Category Archives: Politics

280 – Lomborg at UWA

The news of Bjorn Lomborg establishing the “Australian Consensus Centre” at the University of Western Australia has generated plenty of media attention and much discussion within the University.

Some people within UWA are concerned about the University becoming associated with such a controversial and divisive figure. They are worried about the University’s reputation, and about the perception that his work is scientifically flawed.

There has also been commentary on the fact that the Australian Government could find $4 million for this initiative at a time when government funding in general (and university funding in particular) is under such great pressure.

I had no idea that the UWA arrangement was in prospect until Lomborg dropped in to meet me briefly the day before it was announced a couple of weeks ago. I had not had any contact with him in the past. I found him to be very personable and he asked sensible and genuine questions about environmental issues in Australia.

I have been aware of Lomborg’s work since his 2001 book The Skeptical Environmentalist (TSE), with its message that many environmental problems are not as bad as we’d been led to believe, and some are getting better. I’ve also been interested in his writings on climate policy, and his more-recent initiative, the Copenhagen Consensus, which sets out to prioritise a set of major international policies. The latter will be adapted for a new set of policies in the UWA initiative.

tseAll three of these areas of work have generated controversy and criticism. I’ve read many of the critics, particularly in the early days of TSE when the criticism was raging.

I split the criticisms into two types: identification of errors of fact and criticisms of what he does with the facts (interpretations and judgements). There were some errors of fact in TSE, but not as many as claimed. In my judgement, many of the claimed errors were misinterpretations, misunderstandings or misrepresentations by the critics, quoting him out of context, highlighting trivial issues, and so on. People who didn’t like his conclusions went out of their way to find the smallest hint of an error and blow it up. There is a web site called Lomborg Errors, which includes numerous so-called errors from TSE, but when I read it I was singularly unconvinced by many of them. In fact I found myself laughing out loud at some of them. Given the huge scope of the book, the number of significant, genuine errors is remarkable small, really, and they don’t change the general message of the book. But the myth of there being numerous serious errors got well established, and is accepted as received wisdom by many.

I didn’t agree with everything in TSE. Some parts were less convincing, and it seemed too optimistic to me in some respects. These were generally not errors of fact, but differences in judgement about what they implied or what should be done about them.

Lomborg has faced plenty of disagreement about his policy recommendations, particularly in relation to climate change. He argues that the political barriers to pricing carbon at a price level that will achieve the desired outcomes are so great that we may as well not bother with it. Instead he advocates a large public investment in development of new technologies, such as for renewable energy. This position is obviously at odds with most people who are concerned about climate change, but my own view is that his pessimism about the politics is justified (reinforced by the messages coming out of India recently) and that the technology route is likely to be the only approach with any real chance of averting serious climate change. I’ve written about this here.  Interestingly, his position is not that of a climate sceptic/denier, although he is sometimes characterised as being one.

Looking around the web, I see some scientists arguing that climate change will be greater and more costly than Lomborg has concluded in his climate book, often coupled with attribution of dubious motivations and associations. Perhaps he has made errors here and underplayed some potential outcomes – I haven’t taken the time to evaluate the claims. Nevertheless, even if he has, it doesn’t affect the logic behind his recommended policy approach.

The Copenhagen Consensus work, a version of which he will bring to UWA, is somewhat different in nature. His contribution is to set up and manage the process, bring people together and publicise the results. The judgements made in the process are not his judgements, but those of panels of people (usually senior economists) responding to evidence and cases put by commissioned experts. The focus is on identifying priorities for policy action. From a set of defined policies, which are the ones that are likely to have the greatest benefits for mankind? The explicit focus on prioritisation is critical, but is often missed by people advocating for a particular policy.

The controversy here arises because carbon-pricing policies consistently come out as being much lower in priority than other things like improving childhood nutrition in developing countries and fighting infectious diseases. In my view, this result isn’t a surprise, considering the likely benefits, feasibility, time lags and costs of the options. But it adds to the impression that Lomborg is a climate “contrarian”, even though the results are not actually generated by him.

Some have argued that the concept of prioritising these policies is wrong – we should just implement them all. I think that’s very naïve. It’s not how the world works. None of the policies being evaluated is currently in place. It’s a huge, difficult, risky task to try to get a major new policy adopted, especially when international agreements are needed. Governments have to carefully prioritise how to spend their financial resources and their political capital.

It’s very interesting that Vice Chancellor Paul Johnson has signed up to the University hosting this new centre. He must have anticipated that there would be controversy. I think it’s positive that the University hasn’t been scared off. A university is a good place to do work that challenges people to think differently.

