30 November 2009

Australia's Climate Policy

I've been waiting a few months to finish up an analysis of the implications of the proposed Australian ETS for the decarbonization of Australia's economy (along the lines of my UK and Japan case studies) so I can that submit it for publication. The analysis is pretty much done, but it would be nice to have at least some stability in the politics before putting it out. It is as if the Australian government has no concern about the needs of my academic publication schedule.

Anyway, there are huge goings on down under today (here and here). The opposition Liberal Party has seen a revolt and a new leader voted in in circumstances of high drama -- by just one vote, apparently a "donkey vote" at that (FYI, that is Tony Abbott, new Liberal leader in the photo above, just after the vote). This leadership election was immediately followed by a vote on the ETS, which the Liberal Party voted convincingly to oppose the legislation. What this means for Australian climate policy is unclear, at least to me, as it appears to imply either a deferral in the ETS vote until February or it being voted down in the near term. If the latter then Prime Minister Rudd would be empowered to call a rare double dissolution election, which opinion polls suggest Labor would win convincingly. I haven't yet considered the broader implications for cap and trade in the US or Copenhagen/Mexico City.

All of this is to say, that my paper analyzing Australian decarbonization policy won't be finished up for a few more weeks yet, at the very least. Anyone wanting a draft copy can email me at pielke@colorado.edu. I'd welcome the commentary from our Aussie readers in the comments, especially expert perspectives.


  1. Well, I've only lived here a month, so I'm certainly no expert!

    But as a newcomer to the scene, this whole controversy is pretty surreal. Coverage of the political fall-out has dominated the news for weeks. Climate change policy, it seems, has caused a major political party to totally self-destruct. Yet, when you look in the papers for any kind of explanation, exploration, or analysis of the policy that led to this debacle, it's just not there. It's all about the short term political consequences of the ETS, and not at all about the policy itself.

  2. Hi Roger,
    I'm an Australian and have been following the political goings-on closely. I just wanted to clarify your statement about the donkey vote. As I understand it, Abbott won the vote 42-41. However, there were 84 persons present, so one vote was not counted. That vote, apparently, simply had the word "No" written on it (the vote was for either Abbott or Turnbull, so "No" didn't make sense and was not counted).
    After the leadership ballot was decided, Abbott immediately took a secret ballot regarding the party members' views on the ETS. The members voted 55-29 to delay or, if necessary, vote against the CPRS bill.

    Basic summary here: http://www.abc.net.au/news/stories/2009/12/01/2758221.htm

    Some commentary on Abbott by one of Australia's best political writers here: http://www.abc.net.au/news/stories/2009/12/01/2758645.htm

  3. It is good to have the opportunity to contribute to this blog. After reading your comments on the Japan case study I have been eagerly waiting your comments on the Australian scheme.
    As an Australian my main problem is that the ETS is being forced upon us without any discussion. For months we have been told by PM Rudd that his ETS "must" be passed without delay ....no reason is ever given for this imperative...and that any person questioning the science is akin to a Holcaust denier. Popular opinion is that the real reason for the urgency to pass the ETS legislation is to make Rudd look good at Copenhagen.
    The Liberal party ( = Republician ) leadership was divided over this urgent need to legislate before Copehagen, rather than to take the opportunity to step back and examine the policy in the light of what happens at the conference. Tony Abbott, the new leader of the opposition, will no doubt opt for a delay, and I think this is what the majority of Australians would prefer in spite of the MSM telling us otherwise.
    The political climate is definatly "warming up " but hopefully this will give us Australians time to examine a difficult and important policy.

  4. Here is the bigger picture. The biggest lobbying group at Copenhagen will apparently be the International Emissions Trading Association whose members include :-

    BP, Conoco Philips, Shell, E.ON AG (coal power stations owner, EDF (one of the largest participants in the global coal market), Gazprom (Russian oil and gas) and of course, our best friends, the banks.


    Their aim :-

    the objectives of the United Nations Framework Convention on Climate Change and ultimately climate protection;

    the establishment of effective market-based trading systems for greenhouse gas emissions by businesses that are demonstrably fair, open, efficient, accountable and consistent across national boundaries; and maintaining societal equity and environmental integrity while establishing these systems.


    Why ?

    Carbon trading could be worth twice that of oil in next decade

    The carbon market could become double the size of the vast oil market, according to the new breed of City players who trade greenhouse gas emissions through the EU's emissions trading scheme.


