What new evidence for a carbon tax?

A tax has been announced—contrary to ear­li­er promises—that has no jus­ti­fied role in cli­mate mit­i­ga­tion. It is being held up as a “cor­rec­tion” the car­bon-inten­si­ty of our econ­o­my. But that’s not evi­dent­ly a prob­lem and even if it were, a uni­lat­er­al tax could lead to an over­all increa­sein glob­al emis­sions.

Ms Gillard’s new com­mit­ment to intro­duce a car­bon tax by July 2012 is an appar­ent breach of her under­tak­ing of six months ago:

” ”There will be no car­bon tax under the gov­ern­ment I lead,” she told Net­work Ten. ”What we will do is we will tack­le the chal­lenge of cli­mate change.” The Prime Min­is­ter boast­ed that Labor had invest­ed ”record amounts” in solar and renew­able tech­nolo­gies. ”Now I want to build the trans­mis­sion lines that will bring that clean, green ener­gy into the nation­al elec­tric­i­ty grid,” she said” Extract from Gillard rules out impos­ing car­bon tax in the SMH

The announce­ment is also a trav­es­ty of evi­dence-based pol­i­cy. The tax has been pre-deter­mined with­out deci­sions on cru­cial ques­tions such as scale and while even the idea is being hawked around in search of plau­si­bil­i­ty and pub­lic sup­port from any quar­ter includ­ing, to judge from Dr Garnaut’s recent address to the Lowy Insti­tute:

  • For­eign policy—Dr Gar­naut seems to have a faith shared by few oth­ers that the qual­i­fied uni­lat­er­al offers made in Copen­hagen (and not revised at Can­cún) will be imple­ment­ed. There is no sign of US Con­gres­sion­al action to imple­ment their under­tak­ing and Dr Garnaut’s report­ed sug­ges­tion that our actions will some­how ‘shore up’ U.S. resolve is, at best, fan­ci­ful and at worst sim­ple van­i­ty.
  • Con­cerns about the ener­gy inten­si­ty of Aus­tralian pro­duc­tion (high­er than the OECD aver­age but low­er than Canada’s or South Korea’s); a pol­i­cy debate where the Prime Min­is­ters’ own task force on ener­gy has made a “hope­less mud­dle” of a green-sack­cloth pro­pos­al for cuts in over­all ener­gy con­sump­tion
  • The (incom­pre­hen­si­ble-to-me) impli­ca­tion of Dr Garnaut’s address that there is some­thing wrong with a high car­bon-inten­si­ty of pro­duc­tion in the only sig­nif­i­cant high-income econ­o­my that con­tin­ued to grow through the past three years of glob­al reces­sion and that has a com­par­a­tive advan­tage found­ed on car­bon-based ener­gy as one of the world’s biggest hydro­car­bon producers/exporters.

We are wit­ness­ing this floun­der­ing because no new evi­dence on cli­mate change and CO2 jus­ti­fies this new deter­mi­na­tion to intro­duce a car­bon tax. If any­thing, in the past six months, we have seen still more evi­dence that sur­face tem­per­a­tures bear no rela­tion­ship to man-made CO2 emis­sions in any his­tor­i­cal (or pre-his­tor­i­cal) peri­od up to the end of the twen­ti­eth cen­tu­ry.

Northern Hemisphere temperature proxy record—Lundqvist (2010)See, for exam­ple this 2010 (peer-reviewed, appar­ent­ly missed by Dr Gar­naut) care­ful re-con­struc­tion of the inter­pre­ta­tion of 30 curat­ed prox­ies for North­ern Hemi­sphere data for the past two mil­len­nia, which shows that the Roman warm peri­od (100–200 C.E.) and the medieval warm peri­od (900‑1000 C.E.) were warmer than the 1961–90 peri­od when the proxy record stops. That is, tem­per­a­tures in the pre-indus­tri­al era of neg­li­gi­ble man-made emis­sions were high­er (and low­er) than tem­per­a­tures in a recent peri­od when emis­sions were about 85% of today’s lev­el.

The government’s plans will impose an unnec­es­sary cost on our econ­o­my and could well reduce glob­al net wel­fare, too. Recent analy­sis by Daniel Gross (Chair in Mon­e­tary Eco­nom­ics at Frank­furt Uni­ver­si­ty) shows that it is the rel­a­tive emis­sion inten­si­ty of pro­duc­tion abroad and at home that deter­mines wel­fare out­comes, not the absolute emis­sion inten­si­ty of the tax­ing coun­try. In brief, the intro­duc­tion of a car­bon tax in a small coun­try that is much less car­bon inten­sive than the rest of the world has a high prob­a­bil­i­ty of being coun­ter­pro­duc­tive.

As Gross explains in a brief research note, we would expect some ener­gy-depen­dent parts of our pro­duc­tion to move abroad, after the tax is intro­duced, to coun­tries where ener­gy is low­er-cost even if, in the absence of the tax, Aus­tralian pro­duc­tion would have been more com­pet­i­tive.

