Carbon Tax vs emissions trading vs direct action

It is hard to discuss tax policy, or indeed anything without agreeing on premises.
There is an equivalence between a carbon tax and emissions trading with a fixed price. There is also an equivalence between a carbon tax with a variable price that is set to match the market price of emissions in an international emissions trading scheme, and being part of that emissions trading scheme.

Any scheme can be "gamed" in the sense that the European scheme allocated or grandfathered too many credits, to appease emitters and to bribe them to get in the scheme, and then allowed financial pressures of the debt crisis to further water down the scheme.

In Australia, the scheme seems scheduled to be gamed by lobbying from industrials for the tax to be scrapped. Either way, instead of acceptance, and long term plans to avoid the price efficiently by moving away from carbon intensive industries, plans are on hold on a wait and see with the hedge on what one can bet the future scheme to be. Hold back plans for renewables in the hope of a fat grant from the new "direct action" plan, rather than do what makes sense now, with the energy prices as they are with the carbon tax and assuming they will stay at the relative level.

Avoid the tax by switching to low carbon, or avoid the tax by switching the Government? I prefer the first. Grudging acceptance that the tax may effectively be there for a while. Even the thought that it will be gone soon changes the behaviour of industrials to bet on a low effective carbon price.

Still water flowing down the Murray Darling and out the mouth

The perceived wisdom that drought and a closed Murray Darling system is the new normal continues to be challenged by reality. From my reckoning and the following graph of the Murray river flow rate at lock one, the closest proxy of what is flowing to the sea from the system, 15,000 GigaLitres (or 30 Sydney Harbours) of fresh water has flowed to the sea since September 2010.



This link to see more live river data flows if you are interested.

I had predicted at around January that more water would flow out of the mouth than the total official storage of the whole of the Murray Darling before it stopped again. The total official storage is around 22,000 GL so I could yet be right. I figure that one more year of this kind of thing and we will be wanting to redact our thinking and declare that (the 10 years from 2000 to 2010) was just a freak drought the likes of which we would never see again in our lifetime. It is plausible that we may want to keep strategic dams along the Murray at half capacity to hedge our bets with catastrophic lower Murray floods now possible if we get a repeat of the inflows of last year. Namely the Menindee lakes, Hume and Lake Victoria could moderate catastrophic inflows to just the major flood mark at Renmark and below if they are pre-emptively emptied.

Anthropogenic Global Warming

I have so much in my head at the moment, and a great desire to write it down, but it is completely incoherent.

For the global warming debate, I feel it is important to demonstrate my non-partisan take on it. One easy way to do this is to show an example of a policy belief of mine usually associated with the far left (Green party or left wing of the Labour Party) and a contrasting belief that is associated near the other extreme (National party or One Nation or Right wing of the Liberal Party).

This is not because I want to present myself in the middle ground, but that what I believe to be true takes up a point in idea space far away from the political left-right line that at the moment takes up all the discussion space in virtually every forum I visit.

For instance, I am vehemently against solar PV tarriffs above the wholesale market rate for electricity.

I am also very in favour of a Carbon Tax.

I steer away from arguments that question whether global warming is "real" or not. To me it is like a question of whether I believe in God or not. I perceive both these questions to be a device to flatten my beliefs and squeeze them down onto the political continuum line from their proper place in multiple dimensions - with an aim to push me with denial or acceptance of various assertions one way or another to the correlated viewpoints of (in this case) the left or right of politics.

There is no "references" I can point to in regards to this basic philosophical idea, but it should be simple enough for the casual reader to understand.

The question remains as to how I can convince someone to my same viewpoint. It is much easier to convince someone that solar PV tarriffs are bad because Global Warming is bunk than it is because it makes the energy market dysfunctional. It is also easier to convince people that we should have a Carbon Tax because AGW is real and a threat, than it is because it moves tax reform down a sensible direction (broad based, flat, easy to administer, can replace messier taxes or even carbon trading)

Another question may be why I think minor structural detail of the laws which underpin the energy market are more important than the global risks of catastrophe or conversely wasting our time, money and energy on a non-catastrophe.

