Labor liars on climate change

The claims by Labor that Brendan Nelson is a 'climate change denialist' because he asserts that the current dire situation in the Murray-Darling cannot be attributed to climate change is a deceit. There is no such implication. The statements by Brendon Nelson are accurate - the current drought cannot be attributed to climate change. Moreover, Nelson's claims have nothing at all to do with denying the reality of climate change.

Droughts have occurred around large parts of Australia for about 3 years in 10 since almost the time the first settlers arrived at Sydney Cove (Rob Linn, Battling the Land, 200 Years of Rural Australia is good on this). On this basis moderate drought cannot even be regarded as an extreme climatic event. In the terrible drought of 1895-1903 40% of cattle in Australia perished. There have been major prolonged droughts in Australia from 1911-16, 1939-45, 1963-68 and 1991-95 prior to the current severe drought. There have been specific regional droughts on a much more frequent basis than even this.

Longer-term we might expect a gradual trend increase in temperature, changed rainfall levels that differ regionally and possibly an increased frequency of extreme climatic events including drought. There is, however, no basis for interpreting the particular drought event now being experienced as being attributable to climate change.

As a commenter pointed out a few weeks back on this blog the difficulty with perpetuating these false claims is that, if people are persuaded that the current drought is due to climate change, they will come to disbelieve that climate change is a serious threat if the drought breaks and we have good rains for a number of years. Moreover, there are suggestions from some that ocean temperature changes might cause a temporary easing of warming over the next decade or so before temperatures resume their upward trend.

In addition these lies turn attention away from more proximate causes of the current dire situation namely the overallocation of water use entitlements in the MDB. Nelson is quite correct to point this out.

The lies have the political purpose of seeking to ridicule Nelson (are there diminishing returns to abuse?) but they have potentially serious consequences that go beyond this. It is important that politicians stick to the truth and throw light on climate change problems rather than mud at their political opponents.

I watched Minister Penny Wong repeat this deceit on Lateline last night. She deliberately avoided answering the repeatedly posed question of how she came to the view that drought in the MDB could be attributed to climate change. It was an evasive and disgracefully, inept and deceitful performance. Moreover, when quizzed on the issue of carbon leakage complaints currently being raised by the BCA she seemed lost and mumbled something irrelevant about the need to 'share the burden' of dealing with climate change. Moreover, if she understood the issue at all - one would think she should as she is the relevant minister - she could have advanced some sensible views that would, in fact, have supported the Government's position.

Wong took over the climate change issue from an incompetent Peter Garratt who, in fact, launched the foolish attack on Brendon Nelson yesterday in Parliament. Who can take over handing the important climate and water portfolio from Wong?

Update: The press reports that MDBC boss Wendy Craik has claimed the CSIRO have determined that the current drought is due to climate change. I can't find such a statement in CSIRO material I have read. What is claimed in the literature I have read is that the frequency of droughts has risen and can be expected to rise - a claim that is plausible and indeed which I cite above. This is, of course, quite a different matter from attributing the current drought to climate change. If the CSIRO - or anyone else - claim this it is an extremely incautious claim.

Under-valuing catastrophic risk

Tim Flannery reacted to the recent 4th IPCC report by claiming that its middle-of-the-road forecasts ignored the potential for very steep temperature rises of 6 degrees C (with probability 0.1) and for very rapid melting of the Arctic Ice Cap in 5-15 years. In short he claimed the IPCC understated the possibility of catastrophic risks. Flannery was dismissed as an alarmist (and worse) by right-wing commentators.

But Tim is worth listening to for 2 reasons:

1. In dealing with uncertainty in a global warming context it makes sense to look at extreme catastrophic outcomes that might happen. Even if there was only a small probability of a catastrophic climate outcome that devastated the world that would be an event that should be taken very seriously by decision-makers. Extreme events must be accounted for if their expected costs are very high because society is more concerned with extreme climatic events than averages. For example, we are much less interested in knowing in average temperature will rise by 3 degrees C than in knowing whether we will experience extreme heat waves, droughts or storms.

In other words, we should not only be trying to nail down forecasts of temperature ans sea level changes but also look at the probability distributions od such forecasts with an emphasis on long-tailed events.

2. There is increasing evidence from various sources that the IPCC report was conservative in undervaluing catastrophic outcomes. New Scientist this week voices several concerns. Generally the IPCC emphasized rigorous research so research deemed controversial or not yet incorporated into climate models was excluded.

The political benefit was to leave little room for the climate change sceptics but there was, simultaneously, the dangerous cost that legitimate findings may have been frozen out with many of the more scary scenarios for climate change - those that scientists discuss among themselves - 'being left on the cutting room floor’.

Climate scientists came together 2 years ago to discuss ‘dangerous’ climate change at a conference organised by the UK government in Exeter. They identified potential positive feedbacks and ‘tipping points’ not included in current models of the earth's climate system that could accelerate global warming or sea-level rise. These included:

• the physical collapse of the Greenland ice sheet,
• rapid melting in Antarctica,
• a shut-down of the Gulf Stream in the Atlantic,
• the release of CO2 and methane from soil, the ocean bed & melting permafrost.

Yet last week's IPCC report largely ignored these possibilities.

One concern is that the ice sheets of Greenland and Antarctica could disintegrate causing sea level rises of metres. But the IPCC restricted itself to noting that sea levels are rising 3.1 centimetres a decade - still twice the rate of the early 1990s. Current climate models assume that the ice sheets will melt only slowly, as heat works its way down through ice more than 2 kilometres thick.

But many glaciologists believe ice sheets fracture as they melt, so water can penetrate to the bottom within seconds, warming its full depth so break-up of the ice sheets happens long before thermal melting. Indeed, the rate of ice loss in Greenland has unexpectedly doubled in the past decade and the permanent Arctic sea ice is contracting by 7% each decade.

Moreover, there is research showing that world sea levels are rising 50% faster today than predicted in the last IPCC report in 2001 This could be the first sign of a dramatic acceleration of sea level rise as ice sheets disintegrate. But the IPCC last week reduced its estimate of worst-case sea level rise in the coming century from 88 to 59 centimetres. Controversy over such forecasts continues at Deltoid.

Researchers at the UK's National Oceanography Centre, Southampton also felt overlooked. In 2005, they reported that the Gulf Stream slowed by 30% 1957-2004. But the IPCC summary insists that ‘there is insufficient evidence to determine whether trends exist’.

