The Greens oppose the CPRS not because it is too weak, but because it will point Australia in the wrong direction with little prospect of turning it around in the timeframe within which emissions must peak, says Senator Christine Milne.
Greening the economy
|
Recently I heard on Radio National that Finland has embraced a deep green economic model and that their economy has grown by 44 % as a result. Then, local ABC radio news reported that a half-hearted nod to green economics in OZ would see us all paying through the nose while our economy is composted. Can you tell me who’s right here? Why is what’s good for Finland bad for us? Will we “all be rooned” as Hanrahan said? Or are the smug Finns just “having a lend”? What’s the truth? Tell me, I can handle it. And I have stuff to do. — Wendy Harmer We asked Clive Hamilton: Economies grow because people invest in businesses that provide goods and services. With a given amount of investment each year investors go looking for the most profitable opportunities. If governments impose some restriction (such as energy efficiency standards) or inducement (like subsidies) then investment will be reshuffled a bit. If you assume (as most orthodox economists do) that the situation before the policy change sees investment allocated as efficiently as possible (i.e. to the most profitable firms and sectors) then the policy change will mean investment is shifted a bit into slightly less profitable ventures. The overall effect on the economy depends on how much more costly it is to produce the new set of goods and services compared to the old. Usually the difference is very small. In the case of climate change, the per unit cost of renewable energy (or low-emission energy, like gas) might be 20-50% higher than dirty energy. But since we spend only about 5-10% of our income on energy (directly and indirectly) the effect on growth is small. This is why the Garnaut report and Treasury modelling show we can cut our greenhouse gas emissions by a lot with only a tiny effect on economic growth. On the other hand, an economy might be able to better guess the future than its competitors and by investing in green alternatives before everyone else gee the jump on the competition so that they have trouble catching up. This is what happened in the 1970s when Germany led the world by imposing strict air and water pollution standards, leading German firms to dominate the world market for this type of equipemnt when most other countries followed suit 10-20 years later. The lesson is, if you know where the world is headed get in early and you will make a killing. We know where the world is heading on climate change policy; only obstructionism by the fossil fuel lobby and weakness of will by government stops us doing the economically and environmentally sensible thing. Crikey welcomes your dumb questions, and will find someone smart to answer them. Send your suggestions to boss@crikey.com.au with “clarifier” in the subject field. |
|
|
6 Comments
An excellent summary by Clive Hamilton.
Oil production is forecast to peak in about 2010 and natural gas production by about 2030. Coal (even the “clean” variety) produces greenhouse gasses far in excess of that permissable without contributing to massively damaging climate change - or what economists call disbenefits.
The future lies with countries, organisations and individuals who recognise that the 250 year old Industrial Revolution - Phase 1 (fossil fuel based) is coming to an end and that the Industrial Revolution - Phase 2 (renewable energy with some nuclear power) is beginning.
Amazingly the people who started the first industial revolution have done just this! Two weeks ago the British Parliament passed a bill committing to a legislated 80% reduction in greenhouse gasses by 2050 (based on 1990 emissions). In addition, five year reduction targets will be set and enforced by legislation.
Clinging to fossil fuels when Australia has probably the best environment in the world for renewable energy is simply denying ourselves new business opportunities that in a very short time will far outweigh “Phase 1” of industrialisation.
Thanks for that very incisive overview Dom.
It’s great when these commentators are called to account with facts and reality.
Way to completely ignore the question, Mr Hamilton.
Deep green economic model?
I’ve just moved to Helsinki a couple of months ago (from Melbourne) and I can’t see much evidence of this claim. Compared to Oz, Finns use huge amounts of power (mostly to cope with the cold and the dark). They import a lot of power from Russia, but they are building another nuclear power station to cope with the increasing demand.
The Finns have done well economically in the last few years though, that’s for sure, and their 37yo finance minister Jyrki Katainen just won the Financial Times gong for European Finance Minister Of The Year.
==> When asked what measures came to his mind which had an effect on the strength of the Finnish economy, Katainen replied: “First of all our banking system is on solid grounds. Secondly we repaid our loans when times were good, and thirdly we resisted increasing costs and spending, although there was political pressure to do so.” < ==
http://www.helsinkitimes.fi/htimes/index.php?option=com_content&view=article&id=4170:finnish-finance-minister-tops-ft-ranking-&catid=36:business&Itemid=202
No mention of Deep Green.
The Finns had their banking crisis 15 years ago and learnt their lesson.
Half a dozen paragraphs of meaningless tripe. No spelling errors though - only typos. I just could not find any answer to any of Wendy’s questions, apart from Dr Hamilton peddling his bicycle to nowhere - as usual.
All his propositions are speculative - not supported at all. “the economically and environmentally sensible thing” - Who says?
The system of allocation of investment money is not working. This comes about because the underlying assumption of economics does not work as theory would predict.
The assumption as Hamilton points out is that “With a given amount of investment each year investors go looking for the most profitable opportunities”. The banks are the biggest suppliers of investment money and they look for security of funds over all else. They do not look for the most profitable opportunities. In other words you cannot get investment dollars unless you already have assets against which the loan is secured. It also turns out that the most financially profitable enterprises are enterprises that feed off asset bubbles and other financial manipulation. It is no accident that real estate (easily made into bubbles) and financial institutions are the places where a great deal of investment ends up.
The problem is not with money that already exists and is backed by assets. It should continue to use the existing system.
The problem is with new money. Banks create new money out of thin air by lending money they do not have. They are allowed to do this because of the above assumption. The banks should only loan money that is already on deposit. New money that does not yet have an asset backing should be distributed throughout society as zero interest non repayable loans by the controller of the currency on the condition it must be invested in new productive assets that is deemed by society (the government to be an appropriate under resourced area). A good starting point would be to distribute a few billions that must be spent on renewable energy infrastructure. Renewable Energy Infrastructure costs are 90% financial and only 10% operating. This will make renewables immediately profitable and we can easily have zero emissions in whatever time frame we want - simply by distributing enough billions until the problem is solved.