The answer is to me, that the underpinning structural detail is absolutely vital both to succeed in whatever aims that voters think is important with regards to energy usage, and to not waste any time, money or energy in that achievement. Laws which make markets act in functional ways are a net profit to society, laws which don't, are a net loss - pure and simple.

Grid based access vs grid independent systems

I started thinking about this entry ages ago when I had an epiphany and I felt that it could be proven that a speed/price/throughput advantage would exist for "fibre" over "wireless". (Conversely, a flexibility and ability to function when the grid is "down", advantage would always exist the other way).

The basis of the proof is basically that any imaginable technology that improves speed over wireless electromagnetic radiation, would be applicable to wired electromagnetic radiation in the same proportion of improvement.

In the case of broadband, at one extreme is Fibre to the Home and the other extreme is Satellite broadband. Wi-Fi is closer to the FTTH side, then there is 3G style wireless broadband that relies on the mobile network which is connected via mainly fibre, and satellite, which can work even if the whole countries internet is down, theoretically. This doesn't really prove that FTTH is worth pursuing, because it is a tenable argument (although I would dispute it) that wireless will improve to the point that it is fast and cheap enough for everything we find important.

Back in Uni, it was proposed that solid state storage improvements were happening faster than hard drive improvements and could overtake them, and although a USB stick is enough for most things, portable hard drives still hold more and are used a lot, the storage advantage of hard drives is constant, due to the solid state improvements being equally applicable to hard drive storage.

Similar grid vs grid independent comparisons are common - road vs helicopter, grid power vs home generators, rail vs aeroplane, piped gas vs cylinders, water tanks vs dam & pipes, private dam storages vs large scale dams for irrigation.

With this in mind, simple goal based arithmetic could decide the balance between grid based and grid independent systems.

For Photo Voltaic electricity generation, I think we have got it backwards, which is why grid parity is not served well with thousands (or millions) of individual installations. If a household is after energy independence, a PV system with a significant amount of battery storage (batteries suitable for an electric car?) is actually very useful and would be a boon for extended power outages (like after Yasi). Because home PV installations are optimised to feed power back into the grid, they are quite useless as independent power sources, compared to diesel generators.

However, if we want PV power to compete with Coal or Gas, we need economies of scale of large scale PV based power stations.

Superfreakonomics vs Realclimate vs THE Economist

My recent ideas on Climate Change have been challenged from two different directions. A Superfreakonomics chapter championing geo-engineering and Realclimates attack of it.

Geo-engineering as a "Fix" or even a quick-fix didn't particularly appeal to me in the past because it comes up against the same Geopolitical issues of responsibility and duty that reductions of carbon has.

However, I have had a great respect for freakonomics in teasing out facts and relationships that are counterintuitive, because they demonstrate something new, interesting and almost always useful knowledge.

What I really liked about the chapter was that Levitt & Dubner definitely showed the nuanced nature of their convictions, because they steered away from cliched views and had plenty of solid scientific foundation to their arguments.

Although western societies do not have a tradition of scientific weather-making, the RMP (of China) have that tradition. For instance in the Beijing games they used rockets to prevent storms from interrupting events. It is not much of a stretch to imagine that they will be the first to try some of these geo-engineering feats - perhaps under the guise of something else.

Levitt and Dubner, I believe use the axiom that modifying behaviour will not work. For this they are hammered.

I actually believe the near impenetrable issues with global agreements to reduce GHG's are equivalent to the near impenetrable issues of agreements to use (or agreements not to scupper unilateral efforts) to use geo-engineering.

In a big way changing behaviour is a type of Geo-engineering. Realclimate authors use the axiom that it is better to try to reverse back to a recent known state than to move quickly to a totally new regime that optimises, say average temperature.

I think the point is probably moot, as for both behavioural geo-engineering and the standard sort, way more "metering" of all relevant GHG's is a prerequisite for internalising the externality of warming, whether the overall rise in temperature or whatever is found to be insignificant or not. All engineering is reliant on absolutely rock-solid repeatable scientific foundation. "metering" as well as actual weather/climate numerically predictive science is a prerequisite for humans' incentive programs to help humanity. The science is decades away from that. Both Realclimate and superfreakonomics is in some way guessing and perhaps betting on what the future helpful programs will be.

