Environmental concerns prove to be only tiny piece of puzzle

http://www.smh.com.au/national/environmental-concerns-prove-to-be-only-tiny-piece-of-puzzle-20111208-1olg9.html
MEASURES of economic wellbeing are great at assessing the value of the land and minerals we own and mine, but poor at reflecting the other side of the coin: the cost of resource depletion and land degradation due to agriculture, mining and development.

They are worse still at capturing the cost of pollution - where it causes illness, it can actually push up the gross domestic product of the health sector - and the value people placed on loss of species and ecosystems.

On resource depletion, the Herald/Lateral Economics wellbeing index borrows a model from the Australian Bureau of Statistics, which estimates the cost of land degradation based on impact on land values and yield rates.

In 2009-10, this was equivalent to $406 million. But this alone does not tell the story. The index must also reflect the value of new mineral discoveries and the cost of the exploration. Once these are factored in, it reaches $1.05 billion. While this may sound large, it is small in relative terms - just 0.1 per cent of net national income.

''If you are looking at resource depletion it has a small impact on wellbeing, and if you are looking at it quarter-to-quarter you would hardly notice the change,'' the chief executive of Lateral Economics, Nicholas Gruen, says.

This is not a universally held view. Left-leaning think tank the Australia Institute placed much greater weight on the impact of environmental damage in a report released earlier this year.

Gruen says he expects some people will be surprised by the low cost of resource depletion. ''But when you think these things through, technology keeps improving and we keep finding new resources,'' he says.

''Even if you were starting to end up with fewer reserves, the other thing that happens is we get much better at mining and processing.''

He gives the example of the central Victorian goldfields - an asset that was written off after the 19th century but where resources companies have recently returned with some success.

On climate change, the index weighs the cost and likelihood of three scenarios - that the world does nothing to cut emissions and temperatures rise by more than 5 degrees, that the increase is between 2 degrees and 3 degrees, and that the Copenhagen Accord goal of limiting warming to 2 degrees is achieved.

Estimates of the cost of each scenario are taken from the Garnaut Review; the probability of each happening from a climate models review by the United Nations Environment Programand emissions data from the International Energy Agency.

On current evidence, Lateral Economics concludes there is a 5 per cent chance of the worst-case scenario, a 70 per cent chance of 2-3 degrees warming and 25 per cent chance of less than 2 degrees. The net present value last year of the future economic damage caused by climate change was estimated at $400 million.


On environmental and ecosystem health, the wellbeing index database includes the Yale Environmental Performance Index, which assesses agriculture, forestry, biodiversity and air pollution. But, in what is likely to be a controversial assessment, the results are given no dollar weighting. .

Gruen calls it ''the Spice Girls question'': when people are asked what they ''really, really want'' in financial terms, ecosystems do not rate well.

''People say they want a clean environment and they care about air pollution. They will rally around the Franklin Dam, but if you tell them something is endangered it is hard to see any evidence of the extent to which they are prepared to pay for that,'' he says.

Related:
Nation richer, older and a little bit wiser
WELLBEING has risen even more quickly than gross domestic product, thanks to the boom in Australia's commodity export prices and big improvements in the combined knowledge of its people, according to five years of historical data from the Herald/Lateral Economics Index of Australia's Wellbeing released today. Read more: http://www.smh.com.au/national/environmental-concerns-prove-to-be-only-tiny-piece-of-puzzle-20111208-1olg9.html#ixzz1gHtcytAj

Putting a figure on inequality adds to strength of statistical spotlight
New numbers are to the press as shiny bottle caps are to magpies. Statistics have the power to shape a debate or provide oxygen to an issue. From a major bank's survey of consumer confidence to a political party's targeted release of ''internal polling'', numbers are often used to bring publicity to a company or a cause. When even condom manufacturers use surveys to get publicity, you know what the new maxim must be: statistics sell.
Read more: http://www.smh.com.au/national/environmental-concerns-prove-to-be-only-tiny-piece-of-puzzle-20111208-1olg9.html#ixzz1gHu1ZfIH

When the Best Start in Life Turns Out to be an Early Start
HUMAN capital - the skills and know-how of our people - is the biggest positive contributor to wellbeing after net national income. The index measures it through a combination of indicators that track learning and innovation.
Read more: http://www.smh.com.au/national/environmental-concerns-prove-to-be-only-tiny-piece-of-puzzle-20111208-1olg9.html#ixzz1gHuTMK5R

Distribution of Money Makes a Big Difference
MONEY isn't everything - but it is a major driver of national and individual wellbeing.

