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


  • 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?

  • 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.


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