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The Forum > Article Comments > Challenging Time for Ag Economists > Comments

Challenging Time for Ag Economists : Comments

By John Quiggin, published 8/2/2011

There is not a single economist in Australia with any professional credibility who denies the reality of global warming or the need for a global policy response.

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I'm not altogether sure it's a good thing to hear that AARES economists are of one mind on pricing carbon to reduce greenhouse gas emissions. Leave aside for the moment Quiggin's 'the science is settled' presumption — let's assume that Mann's 'Hockey Stick' is valid despite HIS cherrypicking of paleoclimate proxies to make the Medieval Warm Period disappear, and that Jones' urban heat island effect calculations are valid even though his data was ‘lost’ 20 yrs ago and isn't available for scrutiny. We can all agree that reducing emissions is a Good Thing, no?

So how does a carbon tax/ETS, hybridised or otherwise, reduce CO2? If the price of books goes up, people may buy fewer novels, use the library, or buy an e-book. If the price of food goes up, people don’t eat less ... though they may buy fewer books. Spending on food and energy isn’t discretional for most Australians. If wealthy Jane responds to higher petrol prices by spending $40K on a new Prius, poor Tom will buy the V6 commodore Jane traded in to get to work — minimal net reduction in emissions.

If government spent 100% of a carbon tax on replacing coal-fired base-load power plants with geothermal, CH4 or nuclear, we’d achieve significant carbon reductions. But government isn’t efficient or economical — think Pink Batts & BER. If government promised a 30 year tax holiday for any new power plant using the above technologies, consumers would pay dearly, but we’d get reduced emissions AND improved infrastructure.

Economists, Quiggin says, prefer buy-back of water rights in the Regions to provision of infrastructure. Presumably, then, they’re uniformly livid about billions spent on energy-guzzling desal plants which benefit already infrastructure-rich urban centres. Perhaps they expect that ‘voluntary’ water buy-backs will motivate farmers to move to Balmain where they can get environment-friendly work collecting shopping trollies, or driving to the midnight shift at Macca’s in Jane’s old V6 commodore.

As Quiggin says, it’s one thing to get agreement in principle, quite another to formulate a workable plan. Keep working, I say.
Posted by donkeygod, Tuesday, 8 February 2011 9:35:02 PM
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AS TO THE FUTURE - IN THIS WE ARE ALL BLIND

Thanks John

Time to share this sentiment from an economist colleague.

"It has ever been thus. There are competing schools of thought, each with their political allegiances.

In economic (climate change) policy we are necessarily dealing with the future and in this we are all blind. I suppose economic (climate change) theory is a bit like the blind man's stick, of some but limited use, particularly when crossing a busy road and the path of economic activity (climate change) is a busy road indeed.

Too much reliance should not be placed on it. While it can be an aid in the art of policy making, unfortunately, it is often used in blame-shifting and the dark art of the spin doctor.

The whole subject provides an endless source of entertainment. Enjoy!"

Alice (in Warmerland)
Posted by Alice Thermopolis, Wednesday, 9 February 2011 12:05:03 AM
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I will say it again !

Until the IPCC reruns their computer climate models with the new
realistic data for fossil fuels from the Uppsala Universities Global
Energy Systems Group then all discussion is just the batting of gums.

In fact all climate conferences, CO2 taxes, Sequestration research, etc
etc should be put on hold until it can be seen what the IPCC's new
projected temperature rise would be.

Well I have not heard if they have done that work. It has been almost
a year since the data was published. Have they run it ?

Until they do, what is the point of even discussing global warming.
We might have been wasting our time for the last many years.
Posted by Bazz, Wednesday, 9 February 2011 10:03:49 AM
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What economists fail to note is that the value of irrigated production in the MDB is in the order of $5.5 billion dollars per annum, meaning that the govts modest $1 billion pa proposed spend on the Murray Darling is largely met through taxes derived from the very industry that will be crippled.

Buybacks are dead money whilst water efficiency improvements are an investment that can benefit both the environment and the economy. Forever.
We can invest money on buybacks and get no return, or we can invest a bit more and still retain a tax return, retain robust inland communities and retain food security.

John notes the importance of agriculture, and not just to Australians, yet persists with the conclusion that buybacks are best. Presumably working on the basis that Australian economists will be down the list of hungry peoples.

We don't know the future value of commodities, but the current trend suggests working with values from the last decade undervalues irrigation in the MDB greatly.

I wonder if some of the economists gripes stem from the reality that the benefits flow initially to irrigators, and only then onto the wider community. Unfortunately it is the wider community that will feel the cost of buybacks first, but that's ok - economists predict lots of green jobs.
Posted by rojo, Wednesday, 9 February 2011 3:22:16 PM
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