Happy to live longer but mental illness and obesity still need to be dealt with 
IF LIFE expectancy at birth is any measure, Australians are some of the healthiest people on Earth.
Read more: http://www.smh.com.au/national/environmental-concerns-prove-to-be-only-tiny-piece-of-puzzle-20111208-1olg9.html#ixzz1gHvmPs7W

by Adam Morton
The Sydney Morning Herald http://www.smh.com.au
December 9, 2011

Allocating biosecurity resources between preventing, detecting, and eradicating island invasions

http://www.sciencedirect.com/science/article/pii/S0921800911003855 
Abstract: Finding efficient ways to manage the threat of invasive species helps make the most of limited resources. Different management actions reduce the impact of invasions differently: preventing invasion eliminates impacts entirely, surveillance can facilitate early detection and eradication, and removing individuals can reduce future impact. Few studies have examined the trade-off between all three facets of invasion management. Using a simple model of island invasion, we find how resources should be allocated to each action to minimise the total cost of management and impact. We use a case study of black rat (Rattus rattus) invasion on Barrow Island, Western Australia. The optimal amount to invest in each management action depends on the effectiveness of each action, and the magnitude of impact caused by different stages of invasion. If the pest is currently absent, it is more cost-effective to prevent impacts through prevention or surveillance. If the pest is already widespread, it can sometimes be cost-effective to give up rather than attempting eradication. This model of invasion can provide useful decision support by identifying the trade-offs inherent in each candidate management strategy, the thresholds that alter optimal strategies, and the parameters for which we need more information.

by Tracy M. Rout 1, Joslin L. Moore 1, Hugh P. Possingham 2, Michael A. McCarthy 1
1. Applied Environmental Decision Analysis (a Commonwealth Environment Research Facility), School of Botany, University of Melbourne, Parkville, Victoria 3010, Australia
2. Applied Environmental Decision Analysis (a Commonwealth Environment Research Facility), School of Biological Sciences, University of Queensland, St. Lucia, Queensland 4072

Australia Ecological Economics via Elsevier Science Direct www.ScienceDirect.com
Volume 71; November 15, 2011; Pages 54-62
Keywords: Decision theory; Exotic species; Introduced species; Invasion management; Quarantine; Surveillance

Australia's Carbon Tax: A Sheep in Wolf's Clothing?

http://d.repec.org/n?u=RePEc:pra:mprapa:33997&r=res
Australian Government has produced a CO2-equivalent tax proposal with a difference, it is a short prelude to an emission trading scheme that will allow the increasing rate of emissions to continue, while being a net cost to the Treasury. That cost extends to allowing major emitters to make guaranteed windfall profits from pollution permits. The emission trading scheme suffers numerous problems, but the issues raised show taxes can also be watered down and made ineffectual through concessions. Taxpayers will get no assets from the billions of dollars to be spent buying-off the coal generators or other polluters. The scheme hopes to stimulate private investors to create an additional 12 percent in renewable electricity generation by 2020. A serious emissions reducing alternative would be to create a nationalised electricity sector with 100 percent renewable energy within a decade. We explore the difficulties of implementing meaningful greenhouse gas taxes in Australia.
...
According to the Australian Government ... the proposed CEP scheme, combined with its Renewable Energy Target, will invest A$20 billion in renewable energy. In addition, the commercially oriented Clean Energy Finance Corporation will be allocated $10 billion to invest in renewable energy and innovative technologies to cut pollution. The Australian Renewable Energy Agency will administer A$3.2 billion. On the surface this appears like recognition of a need for substantial change, and a large investment, but is it really? The outcome of this A$33 billion allocation is expected to be that "the equivalent of 20 per cent of Australia’s electricity will come from renewable sources by 2020". As current renewable electricity production is 8 percent, this means just a 12 percent increase in renewable energy production. The Australian taxpayer will not gain any assets for this outlay because all monies are going to fund private enterprise, commercial interests, and corporations. In addition to this A$33 billion a further A$14 billion appears to be allocated to the worst polluters. The billions to be spent on paying the coal industry to close its most polluting plants will be reinvested by that industry. They will also be able to plead for money and cheap loans under the security fund. So the public sector will be financing and underwriting private profits.
...
Beyond Zero Emission (2010), a not-for-profit organisation associated with researchers from the University of Melbourne. Their research shows that Australia can achieve 100 percent renewable electricity generation within a decade using technology that is commercially available now. This would totally replace base load power currently sourced from fossil fuels. Wind power and solar thermal with molten salt storage have the capacity to supply 60 percent and 40 percent of Australia’s electricity respectively. They estimate this will require an investment of A$370 billion over ten years, stated to be equivalent to costing A$8 per household per week. They project that the investment will generate a stimulus to the Australian economy that is equivalent to 3 percent of GDP over ten years and create permanent jobs around four times higher than currently exist in the domestic fossil fuel sector (Beyond Zero Emissions, 2010). Converting the 92 percent of Australian electricity not generated from renewable energy is technically feasible with existing technology and could be funded by a real GHG tax. In return for their investment the public could have a nationally owned electricity generating sector with public benefits in perpetuity.
...
All regulatory and public policy instruments are subject to political negotiation and can be manipulated. Different instruments inherently favour different societal actors and vested interests. Clearly while taxes favour government they can also be watered down, counterproductive and ineffectual. Levels of compensation to polluting industries can exceed acceptable standards of both efficiency and fairness. Substantial concessions in the form of tax exemptions, reductions and rebates to maintain momentum for material growth may appear in design proposals and be justified as being necessary in hard economic times. Highly polluting industries may then be able to gain more concessions than the less polluting ones. Thus GHG taxes can become primarily targeted at securing votes and jobs, and not only fail to correspond to textbook recommendations but also fail to achieve the promised internalization of social and environmental costs.
...
Australia has invented the 'polluter gets paid' principle to replace the 'polluter pays' principle, and the worse you pollute the more you get rewarded. Less energy-intensive industries will be penalised by having to purchase non-tradable permits at a fixed value, whereas the more energy-intensive industries are bestowed permits for free and allowed to sell them. What Australia exemplifies is how the rich and powerful polluters have been able to take control of the debate on human induced climate change, and manipulate it to their considerable financial advantage, while pretending to be the victims of an environmental hoax. 