Water vapour is increasing in the atmosphere, the IPCC says thanks to more evaporation from the oceans. Weather systems are changing, with more intense droughts and tropical cyclones at low latitudes. Rainfall, when it occurs, is heavier because the warmer air holds more moisture. However, the IPCC fail to take up warnings made of ‘carbon-cycle feedbacks’ - the release of greenhouse gases from warmed soils, forests, permafrost and sea beds. It does note that CO2 is accumulating at a rate 1/3 greater than 20 years ago.

The IPCC's predictions of significant warming in northern latitudes should give urgency to assessing potential methane releases from Siberia and the Arctic. But, these fears were not in the IPCC report.

Any committee requiring politicians to agree is going to take time arriving at a consensus. The IPCC’s climate scientists had to run the gauntlet of government delegations, who had to approve every word of the summary prior to publication. By and large, the IPCC scientists insist they ‘faced down political interference’. The prize of having governments formally sign off on the report will, they hope, make any compromises worthwhile.

Future IPCC work on climatic risk and uncertainty should address the prospect of extreme catastrophic climatic events. Such events lower the discount rate one should apply in climate change policy modelling. Also, as I pointed out in an earlier post, such events need to be analysed from the perspective of the ability of policies to offset them. Extremely disadvantageous events that cannot be offset suggest lower incentives to embark on policy and a case for delaying action. Extreme events that can be offset enhance arguments for intense and prompt policy activism. I set out the analytics of such arguments here.

Did climate change cause the drought?

I've said my piece on this issue before. I am happy to concede that the current drought might prove to be a manifestation of climate change but my claim has been that this is not implied by the evidence. My impression is based in part on the following rainfall graph:

which seems to me trendless at least until the mid-1990s. Other graphs for particular parts of Australia - not the far South West of Western Australia - show a similar absence of trends.

The CSIRO have recently completed a study of the case for worsening drought frequency and intensity and for tightening the 'exceptional circumstances' motivation for paying 'drought relief' to farmers. They provide evidence of increasing temperature - we knew that anyway - but argue that evidence of decreased rainfall depends on what period you choose. Selecting data post 1950 it looks like drought frequency has increased provided that the current drought is included. This study has been criticised by David Stockwell who finds that the climate models used wrongly predicted increased drought in areas where it had not occurred. This is of interest becauyse it is these models which predict iuncreasing drought frequencies and intensities. But ignoring this point this study does not provide historical evidence of increasing drought frequency.

The heading in today's The Age - 'What Victorians are living through now is not just a drought, it's climate change' suggests what it says. Moreover, it is written by the head of climate analysis - Dr David Jones - at the Bureau of Meterology so I must stop and carefully read the analysis. But again this analysis does not quite make the claim of increased droughts being associated with climate change. What it says is that rainfall has been below normal for 11 years and this is unlikely to be something generated by chance - it is double the previous record run of dry spells from 1979-1984 and the data base drawn on goes back to 1855. It would be nice to have this data. In the final paragraphs Jones writes:

'Climate change caused by humans is now acting to make droughts more severe and ncreasingly likely, while substantial warming of our climate is inevitable as a result of greenhouse gases already emitted and those that will be emitted in the decades to come.

Regardless of the underlying cause, the drought provides Victorians with a snapshot of a hot and dry future that we all will collectively face'. (my bold).

My inference from the bolded bit is that he has taken a guess that, on the balance of probabilities, the current drought is likely to be caused by climate change. To emphasise the point, Jones may well be right. He writes:

'A notable feature of this drought is the long series of failed autumn rains. Victoria, and indeed most of southern Australia, has experienced a substantial decline in its autumn rainfall since the 1970s. This is important because autumn rainfall "wets up" the soil in catchments, allowing winter rain and snow to flow into rivers. Decent autumn rain also gives crops and pastures a start after the heat and dry of summer. Victoria has now experienced eight dry autumns in a row, and indeed 16 of the past 19 autumns have received below-average rainfall.

The autumn drying trend was first noticed in south-west Western Australia in the mid-1970s, and has subsequently spread to the south-eastern states. This rainfall decline is driven by a rise in atmospheric pressures, and a weakening of cold fronts and low-pressure systems that once reliably brought rainfall to southern Australia. This shift in weather systems and rainfall has been linked by scientists to human-induced climate change, be it through greenhouse gases or changes in the ozone layer over Antarctica.

While we will continue to see the occasional wet autumn in the future, the chances are that we will not see a return to the wet autumns that were once commonplace. Over the past few years we have also seen a repeated failure of spring rains, which is a projected response to global warming across southern Australia'.

Thus Jones is also confirming the causal claim by drawing a link between predictions of climate change effects and what has happened. I am not well up enough on specific predictions to confirm this claimed coincidence. The IPPC forecasts I have seen suggest different rainfall trends in different parts of the country.

It seems plausible to suggest that longer-term temperature increases will be associated with increased drought frequency. Eventually there will then be the ex post judgement that climate change has driven drought. I remain unconvinced that this judgement can be drawn now but I will pursue this matter and if I find convincing evidence to the contrary will publicly retract my views.

Climate change & climatic extremes: forecasts

One prediction is that with global heating (James Lovelock’s term that emphasizes that humans are cooking the planet) we will be hotter and there will be more climatic disasters. More droughts, floods, cyclones, extremely hot days and so on.

Australia’s climate is dominated by El Nino, and hence those ‘droughts and flooding rains’ that Dorothy Mackellar wrote about are already an integral part of our climate. Hence I thought we might really cope it in terms of increased climatic extremes when things get globally hotter. I also believed that Australia would cop it bad simply through above-average, average temperature elevation effects.

According to recent forecasts provided in the current New Scientist Australia is likely to get 6-7o C hotter – indeed the whole globe gets hotter - but the climatic extremes experienced and the extent of warming will be more moderate than those experienced in many other parts of the world. An exception is the area around Perth which will have a more extreme climate – Perth already faces a looming water supply crisis and is destined to be a climate change 'hotspot' (see R. Hensen, The Rough Guide to Climate Change. Roughguides 2006). Maybe that will finally deflate the booming Perth property market.

Globally the areas that are really hammered in terms of extreme climatic variability are the Amazon rainforest, the Congo Basin and a fair bit of China. These areas are also hammered in terms of the sheer extent of temperature gain - temperature increases will range up to 11 degrees C. The result for China is of particular interest since, although its per capita energy consumptions are low, it already emits 15% of the world's Greenhouse gas emissions. It has a stake in cutting carbon emissions to secure its own future viability!

Michele Battig provides a nice visual graphic of where things get much hotter here. She published her co-authored research in Geophysical Research Letters.