  5. Roger,
    As an Aussie, I would echo the above comments. This legislation is/was to be voted on in haste, but doesn't come into effect until 2011. I think Rudd saw an opportunity to play wedge politics with the opposition - and wedge he did.
    I for one would welcome your analysis of the proposed Australian CPRS, as there has been very little analysis within Australia. Seriously, the government has seen fit to perform economic modelling of not introducing the CPRS, but there has been none whatsoever for full implementation. The Treasury, which undertakes such modelling was not asked to provide it. I suspect the government did not ask the question because they have a pretty fair idea of the answer!
    Another factor is the so-called Climategate fiasco or should I say the lack of reporting of same by the MSM here. Coverage has been limited to a few bloggers and one item on the ABC (national broadcaster run by the government). The story is leaking out and very much alive on forums, and will definitely present problems for the government. Also, technically a double dissolution might not be available to the government. A double-dissolution is triggered when the same bill is rejected a second time within 3 months. There is a question mark as to whether the bill can still be considered as the same, having been heavily amended. Will your analysis be of the original bill, or the amended bill ?

  6. Ray from Australia sends this comment in by email, part 1:

    "As is the case elsewhere, there is hardly a 'debate' about climate change, AGW, and the proposed ETS scheme. The widespread public message is that AGW is happening, CO2 is the problem, that the science is 'settled', that there is a 'consensus' of scientists agreeing that AGW is serious, and we must do something about it.

    The MSM here is complicit. Particularly the Fairfax press (Sydney Morning Herald, Melbourne Age) and the publicly owned broadcaster ABC. Murdoch's News Ltd (The Australian plus other papers) is somewhat better in presenting other viewpoints, and Andrew Bolt of the Herald-Sun (a News Ltd paper) deserves particular credit.

    Those asking questions are labelled 'deniers', not just 'sceptics', and today we see how the Labor Government will frame the issue. They are already saying that the Liberal Party (the main opposition party) has been 'captured' by extremists who are deniers about climate change, and who engage in conspiracy theories about the sicence.
    Australia had a Liberal/National Party coalition government from 1996 (check) to November 2007 when current Labor PM Kevin Rudd was elected.

    Unfortunately, the Howard government when in power chose not to challenge the science back in 2004/5 when urged to do so. Howard accepted the advice of the IPCC and the CSIRO, and declined to question the science. This, plus a complicit MSM has meant that there has been very little discussion regarding the science, and those questioning the science are lambasted.

    A hero in Australia is independent Family First senator, Senator Steve Fielding, who has received some publicity for his questions. Fielding says that he, at first, accepted the AGW theories as advanced by IPCC. However, he began to ask questions, and when he did, he found that the science was certainly not settled, and that key questions such as how the CO2 warming theory were not well substantiated.

    Fielding famously asked the Minister for Climate Change Penny Wong key questions re the science, particularly how come if CO2 levels are rising inexorably, temperatures are not rising in sync. Wong wheeled out the Chief Scientist and another adviser, but were unable to answer the questions, and were left embarrassingly exposed.

    Not to worry. Charge on. Ignore Fielding. The MSM complied with Wong's position, and we all "moved on".

    The ETS is a very complex Cap and Trade scheme designed (it would seem) to enrich the traders, lawyers and bankers, while actually increasing the CO2 emissions for the planet."

    To be continued . . .

  7. Ray's part 2:

    "The reason for the last comment is that Australia's energy intensive industries are actually very efficient by international standards in terms of CO2 emissions per unit output. The ETS intends to reduce emissions by closing down efficient Australian producers. The outcome will be that production will move offshore to less efficient producers who produce more CO2 emissions per unit output. Thus the ETS is counterproductive.

    80% of Australia's energy comes from coal fired power stations. Statements have been made that no new coal fired stations will be built, and some power stations are not being maintained at the moment. The issue for the power station owners is that if the ETS is introduced, their auditors will "impair" the value of their assets. There have been suggestions that some at least, if not all, of the coal fired power generators will call in the administrators if the ETS is introduced.

    Australia is being told don't worry. The ETS will encourage alternative power sources. Wind and solar are the main ones. There is almost no scope for further hydro power. Geothermal is touted by some, but clearly has technical challenges here. Nuclear is off the table due to 'green' concerns.

    The emergence of 'ClimateGate' is very good news for those of sceptical persuasion in Australia, even though MSM is, as elsewhere, mainly publishing apologia for the climate scientists, if that.