As for which "side" I am taking in this case : I am siding somewhat with Superfreakonomics because at least it has something new to say and not as Cliched as the Realclimates riposte.

As far as the Economist is concerned, it seems to have sided with RealClimate.

Pricing Signals

There are really not enough of these in the world. Consider these situations:

1) Person who is on a phone plan does not have a direct cost feedback even if the bill goes up to alarming 6 figure sums.

2) A farmer gets their bill for water, but doesn't know how much their neighbours could have gained by buying it, nor if he could have gained more money selling it than keeping it.

3) Consumers cannot gauge how much petrol is costing them for the car air-conditioner or to get to the petrol station with the cheaper petrol.

4) Polluting coal burning power stations don't know how much local residents would be willing to pay to shut it down or modernise it. Nor how long they would be willing to put up with blackouts to achieve that.

5) Consumers considering whether to hang up their worn clothes or put them in the wash + dryer + ironing. What is the cost/benefit analysis.

At what resolution do pricing signals benefit cost/benefit analysis the most. Would a computer that could make calculations about every single activity throughout your day and have an indicator go off regarding your most inefficient activity be useful?

Would it tell me that (buying and) drinking a can of orange softdrink is the most inefficient because a) it costs a fair amount per calorie
b) They are empty calories that could actually reduce your life expectancy.
c) Sugars will stick to and damage your teeth leading to much higher dental bills.
d) contains preservative 211 which is dodgy at the best of times.
e) contains no caffeine so is ineffective at improving concentration.
f) actually dehydrates you to some extent.
g) is energy intensive to create, can, store and refrigerate, compared to alternatives such as coffee or water.

Suffice to say that any improved pricing signals about anything we care about is a net benefit to resource allocation. Whether it is the environmental cost of the ghg's associated with activity or the amount of money an STD call costs, if there is an efficient market to generate a price which reflects all known information and demand, resources WILL be allocated better. Thus money spent on strategic pre-fire season burn-offs in the outback of Australia may be way, way more efficient than investing the same amount in solar panels or planting trees. Being that people will spend the money anyway, pricing signals cut the wastage for everyone's benefit.

The main danger is not that we will be less efficient ignoring/underutilising cheap fossil fuels, but that we will completely ignore cost/benefit analysis and spend the money in a way which makes us feel good, or which buys our vote without even being in line with the goal central to what the money is being spent on. Thus European countries may use the money on pointless subsidies, Americans may give tax breaks on hand-picked industries. Thus, without even giving themselves a chance at meeting self-imposed targets, they are busy regulating in a way which will reduce their growth prospects.

My latest Environmental turn-around

My current global warming/climate change opinion can be summed up as the opposite of what I had summed up previously as my opinion, although in truth there is no facts previously accepted that I no longer hold true nor visa versa.

To sum up: Previously I believed this: Anthropogenic Global Warming is a fact but we shouldn't do anything about it.

Now - I believe that Global Warming is a scientific assertion with little predictive value. However, it has high *proscriptive* value ie. there is value of various kinds in acting against Green House Gases.

The issue to me is that the value of science to predict is that you can adjust what you do to optimise for that prediction. If you know a cyclone is heading your way, you can batten down the hatches - the three to ten day forecasts of cyclones is very valuable. The prediction that my house might be threatened by a storm surge in ten years time is valueless both in a future discounting sense, and in a probability sense.

The idea that there is proscriptive "value" in what climate scientists say comes from the fact that there is benefit in being able to say, "all other things being equal, it is unequivocally better to reduce ghg's!"
This is the same proscriptive value as economists saying "We should reduce trade barriers" among the many correctly proscriptive things experts say in their fields without being able to valuably predict the future (eg. what stocks will go up.)
We do not know how many generations it will take to see the benefits of doing so. It is entirely possible that the next several generations will suffer more by attempting, or even succeeding in a large way to reduce ghg's. It is not a thing that can be predicted. Nor can things that actually make a significant difference - costs associated with actual extreme wheather events. We will be lucky to even have right the most basic easiest question of the next 40 years - will global average temperatures go up steadily, go down steadily, go up and down like a yo-yo or what? Most bets are that it will go up but with several peaks and troughs on the way to confuse things and correctly make a mockery of experts' authority on the matter.

