One of the fascinating lessons from the Garnaut Report, regardless of its content, is that the psychology of it worked. The States and, eventually, Federal Labor commissioned an eminent economist to more or less repeat the Stern Report experience in Australia. That is, get a heavy hitter, someone with profile, who can’t be dismissed as any sort of raving leftie, and get them to do a thorough job on the need to address climate change.
Stern, internationally, and then Garnaut here, changed the way the climate change game was played. No longer was it environmentalists – easily derided as kooks and anti-development types – saying we needed to act quickly to halt global warming, it was Establishment figures, sober economists who had adopted a cautious, even overly-conservative, approach to the issue and still decided that we were in very deep trouble. Garnaut, like Stern before him, had to be taken seriously by the media and he could not be dismissed by the Government – especially as it had commissioned him.
A month later, and all that has been blown away by the financial crisis. Suddenly we’re back talking economic growth, unemployment and recession, not the consequences for economic growth of unchecked climate change and the net economic benefits of addressing it.
Even before we went into full-scale meltdown mode, however, the same thing was being played out at a lower level. Many businesses and their representatives had engaged in the time-honoured rentseeker method of hiring “independent” consultants to commission reports, not even worth the electrons they were emailed on, purporting to demonstrate why they should be exempted from the responsibility of contributing to carbon abatement measures.
The media, lacking the expertise or interest to unpack this rubbish and describe its many flaws, echoed the self-serving contents of the reports – or in the case of some News Ltd journalists, actively spruiked them. Only more sceptical commentators like Ross Gittins were prepared to spend the time necessary for demolishing this stuff.
It’s time for the environmental movement to get its act together and develop a serious economic capability that can deal with this sort of thing and provide an ongoing, informed economic perspective on the costs of climate change inaction. On issues like industry assistance and productivity-related reform, the Productivity Commission provides a powerful opponent of rentseeking and special pleading, deploying the heavy artillery of modelling and econometric analysis in response to the claims of special interests. No industry groups can match it and the Government, when it wants to avoid the implications of the PC’s rigour, has to establish parallel review processes.
There’s nothing similar available on climate change and environmental economics. Indeed, the Government fully funds an economic modelling unit – ABARE – pretty much devoted to undermining attempts to address climate change and protect the environment.
This idea isn’t new. At least one green group has tried to recruit economists but found it difficult to attract talent. It’s been a pretty tight labour market and econometrics is a highly-prized skillset. That, one suspects, will change now, and there might be more than a few refugees from the banking industry that might be able to redeem themselves crunching the numbers on GDP impacts of an ETS.
Nor should such a unit be above some of the tricks of the consultants-for-hire used by industry. For example, Garnaut very conservatively estimates unchecked climate change will cost nearly 7.5% of GNP by 2100. What’s that for every man, woman and child?
Use a generous discount rate to maintain credibility, but let’s have a dollar figure of the type that greenhouse sceptics love to bandy around when discussing the costs of taking action. The media swallow those without cavil – no reason why they shouldn’t be given the same treatment from the other side, or subject both sides to the same sort of scepticism, which would be far better.
Action on climate change is in serious danger of being swamped by bad news. Environmentalist groups are going to have to get their hands dirty with economics and start trying to shape the debate in the dollars and cents terms that the media love best.