Hamilton: why we should stick to carbon trading regardless
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We are told that the left and the right have joined forces to oppose the Government’s Carbon Pollution Reduction Scheme. We know why the right opposes it — they don’t believe in global warming, or do so only half-heartedly, and oppose serious measures. But what of the Left? Or at least environmentalists — Martin Ferguson is said to be of the Left and he believes global warming is a crock. Some who take warming seriously seem to have been captivated by a new argument against emissions trading. Under the CPRS, any efforts by individual householders to reduce their emissions, such as by installing solar panels or ceiling insulation, will have no effect on Australia’s total emissions. Reducing their electricity demand will allow “big polluters” (or just other households) to take up the slack because the Scheme imposes a national cap on total carbon emissions. Emotionally, one can see why this grates. Noble environmentally conscious householders do the right thing but their efforts are undermined by corporate polluters who don’t care. But that’s no basis for rejecting emissions trading. Indeed, inducing people to install solar panels is exactly what emissions trading is meant to do, except that the inducement is economic rather than moral. Capping emissions drives up the price of energy and provides an incentive to change behaviour. Where in Australia those emission cuts occur is irrelevant. The objective of emissions trading is to ensure that emission cuts occur wherever they are cheapest, which then makes a tighter emissions cap more feasible. The essence of the criticism is that emissions trading undermines altruistic behaviour. This is a curious political inversion. The Howard Government and right-wing think tanks for years argued that voluntary actions are the best way to tackle climate change. They did so to head off real, government-mandated efforts to cut emissions. Voluntary action, which can never make a big dent in our emissions, is a substitute for collective action. Promotion of altruistic measures by concerned individuals only shifts responsibility from government and the big polluters onto the shoulders of individuals. It is the ultimate affirmation of the neoliberal conception of a society of consumers who act individually rather than citizens who act collectively.
Those citizens voted for a Government that promised to introduce mandatory cuts through an emissions trading system so we would all be required to change our behaviour. So it is passing strange that now some environmentalists are using the voluntary actions of altruistic individuals to attack a policy that, for all its flaws, mandates emission cuts. A case could be made to modify the CPRS so that those who want to do more than respond to higher energy prices can do so. In fact, they can do that already, by clubbing together and buying emission permits that they simply retire so the aluminium smelters can’t get their hands on them. The politics become even stranger when the promotion of voluntarism is used to call for the CPRS to be replaced with a carbon tax. There is one fundamental difference between emissions trading and a carbon tax that ought to see environmentalists plugging for the former. Emissions trading fixes the amount of pollution and then allows the market to set the price of an emissions permit. This gives priority to environmental certainty over business certainty. The price will bounce around but businesses are used to managing uncertainty through hedging. Against this, a carbon tax fixes the price of pollution through the tax rate and leaves it to the market to decide the amount of pollution. Business has certainty but the environment pays for it. If Australia has a legally binding emissions cap, as we now do under the Kyoto Protocol and will have again under a Copenhagen agreement, then the government will be compelled to adjust the tax rate frequently and by large amounts as it tries to hit the target. Imagine the politics of that, remembering that the GST rate is virtually cast in stone. Politically, it’s infinitely easier to let the price fluctuate in the marketplace, with the peaks and troughs smoothed by business planners. There are several other powerful reasons for sticking to trading, despite the defects of the CPRS. Firstly, the trading scheme is flawed because of the Rudd Government’s political cowardice and willingness to cave in to pressure from corporate interests. If a carbon tax had been negotiated it would be just as full of loopholes and concessions as the CPRS. The tax rate would be far too low, petrol would be excluded, the biggest polluters would be exempted or receive concessions, and there would be a stampede from sectional interests to get their hands on the revenue. Second, climate policy is hard and takes a long time. To argue that years of working towards a trading system in Australia should be ditched for a new approach is to argue for more years of delay. This is why the sceptics in the Coalition have begun to talk about a carbon tax. For those who know it is untenable to call for no action, calling for carbon tax is the next best thing. Third, at the insistence of the United States and Australia, in 1997 the Kyoto Protocol