Gentlemen’s wagers on carbon emission policies

The political fight over climate change policies continues to rage in our parliament, with the shadow minister for Climate Action apparently threatening a double dissolution of parliament if that is what it would take to repeal the current policies. The deeper question for analysts in the background is whether emission policies are a political feasibility, not just at the world level but even within Australia.

Some public commentators believe that reducing carbon emissions is possible and that we are on the right way with the current policies. Others, like me, see carbon emission policies as a political dead end and advocate geo-engineering and adaption. Hope versus realism one might say. Endless debates full of emotions and hot air ensue, yet how can an outsider tell who is right?

In the best of Aussie traditions, I propose a set of gentlemen’s wagers. For each one, the stake is 1000 AUS to a favoured charity (mine is Amnesty International). The propositions[1] which I offer to any Australian scientist active in the climate change debate are:

  1. Australia will not meet its 2020 Kopenhagen emission commitments in that domestic emissions in 2020 will not be at least 5% lower than they were in 2000.
  2. World emissions of CO2 (measured by the EIA) in 2020 will be higher than they were in either 2000 or 2010. And there will be no global Emission Trading Scheme in 2020 of which the participating countries cover at least 80% of world GDP (measured in PPPs).
  3. Both Australian and world coal production will be higher in 2020 than in 2010.

Conditions: first come, first served; names are made public; scientists active in the debate only; I win if and only if, measured in 2021, the proposition holds; disputes to be settled by ESA peers; offers close end of October 2011.

Proposition one should appeal to Labor politicians who write flowery speeches about how the government’s emissions policies are good policies that are going to work. I am calling those policies symbolic wastes of time that are not going to achieve anything substantial, like delivering our promises. The bet is on domestic emissions because there is some chance we will pay other countries to pretend they are reducing their emissions, which should not count.

Proposition two is a judgment on world developments and is a challenge to anyone who believes serious international cooperation to reduce emissions is going to happen. Note that there are various non-political events that could deliver the outcome: a major world recession or a technological breakthrough could also tilt emissions down, so one gets several bites at the cherry.

Proposition 3 is a direct challenge to those who believe Australia is serious or will become serious about carbon emission reductions: the whole point of emission trading schemes is to get to a situation where we stop digging up our fossil fuels and leave them unburnt in the ground. The wager is that neither Australia nor the world is going to actually do this.

Why am I offering these wagers? Because I have found that scientists often dodge the question of whether their policies are politically feasible. They debate on the basis of the policies they want to see succeed rather than on the basis of what could succeed. The arguments are thus emotional, involving the intricacies of climate science, or how we owe it to the next generation to do something. Yet, precisely when you truly believe the doomsday scenarios and our inter-generational obligations, you need a calm look at what is politically feasible in this world: whoever thinks carbon emissions policies are not going to work given the political realities of this world, owes it to the next generation to say so and move on to advocating things that might work. If those emotionally defending current policies believe their own words, they should be brave enough to take up the offered wagers.

I would advocate more bets on this debate and others debates in which the number of participants is too small to sustain a commercial betting market. Bets are an open signal to the public as to where the balance of probabilities lies on complex questions. They are a quick way to force scientists to stop posturing and have a calm look at the political realities of the world, which in turn should help to focus the policy debate on what is workable.

Besides, Australia is the betting capital of the world and we should make that national trait work to our benefit.

[1] In terms of the reasoning behind these propositions, see here, here, here, here, and here.


Author: paulfrijters

Professor of Wellbeing and Economics at the London School of Economics, Centre for Economic Performance

11 thoughts on “Gentlemen’s wagers on carbon emission policies”

  1. Rephrase proposition 1 by redefining “domestic emissions” as those attributable to people resident in Australia in 2000. Or make it emissions per head. It is really ridiculous to expect Australia to accept 200,000 (Chinese and Indian) immigrants every year and reduce our emissions.

    Your argument against carbon trading is bizarre for an economist. Even if it is not the full solution, it is an externality that should be paid for. You presumably believe that people should not be allowed to dump their rubbish in the street. The only difference with carbon is that the effects are imposed on people remote in space and time.

    Your argument against carbon trading also contains two false dichotomies. FD1: It is not a matter of carbon trading OR adaptation. Carbon trading does not cost much at all, at least initially. And IF it stimulates innovation it could end up costing not much at all. FD1 says we should abandon random breath testing and just build stronger cars. FD2: It is not a matter of stopping warming or not. It is a matter of mitigating it. Every 1 degree increase has big costs. FD2 says we should abandon random breath testing because we cannot reduce the road toll to zero.