Conserving biodiversity in the face of climate change

A framework is provided for designing adaptation policies for conserving Australian biodiversity in the face of climate change.

Uncertainty about climatic effects and the resilience of biodiversity are intrinsic as are ‘species loss’ and ‘sunk cost’ irreversibilities, nonlinearities in damage responses, long policy maker time horizons and ambiguities in objectives.

Policy insight can be gleaned from the economics of information and using ‘real options’ models that account for possible catastrophic risks.

The Natural Resource Ministerial Council provides an ‘action plan’ that can be used in this setting. The case for investing in information and for pursuing a range of safety-first policies and insurance options is emphasised.

1. Introduction. Most scientists accept that environmentally-damaging, anthropogenic, global warming has been a reality over the past century and that, unless societies reduce their greenhouse gas emissions, warming will become a more serious global concern over the next 50-70 years. Even with active greenhouse gas management policies it is also widely agreed that global warming will continue because of lags in climate generation. This has led to policies being developed which seek adaptation to the effects of global warming as it is expected to unfold. These policies accept that future global warming is a reality and seek to learn to live with it.

Adaptation policies are of particular concern to individual countries whose greenhouse gas emissions contribute in only a minor way to aggregate global emissions. While such countries can, and should, seek international cooperative agreements to manage emissions, they only exert a marginal impact on aggregate global emissions and it is this global ‘public bad’ that will impact on the climate change likely to be experienced in their country.

One class of adaptation strategies, of concern to Australia, relate to biodiversity resources. Biodiversity has intrinsic value since citizens value species and habitats that exist per se. Biodiversity also has instrumental value in improving the quality of life of citizens who consume the direct service flows stemming from its existence and, indirectly, through biodiversity’s role in insuring a reliable supply of agricultural, water resource and other outputs.

This paper shows how to determine economically efficient public policies to reduce climate change’s impact on the range and richness of Australian biodiversity. It emphasises issues of limiting species extinctions to advance the community’s intrinsic demands for conservation. However avoiding extinctions, by itself, is a narrow conservation perspective. More generally we think of policies to improve the resilience of Australian biodiversity to climate change. How does one design an response to climate change when costs and benefits of dealing with the problem are uncertain as are physical and environmental effects, when there is controversy over the discount rate to be used and when damages associated with biodiversity destruction are highly nonlinear, involve important irreversibilities and when policy makers must address events over distant time horizons.

This is a complex policy design task because of the interaction between risk and the irreversibilities. But economic theory suggests approaches to analysing such issues using ‘real options’ theory: See Pindyck (2007).

Section 2 below provides background information on the biodiversity conservation problem posed and articulates factors complicating its resolution. Section 3 examines policy developments in Australia in relation to this problem and articulates an approach based on that proposed by the Natural Resource Ministerial Council (2004). Section 4 makes final remarks.

2. Global warming and biodiversity conservation. Most of Australia will warm by between 1-6o C by 2070. Annual rainfall is likely to fall in the south and southeast where population and agricultural production are concentrated and evaporation will increase. Some sparsely-populated inland and north western areas will have moister summers. To provide perspective, with a 4-6oC increase in temperature, Melbourne’s climate would resemble that of Moree in northern NSW. Forecast climatic effects are not necessarily marginal – they could be very significant. Globally a 6oC average temperature matches the temperature increase experienced since the last ice age.

2.1 Climatic uncertainty. Precise climatic effects are complex and difficult to forecast. Meteorological science shows the relation between greenhouse gas concentrations and climate is highly uncertain. There is substantial uncertainty concerning effects on climate of measures to control emissions and the high natural variability of climate masks slowly evolving induced climate trends. Furthermore, Australia spans regions from the tropics to the mid-latitudes and already has a highly variable climate because of the El Niño Southern Oscillation (ENSO). This brings about Dorothy Mackellar’s description of Australia’s climate as one of ‘droughts and flooding rains’, particularly in eastern Australia. Climate change can intensify extreme climatic outcomes with increased intensity and frequency of droughts, heavy rains, floods and cyclones. With higher temperatures too there will be more heatwaves and fewer frosts. Impacts on specific average rainfall patterns are highly uncertain with reduced rainfall in the southwest but with either uncertain rainfall effects in northern and eastern Australia. Pittock (2003), (2005, 256-257) provides further information.

Finally, while climate change is recognised to be generated by global greenhouse gas emissions its effects will differ widely by region and even by continent: See Wolfson and Schneider (2002, 36-40). But while information on general trends in a broad region are often useful, species conservation concerns often involve analysing specific habitats. Indeed, endangered species may occupy very narrow geographic regions that may be subject to anomalous climatic and environmental experiences. Conservation biologists will therefore be forced to place considerable weight on aggregated, uncertain climate forecasts.

A major initial observation is therefore a simple one: The effects of climate change in Australia are geographically diverse and hence exceedingly complex. They are also highly uncertain in terms of both specific temperature and rainfall effects.

2.2 Environmental uncertainty. While analysis has focused on the impacts of climate change for human life, a growing literature addresses consequences for non-human life and particularly for biodiversity. Flora and fauna face difficulties in adapting to, or migrating from, changed climates, even with gradual climate change, due to the human fragmentation of landscapes. If, as expected, substantial climatic changes occur over a short period, such as 50-100 years - on a geological timescale this is abrupt - effects will be severe.

A possible extreme environmental consequence of climate change is an ensuing wave of species extinctions globally and a destruction of biodiversity values. Thomas et al (2004) estimate that, in regions covering one fifth of the earth, 15-37% of plant and animal species could face extinction by 2050 should a middle-of-the-road scenario for increased emissions eventuate. If emissions are on the high side, the range jumps to 21-52%. Note the wide range in these estimates and their sensitivity to assumptions regarding mitigation responses.

The Stern Review (2006) endorsed these estimates. A warming of 2oC was expected to leave 15-40% of the world’s currently extant species extinct.

In Australia, the Climate Change Network, at their website, identifies 90 Australian species at risk from climate change - for the most part species identified at this site are currently threatened species. What is required is an indication of the sensitivity of various species and habitats to climate change – on their resilience - and, on this, there is only partial information.

For example, Hughes et al. (1996) examine the distribution of 819 species of Eucalyptus the major tree type characterising the Australian landscape. The majority of these individual species occupy small discrete regions defined by narrow temperature zones. More than 200 species have ranges spanning 1oC while 82 span just 2oC. Should Australia’s temperature rise by 3oC this century half of Australia’s Eucalyptus would grow outside their current zone. How well they would adapt to this is uncertain but there is potential for sensitivity.