Overall, if it can sufficiently avoid the taint of politics (which might be tricky), I think the initiative could make a worthwhile and interesting contribution to the policy debate in Australia. But also there will no doubt be aspersions cast against Lomborg and UWA.

274 – Tokenistic policies

Many government actions are tokenistic. They are too small to really make a difference, but they are pursued anyway. Why do governments do this, and how do they get away with it without provoking public anger?

Listening to ABC Radio National’s breakfast program this week, I heard an interesting interview with Professor Hugh White from the Strategic and Defence Studies Centre at the Australian National University. He was arguing that the current response to the IS threat in Syria and Iraq is too small and constrained to achieve any significant impact on the progress of IS.

“If you find yourself, as I think we do today, undertaking military operations without making them big enough to give yourself a reasonable chance of success, you’re just going through the motions and you’re better off not doing it.”

“Going through the motions doesn’t make strategic sense and I don’t think it makes moral sense either.”

jetWhat struck me about this argument was its similarity to my own argument about some environmental investments by governments. Starting with dryland salinity, I argued that our investment was spread too thinly across too many investments for any of them to be successful. Reinforcing this, the Australian National Audit office concluded that the level of change in land management in well-monitored cases was about one percent of the level needed to achieve stated targets.

More recently, I’ve been researching other aspects of water quality (nutrients and sediment) and there too governments tend to hugely under-fund projects. For example, funding to protect the Gippsland Lakes in Victoria from nutrient and sediment pollution is around 2% of the level that would be needed to achieve the official target of a 40% reduction. (See PD210)

One question is, why do governments do this? The reasons probably vary from case to case, but I think there are two main factors. The first is, to be seen to be doing something. At least in some cases, the government realises that the funding allocated is woefully inadequate, but they proceed with the policy anyway because they think there is electoral advantage in being seen to be doing something, rather than nothing. So this is a cynical political motive.

In other cases, I think the reason is ignorance, combined with a lack of evidence and analysis in the policy-development phase, combined with a tendency towards excessive optimism about the effectiveness of a proposed policy (PD213). That was the problem with the salinity policy. Lots of people thought it was a good idea to have a policy to combat such a prominent national problem, but very few people had enough knowledge of the science and economics of salinity to recognise that the policy was badly misconceived and would achieve little. The policy approach adopted was an evolution of earlier programs (the National Landcare Program and the Natural Heritage Trust) rather than one designed after careful analysis of what it would really take to substantially reduce the impacts of salinity.

This second reason is, perhaps, less offensive than raw cynical politics, but it’s still terrible.

Another interesting question is, how do they get away with it? Why is there not more public anger directed at these politically motivated or ill-conceived policies? Here are some possibilities.

Complexity. The issues I’ve talked about are complex and multi-faceted. It can be difficult even for experts to work out what policy response would be most effective. Most people lack the expertise to judge whether any particular policy response will be effective. They don’t have the time or inclination to learn enough to make those judgements. They therefore trust governments to do what they say they are doing.

Time lags. For some of these issues, the effects of current management would not be felt for some time – years or even decades in the future. By then, it’s hard to make the connection back to policies that were put in place previously, and judge whether they made a positive difference.

Intractability. Some of these problems could be solved but only at exorbitant expense, while others can’t be solved at all in any practical sense. I suspect that governments sometimes recognise this and then implement the least costly policy they think they can get away with politically.

Communication challenges. I was interested that, in her interview with Hugh White, the program’s host Fran Kelly did not pursue questions about the tokenistic nature of the policy, focusing instead on other issues. Perhaps she felt the argument was too complex or subtle to be comprehended by people eating their Weet Bix. Or perhaps she herself didn’t recognise its significance.

Sometimes an underfunded policy does explode into political controversy because of its ineffectiveness, but usually they don’t. Normally, they drift along, spending money and going nowhere much. They might receive an adverse review from some government committee or inquiry, but governments tend not to respond substantively to those sorts of reviews if they think they can get away with it.

Overall, policy tokenism is an understandable but regrettable aspect of our system of democratic government. It is hard to combat, but sometimes can be changed by outside pressure, either from the public or from vocal expert commentators.

Further reading

Pannell, D.J. and Roberts, A.M. (2010). The National Action Plan for Salinity and Water Quality: A retrospective assessment, Australian Journal of Agricultural and Resource Economics 54(4): 437-456. Journal web site here ♦ IDEAS page for this paper

Roberts, A.M. Pannell, D.J. Doole, G. and Vigiak, O. (2012). Agricultural land management strategies to reduce phosphorus loads in the Gippsland Lakes, Australia, Agricultural Systems 106(1): 11-22.    Journal web site here ♦ IDEAS page for this paper

267 – Budget 2014 and the environment

Last week’s budget included funding cuts to many areas of government, and the environment certainly was one of the areas to suffer. There were some new initiatives, but they were outweighed by what was taken away. 