But tax­ing away our com­par­a­tive advan­tage is only one part of the cost: we also share in a loss of glob­al welfare—accepting, for argu­ments’ sake, the AGW hypothesis—if future pro­duc­tion takes place in coun­tries such as Chi­na where the car­bon inten­si­ty of out­put is still high­er (by half) than it is in Aus­tralia; glob­al emis­sions could rise as a result of our car­bon tax, not fall.

Car­bon inten­si­ty of ener­gy pro­duc­tion times ener­gy inten­si­ty of out­put
2007 2030 (pro­jec­tion)
Chi­na 918 433
Rus­sia 841 466
Oth­er non-OECD (region avg.) 823 461
Australia/New Zealand 599 370
South Korea 525 349
Cana­da 479 309
India 476 220
Unit­ed States 459 272
Africa (region avg.) 386 237
Mex­i­co 317 212
Japan 310 235
OECD Europe (region avg.) 293 188
Brazil 233 162
Source: US EIA esti­mates from here

2 Comments

  • amanda lopez wrote:

    Dear Mr. Gal­lagher,
    I am a great pro­po­nent of our plan­et and I am
    ter­ri­fied of how it will be in one or two gen­er­a­tions.
    I see the changes just in my life time.  There is
    so much con­flict­ing evi­dence. How to know?
    Just see­ing David Attenborough’s pro­gram on TV
    on Sun­day night we see the effect of an accu­mu­la­tion
    of green house gas­es; melt­ing of caps, trapped heat,
    etc. how can we assume that our over pro­duc­tion of
    CO2 will not have the same con­se­cuences?  Why not
    do all we can to reduce it in case they are right?
    Sin­cere­ly,
    Aman­da

  • Hi Aman­da,

    Those are all rea­son­able ques­tions.

    1. Glob­al tem­per­a­tures? The best evi­dence is that there’s been no change since 2001. Before that, there was def­i­nite­ly a small warm­ing since the mid-19th cen­tu­ry of about 0.7 degrees cel­sius. Many sci­en­tists have ques­tions about the way the glob­al aver­ages are esti­mat­ed. A new effort to make more pre­cise esti­mates is almost fin­ished (http://www.berkeleyearth.org/). It will be very inter­est­ing to see the results when they are pub­lished in a few weeks. I’m bet­ting they’ll show very mod­est warm­ing in the past 160 years or so.

    2. Ice caps? There has cer­tain­ly been some small shrink­age in the glob­al ice deposits since the 1970s in the North­ern Hemi­sphere (the Arc­tic) where most of the recent rise in tem­per­a­tures has tak­en place. You can see a graph of the offi­cial US. records here:  http://arctic.atmos.uiuc.edu/cryosphere/IMAGES/seaice.anomaly.arctic.png  But in the South­ern Hemi­sphere (the Antarc­tic) the ice cov­er is actu­al­ly expand­ing. Here is the graph: http://arctic.atmos.uiuc.edu/cryosphere/IMAGES/seaice.anomaly.antarctic.png Over­all, a small reduc­tion in the past half-cen­tu­ry. But we know that this is real­ly a small vari­a­tion com­pared to what hap­pened in the his­tor­i­cal past. I don’t know why any­one wor­ries about it.

    3. How can we assume that increased CO2 will not make things worse? Well the real ques­tion is why there’s an assump­tion (that’s real­ly all it is) that CO2 is caus­ing the recent warm­ing at all. The answer is that the assump­tion was made by a U.N. group in the 1990s who said that they couldn’t show what else could be respon­si­ble. But even at that time, many peo­ple found this claim incred­i­ble. The sci­en­tif­ic group work­ing for the U.N. had not been able to ful­ly explore quite a few alter­na­tive expla­na­tions (aver­age cloud cov­er, for exam­ple) because they did not have the data. Their iden­ti­fi­ca­tion of CO2 was noth­ing more than a guess and a con­ve­nient ‘sus­pect’. Prob­lem was that the ‘sus­pect’ had a pret­ty good ali­bi. It had been around in much high­er con­cen­tra­tions in the earth’s past with­out caus­ing run-away warm­ing. Also the glob­al tem­per­a­ture had fall­en dur­ing sev­er­al decades of the 20th cen­tu­ry when CO2 was ris­ing. Even if CO2 played SOME role, it didn’t look like the ‘cul­prit’.

    As under­stand­ing of cli­mate improves (it has improved a great deal since the 1990s) the expla­na­tions offered by those who say “man is to blame” are look­ing weak­er and weak­er. The truth is that we still don’t know what caus­es the vari­a­tions in report­ed glob­al tem­per­a­ture aver­ages that we have seen over the 2000 years (or so) of his­tor­i­cal records. But we do know it’s been hot­ter and cold­er in the past and that what we’re see­ing today does not look all that spe­cial.

    Best wish­es, and thanks for your com­ments.

    Peter

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