Global warming - just polite conversation while we are waiting for real news

From: business spectator article

Perhaps it’s all just different ways of politicians who are under pressure from rising unemployment trying to appear to be doing something about global warming, while not doing anything at all.Europe’s method is to have a cap and trade scheme that doesn’t work. Australia’s method is to propose one that does not happen.


Back in 2007, I said:
When there are no "World" wars to talk about, no "great depressions" happening, the conversation will almost always turn to the weather :).

Maybe this slide into deep recession worldwide is just a symptom that the world has nothing interesting left to discuss other than the weather.

Individual action and carbon emmissions

From getup

Dear friend,

We thought long and hard about sending you this email, because we like to promote the idea that our individual actions make a difference. But we have to be honest about the Government's current climate policy.

Under their current proposal, action you take at home to reduce energy - like changing to efficient light bulbs and appliances or installing solar hot water - will not reduce Australia's total greenhouse emissions further than the Government's weak target of 5-15%. It will even make it cheaper for industry to increase their own emissions.


I may have got into this in detail in my other posts, but I think I am hearing the penny drop for climate activists. I reiterate what I said in other posts, that individual actions, even without the Rudd proposal mentioned above, do not proportionally reduce overall emmissions, because of the rebound effect and that individual actions tend to absolve guilt without being optimised for a nation-wide reduction of any amount.

However, like with water allocations, reducing carbon emmissions further comes down to a simple buying of emmission allocations, and then not using them. It actually sounds simpler than worrying about whether your net emmissions are going up because you use the money you saved on electricity to buy toys for your kids (WHICH ONE IS MORE CARBON INTENSIVE???) I think that in a decade, if the Murray floods again, and the Government has bought all these water allocations, it could make a mint selling them again.

It is not enough to grow trees one must also sequester!

The trouble with letting wilderness grow untouched by humankind is that sooner or later, it is going to burn (Not if you are in a rainforest). What is the point of growing trees to capture carbon, wilderness areas to encourage wildlife when it's going to eventually burn, sending uncontrolled black carbon and carbon dioxide into the air and killing vast swathes of native wildlife. Why not graze away the underbush with suitable farm animals, sequester large swathes of trees (eg. turn it into furniture, etc.) to make fire breaks, and contract Australia's army to make choices on various risk-reduction controls to take it out of the hands of NIMBY-minded councils and state governments.

Strategic analysis of Global warming

From Marconomica Principle #5 I've grouped entities strategically as countries. In the global scale, it is countries leaders making the commitments on behalf of all their citizens. The Dillemma's leaders of democracies face is that signed committments get votes now, but may lose them votes if they fail to achieve them later, or if it ends up costing more than voters are willing to pay. The over-riding strategic concern must be "the tragedy of the commons". I have imagined scenarios in which generalised fears cause emmissions to accelerate, with every country more or less blaming every other country. Individual countries obviously try to make any committments at such a long term as to ensure they won't lose personally by failing. As the long term committment nears maturity, the gap between the committment and reality will be so wide that no Government would accept responsibility. The proposed targets are framed in such a way that it is only the end result that is being argued over - not anything in between that will necessarily have to happen to get there (eg goals within an electoral term window). Examples that perhaps ought to be copied if we were serious about it, have their own horrors associated. For instance, Russia is the only Kyoto ratifier to obviously achieve their goal. Clearly, having an economy tank is an obvious way to reduce emissions, but no environmentalist is seriously suggesting it (except Peter Garrett before he became a politician:)). Also examples of rich countries with a very low carbon intensity exist (France), but this contradicts heavily with environmentalists hatred of Hydro and Nuclear power (and hatred of France). Having all but strategically ruled out strategies with proven records, my prediction is of a 10% increase in emmissions in developed countries by 2020 (from 2000 figures)