The most substantial environmental initiative in the budget is the Emissions Reduction Fund (ERF), a key part of the government’s election promise of a Direct Action climate policy. The headline commitment is A$2.55 billion, although spending in the next three years will be only A$300 million, A$355 million and A$417 million – 30% less than the amounts announced by Environment Minister Greg Hunt as recently as November last year.

The ERF is intended to replace the carbon tax, which is expected to raise more than A$7 billion in 2013-14. It is no secret that economists generally don’t support this policy change, viewing it as a move from a relatively efficient to a relatively inefficient mechanism that will worsen the deficit.

volunteersAnother of the key initiatives also amounts to give and take. There is A$525 million over four years for the Green Army (another election promise), which will undertake a range of environmental work. But this is almost fully offset by cuts of A$484 million over five years to the Caring for our Country programme and Landcare, now merged into a new National Landcare Programme.

Of the A$1 billion over four years that remains in the merged programme, some is tied to other election commitments, such as a nature corridor in Western Sydney (A$7.5 million), a Whale and Dolphin Protection Plan (A$2 million), and the 20 Million Trees programme (A$50 million).

These changes amount to a substantial cut in funding to Australia’s 50 regional natural resource management bodies – a fate they also suffered after the last change of government in 2007.

On the face of it, the budget looks to have delivered on an election promise to safeguard Australia’s most iconic environmental asset, the Great Barrier Reef, with a new Reef Trust set to provide A$40 million over four years.

But while this sounds respectable, it is a very small percentage of the amount needed to achieve existing targets for the reef. It is also partly offset by a A$2.8 million cut (over four years) to the Great Barrier Reef Marine Park Authority.

There are lots more cuts too. The 4900 staff employed in the environment portfolio will be reduced by 300, although that is fewer than might have been feared.

Then there are numerous cuts to existing programs. The most affected areas, predictably, are those related to climate change, including carbon storage, renewable energy and alternative fuels. The Australian Renewable Energy Agency is to be wound up, saving A$1.3 billion over five years starting in 2017-18. Funding of A$1 billion remains to support existing projects. 

Another large saving is a A$459 million cut to the Carbon Capture and Storage Flagship Programme, also commencing in 2017-18.

Climate Spectator has confirmed that an earlier promise of A$500 million for a One Million Solar Roofs program has been quietly dropped. Similarly, there is no sign of the promised A$50 million for Solar Schools, and the promised Solar Towns program has been dramatically scaled down, from A$50 million to A$2.1 million.

Biodiesel and ethanol will both be subject to increasing excise rates, growing to 50% of the “energy content equivalent tax rate” (the scale by which fuels are taxed according to how much energy they contain) by 2021. This will reduce the incentive for people to prioritise these fuels over fossil fuels.

Meanwhile, there are various cuts to fuel efficiency and green technology measures, including:

  • The National Low Emissions Coal Initiative (A$17 million)
  • The Clean Technology Programme (A$45 million)
  • The National Greenhouse and Energy Reporting Scheme (A$2 million)
  • The Ethanol Production Grants program (A$120 million over six years)
  • Grants to support algal synthesis and biofuels (A$5 million)
  • The Cleaner Fuels Grants Scheme
  • Water and science

Water is also a target for cuts, with the abolition of the National Water Commission (A$21 million over four years) and savings of A$408 million in the Sustainable Rural Water Use and Infrastructure progam, leaving that program with A$4.5 billion over 10 years.

These savings include reduced funding for water buyback, with the government prioritising water recovery through infrastructure projects. In this, the government has chosen to prioritise a highly inefficient method to generate water, in response to political pressure from the agriculture sector. As with the changes to climate policy, this policy conflicts with the government’s aim to be seen as a sound economic manager.

Environmental research funding will probably be affected by cuts to CSIRO (A$111 million), the Cooperative Research Centre program (A$80 million) and the Australian Research Council (A$75 million). It will definitely be affected by cuts to the National Environmental Research Program (A$21 million), the Office of Water Science (A$10 million) and the Australian Institute of Marine Science (A$8 million).

Finally, the decision to resume indexation of the fuel excise will have an incidental effect on the environment. One cannot help being struck by the irony of this measure being introduced by a government that was so highly critical of the carbon tax and the burden it places on the community.