adopted an international emissions trading system because it was believed to be more market friendly. The world is now firmly on an emissions trading path. The Kyoto Protocol embodies it, the EU is practicing it and the US Congress seems certain to adopt it, following the lead of the 12 north-eastern states. For Australia to repudiate trading in favour of a carbon tax would isolate us from the global market, and exclude us from an important part of international negotiations. In short, a respectable case could be made for a carbon tax instead of trading in 1997, but the world is now irrevocably on a different course. After many years we are perhaps half way towards having an environmentally responsible emissions trading system. Nevertheless, the proposed Carbon Pollution Reduction Scheme is so weak and has so many flaws that a strong case can be made for rejecting it in anything like its current form. Some argue that environmentalists should not reject it because a flawed scheme is better than no scheme. But that is not the choice. The choice is between a flawed scheme that will lock in a weak target through to 2020 just when the science is saying we must go much further, and no scheme that over the next few years nevertheless keeps open the possibility of a scheme that responds adequately to the science. Clive Hamilton is the author of Scorcher: The dirty politics of climate change (Black Inc, 2007). |
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8 Comments
Gordon
Thanks for the comments. A price signal alone is often not enough, although a sudden, sharp increase is much more likely to cause people to want to change their behaviour. The ETS is aimed at big energy suppliers who are mandated to change the nature of energy they supply. As for final consumers, a good case can be made for complementary policies targeted at specific and well-understood ‘market failures’.
Perhaps 10-20% of the population will be motivated by green altruism, which is why it can never be more than a small part of the answer. The other 80% may not take voluntary action, but they are happy to support and respond to mandatory measures. The psychology of “I will do the right thing as long as every else does” is a powerful moral principle. That’s why we pay our taxes. The ETS is aimed at the 80%; if the 20% want to do more then that’s fine. I am one of the 20% but I don’t delude myself that my actions and those like me will save the world.
Charlie
Yes, I was a little unclear. In the case of consumers the ETS changes the environment in which decisions are made. They face higher prices for energy and they voluntarily respond to the new incentive structure. So changing the incentives induces changes in behaviour but the choice remains ‘free’ in some sense. I think you are right that to really tackle climate change we will need a transformation of our ethical stance, a transition beyond growth fetishism and a new attitude to the natural world. The question is, can we possibly do it in time?
We voted for a government who promised effective action on climate change. A 5% reduction target is within the margin of measurement error, and doesn’t even bring us below our pre-Kyoto levels! An emissions trading system is the best solution, but this bastardised approach being bandied by Labor won’t reduce emissions and rewards polluters.
Dear Clive
You are no doubt right that whether or not an ETS is superior to a carbon tax, it is the way the world is going and much of the policy development has been done. It appears now to be the only realistic way of undertaking collective action to significantly reduce GHG emissions.
But your arguments about voluntary action are misconceived.
First, the price signal. Any likely carbon price will not send energy price signals to consumers strong enough to change behaviour except in very particular circumstances. Consumers face several kinds of problems in making sensible investment and behaviour change decisions to reduce energy use, including information problems, access to capital, a bias towards the present and split incentives (eg landlord/tenant). There are ways to solve most of these problems. That’s one reason why the CPRS needs to work in partnership with an effective energy efficiency strategy. We haven’t got one yet.
Second, for effective political action on climate change we need to maintain and build a citizen/consumer constituency that understands the issues, feels empowered to act and feels responsible. Combining voluntary action with a robust ETS is surely a far more powerful approach than letting the government scheme do all the work. Many consumers want to act - they are not just consequentialists but want to define themselves as responsible citizens. Even if Senator Wong can justify the low target and the excessive compensation to non exporters, the failure of the scheme to allow for voluntary action other than ripping up permits is indefensible. The Australia Institute has suggested one solution within a CPRS framework; there may be others.
Third, I’m all for effective and efficient collective action where markets / individualism fails. But not everyone shares my view. While I don’t agree with them I respect their right to hold that view and want them to respect mine. A solution should empower all of us to ct if we are concerned.