Marconomic Analysis of the state of play in Climate change

In Principia Marconomica
principle #2, I have stated that perception is not reality, and having a quick look at Wikipedia's Determining political spectra, the climate change state of play is that people's views are highly correlated on this, thus a one dimensional line is very apt to describe it. Principle #2 states that it is very likely that none of the points on the line reflect reality. The perception of the majority, including those that are uncertain, is that if the "alarmist" is right about one thing (say rapid increasing temperature prediction) that they will also be right about a correlated view (Disaster will befall the Earth). Similarly for "denialist" views.
Politics is certain to use this line to influence certain peer groups as units to obtain votes; activists are going to try to influence individuals to join their peer such as to increase their numbers and weight as efficiently as possible.
The unfortunate thing is that a set of views that is without peer almost always gets misunderstood, ignored or forever questioned. What we need is a set of scientists and other professionals that is unburdened by their peers or lobby groups. I just wonder whether "Peer review" leads to "peer pressure" when it comes to the spin on scientific research.

Trading Hot Air

I realise I have perhaps been too harsh to completely dismiss the current state of affairs with "Carbon offsets". I have claimed that these are a "bastardised" form of *allocation* trading. My reasoning is that trading allocations works because the number of allocations is finite and controlled. If one starts to use something like planting trees or buying incandescent lightbulbs, you can buy an infinite amount of these and obviously this would break down the system. Contrast this to a carbon tax, that like any sin tax will reduce demand for the sinful product (in this case carbon), punish bigger users in proportion, and if it replaces other non-carbon-proportional taxes, will be revenue neutral, thus there should not be any net capital flight away from the taxing country.

However, adopt cumulative palatable changes to this system and something strange happens. First, these offsets can move from being voluntary to being compulsory for a certain energy class. Say with electricity, an automatic calculation of carbon based on your electricity bill is used to bill you for the offset. Ditto with fuels. This would not be too controversial. Next, these could be further refined by more accurate metering. CH4, NO2 etc. levels could be monitored over different urban areas and these could form the basis for more compulsory offsets.

In the long term these offsets would be collected by the government and become quite proportional to the carbon usage. The offsets would no longer necessarily go to the lowest price, nor to the one decided on by the payer, but be decided pretty much like any other Government project. This way it would end up being indistinguishable from a carbon tax. This is just a pathway for the Government to sell the idea of something that is essentially increasing cost for basic utilities without any added direct value - generally a fatal policy move.

Worm Farm

One of the things that I did back in 1999 was to buy and use a worm farm. My main motivation was to use the worm casts in the garden. Also to have less smelly garbage in the bin. If I had calculated whether this reduced or increased green house gases, my thought would be that it was much of a mulchness. Whether my food scraps rotted slowly in my wormfarm and garden, or in a landfill was not much different. In fact I would have thought that in a landfill the carbon would be buried deep underground to become coal in the distant future ie - sequestered. However, recent studies have shown that in a typical landfill and typical worm-farm, the worm farm would absorb the CH4 very well, and the landfill not at all. So it would seem that I was inadvertently helping the environment... Not so fast. As I recall at about the same time, we had a child and to give ourselves more time for gardening, we switched from reusable to disposable nappies exclusively. So instead of nappy-waste going down the drain and into sewage treatment plants to fertilise golf courses etc; it was ending up in the landfill generating methane. Besides which, I never really had enough worms to absorb all foodscraps, so plenty still goes in the bin. And the worm casts in my garden? Myriad tomato, rockmelon, pumpkin and pawpaw seedlings pop up from the casts. I never know whether to try to cultivate them, or to pull them out to leave room for the plants I'm trying to fertilise with the casts.

Younger Dryas - Why can't it happen again?

Apparently, the most likely theory of the cause of the younger dryas involves a comet impact. The Younger Dryas is a rapid cooling event of about 13K years ago, going against the trend of moving into the current interglacial period. The reckoning is that a comet caused a catastrophic melt event which rapidly sent fresh water into the northern polar region: This caused a severe disruption of the thermo-haline current, plunging the Northern hemisphere back into ice age temperatures. Extra snow and ice cover caused an albedo effect which somewhat affected the temperature of the whole Earth somewhat, giving a thousand year pause to the interglacial warming, which even more suddenly corrected globally to a warm temperature consistent with the interglacial.

Climate scientists are almost unanimous in stating that a similarly triggered iceage could not happen due to the ice melt in greenland etc. due to global warming. The two prongs of this argument are 1) that the melting is too slow to give enough fresh water to similarly disrupt the currents, and 2) the base climatic conditions are too different - ie. there are less chance that there would be enough snow/ice cover to affect the albedo enough.

