Economists support carbon price

I have to admit that it saddens me that we are in 2014 and still need to lobby Australian politicians for something so blindingly obvious than a price on carbon but here we are. Coordinated by the World Wildlife Federation, today a letter signed by 59 economists (including myself) has been released. The text is below.

2014 ECONOMISTS¹ OPEN LETTER SUPPORTING A PRICE AND LIMIT ON CARBON POLLUTION

We are writing this open letter as a group of concerned economists with a broad range of personal political views, but united in the judgment that a well-designed mechanism that puts a price and limit on carbon pollution is the most economically efficient way to reduce carbon emissions that cause global warming.

Such a mechanism is a necessary and desirable structural reform of the Australian economy, designed to change relative prices in a way that provides an effective incentive to consumers and producers to shift over time to more low-carbon, energy-efficient patterns of consumption and production. Australia’s major trading partners are acting on climate change and it is important to have an effective price and limit on pollution in place now to begin Australia’s transition to a low-carbon economy. A well-designed price and limit on carbon pollution has many benefits over alternative schemes, including:
• stable and long-term policy settings that improve certainty for business
• greater confidence that emission reduction targets will be met
• lower administrative cost and complexity
• the ability to link to other global schemes, such as emissions trading schemes operating in Europe, China and the United States
• incentives for consumers to reduce their demand for emissions-intensive goods
• incorporation of the cost of the damages caused by carbon emissions into business decisions, by requiring companies to pay to pollute.
The Intergovernmental Panel on Climate Change has made it clear that human influence, through activities such as accelerated and large scale burning of fossil fuels and clearing of forests, is warming the globe and that the impacts of climate change are being felt across the world. These findings are supported by the leading scientific bodies of the world, including the CSIRO and the Australian Academy of Science.

Australia can and should do its fair share to contribute to global emissions cuts, which will require Australia to make significant and sustained reductions in emissions and transition to a low-carbon economy. Clear short-, medium- and long-term targets to limit emissions would guide expectations. It is important therefore to provide stable, long-term policy that can meet deeper cuts in the future, and that improves certainty for business and investors to begin an orderly transition to cleaner technology.

We urge all Members of Parliament and Senators to work in the national interest towards lasting agreement on a fair, economically efficient and environmentally effective policy to price and limit carbon emissions.

9 thoughts on “Economists support carbon price”

  1. Joshua,

    Sadly I will have to disagree with you and all your confederates on this. I am equally sure it would not be too difficult to gather an equally eminent group of economists who would also do so.

    I am actually surprised that any economist would support a carbon tax. But then I must remind myself, economics is not a science, and the outlook of individual economists can and probably must be determined by their political, social and ethical beliefs where emotion more often than reason is the major factor. It is difficult to be dispassionate about economics. Equally, given the polarisation of the global warming (or as now fashionable the”climate change”) debate it is almost impossible to be dispassionate in that discussion also.

    Sadly it is a debate where science has been subsumed by a new “religion” with demands that the heretics be ostracised or otherwise punished.

    Pricing carbon is an idealised concept which can only work in an ideal world where markets can be perfectly regulated. Such a world has never existed, and probably never will.

    Moreover, pricing carbon is made even more ridiculous by the simple fact that the quantity being measured is known so imprecisely. Carbon offsets by planting trees, is a simple illustration of this.

    Any carbon pricing system is therefore susceptible to corruption and distortion and there is actually no surety it will produce the outcomes that you and your eminent colleagues assume.

    However, I am content by my belief that it will never happen anyway, despite your efforts to add some impetus to the new religion.

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  2. Peter S:
    1) The debate over climate change is not polarised among climate scientists. The overwhelming majority interpret the mountain of evidence as supportive of the hypothesis formed in the 19th century.
    2) Describing climate science as a religion, and those in denials as persecuted heretics, is just a cheap trick thought up by the same spin doctors who slandered medical researchers the same way when they warned of the health consequences of smoking.
    3) Of course the world is not the ideal world of economics textbooks, which is exactly why people like Garnaut and Stern proposed measures to assists investment in renewables, for example, due to markets not working perfectly.
    4) The quantity of carbon dioxide and other greenhouse gases is known well enough for policy purposes. Claims that we don’t know everything with perfect precision therefore should not act is a standard fossil fuel industry debating tactic, and it’s nonsense.
    5) Any economic measure is susceptible to corruption. Pricing carbon is no more or less susceptible than any other system.
    6) It is not “fashionable” to refer to climate change. The CC in IPCC stands for Climate Change. The IPCC was set up 26 years ago, and it was not considered an unusual term even back then. (This is another “denier” talking point.)
    7) If you want an example of someone whose views are “determined by their political, social and ethical beliefs where emotion more often than reason is the major factor”, just re-read your own comment.