Clearly knowledge of climate change effects on biodiversity is limited partly because of uncertainty about the effectiveness of natural adaptive responses, the role of geographical fragmentation of landscapes and the assault that might be launched on certain areas by invading exotic and natural species. Most of the information that is available is individual species and habitat specific. Given ecosystem complexities and the partial nature of information, uncertainty is intrinsic to analysis of the effects of climate change on biodiversity and to assessing species and habitat resilience in the face of climate change. As Pittock (2003, p. 168) states:

‘…there is relatively little specific information about the long-term capacity for and rates of adaptation of ecosystems in Australia that can be used to predict likely outcomes. Therefore, a large degree of uncertainty inevitably exists about the future of the Australian natural ecosystems under climate change.’

Our second major observation is also simple. The specific effects of climate change on biodiversity are highly uncertain.

2.3. Policy objective uncertainty. Finally, it is important to clarify what policy objectives are with respect to conserving biodiversity. These are complex because the idea of ‘biodiversity’ is itself complex – it is a pseudo-cognate concept (Gaston (1996, 1)) with different users of the term having distinct concepts in mind but using it as if it had a common meaning. It is difficult to formulate policies towards a loosely-defined notion.

Even ignoring definitional niceties, the development of biodiversity conservation strategies in Australia, as in most countries, has been partly ad hoc and partly based on delivery of sound conservation outcomes. It is acknowledged, for example, that land with high agricultural value has been under-supplied for conservation purposes.

With respect to biodiversity conservation per se, specific objectives of policy are diffuse and numerous: See Environment Australia (2001). Policies sometimes seek to limit extinctions and sometimes to retain representative habitats. In seeking strategies to deal with exogenous climate changes we are not addressing simple objectives.

Moreover, as benefits and costs from biodiversity conservation are distributed into the distant future the inter-temporal valuation issue of choosing a discount rate arises in choosing between conservation options. There is disagreement and uncertainty in assigning discount rates which becomes crucially important in problems with long-term time horizons. One can argue that if discount rates are anything other than very low and if costs of acting are borne now while benefits accrue in the distant future then, on the basis of cost-benefit analysis, the best policy is to do nothing – since discounted benefits then may not justify costs. Thus if conserving a species provides a $1 billion benefit in 200 years that is worth only $58,000 today at a discount rate of 5%. Moreover, intergenerational arguments - placing significant weight on the environment we hope to transfer to our children - suggest discounting at a low rate. Pindyck (2006) shows that being uncertain about the discount rate means itself that the rate used should be set at less than the expected future discount rate in the absence of uncertainty with the difference increasing as the planning time-horizon increases. For long-term planning, a rate close to zero is not implausible.

2.4. Irreversibilities. Inter-temporal aspects of any plan to address effects of climate change on biodiversity make the task complex and, again, uncertain.

Finally, important irreversibilities impact on policy-making. These pull in opposite directions in terms of desired policy intensities and the timing of interventions and substantially complicate policy planning.

(i) Species loss effects – in particular species extinctions - are irreversible. This creates incentives to adopt active management policies early even if benefits from doing so fall somewhat short of costs. The existence of the possibility of a future benefit from not allowing a species to go extinct provides an ‘option value’ rationale for species protection that reflects the irreversible loss of options that extinctions imply – indeed this is the core idea of the ‘real options’ approach to irreversible investments under uncertainty: See Dixit and Pindyck (1994). The existence of option values provides a bias towards early adoption of policy and for greater policy stringency.

(ii) Sunk cost effects also arise however because policies to deal with climate change problems impose sunk costs for society. For example, investing in captive-breeding programs or the translocation of species are expensive discrete investments that are not recoverable should the investments prove unwise because uncertain policy costs and benefits turn against such provisions. For example, if long-term conservation costs should turn out to be higher than expected while long term benefits are lower. This provides a motivation to wait for better information before investment in biodiversity protection is undertaken. Cost benefit analysis which accounts for this value of waiting, will be biased toward postponing adoption of such policies and for reducing policy stringency.

This is an important summary point. Irreversibilities combined with uncertainty can sometimes increase and sometimes decrease both the timing and extent of desired conservation effort. Without good empirical evidence – and this is lacking to this point – there is no way of making a simple qualitative judgement a priori. It is necessary to assess the relative size of ‘species loss’ and ‘sunk cost’ effects. Some literature – based it must be acknowledged on plausible though invented data - suggests ‘sunk cost’ effects are relatively strong implying a case for deferred and reduced intensity investments rather than pursuit of high intensity conservation policies now: See Pindyck (2000), (2002).

2.5 Nonlinearities and thresholds. The case for emphasising ‘sunk cost’ irreversibilities is tempered by the prospects for non-linearities in the damage response of the environment to climate change when uncertain critical thresholds occur: See Pittock (2005, 99-105). Such non-linearities can be accounted for by allowing for the prospect of a catastrophic risk of a substantial damage response. A biodiversity example might be widespread species extinctions while at the climate level catastrophic risks include possible rapid deglaciation of the polar ice sheets or collapse of the conveyor belt circulation in the North Atlantic. Note that given the complexity of environmental systems, catastrophic risks could also take the form of currently unanticipated consequences: See Grant and Quiggin (2006). In this case previously undiscovered consequences of climate change for biodiversity may be discovered in the future and events previously regarded as impossible may turn out to be possible. We may also find out that we know less than we thought we did.

Clarke and Reed (1994) show that, if the degree of risk of catastrophic collapse is strongly related to the extent of policy intervention, so a critical level of lack of conservation effort can bring about a wave of costly extinctions, greater stringency in control is sought. In simple terms this provides a case for pursuing ‘safety first’ options. If, however, greater risk is expected that is unrelated to the extent of policy intervention then, by a familiar triage argument, less should be expended on protecting species since their value has unalterably fallen.

Intuition suggests that a case for early action is also motivated by standard arguments emphasising the increasing value of natural capital relative to person-made capital as society advances. With technical progress, person-made capital can be augmented and replaced while natural capital cannot. Also, with increasing wealth if it is supposed that demands for biodiversity conservation are a luxury good, so more is demanded with increased affluence, there is again an argument favouring early adoption of adaptation policies to improve biodiversity resilience: See Krutilla (1967).

2.6 Summing up. There is uncertainty about the scale of climate change, climate change impacts on biodiversity and about what the impacts of an adaptive policy should seek to achieve. There are also significant irreversibilities that add complexity to the planning task. Formal economic model building can help sort out the qualitative role of these complicating factors and can suggest sensible policies.