by Clive L. Spash and Alex Lo
WU Wirtschaftsuniversitiat Wien, Norwegian University of Life Sciences
Munich Personal Repec Archive MPRA Paper Number 33997; October 3, 2011 
via REPEC Research Papers in Economics www.REPEC.org

Public responses to policies designed to internalise environmental and social externalities from road transport in New Zealand

http://www.sciencedirect.com/science/article/pii/S1361920911000885
Abstract: Based on a public survey of registered voters, we explore four options for internalising the social and environmental costs of road transport. The options were presented together with generalised factual information about their benefits and costs. Respondents are highly supportive of fuel use efficiency standards and exhaust gas quality standards, with lesser support for proposed initiatives of road user charges and speed reduction. Demographic analysis of responses enables identification of those who might favour or oppose particular options. In this case women are identified as being strongly supportive of the speed reduction option.

by Kenneth F.D., Hughey , Geoffrey N., Kerr , Ross, Cullen; all of Lincoln University, PO Box 84, Lincoln 7647, Canterbury, New Zealand; Tel.: +64 3 3252 811; fax: +64 3 3253845
Transportation Research Part D: Transport and Environment via Elsevier Science Direct www.ScienceDirect.com
Volume 16, Issue 8; December, 2011; Pages 575-578
Keywords: Environmental impact analysis; Social impacts of road transport; Full transport costing

'A Price on Pollution: The Next Step Forward in Economic Reform'

http://www.treasurer.gov.au/DisplayDocs.aspx?doc=speeches/2011/017.htm

In an address to the National Press Club on June 7, 2011 The Honorable Wayne Swan, MP, Deputy Prime Minister and Treasurer said:

The theme of [my post-Budget speech] a month ago ... is making the most of the tremendous opportunities presented by the enormous change underway in the world. Recognising that rather than being on the periphery of the global economy, in coming decades we will be closer and closer to its centre. The impact is most vividly apparent today in the mining boom, but in years to come it will be apparent in many other areas of our economy.

As I said when I was last here, to accept that challenge, to make the most of our opportunity, we need to modernise our economic infrastructure, increase our capacity, and invest more in the education and training of our workforce. But crucially, we also need to price pollution, so that we can drive new investment in clean energy. That's what I'm here to talk about today.

I start from a conviction that no first-rate, first-world economy will be anything other than a clean-energy economy into the future. Just like the global economy was propelled forward in the decade to now by rapid development in communications technology, success in the coming decades will be powered by cleaner energy innovation.

The only way to drive investment in this technology is to put a price on pollution. Only a market mechanism does the job. You can have a first-rate modern economy and a carbon price, or you can have neither.

