would prompt continued pressure for new policy in Australia. Inaction by Australia, with the highest emissions per person in the developed world, would invite retaliation in trade and other areas of international cooperation.
If current efforts on carbon pricing failed, debate would continue over how much Australia should do and how we should do it. This would continue to raise the supply price of investment in businesses that might be affected by restrictions on emissions. The political system would respond to continued community interest in and pressure for action on climate change by myriad costly interventions. The failure of current efforts to place a price on carbon through much of the economy would open the way to a long period of policy incoherence and instability.
There is no reason why carbon pricing should continue to be a matter of partisan political division in Australia. In much of the world—perhaps everywhere except Australia and the United States—concern for global warming is a conservative as much as a social democratic issue. The conservative governments of Germany, the United Kingdom, France and the Republic of Korea are playing important global leadership roles. Even in the United States, the most effective political leadership on climate change has come from a Republican governor of California and a Republican mayor of New York.
A concern to avoid dangerous climate change fits naturally within the conservative tradition. It may be rational for the radical to risk the institutions of human civilisation in a throw of the climate change dice, just as Lenin saw merit in inflation in the capitalist countries. The radical may hope that the outcome will open the social and political order to new shapes. It is strange for the conservative to embrace such risk.
Nor do the characteristic divisions between the conservative and social democrat argue for conservative opposition to carbon pricing. Market-based approaches to mitigation sit as easily with a conservative party that is self described as liberal, as they do with social democratic parties.
It would be open to current or future leaders of the conservative side of Australian politics to take over ownership of carbon pricing arrangements once they are in place. The interests of their future governments, as well as those of Australia, would be served well by the continuation of carbon pricing.
This is an edited extract from Ross Garnaut’s 2011 update ‘Climate Change Review’. Read the entire document here