As a general matter, the high uncertainty in analysing this policy task suggests a need to invest in providing information on the extent of climatic effects and consequent biodiversity impacts. It also suggests a case for monitoring the environment’s response to climate change. Finally, the high risks suggest that a policy focus with emphasis on a narrow range of policy options is inappropriate. A number of policy responses need to be sought and backup ‘insurance’ options pursued lest major policy responses should fail. For example, with respect to endangered species protection, one might simultaneously seek to strengthen the protection accorded to that species in its current environment, seek to translocate that species to new environments and perhaps also seek a captive breeding response as insurance.

Uncertainty needs to be incorporated into formal decision models by attaching probabilities to the various anticipated outcomes with account taken for possible surprise events. Probabilities should be assigned using expert judgement even if the costs and benefits assigned to outcomes reflect policy-maker or community values.

The general policy prescription involves increased investment in biodiversity conservation to reflect the increased risk that this valuable community asset is exposed to. In part this investment reflects the fact that species will endogenously migrate as climate change proceeds. Thus investment effort will need to be devoted to improving the resilience of existing conservation efforts, the adaptability of new areas a receptor sites for new species and to preventing unwanted species invasions.

3. A policy framework. Australian governments have prepared an ‘action plan’ for addressing climate change impacts on Australian biodiversity: See Natural Resource Ministerial Council (2004). The NRMC’s intention is for each state and territory to undertake specific initiatives to implement this plan and for the commonwealth to coordinate efforts. The plan splits into three types of undertaking that are broadly consistent with the framework set out above. They involve investment in information, investment in minimising biodiversity impacts and integration of policy designs into pre-existing conservation planning and policies for managing new efforts. Suggestions are now made to develop this framework using economics. The economics of information and investment provide the main conceptual and practical guidelines to conservation planning where risk and irreversibility play a major role.

3.1 Increasing knowledge. This NRMC objective seeks to improve knowledge of the impacts of climate change on biodiversity over time horizons where adaptation planning is sensible; to improve understanding of adaptation responses and to increase the capacity to assess costs and benefits of different policy responses. These objectives also need to be augmented to include improving knowledge of the specific likely extent of climate change. The NRMC also emphasise the need to transmit these types of information to policy makers and the broader community.

The economically desired investment in information depends on the extent of uncertainty faced, costs of acquiring information and the benefits consequent to having better information. As emphasised above, there is substantial uncertainty regarding effects of global warming and on the resilience and adaptability of biodiversity to climate change. Information about climate change is in some respects a global public good that will be underprovided by private markets partly because it can be drawn on at low cost. Hence, unless costs are prohibitive, there is a case for public investment in long-term meteorological and climate research to gain information. A basic question is the extent of likely climate change given plausible assumptions about global mitigation responses.

Information on the adaptability of Australian biodiversity is, in the main, a local public good that must be generated primarily in Australia. This is likely to be much more expensive than climatic information as it will need to be site and species specific. Such informational investments inevitably call for prioritization since exhaustive characterisations are impractical.

Climatic and biological information accrues through time with experience of climatic change, through observing the adaptability of ecosystems and through independent science-based learning. Given learning possibilities there are incentives to monitor developments and to delay acting on developments until information quality improves. While the need to ‘wait’ is a standard incentive in dynamically-evolving uncertain systems, significant effects of climate change will occur short-term, over perhaps 30-70 years.

Moreover, it might be expected that adaptation strategies could become both more expensive and less effective as the pace of climate change increases. As with the climate change issue as a whole, there are incentives to act promptly on the basis of imperfect information rather than to wait for much more accurate information. This means that policy responses should be closed-loop feedback rules reflecting the current state of knowledge and which evolve as knowledge evolves.

A particular information concern is to identify ‘at-risk’ species and to list them as threatened under threatened species legislation. This makes sense if high costs are associated with species extinctions. Moreover, addressing the extinction issue enables policy authorities to simplify one of the key irreversibility constraints namely the species conservation constraint.

A final specific information concern is to identify climate change effects on the distribution of new and established exotic as well as native invasive species. While some species will be damaged by climate change the survival prospects of others may be improved thereby damaging the survival prospects of competitive species.

3.2 Minimising biodiversity impacts. These impacts are classified into different categories by geographic area and actions sought to minimise the harmful effects of climate change. One focus is on impacts on hydrological cycles and consequent impacts on inland aquatic and semi-aquatic species. Another looks at impacts on marine, estuarine and coastal ecosystems. A third focus looks at terrestrial systems. Concern also focuses on minimising the impact of invasive species whether they are exotic or native species.

Clearly there are a range of adaptation investments that can improve the resilience of biodiversity. For the most part NRMC emphasise investments building on current conservation efforts. These fall into several areas.

Policies designed to increase the environmental resilience of existing conservation zones. This includes policies for increasing conservation reserve size, measures to improve and restore streams and aquatic environments, limiting land degradation and invasive pest species and to provide appropriate fire management regimes. For many conservation efforts the general prescription for policy responses is for more active management.
Investments in new reserves that seek to strengthen the capacity of the reserve system as a whole to act as refuges for vulnerable species that migrate in response to climate change. This might include investments in wildlife corridors that facilitate migrations and the translocation of particular threatened species. An important aspect is to develop partnerships between government and landowners to facilitate linkages and stepping stones to assist biodiversity adaptations.

Efforts should be devoted to protect species whose existence is threatened by climate change. These species require investments as discussed above but might also call for conservation in captive-breeding programs, zoological and botanical gardens and/or germ-plasm/seed banks.

If a pessimistic assessment of the likely success of adaptation measures is taken insurance policies can be adopted to reduce the probability of extinctions. The NRMC suppose captive breeding and translocation strategies are expensive compared to adapting current conservation policies. They may however make sense as fallback insurance options that imperfectly realise conservation objectives should more general programs fail.

Translocation policies require specific analysis since they are complex and expensive.
The radical strategy of assisted migration involves moving species to climatic zones where they have improved survival prospects. This policy triggers strong, mixed feelings from conservation biologists because the procedure is risky even though not undertaking the strategy may condemn species to extinction. Parmesan (2006) reviewed studies on the ecological effects of climate change and concluded that many plant species are already now budding earlier in the spring, animals migrate earlier and the ranges of many species are shifting to higher latitudes, as they track climates that suit them. So migrations are already occurring.

These adjustments have occurred over the past 2 million years as the planet has swung between ice ages and warm periods. But the current warming is different as the earth was already relatively warm when it began. It will also be more difficult for some species to move since, when the planet warmed at the end of past ice ages, retreating glaciers left behind empty landscapes. Today’s species face obstacle courses of cities, farms and other human settlements. Animals and plants will also have to move quickly if they are to keep up with relatively quick climatic changes.