As Treasurer I refuse to let this country become an old-world, high-polluting technological backwater.
...
As Ross Garnaut reported in 2008, world GDP would be 8 per cent lower by 2100 in a world with climate change compared with a world without climate change. Our own real GDP could be around 6 per cent lower over the same period, and real wages would suffer.

Without global action, we will experience severe water shortages and higher temperatures, and the Murray Darling Basin could lose half of its annual irrigated output by the middle of the century – with consequences for food prices and the cost of living more broadly. Extreme events, permanent changes to local climate and loss of parts of our coastline could severely damage our water supplies, electricity networks, ports, homes and commercial buildings.

As global growth slows, the engines of our prosperity would switch down to second gear as demand for our mining resources falls as well. Overall output from Australian mining could be 13 per cent lower by 2100, and – with a poorer world demanding less – coal and other mineral prices would fall. Tourism would also be hit harder by fewer overseas visitors due to widespread environmental damage and a weaker international economy.
...On Thursday this week the Productivity Commission's important piece of work on international action will be released. It will show that all of the countries studied, including seven of our top ten trading partners, have adopted major policies to reduce pollution and support clean energy. The approaches vary from country to country, but the report will make it clear that market mechanisms are a far more cost-effective way than other approaches like regulation and subsidies. So it will deal comprehensively with those who claim we would be striking out on our own, and those who argue for so-called direct action.

The PC will highlight something lost on too many people – that the world is moving, and it follows that if we don't act now we'll be left behind. Countries accounting for around 80 per cent of emissions have already pledged to act to address climate change. Thirty-two countries and ten American States already have operating emissions trading schemes in place. The world's key economies are all taking action of one kind or another.

China's 12th Five Year Plan, which covers the years to 2015, has a goal of 'gradually establishing a carbon trading market', while emissions trading is planned to be trialled in six key provinces before 2013. This is on top of existing incentives for low-emissions power generation.

India has begun implementing a national energy efficiency certificate trading scheme accounting for more than 50 per cent of the fossil fuel used there, and a coal tax is expected to raise about half a billion dollars for investments in clean-energy technologies in the first 12 months.

In South Korea, legislation was introduced in April to commence mandatory economy-wide emissions trading from 2015. The South Koreans have also had a trial emissions trading scheme in place since January involving 14 cities and provinces, including Seoul.

And Japan has also operated voluntary emissions trading schemes involving some of its largest companies since 2005.

In Europe, an Emissions Trading Scheme commenced in 2005 and applies in 30 countries, some of which also have a carbon tax, and many of which have additional measures such as renewable energy subsidies.

In Britain – which produces roughly the same total carbon pollution as Australia but has a population three times our own – a Conservative coalition government has just tightened its emission targets to 50 per cent below 1990 levels by around 2025.

In the US, despite a hostile Congress, the President is committed to a new Clean Energy Standard that will double the share of clean-energy sources in the US electricity supply mix to 80 per cent by 2035.

So the world is moving now to reduce pollution, and we need to be part of that if we want to maintain and improve our competitive advantage. Our 2008 modelling indicated the costs of taking action now could be around 15 per cent less than if countries play catch up later on – and we will provide an update of that estimate in the coming weeks.

But it's already clear that with the highest level of carbon pollution per capita in the developed world, Australian exports will become a prime target for trade measures if we fall too far behind....

Take coal, as just one example. The world will continue to burn our coal for a long time, especially with concerns over nuclear power. Prices are high, having doubled since the CPRS was proposed. But our job is not just to export cleaner coal at good prices, but to export the technology that makes coal more viable into the future.
...
Of course, when it comes to the big ticket reforms, there are always those who say the sky is going to fall in. As Bob Hawke reminded us last week, so many of our most important reforms were once described as a potential disaster for our economy. But in time they reaped big dividends for the country, helping secure two decades of uninterrupted economic growth.

Imagine if he and Paul Keating hadn't brought down tariffs, imagine if we were still an isolated, island economy, hiding from the world. China's industrialisation would be booming away to our north – and Australia would still be paying industries to be uncompetitive. Rather than plugging into global supply chains, we would be on the sidelines of the Asian Century, failing to capitalise on the shift in global economic weight that we are now living through.

Imagine if in 1992 the Keating Government had been spooked by the business group that called the superannuation guarantee 'irresponsible and ludicrous'. We wouldn't have achieved an increase in national savings and retirement incomes, setting the platform for dealing with a global recession and the long-term pressures of an ageing population.