    What has happened to the Liberal Party is that the Leader sacked today, Malcolm Turnbull, has views very similar to Rudd re the ETS, and has urged support for the scheme, after a 5 week process of 'improving' the scheme in detailed discussions with the Rudd government. However, the Liberal party base (and the National party base) have been very vocal in recent times about the hazards of the ETS, and MPs, Senators, radio stations etc have been inundated by angry voters urging the Liberals to reject the ETS.

    That situation led to today's developments, where the anti ETS Tony Abbott was elected leader. The likely outcome is that the Liberal senators now will not vote in support of the ETS in the Senate, which means that the bill would be rejected.
    The Liberals are asking for a deferral while a Senate inquiry into the ETS takes place, and that could be one outcome.

    In the meantime, the ETS has received massive publicity, and even Climategate has been mentioned.

    We live in interesting times."

  8. Count another Aussie in for your analysis Roger.

    None of us here have got much of a clue about it.

    Thank God Rudd has now got an opponent!

  9. Dr Pielke

    Here is a small but relevant comment that might illustrate how fractured and incoherent the whole thing is Down Under.

    I have been minded of some of your recent posts in this.

    This is editorial from a mailing list Australian business news website, run by respected and well-known business journalists. They have a big 'eco-business' section and a fairly 'green' tinge to a lot of the political commentary. ie they may analyse business but they are not conservatives in any American sense.


    "I have written two commentaries which set out how this politically driven scheme was designed to take money from business and distribute it to lower and middle income groups; plus, how it will destroy some of the sources of capital required to erect low-carbon power plants; and how the Commonwealth could be forced to guarantee $7 billion in bank loans to brown coal power stations which may encourage a much longer period of brown coal power generation than is sensible in a carbon constrained world."

    Point One - from this respected analyst who is by no means 'sceptical'. The Australian Labor ETS was a stealth, wealth redistribution scheme. Which may have completely opposite carbon emission outcomes to the stated objectives ( Law of Unintended Consequences bites again ).


    "Assuming the legislation is stalled, Tony Abbott should book himself a trip to China and schedule it after Copenhagen. Abbott should examine the Chinese plans and then, with advisers, begin to synchronize Australian carbon reduction with our largest trading partner."

    Just try and get a message through to these guys, including your recent work, that China is merely looking to lower its carbon intensity per unit of GDP - just like any nation moving up the development scale !!

    They actually think China is showing Australia the way forward on the environment ! And these are supposedly respected commentators ?!

    Given the view that China is probably just looking at business-as-usual - that is a good starting point for the new opposition leader. Minus of course China's gross output of toxic emissions and particulates of course !

  10. I was pleased Australia's ETS was voted down simply because it became so flawed in the political negotiation that preceded the Senate vote.

    I require no convincing that economic planning (resource allocation) systems must explicitly account for environmental externalities, natural system limits, and the risks of irreversible tipping points.

    My formal training was as a fisheries economist, and I worked in the New Zealand fishing industry under an ITQ system. Rather than take a risk management approach, industry disregarded scientific indicators in favour of higher catches - only for the fisheries to subsquently collapse.

    Now I live in Adelaide, at the end of the Murray River which is dying. Many blame the drought, but over-use of water upstream and a management system that straddles 4 state Governments + the federal government. The result is protracted inaction, total disregard of the science, and a river and lake system on the verge of systemic collapse. Over the past century,the Murray River has long supported Australia's food bowl. But Australia's population since Federation in 1900 has grown 6x from ~3.5M to currently 22M, and over the coming decades, the Federal Government wants to increase it to 30M+. You don't need to be a rocket scientist or resouce economist to see the policy contradiction. And you don't need to be a climate change sceptic to see the impact which humans have had on this particular environmental system.

    I've also witnessed massive industry subsidy schemes to keep the car industry (Mitsuibishi) afloat in South Australia - only for them to recently exit. And today, Alcoa, one of the world's largest alumunium producers (and lobbyists under the ETS) decided to scale back one of its Australian plants - which they say is coincidental to the Senate ETS decision. http://www.abc.net.au/news/stories/2009/12/04/2761631.htm

    Should "carbon intensive" industry business models approaching end-of-life receive dispensation or compensation under an ETS?

    Many, particularly established industry, think 'yes'. Startups, technology innovators would probably argue 'no'.

    In my view, we're witnessing not just a market failure (the overuse of underpriced resources), but government failure. And the rhetoric and postering by the technical elite / technocrats is wearing pretty thin.

    So what's the answer? Technology. And I see China and the USA not so much as the problem, but key to finding the solution. And in the meantime, we should let outdated, carbon intensive business models die a natural death (without payment for the priveledge).