Many conservation biologists believe alternatively that conventional strategies may help combat extinctions from global warming. Bigger reserves and corridors connecting them, could give species more room to move. McLachlan, Schwartz and Hellmann (2007) examine this debate.

Assisted migration may be the only way to save some species but biologists need to do it safely and effectively. The basic question is: Which species to move and where to take them? If numerous species face extinction then prioritization is inevitable. Those selected need to be relocated to regions where they can survive in a warmer climate. Simply moving a species is no guarantee it will survive since many species depend on other species for survival. Finally, a transplanted species is an invasive one which might start to harm other species. Will some migrant populations need to be controlled or eliminated?

Some argue that assisted migration should be a measure of last resort used sparingly. But further species migrations will occur and, as species shift their ranges, some will push into preserves that are refuges for endangered species.

3.3 Incorporating strategies into current practise. Finally, the action plan examines the integration of thinking about impacts of climate change into current biodiversity planning. The premise is that these programs exist so one can build on the knowledge of them. But in addition, new land use strategies might need to be developed to accommodate adaptation to climate change planning.

To make current conservation efforts responsive to climate change issues:

Existing conservation strategies must incorporate climate change into monitoring and reporting systems and use this information to provide policy advice on climate change-induced effects on conservation. A particular concern is with rural adjustment policy and links between the action plans for biodiversity and that for agricultural adaptations: See NRMC (2006).

Major issues concern how the national reserve systems can be linked to provide corridors for species migrations in the face of climate change. Specifically how can such measures be linked to agricultural land reclamation programs and what are the cost and benefits of such programs?
There is a need to review new land use and reserve planning policies to account for climate change and to make provision for species adaptations. Again there is the need to provide policy advice on these issues.

To include impacts of climate change on decision-making associated with listing threatened and endangered species and to develop recovery plans for such species. While emphasis should be on planning at habitat or biome level, flora and fauna species checklists should be used to determine vulnerable species not protected by broader conservation efforts.

These developments belong prior to the derivation of specific investment policies. Their articulation and refinement is the major output of attempts to address climate change impacts using economics.

Directing policy towards pre-existing conservation efforts is sensible also from the perspective of offsetting the effects of uncertainties by emphasising win-win options. Such efforts are useful if anticipated climatic outcomes eventuate but, in so far as they strengthen current programs, they will advance conservation objectives even if climate change impacts are less severe than expected. Win-win options can also be encouraged by thinking about synergies with the agricultural sector through enhanced conservation and water resource management policies. Again payoffs will eventuate even if anticipated climatic changes are unrealised. These win-win payoffs have the incidental benefit of helping to secure community support for addressing impacts of climate change on non-marketed biodiversity.

4. Final comments. A major issue in biodiversity conservation in the face of climate change is the interaction between high risk and irreversibility. The existence of risk provides incentives to invest in information and provides consequent conflicting incentives to wait for additional better information. However irreversibilities can drive an emphasis on dealing promptly with a problem before it becomes severe.

In this setting utilising adaptation policies to ameliorate climate change effects makes sense. These policies can be both passive reflecting observed changes in biological systems and anticipatory adaptation: See Schneider & Kuntz-Duriseti (2002). Proactive policies involve strengthening the resilience of biological systems now to deal with climate change impacts in the decades ahead.

As a general proposition it makes sense to rely on a range of policy responses and to view policy as adaptive or closed-loop rather than an open-loop response. It also makes sense to err on the side of caution in predicting longer-term effects of climate change on biodiversity.

Unless one believes in science fiction, biodiversity losses are irreversible so it is sensible to be prepared to deal with the worst that can happen. This suggests assigning higher than expected values to biodiversity losses to reflect their option values and to prepare worst-that-can-happen policy responses to climate change effects. Most importantly it also implies the need to devise back-up plans involving species translocations and captive breeding.

With these uncertainties it makes little sense to seek to develop a comprehensive national conservation response a priori. Test runs should be devised using case studies of a representative sample of conservation sites as the basis for a more comprehensive plan. The test runs should include a focus on conservation efforts in Australia’s single conservation hotspot namely south west, Western Australia, in Alpine habitats such as the Victorian Alps or the Snowy Mountains, in the rainforest habitats of northern Queensland, in coral reef habitats such as the Great Barrier Reef and in the rangeland areas of southern Queensland or central Western Australia. The costs and benefits of various adaptation policies need to be measured and species loss and sunk cost effects identified in each of these settings. The likelihood of catastrophic risks should be examined and their possible implications for policy intervention identified.

The case studies should assess the economics of conservation efforts at the various sites, examine existing plans for dealing with climate change and, where necessary, look at cost-minimising options for improving resilience as discussed above. The options examined should include ‘doing nothing’, investing in improved resilience onsite and, as a limiting policy, arranging species translocations. The ‘doing nothing’ option is relevant for species whose viability is unthreatened and, using triage arguments, for species whose extinction is inevitable.

Given the information and management expertise possessed and the existence of existing conservation resources it makes sense, as the NRMC review suggest, to base an adaptation strategy around existing conservation efforts. This will reflect the existing reserve system and pre-existing efforts to promote conservation on private land, including wildlife corridors. But conservation priorities could change in regions most affected by climate change and this needs to be reflected in planning.

Along with attempts to strengthen existing conservation efforts there needs to be a critical emphasis on where existing efforts are vulnerable and possibly made redundant by climate change impacts. As the NRMC note, to the extent that climate change causes changes in agricultural land values, there are both problems and opportunities for new approaches to planning.

The significant contribution economics can make in helping to understand the impact of climate change on biodiversity is to provide a framework for assessing objectives and the scope of policy. Cost benefit analyses, adapted to account for information acquisition issues under risk, can be used to prioritise conservation options. The emerging literature on cost-benefit analysis under uncertainty, where significant irreversibilities are involved, shows the structure of the policy design task.

References

R. Brereton, S. Bennett & I. Mansergh, ‘Enhanced Greenhouse Climate Change and its Potential Effect on Selected Fauna of South-Eastern Australia: A Trend Analysis’, Biological Conservation, 72, 1995, 39-354.

H. Clarke & W. Reed, ‘Long-Run Consumption Pollution Tradeoffs in an Environment Subject to the Pollution-Related Catastrophic Collapse’, Journal of Economic Dynamics and Control, 18, 1994, 991-1010. Reprinted in M. Hoel (ed) Recent Developments in Environmental Economics, The International Library of Critical Writings in Economics, Elgar, Cheltenham, Vol. 1, 2004, 497-516.