Imagine if we'd given up on reforming resources taxation, just because the miners said it would ruin the industry, close down mines, send companies offshore, and smash profits. Instead we have a deal that will allow us to cut company tax especially for small business, boost super and invest in infrastructure, while mining profits and investment continue to skyrocket.
...
We are doing our best to counter the scare campaign in a methodical, considered way, and by commissioning new analysis by leading experts:

Professor Ross Garnaut has updated his 2008 climate change review, including the latest economic data and developments.
...
* We are working on an emissions trading scheme with a fixed price for three to five years beginning as early as July 2012.
* It would then convert to a 'cap-and-trade' emissions trading scheme with a flexible price.
* And as the multi-party committee said in February, the scheme will have broad coverage across the economy.

We have also made clear that every cent raised by the scheme will be directed to three important purposes:
* Generous assistance to households and families, to help them make the transition to clean energy;
* Support for businesses, to protect jobs, investment and energy security, without affecting the incentive to reduce pollution;
* And we are also examining new ways to support investment in clean-energy projects and provide additional support for innovation in a way that is supported by unions, environmental groups and superannuation funds who want to invest in the technology.

The household assistance will be targeted to pensioners, and low- and middle-income households. More than half the revenue raised by the scheme will be allocated to household assistance. The assistance will be permanent. And millions of households will be better off.
...
The second really key point I want to make today is that we can have strong economic growth without growth in pollution.

Don't believe the vested interests who argue Australia must choose between a stronger economy and decent environmental outcomes. Jobs will still be created, industries will prosper, and our economy will continue to grow strongly with a carbon price.

When we finalise the modelling I look forward to releasing hundreds of pages of detailed information that bears this out, including an updated assessment of the benefits of acting now versus acting later. But today I'm able to give you a bit of a sense of where it is headed and a handful of key conclusions.

For the purposes of this speech please don't read anything into the fact I've used the numbers for a $20 carbon price, as this is just the example price we've used before. There will be a range of modelled scenarios and nobody should take this example as meaning we have settled on a price, because we haven't.

The first conclusion is this: our economy will continue to grow solidly while making deep cuts in carbon pollution.

The modelling will show real national income growing strongly under a carbon price, at an average annual rate per person of around 1.1 per cent until 2050 instead of 1.2 per cent. This means a carbon price would only reduce annual growth in GNI per person by about one-tenth of 1 percentage point.

Real national income per person would be 16 per cent higher than current levels by 2020, which is an increase of more than $8,000 in today's dollars. By 2050 the increase is about 56 per cent, or more than $30,000.

That's before you take into account the long-term benefits of carbon pricing – like protecting tourism icons such as the Great Barrier Reef or Kakadu, or the agricultural wealth of the Murray Darling Basin.

The second conclusion is just as important: employment continues to grow just as strongly after we put a price on pollution.

Today I can say that the modelling shows aggregate employment is approximately the same with or without a carbon price. By 2020, national employment is projected to increase by 1.6 million jobs, while at the same time growth in domestically-produced pollution slows. For a Government obsessed with jobs, this conclusion is crucial.

The third key outcome of the modelling is that demand for low-emission goods and services increases dramatically with a price on pollution, so that there will be stronger growth in sectors, such as less-emission-intensive or renewable electricity.

As I mentioned in my economic note on Sunday, gas-fired electricity is projected to increase by between 150 and 300 per cent over the period to 2050, with the renewable electricity sector projected to be 600 per cent bigger than it is today.
...
But the only way to get these kinds of outcomes in a cost-effective way is with a market mechanism. This is my third key point today.

It is a view shared by the Productivity Commission, by Professor Garnaut, and by every serious economist including the 13 who were moved to pen an open letter last week.

True to form and despite all the evidence and analysis, our political opponents will have you believe the sky will fall in if we price carbon. The bipartisanship of earlier years has been unwound by the most negative Opposition we have seen....

They say they can deliver abatement through what they describe publicly as direct action and privately as trying to look like they care.
...
As Greg Combet has said, their inability to hit the 5 per cent target means international permits would need to be purchased at a cost of over $20 billion. So the Coalition's Direct Action policy would cost over $30 billion rather than the claimed $10.5 billion, leaving households $720 per annum worse off on average.
...

The Honorable Wayne Swan, MP, Deputy Prime Minister and Treasurer
Address to the National Press Club; 7 June 2011

Australian Treasury Department www.treasurer.gov.au