Garnaut and after

The Garnaut Climate Change Review, released this week, is a responsible and measured analysis of the implications of climate change for Australia and policy options available to it.  Most of the best-regarded economic and policy elements are there: an emissions trading scheme, with initial permits sold to emitters; the allocation of this income (the ‘double dividend) to address distributional inequities and to spur investment in renewable energy; acceptance of the need for deep cuts in emissions; the adoption of a conservative ‘maximin’ managing of the probabilities, in which strong action now preserves options for the future; the clear recognition that climate change can only be addressed by the international community, of which Australia is a part; and the equally clear recognition that Australia must play its part, whatever the rest of the international community does. There is a strong recommendation to include as many sectors as possible in the plan–that is, not to allow special pleading. 

There is a degree of cautious optimisim in the Review, derived largely from confidence in the flexibility and creativity of Australia’s market economy and in the depth of renewable energy resources available to it.  At the same time, Garnaut refers to his approach as intended to ‘nourish the slender chance’ that the International community will in fact act, and act with sufficient commitment, to meet the challenge–an assessment with which few could argue.  Even in Australia, Garnaut recognises, developing consensus will be difficult.  All in all, from the viewpoint of economic analysis and policy development it is an admirable piece of work, and one which, if actually adopted and implemented by government, would place Australia literally in the forefront of international action on climate change.

The ink was scarely dry on the document, however, before the weasel words (in the absence of water) began to rain down thick and fast.  The Government quickly noted, after perfunctory politness, that the Review was only ‘one input’ into its policy, thus clearing the way for rejecting key provisions, such as (it is clear) the cap and the sectors to be included–notably petrol, because the Opposition, with a display of political cynicism probably unequalled in the history of this country, made the spearhead of its deeply uninformed critique the exemption of petrol from the ETS.  Special pleading poured onto the airwaves.  The New South Wales treasurer distinguished himself, even among such deep ignorance, in labelling the Review a ‘Chicken Little’ approach–thereby confirming the appropriate reading level of his particular expertise.  The exporters, of course, were at the forefront, arguing (an argument which Garnaut accepts) that they had to be exempt because they couldn’t pass on their increased costs to an international consumer base that doesn’t accept the need for them; if such support were not forthcoming, they threatened, they would move offshore–that is while there is an offshore, economically and literally, to go to.  Unions were uneasy, and have become more so, at the prospect of increased costs forcing job losses.  The brown coal manufacturers publically argued, apparently without shame, for the support of their (notoriously dirty) industry, on the grounds that otherwise there would be massive reductions of the workforce, the decline of Latrobe valley communities, and brown-outs in Melbourne.  The admirable ACTU president, Sharon Burrows, on the other hand, risking the wrath of her members, sturdily maintained that no sector should be allowed special pleading; that we were all in this together.  As indeed we are.

As Garnaut pointed out, there is no guarantee, to say the least of it, of decisive action by the international community in the short- or medium-term; despite the fact that the UN recently argued that there is a matter of perhaps seven years in which to act.  Just why this is so is displayed in the Australian debate, in microcosm.  The politicians, on both sides, are doing what politicians routinely do: jettisoning as quickly as possible principles and realities for political power.   The daily spectacle of politicians exhibiting abysmal ignorance on the technical content, shameless and cynical action in pursuit of power, ad hominem attacks, childish taunts and soundbites on climate change matters, instead of the national leadership of deliberative processes in the community, is not just a disgrace but actually a criminal disregard for the people who put them there, and for the future generations who will have to live with its consequences.  Industry and union leaders who have leapt into special pleading appear in no better light: they are transparently attempting to defend what they conceive to be their own interests without regard for the implications of their actions–which, ironically,will bear down on their own members along with everyone else.  The first and largest and most intractable challenge to a coherent response to the Garnaut Review will be the inability of all the special interest groups in the country to place their interests in the larger context:  to think for the whole, and to have the courage to act for the whole.

I think this may be largely driven not so much by ignorance and ignoble motives (although, as noted, there is plenty of both about) as by fear.  People have come to believe that the so-called ‘quality of life’ enjoyed in Australia is critical to their sense of well-being: any change or reduction in it is simply not to be contemplated.  This entrenched attitude, which even Garnaut appears to accept, tightly constrains the options for action.  For example, it precludes the idea of reducing energy use, because that would make life, it is argued, relatively unbearable; hence the policy option is to maintain the level of energy use but to seek renewable sources for it.  Yet, as Ian Lowe has pointed out in his recent essay (see my post of September 17, 2007), there is evidence to suggest that if the standard of living of world’s population could be set at the standard of living of Australia in the 1960’s–an inconceivable improvement for the two billion or so people who live on less that $2 per day–world energy use would be approximately sustainable.  As one who grew up in the 1960’s I say that in this there is nothing to fear.

And that points, I think, to a fundamental problem with the Garnaut report, despite its evident qualities, outlined above.  Garnaut deliberately frames his analysis primarily in terms of market instruments; not unreasonable for an economist.  This approach is intended to allow for the operation of market forces in achieving the changes in social and economic coordination that will be required to meet the climate change challenge.  It aligns with his incremental, emergent strategy of dealing with high levels of uncertainty, with respect to both the underlying scientific evidence of climate change and to its effects and mitigation.  None of this is unreasonable. 

But it is unlikely to be big enough or fast enough–as Garnaut himself implies.  The fact is that an effective response to climate change must be structural.  And although Garnaut and others will argue that the kinds of market instruments they propose will induce the required structural change, there is reason to doubt their effectiveness.  There is no question that, without social consensus, their implementation will be resisted tooth and nail, fanned by the political and social special interests described above; lags will be inevitable; special pleading will produce subsidies and exceptions that will slow, and perhaps undo, the gains.  And, most fundamentally, there is no evidence to suggest that market mechanisms alone, or even primarily, can produce a fundamental change in the externalities of business as usual; indeed, Nicholas Stern (of the UK Stern Review) rightly referred to climate change as the biggest example of market failure in history. 

Market instruments will therefore be part of an effective strategy, but not its centre.  It is critically necessary to begin thinking about what a low carbon economy and society looks like, and how the transition to it can be best undertaken.  This is not just a task for economists and social analysts–although it is a task for them, and very few are thinking about it–but for the entire Australian polity, at national, state and local (perhaps above all local) levels.  It will require us to think through how we decide to live our lives, what values and ethical frameworks we are commited to, what kind of life we want to live, in this country and in the world.  It will require us to consider how to engage whole communities in these deliberations.  It’s not impossible–indeed, Australia, more than most nations, is reasonably well placed for it, given the egalitarian ethos of its culture–but it requires a degree of wisdom that will test to the limit our claim to civilised society. 

This is, in my view, the principal limitation of the Garnaut Review.  It is in truth one input–but not just or most importantly into government.  Rather it is a platform, and a fine one, to begin the collective process of understanding this critical challenge by the entire Australian community; a process which will only find its way through to a solution if it values all of its elements and thinks together for the whole–for this country, and for a world overwhelmingly less fortunate than us.  The impacts of global climate change are already falling on those least able to afford them, across the world.  Behind our parochial concerns sit the human rights of climate change–the subject of my August 23, 2007 posting, and to be continued.

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