The initial cost of this change will be relatively minor (A$280 million in 2014-15), but it will grow rapidly year by year (to A$1.85 billion by 2017-18). Before long, its annual cost may exceed that of Australia’s carbon pricing arrangements, depending on how prices change in Europe’s carbon market, which the previous government had signed up to.

Not that I’m being critical of the decision to index the fuel excise. As well as generating revenue, it will reintroduce at least some of the incentive to reduce fossil fuel consumption that will be lost if the Senate approves the government’s plan to dismantle the carbon pricing system.

That point aside, it is not a good budget for the environment – but then that was expected. In relative terms, the environment probably hasn’t been hit any harder than other areas like health and education.

A version of this article was first published in The Conversation on 14 May 2014.

I did an interview on ABC Radio National (Bush Telegraph program) on 16 May 2014 about Landcare and the Budget. You can listen to it here. (My bit starts about half way through the item.)

 

265 – Fossil fuel subsidies

Amidst all the discussions about carbon taxes and emissions trading schemes for mitigating climate change, we hear very little about fossil fuel subsidies. You’d be forgiven for not knowing that they are, in fact, enormous.

This matters for several reasons, including that these subsidies encourage increased use of fossil fuels. From the perspective of climate-change policy, fossil-fuel subsidies make things even worse than they need to be. Climate policies are intended to push us in one direction, but fossil-fuel subsidies are pushing us in the opposite direction. It’s like running a race but starting well behind the start line.

I was surprised to learn that Australia has one of the highest levels of fossil fuel subsidies in the OECD, totalling US$8.5 billion of budgetary support and tax expenditures in 2011.

petrol_pumpWe have a bewildering array of schemes that subsidise fossil fuels. Federal subsidies include exemptions from crude oil excise for condensate, a reduced excise rate on aviation fuel, and the clean coal fund, plus there are numerous schemes at the state level. The biggest subsidy by far is the Fuel Tax Credits program, which provided almost $6 billion dollars of support to businesses for their fuel use in 2011.

Our total level of subsidies is behind the USA ($13 billion) but ahead of some economies that are much bigger than ours: Germany ($7 billion), the UK ($7 billion) and France ($4 billion).

We are told by our national government that our carbon tax is cripplingly expensive and has to go, but in 2012-13 it collected only $4.9 billion, not much more than half the cost of our fossil fuel subsidies. For some reason, the subsidies are not considered too expensive for us to bear. The most cost-effective way to make a start on reducing carbon emissions would probably be to remove these subsidies. At the same time, it would help to reduce our budget deficit.

The problem is even worse outside the OECD, with some staggeringly large subsidy programmes in Egypt ($19 billion), China ($20 billion), Russia ($23 billion), Venezuela ($24 billion), India ($34 billion), Saudi Arabia ($46 billion) and Iran ($65 billion). In Venezuela, fuel at the retail level is almost free – just a few cents per litre.

Fuel subsidies in these countries are often justified as a form of assistance to poor people, but it’s a really dumb way to try to help them. For one thing, most of the benefits go to people who are not poor. Secondly, the greatest needs of poor people might be something other than fuel – food or education, for example. Thirdly, big subsidies hold countries back economically, which ultimately is bad for poor people.

Getting rid of them is really hard, though, because the beneficiaries are used to them and see them as entitlements. Sometimes the subsidies are targeted at special interest groups, like farmers, who would fight really hard against any attempt to remove them.

It’s another illustration of the adage that we shouldn’t put any major policy in place that we might later want to remove, because special interests take hold and use the political system to defeat the public interest.

Further reading

Burniaux, J.M. and Chateau, J. (2011). Mitigation Potential of Removing Fossil Fuel Subsidies: A General Equilibrium Assessment, OECD, Paris, IDEAS page

OECD (2012). Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels 2013, OECD, Paris, here

Whitley, S. (2013). Time to change the game: Fossil fuel subsidies and climate, Overseas Development Institute, here

 

259 – Increasing environmental benefits

It is obvious that the budgets of our public environmental programs are small relative to the cost of fixing all of our environmental problems. If we want to achieve greater environmental benefits from our public investments, what, in broad terms, are the options?

I remember seeing a graph last year – I think it was from the Australian Bureau of Statistics – showing the level of concern felt by the Australian community about environmental issues. It looked to have peaked a few years ago, and was pretty flat, or slightly declining. In that context, the prospects for a big increase in environmental spending over time don’t look good, particularly given the general tightness of government budgets. So I was wondering, if we wanted to double the environmental values protected or enhanced by our public programs, what are the options? I was able to identify several. I’ll list them here, and briefly comment on their potential effectiveness, cost and political feasibility.