A.K. Dixit & R.S. Pindyck, Investment Under Uncertainty, Princeton University Press, Princeton, 1994.

Environment Australia, National Objectives and Targets for Biodiversity Conservation 2001-2005, Commonwealth of Australia, Canberra, 2001.

K.J. Gaston, Biodiversity: A Biology of Numbers and Difference, Blackwell Science, Oxford, 1996.

S. Grant & J. Quiggin, ‘Learning and Discovery’, Risk & Uncertainty Program Working Paper, R05-7, University of Queensland, 2006. .

M. Howden, L. Hughes, M. Dunlop, I. Zethoven, D. Hilbert & C. Chilcott, Climate Change Impacts On Biodiversity In Australia, Outcomes of a workshop sponsored by the Biological, Diversity Advisory Committee, 1–2 October 2002, Commonwealth of Australia, 2003, Canberra.

L. Hughes, ‘Climate Change in Australia: Trends, Projections and Impacts’, Australian Ecology, 28, 2003, 423-443.

J. Krutilla, ‘Conservation Reconsidered’, American Economic Review, 47, 1967, 777-786.

J.S. McLachlan, J. J. Hellmann, & M. W. Schwartz. ‘A Framework for Debate of Assisted Migration in an Era of Climate Change’, Conservation Biology (forthcoming). .

Natural Resource Ministerial Council, National Biodiversity and Climate Change Action Plan 2004-2007, Department of Environment and Heritage, Canberra, 2004.

Natural Resource Ministerial Council, National Agriculture and Climate Change Action Plan 2006-2009, Department of Agriculture, Fisheries and Forestry, Canberra, 2006.

C. Parmesan, ‘Ecological and Evolutionary Responses to Recent Climate Change’, Annual Review of Ecology, Evolution, & Systematics, 37, (forthcoming 2006).

R.S. Pindyck, ‘Irreversibilities and the Timing of Environmental Policy’, Resource and Energy Economics, 22, 2000, 233-2589.

R.S. Pindyck, ‘Optimal Timing Problems in Environmental Economics’, Journal of Economic Dynamics and Control, 26, 2002, 1677-1697.

R.S. Pindyck, ‘Uncertainty in Environmental Economics’, Review of Environmental Economics Policy, (forthcoming 2007). AEI-Brookings Joint Centre for Regulatory Studies, Related Publication 06-39, December 2006.

B. Pittock (ed) Climate Change – An Australian Guide to the Science and the Potential Impacts, Australian Greenhouse Office, 2003.

B. Pittock, Climate Change: Turning Up the Heat, CSIRO Publishing, Earthscan, Collingwood, 2005.

O. Pouliquen-Young & P. Newman, The Implications of Climate Change for Land-Based Nature Conservation Strategies, Final Report 96/1306. Australian Greenhouse Office, 2000.

S.H. Schneider, A. Rosencranz & J.O. Niles (eds), Climate Change Policy: A Survey, Island Press, Washington, 2002.

C.D. Thomas et al, ‘Extinction Risk from Climate Change’, Nature, 427, 2004, 145-148.

R. Wolfson & S.H. Schneider, ‘Understanding Climate Science’, in S.H. Schneider, A. Rosencranz & J.O. Niles (eds), Climate Change Policy: A Survey, Island Press, Washington, 2002, Chapter 1.

Does the country change when the government changes?

Tim Dunlop has asked me to be part of a blogging ‘conversation’ experiment he is co-ordinating from his Blogocracy blog. Each person in a group of commentators, posts a question in turn. Each member of the group then responds to the question on their own blog and links to the responses of the others. So I will respond today and get a chance to post a question for the others at some time in the future.

Tim’s initial question is:

My first question is picking up on something said by both John Howard and Paul Keating, namely, that when the government changes, so does the country. Both made the comment at a time when it looked to them like they might be about to lose power and so there was, of course, a sense of warning in their observation. So that’s my question: Does the country really change when the government changes?

My response.

This question seems to in part pose the tweedledum-tweedledee issue. Despite the different way they portray themselves, are the two major political groupings in Australia so similar that they can be expected to provide essentially the same policies?

If so then a change in government will not provide much of a change in the country.

The question is a very general one and clearly does not admit a simple ‘yes’ or ‘no’ answer. To answer it precisely one would need to relate the history of the major political groups in Australia to the history of Australia. There would be a significant random element in effecting this linkage reflecting the role of general global changes, the role of other levels of government, the unions, Reserve Bank, public sector and the Treasury. Perhaps, too, social attitudes drive history and to some extent politicians just play catch-up.

Thanks Tim it’s a tough question.

Let me give a narrow economic perspective of the question based on some specific cases that I know something about:

1. In the very long-term some major policies seem to be determined by events rather than the party-political identity of politicians.

One of my academic interests is the very long-term history of labour and capital migrations to Australia. My judgment is that most of these outcomes reflected events in the international economy, and the ups and downs of the Australian economy, rather than party political policy decisions in Australia.

Up until the 1920s, capital and labour moved freely and in great quantities into the Australian economy. The main determinant of intakes had nothing to do with Australian policy at all – they were primarily determined by the size of US capital and labour inflows which left countries like Canada and Australia sharing the residual. After the 1920s a period of restrictions emerged that lasted up until the Second World War. This was then followed by an increasingly Liberal phase. Hiccups occurred during the banking collapses and droughts towards the end of the nineteenth century but these, again, had nothing to do with political identity.

It is difficult to tie these broad immigration phases to particular political developments in Australia since the other countries of high immigration (Canada and the US) followed exactly the same chronology. You would have to be naïve to see this as mere coincidence.

Even particular events such as the abolition of racially discriminatory immigration policies in 1973 were accompanied by similarly-timed changes in other countries. Big reforms based on changing morals or a common response to the same international factors? I’ll bet the latter.

These days I remain surprised, more generally, by the extent to which economic progress in Australia is driven by the international economy alone. The driver now is China and Japan rather than Europe and the United States. The main task for policy-makers is to not stand in the way of inevitable changes.

2. Over the past 40 years the outstanding events in Australia’s economic history were the 1975 tariff cut by Gough Whitlam and the move by the Hawke-Keating Government in December 1983 to float the exchange rate and liberalize foreign exchange controls. These moves cemented Australia’s modern role in the world economy. They were moves that one might have expected a conservative government to implement.

