Open letters and such

I knew, as is always the case when I am a signatory to an open letter on some issue, that the whole concept will be bashed. Frankly, the carbon price letter’s statements were so uncontroversial that I’m surprised the WWF didn’t go for 130 economists rather than just 13. But as with these things, many like to be happy with every element of the wording and so negotiating that would have been difficult. I’m generally more relaxed but, in this case, the position was so reasonable had I been pedantic I would have still been comfortable.

The point of these letters is to force out of the woodwork the opposition to them. To give them something to answer. The Federal Opposition aren’t quite up to the intellectual task (and maybe don’t have the courage) but the folks over at Catallaxy were there to fill in the gap. Sinclair Davidson reiterated the position that this is all premature and we need to wait until there is an international agreement before doing anything. This actually a position upon which reasonable people can disagree. I do as I think that action is inevitable and we will serve our economy well by building in a price sooner rather than later. We also get a ‘two for’ because we reduce pollution and traffic congestion which is something we want regardless of what the rest of the world are doing.

But there was no move to reasonable debating points coming from Judith Sloan. She attacked the messenger. She couldn’t help but jibe me for being out of the country. Is that a crime? Or does she think that as I don’t have to face the consequences of an Australian carbon price that I can’t comment? And for everyone else it was the notion that the WWF paid for the ad; well, at least all know is that I didn’t. This in a world where economists are often paid for their opinions and that is what we worry about. When it comes down to it, this was a letter where many of the signatories — being private sector employees and such (actually, right now, including myself) — face actual market risks when expressing opinions in public. It is good to see that group moving actively into the public arena.

Nonetheless, looking at this particular reaction, the letter was a failure. It brought forth exclamation but not explanation. It is an advertisement for how far we have to go to achieve some decent economic literacy in our public debates.

Open Letter calling for a Carbon Price

A letter was published today by the World Wildlife Federation calling for a price on carbon pollution. It was also advertised in The Australian. I was a signatory and the letter is reproduced over the fold.

Continue reading “Open Letter calling for a Carbon Price”

Can energy efficient technology harm the environment?

The answer is yes according to this recent article in The Economist.

SOLID-STATE lighting, the latest idea to brighten up the world while saving the planet, promises illumination for a fraction of the energy used by incandescent or fluorescent bulbs. A win all round, then: lower electricity bills and (since lighting consumes 6.5% of the world’s energy supply) less climate-changing carbon dioxide belching from power stations.

Well, no. Not if history is any guide. Solid-state lamps, which use souped-up versions of the light-emitting diodes that shine from the faces of digital clocks and flash irritatingly on the front panels of audio and video equipment, will indeed make lighting better. But precedent suggests that this will serve merely to increase the demand for light. The consequence may not be just more light for the same amount of energy, but an actual increase in energy consumption, rather than the decrease hoped for by those promoting new forms of lighting.

The idea is that the cheaper lighting might so increase lighting purchases and energy consumption that energy use might rise. Continue reading “Can energy efficient technology harm the environment?”

The sad state of the CPRS

I’m no political scholar but I thought the deal was this: the Government tries to pass legislation through both houses of Parliament a couple of times. If they fail, they can call an election with a double dissolution to decide the matter once and for all without minorities blocking it. Now I don’t expect that is worthwhile for some fuel price monitoring or minor taxation issues. But for the biggest economic issue facing the country over the next fifty years? What better issue is there to hold an election on than climate change policy?

From what I can gather the Federal Government appears to have put that on the back-burner for exactly the reason that the far right have argued for — the rest of the world hasn’t go its act together yet. However, do I have to remind you that Australia’s decision to act here has little to do with the rest of the world. We neither lead it nor will have an impact if we don’t follow it. The issue is that we will likely want to be part of a global solution should it arise (you know, for moral reasons) and that it is better to decide and work out how we are going to do that now to give our businesses an advantage and relieve them of uncertainty than to wait. It is for the moral reasons that this is worthwhile putting to real vote.

Near as I can tell, the Government is given up trying to be a proactive leader on this front. I’d like to be proved wrong but all the signs point in the wrong direction.

Altruism and cap and trade

Paul Krugman has written 2010’s treatise on climate change policy. All should read it. The ultimate conclusion is that the probability of catastrophe should guide climate change policy and this is something that I agree with. The question is how and that is a much harder question that Krugman does not really address.

But he does touch on the issue of taxes versus cap and trade but without taking a stand. I suspect he thinks there isn’t much in it. But I do want to comment on one argument against cap and trade that raises its ugly head again:

What Hansen draws attention to is the fact that in a cap-and-trade world, acts of individual virtue do not contribute to social goals. If you choose to drive a hybrid car or buy a house with a small carbon footprint, all you are doing is freeing up emissions permits for someone else, which means that you have done nothing to reduce the threat of climate change. He has a point.

Krugman then dismisses this on the basis that altruism is no basis to conduct policy. However, he could also use some economics. Suppose that altruistic behaviour is currently holding emissions down to a significant degree. If you put in cap and trade, it looks like those actions will lead to emissions being allowed elsewhere relative to not providing those actions. However, that presupposes our would be altruists are naive in their altruism. If they are sophisticated, emissions caps give them more options rather than less for actually reducing emissions. What they can do is buy permits and burn them. They don’t have do change behaviour, altruists just need to be altruistic with their money. Pure, simple and far more straightforward than trying to work out what impact you are currently having by walking and not driving. Certainty should drive more altruistic behaviour, not less.