  1. Double the budget. Effectiveness: high (in the sense that we could actually double the environmental benefits generated). Cost: high. Politics: very unlikely in the foreseeable future. It wouldn’t be my first priority, anyway. Increasing the budget would be more effective if we first delivered some of the strategies below.
  2. Improve the prioritisation of environmental investments. Improve the usage of evidence, the quality of decision metrics (Pannell 2013), and the quality of evaluation of proposals. Effectiveness: high (because most programs currently have major deficiencies in these areas). Cost: low, especially relative to doubling the budget. Politics: Implies a higher degree of selectivity, which some stakeholders dislike. Probably means funding fewer, larger projects. Achievable for part of the budget but the politics probably require a proportion to be spent along traditional lines (relatively unprioritised).
  3. murray_riverEncourage more voluntary pro-environmental action through education, persuasion, peer pressure and the like. Effectiveness: commonly low, moderate in some cases. Cost: moderate. Politics: favourable.
  4. Increase the share of environmental funds invested in research and development to create pro-environmental technologies (Pannell 2009). Note that this is about creation of new technologies, rather than information. Examples could include more effective baits for feral cats, new types of trees that are commercially viable in areas threatened by dryland salinity, or new renewable energy technologies. Feasibility: case-specific – high in some cases, low in others. Cost: moderate. Politics: requires a degree of patience which can be politically problematic. Also may conflict with community desire to spend resources directly on on-ground works (even if the existing technologies are not suitable). There tends to be a preference for research funding to come from the research budget rather than the environment budget, although this likely means that it is not as well targeted to solve the most important environmental problems.
  5. Improve the design of environmental projects and programs. Improve evidence basis for identifying required actions. Improve selection of delivery mechanisms. Improve the logical consistency of projects. Effectiveness: high (because a lot of existing projects are not well founded on evidence, and/or don’t use appropriate delivery mechanisms, and/or are lacking in internal logical consistency). Cost: low. Politics: Implies changes in the way that projects are developed, with longer lead times, which may not be popular. There may be a perception of high transaction costs from this strategy (although they would be low relative to the benefits) (Pannell et al. 2013).
  6. Increase the emphasis on learning and using better information. Strategies include greater use of detailed feasibility studies, improved outcome-oriented monitoring, and active adaptive management. Effectiveness: moderate to high. Would feed into, and further improve, options 2 and 5. Cost: low. Politics: main barrier is political impatience, and a view that decisions based on judgement are sufficient even in the absence of good information. Often that view is supported/excused by an argument that action cannot and should not wait (which is a reasonable argument in certain cases, but usually is not).
  7. Reform inefficient and environmentally damaging policies and programs. Examples include subsidies for fossil fuels, badly designed policies supporting biofuels in Europe and in the USA, and agricultural subsidies. This strategy is quite unlike the other strategies discussed here, but it has enormous potential to generate environmental benefits in countries that have these types of policies. Successful reform would be not just costless, but cost-saving. Effectiveness: very high in particular cases. Cost: negative. Politics: difficult to very difficult. People with a vested interest in existing policies fight hard to retain them. Environmental agencies don’t tend to fight for this, but there could be great benefits if they did.

In my judgement, for Australia, the top priorities should be strategies 2 and 5 followed by 6. Strategy 4 has good potential in certain cases. If these four strategies were delivered, the case for strategy 1 would be greatly increased (once the politics made that feasible). To succeed, strategies 2, 5 and 6 would need an investment in training and expert support within environmental organisations. Over time, in those environmental organisations that don’t already perform well in relation to strategies 2, 5 and 6 (i.e. most of them), there may be a need for cultural change, which requires leadership and patience.

In Europe and the USA, my first choice would be strategy 7, if it was politically feasible. After that, 2, 5, 6 and 4 again.

Further Reading

Garrick, D., McCann, L., Pannell, D.J. (2013). Transaction costs and environmental policy: Taking stock, looking forward, Ecological Economics 88, 182-184. Journal web site

Pannell, D.J., Roberts, A.M., Park, G. and Alexander, J. (2013). Improving environmental decisions: a transaction-costs story, Ecological Economics 88, 244-252. Journal web siteIDEAS page

Pannell, D.J. (2009). Technology change as a policy response to promote changes in land management for environmental benefits, Agricultural Economics 40(1), 95-102. Journal web page ◊ Prepublication version

Pannell, D.J. (2013). Ranking environmental projects, Working Paper 1312, School of Agricultural and Resource Economics, University of Western Australia. IDEAS page ◊ Blog series