Most of the fearmongering however is that the icemelt and northern polar warming is going to be much more than had been calculated just a few short years ago, and quicker than anything since the younger dryas. That, to me, means that if Europe has a sudden cooling event (whithin the next 40 years), climate scientists could still claim that they were correct.

Marconomics predicts longterm failure to reduce CO2 emissions

Going straight from my axioms,
- The judgement on policy is essentially which country does well in a typical competitive environment in the ideal where the policy concerned is the only point of difference.

Policies which involve ignoring, lying about, or failing to meet targets will put countries at a competitive advantage economically. Geopolitics, for good and ill, is optimised such that any policy which gives a distinct competitive advantage to any country, becomes policy in competing countries. The average citizen is completely oblivious but complicit, just by their own cost-benefit analysis in their own head. This process for say fifty years into the future is pretty much immune to global targets of any sort. The trick is to globally constrain the economy such that "doing well" CO2 reduction wise, is going to be "doing well" money-wise. This is just not going to happen without a global government with teeth. A global government with teeth is not compatible with the benefits gained from the competitive aspect of nations. Basically for the future 50 years or so, we will all be talking about CO2 global targets, but have no chance of meeting them. Regional CO2 targets will occasionally be met, but only by accident of say economic ruin, or accident of geography (eg. Soviet breakup, France's love of Nuclear/hydro)

The other reason why Polar Bears are 100% safe from extinction

Like elephants, tigers, whales, koalas etc., selected large mammals have such an importance in human's consciousness, that an unfathomly high priority ends up being placed on salvaging at least the genetic pool of these animals in captivity, if not special "reserves", where their natural habitat is preserved or they are protected from competing wildlife and human encroachment.

This is with a background of a possible large scale extinction in the chunk of climate specific/sensitive species which is not very visible to the human consciousness. Through climate change, the overall number of organisms shouldn't change that much in any particular class, but opportunistic species will win out over the highly specialised in any particular category.

Threat plus opportunity = zero net cost (approx)

Tourism in Greenland is evidence that Global Warming brings opportunity in equal measure to threat.

Historical Sciences Bah...

I am not really a big fan of the historical sciences. To me it makes a mockery of the word science(*). Scientific method is about repeatable experiments, and everybody knows that... "His-tory neever repeats...". Also, one can always quip back to some asserted historical fact - "Were you there?" you know to "observe" it. Indirect observation, irrepeatable conditions = always conjecture. This especially irks me when experts in their field go to extreme lengths and expense to prove for example A) that Jesus performed miracles or
B) that a particular fossil is the common ancestor of apes and humans.

To me these factoids are primarily used to enforce one's theological convictions, and are therefore pretty useless scientifically.

Even historical ice cores for temperature & atmosphere content statistics have gone as far as is scientifically useful. Todays conditions and issues are so radically different to historical ones, that it cannot help policy decisions today, and are therefore again only useful in promoting ones views (perhaps at taxpayers' expense).

(*) - To tell you the truth, I probably just have a problem with the "SPIN" placed on historical sciences rather than the historical science itself.

Where's the figures?

This article states confidently that Australia's emissions grow at twice the rate of other rich countries but was there a link to the data? Does any bloody news service that rants about global warming ever make the data demonstrating latest trends that they mention available? Nope. Where does this place Australia in its notional Kyoto targets that we didn't sign? Until the latest (but not linked) figures we appeared on target. I am quite for the concept of exporting emmissions to exempt developing countries like Indonesia etc. This may invoke a much more rapid transfer of real wealth to the third world, as we tax our Carbon highly, and they can remain exempt gaining a competitive advantage. And the nice thing about competitive advantage is that it isn't a "freebie" like aid, grants, tarriffs or oil resources. They still have to work hard and competitively to take advantage of the advantage.

On the latest posturing of "players" in the "global warming" game, there appears little prospect of (global) emmissions reductions for at least a couple of decades. Plus the moral hazard is just too great. I reckon if (global) emmissions are at 120% of current emmissions by 2030, we will be doing well. The only thing left to guesswork is who everyone is going to blame.