Let the science catch up
article in The Australian 12 October 2009
Even if temperatures are rising there’s no need for costly panic, insists Des Moore
When asked by the Economics Society to debate on October 2 the global warming issue with environmental economist Harry Clarke of Latrobe University, I decided that, although I would argue that the dangerous temperature threat thesis has no substantive basis, it could also be useful to ask another question. That question was: why will alternative sources of energy not become available before temperatures reach dangerous levels and thus eliminate any need for an emissions reduction program?
Modelling the Treasury and Professor Garnaut of the economic implications for the period to 2100 produced an outcome in Garnaut’s final report that “Australian material living standards are likely to grow strongly through the 21st century, with or without mitigation.” Thus, government action to reduce emissions of CO2 (described as mitigatory action) would involve “cutting the growth rate over the next half century, lifting it somewhat in the last decades” and a GDP at the end of the century “higher with 550 mitigation than without.” The graphical presentation of the mitigated outcome shows GDP about 5 per cent higher than otherwise in 2100.
So, under a mitigatory policy the present generation would have lower growth for the next 40 years so that the next (and later) generations could (supposedly) benefit. However, the modelling also indicated that the “saving” would be from a GDP that at end century would otherwise be 700 per cent larger in real terms than today even after supposed damage from higher temperatures.
I suggested to the Economic Society that, given the extensive structural changes in the economy Garnaut acknowledges would occur from mitigatory action, there could be substantive error in the modelling. Estimates by prominent German climate economist Richard Tol, for example, are that the cost of mitigatory action by 2100 would be about 40 times greater than the benefits. By definition, productive systems would be based on less efficient capital and energy and increased government intervention in economic decision-making would inhibit entrepreneurial activity outside the financial sector.
However, accepting the outcome of the vast research undertaken by Professor Garnaut as the chief economic adviser to all Australian governments on climate change, I suggested his conclusion raised three issues.
First, if Australian living standards are likely to increase progressively to ever higher levels even if there is also a large increase in temperatures, this suggests that a private sector that is getting wealthier and wealthier should be directly responsible for alleviating or suffering the main costs. Why shouldn’t that mean a government policy based mainly on progressive adaptation by the private sector rather than enforced emissions reductions?
Second, given the wide range available of technological alternatives to fossil fuels, and the considerable research assistance already provided by governments for their development, over the next 25 years one of those technologies will likely become economically viable. But even if this doesn’t eventuate, why couldn’t nuclear power start to be used in Australia, perhaps initially on a subsidised basis, and then extended progressively if temperatures increases resume? Even Garnaut predicts that, if nuclear is adopted, it could supply 27 per cent of electricity by 2050.
So, why start now to force reductions in CO2 emissions, let alone to mandate resort to alternatives to supply 20 per cent of electricity by 2020? As Tol also points out, “cutting emissions now is much more expensive because there are few inexpensive alternatives to fossil fuels”. Much better to start with only a small emissions reduction program, using a low tax, and encourage cheaper alternatives.
Note also that Treasury modelling proceeds on the basis that “carbon capture and storage technology combined with coal and gas electricity generation is assumed to be available on a commercial scale from 2020 in both Australia and the world”. If the Government accepts this widely touted option, why is it proceeding with an emissions reduction policy?
Third, why is it necessary now to consider what might happen beyond 2050 when temperatures are projected to reach a supposed additional two degrees tipping point. Even if existing alternative energy technologies, including nuclear, do not become economically viable by then, history tells us that science would very likely have produced a new, but now unknown viable solution. It is nonsensical to argue for government intervention now to “save the planet” because no economically viable solution is currently available.
Malcolm Turnbull says he believes it is necessary to reduce emissions of CO2 and that he cannot lead a party that says nothing. But even for misguided believers there are sensible alternative approaches he and the Coalition could espouse. I detected a similar outcome at the Economics Society.
Des Moore is a former Deputy Secretary, Treasury, is Director, Institute for Private Enterprise.