    Make no mistake – I am for adaptation and I do think much global warming is inevitable. Just be very clear that the defeatism in this article is self fulfilling. I expect to see it trumpeted in the Oz.


  2. Chris,

    yes, that is one possible reaction: why say what you think if saying it makes it true. If it were only a matter of me agreeing with emission policies, i would be all for them. Unfortunately, even if Obama was all for them, I would still say they have zero chance.
    Hence your position strikes me as very weird: if you too believe that there is no political hope in emission policies, why keep on supporting them? Why not be forthright and open about what you think could work?


  3. “The bet is on domestic emissions because there is some chance we will pay other countries to pretend they are reducing their emissions, which should not count.”

    It is not entirely clear why Australia paying for overseas emissions reductions should not count. You can certainly argue that the current Clean Development Mechanism does not provide real, verifiable, emissions reductions. But there is the possibility that a better international standard could evolve before 2020.

    Requiring that emissions reductions are domestic reductions, and not domestic financed reductions, seems to artificially increase the cost of reductions. As economists we should strive for the most efficient way to achieve a given goal.


  4. Evan,

    of course, in principle it should not matter where the reductions are made. However, if in reality you expect nearly all countries to increase their emissions, then where are the true reductions made when you pay some government abroad to increase their emissions slightly less than before? It is basically a form of window dressing.


  5. I wouldn’t bet against you on any of those as stated. We have the same expectations on them. I don’t think anyone with a realistic viewpoint would bet against them.


  6. David,

    I agree and dont expect anyone to bet against them. You know a lot more about this than the general public though so what is clear to you, will not be clear to many non-economists and climate scientists.

    Once you accept these propositions however, that means you effectively think the Australian government (of whatever pursuasion) will not meet its Kopenhagen commitments, that the world as a whole will be increasing its emissions, and that we wont even get closer to the stated ideal of emissions policies which is to stop the digging up of more fossil fuels. That would seem a pretty solid acknowledgement that emission policies are a dead end and that one should look at other things.


  7. The 2020 deadline you set, a global trading scheme, and that Australia’s commitment must be met domestically despite everyone involved expecting that around half will come from offshore is what makes these propositions unlikely. But none of that means that nothing is happening. What the three biggest players do (China,EU,US) matters most as they have the capacity for real cost-reducing innovation in alternative energy, carbon sequestration etc. Australia should play its part but shouldn’t punish itself with useless symbolic moves.


  8. Paul,

    I basically agree with your assertions that nothing substantial will be achieved by 2020.

    However the bigger picture is getting things happening by say 2030. Thats a different story, but it requires the right signals to start soon.

    Getting a system in place, ironing out the inevitable perverse incentives and providing a firm direction of where things are heading is the only way for long term change to happen. Maybe I have too much faith in market based innovation.


  9. M,

    I am willing to add another proposition that extends number 2 to 2030, conditional on the other side being young enough to live till then. It is an equally hopeless proposition for 2030, if not more so because the world will on current trends have an economy about 30% bigger in 2030 than in 2020. My essential point is that emission policies are without hope, not just now but even in 20 years time.


  10. Paul,

    these kinds propositions are no “test” of whether mitigation policies is just rhetoric. #2 and #3 would require an extremely strong and fast global response which is not on the cards. The main game for the world is post-2020.

    The foundations can and need to be laid now. But to be claiming that if there’s no drastic response in the next 9 years then there will be no response ever does not do justice to a complex issue. Understanding of these questions has moved on quite a lot from the simplistic non-cooperative game theory models of the early 1990s.

    On #1, the official Australian target is NOT framed as a purely domestic reduction, but as the net reduction after taking into account international emissions units. Your definition here has nothing to do with how the official target is defined.


  11. Frank,

    I deliberately framed #1 as domestic emissions because I have no faith in the ability of other countries to reduce their emissions either (which is piont #2): if you do not actually expect foreign countries to reduce their emissions, then what does the buying of foreign emission reductions actually mean apart from window dressing?
    As to your assertion that it is unrealistic to expect movements in the next 9 years: as I have indicated in a previous comment above, I do not just expect the next 9 years to see increases in emissions, I expect the next 20 years to do so and am willing to extend the bet under #2 with you to 2030 since you and I are both young enough to be around then.
    I seem to recall you have a government grant to look into political lock-in effects in this area?


Comments are closed.