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  3. Thank you Gaz for your comments. Let me respond.

    1). The overwhelming majority argument is a furphy. Papers by Cook and others purporting to cement this have been substantially repudiated.

    2). Perhaps Climate science is not a religion. I am prepared to acknowledge that. But its adherents, especially among the population who are not scientists, who constantly refer to critics as “deniers” are certainly exhibiting the same religious fervour that drove the inquisition.

    3). Have you actually read the Stern and Garnaut treatises. I have. Stern’s economic analysis has been largely discredited. Garnaut’s, which is simply derivative of Stern, as is his record in other areas must be similarly judged.

    4). Clearly you have no understanding of measurement error. Policy is not the issue. The cost is based on estimates that are subject to substantial errors, as are the offsets. This is not the normal practice in any other area of regulation.

    5). Any economic measure is susceptible to corruption. True – but some considerably more than others. I am reminded of a case I personally experienced. Poland had a substantial tariff on imported cars. The tariff on parts was much less. This made it possible the ship mercedes benz’s to the polish border, dissassemble them, import them as spare parts and then reassemble them. The ETS in Europe has been substantially rorted already – the principle offenders being governments.

    6). The IPCC title is irrelevant to the comment I made. “Global Warming” was initially the perjorative term. It has subsequently changed to “Climate Change” because the warming was not happening. I suggest you review the literature.

    7). My views are driven by my training as a scientist and my understanding of scientific method. Collect data, formulate a theory to explain the data, then predict beyond the range of the data. The problem facing the IPCC is that its policy formulation is based upon computer models that are demonstrably wrong. I said this 15 years ago and the data has proved me correct.
    I
    Have a good day.

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    1. Hi Peter,

      That is an interesting summary of the scientific method. I understand it slightly differently: 1, Form Hypothesis, 2, Collect data, 3, Test hypothesis. I am not a trained physical scientists however.

      I would be interested to know if you believe that climate change is man made at all. Your theme in your first comment suggests that you disagree with the action (carbon pricing), not the science, but your later comment seems to suggest that you disagree with the science instead.

      I notice a common thread through your comments that you are referring to some other authorities. In your comments on Garnaut and Stern you say that in reading the papers, they have been discredited. If you don’t mind, I would be interested to read the source. It is so important to me too avoid cognitive dissonance and confirmation bias as much as I can.

      As a trained scientist, would you mind also showing some authority stating that the scientific consensus is not what is publicly known? The perception is that 97% of scientists agree that climate change is man made.

      This is important to me, as I am not a trained scientist, so I take cues from those trained. For example, I have but a preliminary understanding of quantum mechanics, yet I do not disagree with the science. To be fair, quantum mechanics is much more visible, TVs wouldn’t work without this quantum mechanics, but on a similar vein, This is very typical of me though, I listen to experts all the time, my financial position is only so strong because I listened to my accountant and financial advisor.

      Irrespective as to whether climate change is man-made (or if it exists), I do worry about Australia in the new economic world. As an economist, I observe that the scarcity of fossil fuels is increasingly more pronounced, and developed countries are getting a very big head start in technological advancements. From an economic point of view, I predict that it will not be long before trade sanctions are placed on developed countries that do not have carbon reductions schemes in place. For these reasons, it seems economically responsible to nurture emerging economic constructs, but I would love to hear your evidence.

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  4. Prefer to see the Carbon Tax retained, even IF reduced to minimum amount, so at least the accounting processes involved function so can iron out any claimed problems for industry.

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  6. Pingback: UK shows how Australia can cut emissions without a carbon tax – The Fifth Estate « The Fifth Estate

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