An emissions tax, it should be noted, does not provide this same opportunity. There are no new options for altruists. What is more, to the extent that such behaviour is holding down emissions, it is also loosening the pressure on governments for a higher tax as they can target the same level of emissions with a lower one. Increase altruistic behaviour and the pressure for a higher future tax is reduced. In other words, it seems that the concern that altruistic actions will come to bite them back with a limited impact on emissions, is even more salient with an emissions tax.

LED Lighting in Japan

Click for more of our Sakura images

A new innovation is all the rage in Japan… and yes, it’s even better than the iPad ;-). LED lighting is starting to reach the mainstream, and it is both efficient and good. For example we saw this one being advertised on a train as a drop-in replacement for any 60 Watt household lightbulb. Each LED tube consumes only 7.5 Watts and lasts 40,000 hours, or about 4.5 years continuously. While elsewhere people talk about LED lighting, here in Japan regular families are starting to buy them for home use. With prices as low as AUD25 and often ranging AUD50-100, it is starting to become an affordable option. The benefits are not just in energy efficiency. LED lights are cool and the color can be made to appear “natural”. One common complaint is that each LED unit produces only a limited amount of brightness, but it should be sufficient for most households; in any case you can use multiple units. New innovations are allowing for super-bright LEDs, and during the weekend we enjoyed the jaw-dropping experience of “night sakura”: several hundred fully flowering cherry blossoms gracefully lining the moat of the Imperial Palace. These were lighted using LEDs, and I was amazed that each lighting unit was just about the size of a 7-inch frying pan but a couple of inches deep. Only two or three units were needed to light up each cherry tree. They were very bright, but in a manner that was pleasing to the eye and did not overpower the delicate texture of the cherry blossoms.  The park claims to have reduced CO2 emissions by 90% to 0.2 Tonnes by using LED instead of conventional lighting. I imagine LED lighting will become widespread pretty soon, not just in Japan but around the world too.

Of smug and smog

So here in Boston we have moved from a two car commuting family to a single car that is used for incidental activities rather than regular travel. The kids walk to school while I walk and catch the bus to work. Even though it is the dead of winter I have actually sustained this new routine mostly due to the ability to work on the bus with my iPhone. The exercise is doing me good and at some level I am supposed to think I am contributing to the environment.

I also listen to podcasts on the bus as I did when I drove to work. So it was of some surprise that I listened to a recent episode of Tim Harford’s More or Less (while on the bus) about the environmental impact of bus as opposed to car travel. Tim repeats the issue in his FT column today.

According to my colleagues on the BBC’s More or Less programme, cars emit 127g of CO2 per passenger per kilometre and buses 106g, based on average occupancy. Even London buses average a mere 13 passengers.

Add my additional walking to the equation and my emissions may well be higher as a result of this change in activity. Indeed, as I like to work on the bus, I prefer to avoid the crowds. So on the bus I catch at 6:30am there are rarely the average number of passengers.

So what is the environmentalist’s response? It is that the bus “would be running anyway.” The idea is that buses have a regular schedule and so there are going to be times where they are more empty than full and other times where the reverse is out. So the appropriate thing is to look at the marginal rather than the average to work out net impact. As the bus is running anyway but a car would not, buses win.

Tim Harford points out, of course, that the same is true for air travel. Air travel is, for the most part, public transport. So the same argument applies to it: “the plane would be going anyway.”

An admittedly unscientific poll of environmentalists at dinner parties suggests to me that they think “the plane is making the journey anyway” excuse is unacceptable but “the bus is making the journey anyway” excuse is spot on – and that they have no coherent justification for the distinction. Their favourite excuse is “you have to set an example” – but surely, before you decide to set an example, you need to be sure that you aren’t setting a bad one.

The resolution lies in a very tortured argument.

For all you environmentalists out there, then, here is the justification for the double-standard of taking the bus but not the plane: it is that bus schedules might be insensitive to passenger demand, while planes are highly sensitive – and ever more so since the budget airlines arrived on the scene. Your best argument for taking the bus is a perverse one: that, no matter how many people do likewise, it’s the rare public transport tsar that will lay on extra buses.

The idea is that airlines and bus authorities put on buses to match demand. But airlines are in a competitive market environment while buses are managed by public authorities who are really bad at putting on extra buses. I’m not sure what the empirical evidence really is for that potential out but it strikes me that it could also go the other way. Public authorities have trouble cutting the 6:30am bus that a private company would happily do away with. In some countries, buses don’t leave until they are full — that is the market system at work.

This all suggests that just like we have ‘time of day’ airline pricing we need ‘time of day’ bus pricing. I should pay for travelling on my average emitting bus more than I would pay for stuffing myself into a crowded one. The interesting question is whether I would end up contributing to emissions less once all of this is in place. For the moment, there is no reason for me to be smug but I do enjoy being able to work while commuting.