Clive, i don’t understand your arguments distinguishing altruism - voluntary action - from other action in this context. It is my understanding that neoliberals (a la Chicago School) don’t, and arn’t concerned about, distinguishing between motivations for preferences (eg altruism, ignorance or economic self-interest). All they’re concerned about is that individual preferences can be delivered via market mechanisms in terms of choices - thus determining the ‘true’ value of something via the price mechanism. It is my understanding that in their view all choices are (or ought to be) ‘voluntary’ and it matters not whether these choices are communitarian, evangelical, ecological or personal wealth oriented. The important thing is making sure the market enables and reflects those preferences. And where they involve collective action dilemma problems, that there are corrections (via govt means if necessary) but preferably through manipulation of price in the market (like a carbon tax).
Nevertheless, I’m not a neoliberal and agree with Renouf that the distinction is important and useful to make because society (in which economics and choices are a small part) is the context in which ethics are formed, developed and sustained. Change on the scale that is needed to combat climate change impacts is going to need, in my view, a substantial shift in our societal ethical practices and outlook - one which market techniques are inadequate (and sometimes contrary) to achieving.
Richard McGuire
Monday, 16 February 2009 10:55:46 PM
Harold….Feb 16th 2009….9.10.38.pm…… Most of us know who Clive Hamilton is…. But who the f**ck is Harold ?
Crikey’s rules seem to block a second bite so I couldn’t answer this on 16 Feb by pointing out that R McG missed my point. I was complaining that knowing who Clive Hamilton was didn’t help know whether there was anything he knew more than diddly-squat about, compounded by the title “Professor of Public Ethics” which, I hope as an indication of sensitivity and intellectual modesty, he has not attached to his name today. And my wider point remains. Why should Australia do anything which cost us a cent that could be spent on research, adaptation to climate change, helping others, including our own old and infirm and islanders displaced by rising seas (if and when that really threatens) when there is nothing we say or do that is going to make any difference. The furthest the contrary argument can plausibly go is to say that we should sign up to anything that India, China and the US commit themselves to as part of any genuine international effort to reduce the rate of global warming. It does look as though the global average temperature is likely to continue a long term rise but, given the logarithmic function which describes the heating effect of increased greenhouse gases and the as yet unresolved question relating to evaporation, precipitation, latent heat, and long term oceanic effects, it could well be of an order which will never require radical changes in Australian lifestyles, despite perhaps drier and often hotter temperate regions, wetter tropics and worse bushfires. So why not recognise that Australia’s big problem is ensuring security for investment in long term projects such as all major power production (including research for economically affordable alternatives to coal burning) always are.
The reason I had to put 3600 watts of solar panels on my shed is that content free morons like Ferguson, Wong and Rudd and their cohorts in the coal industry, the AWU and the CFMEU have ensured that the carbon trading scheme will have zero effect on the coal industry and therefore there will be zero effect on carbon emissions. Of course individual effort will not fix climate change, but if our glorious leaders can’t show the required leadership then it’s left to us, the semi illiterate prolatariate to do so.
People like Ferguson don’t believe in anthropogenic climate change. They only belief is progressing the interests of their illegitimate constituencies that will keep him in power.
It surprises me that people keep assuming that voluntary means ‘dinky’ and ‘quaint’. The Government has run this line for some time but it ignores some really interesting possibilities including:
1) The propsed 30% emission reduction for the ACT
2) Renewable energy targets in South Australia
3) The Commonwealth’s own $4 billion household insualtion package
There is absolutely no reason that the benefits of such ‘voluntary’ (but collective) action can not accrue to the atmosphere (in the form of a lower target) rather than to the polluters (in the form of cheaper permits).
There is also no reason to be forced into taking a position on whether we should rely exclusively on voluntary measures or exclusively on market measures. With some straight forward ammendments the CPRS targets could easily decline in line with the quantum of voluntary action (be it individuals or governments on their behalf).
Price signals and targets have their place, but so too does motivation. The best scheme will rely on the strengths of both