Garnaut’s frightening climate change challenge: Kohler

Climate change mitigation is an emotionally moral topic in which the direct participants fluctuate between shouting and horse-trading. The reaction from scientists and greenies to the new Garnaut paper is of the shouting variety – that it’s too soft – and

Ross Garnaut’s latest instalment, “Targets and Trajectories”, is both deeply depressing and magnificent.

Depressing because he concludes that the Great Barrier Reef, among other things, can’t and won’t be saved; magnificent because his approach is remorselessly logical and economic and thus provides the arithmetic, if not the language, of optimism.

Climate change mitigation is an emotionally moral topic in which the direct participants fluctuate between shouting and horse-trading. The reaction from scientists and greenies to the new Garnaut paper is of the shouting variety – that it’s too soft – and the business reaction, as usual, is to negotiate.

In my view, simplistic responses don’t do his work justice. Ross Garnaut’s reports are like a combination of Hamlet and Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations.

Reading them is to take a journey with a brilliant economist confronted by a heartbreaking inevitability; a man who is eloquently thinking aloud about what can be done: To be or not to be, that is the question.

His paper focuses on two arbitrages – the difference between the total national reduction in CO2 emissions and the per capita reduction, and thus the impact of population change on emissions targets; and his work on the net generational costs of mitigation, including the question of “How much value should be attached to climate change impacts that occur beyond the lifetimes of most of those alive today?”

His calculations about the impact of population growth lead him to suggest a 10% reduction in national emissions by 2020, which equals 30% per capita. In the absence of international agreement, he suggests a 5% reduction (25% per capita).

There is now a debate of whether these are “tough” enough targets, with everyone bringing prejudices and vested interests to the table.

I don’t know enough about whether 550 parts per million or 450ppm is necessary or achievable to join the debate, so I won’t.

But it seems obvious to me that any international target that rewards low or negative population growth – that is zero immigration and low birth rate – is not going to be helpful.

Each immigrant brings their carbon emissions with them. If the emissions targets of both the home and destination countries are not adjusted, then there will be no job for that person, since high-emissions industries will move to the country he or she came from because the cost of its carbon will be lower.

That is one key arbitrage that Ross Garnaut confronts and deals with; the other is generational.

His attempts to measure the immeasurable, as he puts it, and to weigh the cost of mitigation against the cost of global warming comprise about half the report, and are too complex to go into in much detail here.

In comparing utility across generations, Garnaut uses two discount rates – 1.4% and 2.7% – and two reductions targets, leading to 550ppm and 450ppm.

Using the standard global trade and environment model, he concludes that the net present cost to GDP of the combinations go like this: 1.4/550 – 2.6%; 1.4/450 – 3.3%; 2.7/550 – 2.4%; 2.7/450 – 3.2%.

And then he asks: “Is it worth paying over the course of the century less than 1% of GNP for the non-market benefits, insurance value and the enhanced value beyond the 21st century of the 450 strategy?”

But actually it’s a pointless question because Australia alone can’t achieve 450ppm of CO2 in the atmosphere. Is the international community ready to commit to it? Not yet, says Garnaut.

And here’s the other problem that he does not mention – what I would call the alcopops factor.

The Rudd Government in April introduced a new tax on pre-mixed drinks to cut down on binge drinking. We’re waiting on figures yet, but it doesn’t seem to have worked even sightly; consumers are just paying more and filling government coffers with more money.

Emissions trading, or other means of putting a price on carbon, won’t work either. Consumers will simply pay more for carbon-based products, they’ll shift expenditure around, there’ll be a recession, the Great Barrier Reef will still die and Bangladesh will still be inundated.

If any kind of serious carbon reduction target is to be achieved, it seems to me, emissions trading must be accompanied by mandatory renewable energy targets plus, more importantly, draconian energy efficiency laws.

Let’s assume Ross Garnaut and many others are right, and we have a global emergency with little chance of doing something about it through international agreement on emissions trading.

The only short-term solution that is remotely achievable therefore involves a sudden international regulatory clamp, in which freedoms are curtailed rather than prices (of carbon-related products) raised through market-based schemes.

Energy efficient buildings, lower consumption of meat, enforced carbon capture, mandatory household solar power.

That is the real Garnaut challenge.

This first appeared in Business Spectator