Why we need a carbon price, again

With Tony Abbott and the Liberals moving away from having a carbon price and towards seemingly heavy-handed regulation, today’s piece by Tim Harford is a welcome reminder of the dangers of that (echoing something I wrote a few months ago).

Other less-than-obvious truths are: that pork and chicken have substantially lower carbon footprints than beef and lamb (yes, even organic beef and lamb); that milk and cheese also have a substantial footprint; that dishwashers are typically more efficient than washing dishes by hand; and that eco-friendly washing powders may be distinctly eco-unfriendly because they tend to tempt people to use hotter washes.

This leads to the conclusion that a price will sort out the truth.

That is why a broad-based, credible carbon price will be the foundation of any successful policy on climate change. The price would affect the cost of every decision we make; it would take away the guesswork. Current carbon pricing schemes, such as the European emissions trading scheme, are a good start, but they leave out too many sectors, and permits are too cheap.

So Abbott will face the obvious situation of going for populist conceptions of what might reduce emissions and then will face scrutiny on each and every one of them. This is the danger where common sense is not likely to be sensible.

As for my view, in washing dishes, we both wash them by hand and then put them in the dishwasher just to be on the safe side.

5 thoughts on “Why we need a carbon price, again”

  1. Harford’s conclusion does not follow from his obvious truths.

    When the public sector and governments are measuring and monitoring a wanted positive social result, such as a reduction in global harm and warming, there is always a proxy problem. The government always selects some indirect, intermediate and prior effect to control.

    The ultimate and desirable goal is to prevent substantial harm to the planet and its inhabitants. Right now, our focus is on global warming, but of course, there are many other ways to harm the planet and to increase global warming. Currently, we know some of the other ways to cause extensive planetary damage and global warming, but we have yet to discover or notice the many other things we do that cause harm.

    The best market approach to global warming would be some current indicator that measures the intended result and measures or modifies all future temperature increasing output of the planet’s inhabitants and companies. Something akin to the market price of a company’s shares that measure in current value all the future earnings output of a company. Minimizing the value of an indicator that measures the summation of future global temperature increases would maximize the reduction in global warming.

    As history shows, when a public policy focuses on an intermediate casual effect, in this case carbon output, behavioral changes occur in the measured effects, but often do not achieve the intended results. Changes in the output of complex systems are never easy to predict when behavioral and input changes occur.

    As I mentioned, our goals are to protect the planet and inhabitants. If we reduce carbon output and global warming, but harm life on the planet, we have both succeeded and failed. For example, many processes to reduce global warming use intermediate products that rely on heavy metals and rare earth materials, which can be harmful to the planet’s inhabitants. Gases, other than carbon-based gases, which we are not limiting, may also increase long-term global warming. A proxy measure, such as carbon output, will create behavioral changes, but may not necessarily result in greater benefit to the planet’s inhabitants. We could be finding ourselves running from one fire to another, until we reach a point without any feasible solution.

    For example, right now, the earth absorbs a certain amount of the sun’s energy and that energy heats the earth and its atmosphere. Suppose that in response to a reduction in the use of carbon fuels through price increase to carbon, it is more economical to use solar energy absorbing materials, such as darker colored materials. A slight change in the overall reflectivity and absorption of the sun’s energy on the earth could undo all the benefit achieved through carbon and greenhouse gas reductions. Similarly, an increase in use of lesser solar energy absorbing materials could accelerate the next ice age. A change to solar energy absorbing materials exposed to the sun would occur gradually, without notice, intent or consciousness of its global warming/cooling effect.

    Simply reducing a proxy, which is an intermediate effect, will achieve the results measured by the proxy, but it may not prevent the crisis. In the end, the proxy reduction may not achieve the desired overall benefit of decreasing global warming.

    There is much more uncertainty about the effects of using carbon based pricing than often discussed. The results could be environmentally positive or negative and decrease or increase global warming. Results from complex system changes are never exactly as one predicts or envisions.

    There is more uncertainty to Harford’s conclusion, “a broad-based, credible carbon price will be the foundation of any successful policy on climate change” then he and many other carbon based pricing economists realize.


  2. “in washing dishes, we both wash them by hand and then put them in the dishwasher just to be on the safe side.”
    Is that not the worst possible thing you could do with regard to carbon emissions? Well, aside from washing them twice by hand, I guess.


  3. Milton,
    I agree with the gist of your piece on uncertainty within complex systems, but you may be overstating the problems. Isn’t the ETS based on a similar scheme that reduced SOx emissions in the USA? My understanding is that the trading scheme worked as expected. Or is that not the whole story?
    While methane emissions have been left out of climate change considerations, I believe that is due to their relatively short-lived impact (years or decades, as opposed to centuries for carbon emissions) on climate.


  4. Milton,
    There is plenty of waffle in your comment but little in hard facts.  So, there may be other unknown contributors to global warming, but how can you tax something that is unknown?  What are these other non-carbon greenhouse gases and why are they not included in emissions targets?  Are they significant?
    To what extent do low albedo surfaces increase global warming?  If there were to be tax on black paint (say), what would be the efficient level, equivalent to a carbon price of $50/tonne, say?  I suspect it would be too low to change behaviour.  Or, put another way, painting everything white is probably a very inefficient way of preventing global warming, compared to carbon mitigation.
    You’ve got a website.  Do the analysis, post it up and link to here.  But, even if you are correct, this does not invalidate carbon pricing.  It just means we need taxes on other global-warming behaviour as well.
    Waffling is easy but counts for nothing.  Do some proper analysis and you might be taken seriously.


  5. Just a question as to where I might find the empirical analyses that show that that pork and chicken have substantially lower carbon footprints than beef and lamb (yes, even organic beef and lamb).  I’m just interested in getting access to the numbers; are they available in Australia, I know that ABARE does not produce such numbers at such a disaggregated level?  I presume that the analyses are at the supermarket/butchers & include the total production/input processes for each meat type.  Thanks anyone who can assist.


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