Most conservative supporters saw the years of Mr. Fraser’s Prime Ministership as years of inaction and wasted opportunity in relation to liberalizing the Australian economy - although the conservatives in opposition did support the subsequent liberalizing moves by Labor they were bound by interest-group politics and their conservatism not to bring these changes on themselves.

Moreover, the international community, as a whole moved, towards greater flexibility in exchange rates and to less reliance on foreign exchange controls so it is not clear how much specific Labor input there was in the decision. I don’t think that much though Labor drove the specific timing.

I think Labor can be identified with changes that altered significantly the way Australia related to the world but I am unsure how much of the change was endogenously determined by events. I don’t worry too much about the attribution of such changes - they were unambiguously welcome.

The Howard conservative Government has presided over what is perhaps the longest boom in Australian history for the past 100 years. The key remaining item on the reform agenda is to rid the economy of destructive workplace practices which reduce our freedoms and our prosperity. I think Howard has taken a small step in this direction but his basic virtue has been to not stuff things up. A Labor Government might well introduce urgently-needed, simple labour market reforms eventually. It would not surprise me.

3. The present. Would a Rudd victory change Australia?

In the short-term a Rudd victory will restore the failing fortunes of Australia’s trade unions but this is unlikely to have much medium term impact. The decline in the role of the unions reflects changes in the way work is carried out in Australia and is only marginally a function of anti-union activities by the conservatives. That Mr. Rudd’s wife chooses common law individual contracts for her firm rather than relying on collective agreements is telling as Terry McCrann points out.

The current IR stance of the ALP will fade in the face of economic realities and its Therese Rein-style contradictions. The unions and collective bargaining will die over the next few years to become a perceptible force only in the public sector.

Mr. Rudd’s indicated withdrawal of troops from Iraq will weaken the Australian-American Alliance but not in a major way. The war is as unpopular in the US as it is in Australia. In addition, the latent anti-Americanism in the ranks of Labor’s left will be squashed by policy realists who understand the overwhelming importance of the Alliance. The most significant impact of the proposed Australian withdrawal will be to signal (in a minor way) to the terrorists that the propaganda tricks and manipulations they have played on the West have won.

The West will live with the consequences of this victory for decades – it is my major current political concern.

The other distinctive parts of Mr. Rudd’s agenda such as reinstituting an ‘industry policy’ which favors manufacturing will likewise, in my view, fade. Much damage can be done here but it will only be temporary. The factors that limit growth in, for example, the Australian automotive assembly industry have much less to do with whether we have 5, 10 or 15% tariff protection than the existence of China which will be the largest automobile market on earth by 2020. We will still sell and service vehicles in Australia then but we probably won’t produce many. Avoiding this would require protection of 60% and that is not on.

In my view Rudd is a right-wing bureaucrat who will seek to operate Australia much as it operates now. He is a fairly able guy (not in the order of JWH) but has really poor quality people to draw on as ministers and a hopeless backbench. If Rudd secures power there is a high chance of monumental policy stuff-ups but there is little chance of long-term damage.

Conclusion: The notes above probably doesn’t answer Tim’s question adequately but I think I have shown why it is a demanding question anyway.

Political parties provide us with ways of adapting to the inevitable and are only partial creators of our social evolution. The world changes and we will too.

My response to the other commentators.

Joshua seems to see the rise of more liberal economic policies in the 1980s in Australia as leadership-driven. I would ask why this liberalization was then and after such a global phenomenon in Western countries. With respect to immigration policy at the time countries such as Canada had much higher intakes than we did. Joshua’s comments on immigration policy under Howard seem off the mark – Howard increased intakes considerably over those in the Hawke-Keating years – easier now of course since we have much lower unemployment.

Tim and I seem to have similar views on the issue even though we would draw different political conclusions; I agree with him that politicians have incentives to exaggerate their role. I liked his discussion of the role of ‘inevitability’ arguments.

I also thought Ken and I had similar thinking – WorkChoices continues reforms begun under Hawke/Keating – I agree.

Tigtog and I are apart in terms of politics and I think that her emphasis on the relation between parties and views in the electorate is only part of the story. We are also impacted on by the world as I argue in my post.

Kim’s arguments I find really difficult. Her claim is that leaders should lead and when they don’t lead the ‘people perish’. I think this is a boring old lefty illusion – we don’t need a ‘prophet’ (to Kim Keating was a prophet!!!!!) to go forward and if we don’t we will not necessarily stagnate. Indeed she regards JWH as anything but a prophet but he has delivered good outcomes. Basically I don’t want any political visionary ‘leading me’. It is ‘clear that prophecy and prophets are what give sustenance to the people’. What you are saying here Kim is close to being fascist and an unhappy conclusion in what should be a free society. Moreover it is inaccurate – as a number of us have argued many of the political changes at this time were replicated elsewhere with local politicians understating the extent to which they just reacted to events.

Robert M is one of the interesting bloggers on the left and on this question is sensible enough to see that things won’t change drastically if a Rudd government is elected. As I have stated (and I think Ken agrees) the current IR reforms continue a set of historical developments that ultimately will not be reversed. Ken might regret that but I don’t. I think Robert is astute in recognizing the lack of leadership the coalition has displayed on climate change. It’s a justifiable gripe but the facts of climate change will drive Coalition policy even if they do so with a lag.

Andrew, as a politician, is in the thick of it and despite his qualifications I think he (almost naturally) overestimates the autonomy of politicians. Like Tigtog he emphasizes constraints imposed by the electorate. I think these are important but that constraints imposed by the world (Greenhouse, China, India, US policy) are as important. I liked Andrews’s comment about Al Gore. Particularly on the climate change issue the world would have been better-off had Gore been elected instead of Bush. This exception establishes (if you really needed to prove such an obvious point) that one cannot ignore totally the issue of political identity.

A good discussion which I enjoyed. I welcome comments on this draft and will add changes in perspective as updates.

Other commentators are: Joshua Gans, Tim Dunlop, Ken Parish, Kim, Robert Merkel, Andrew Bartlett and Tigtog.

My response: I enjoyed this discussion and my responses to the various participants are at the bottom of the page over the leaf.

Denialist stupidity

I am astonished at the The Australian newspaper for suggesting that cool temperatures in 2008 might provide a ‘serious blow to global warming alarmists’. It is my bolding on the word ‘alarmists’ – an unusual turn of phrase since it includes almost all figures in climate science and the Australian Bureau of Meteorology.

The Australian's judgement is wrong on two counts. First, climate is not determined by a single year’s average observed temperature. To suppose otherwise is just incorrect. Keith Colls and Richard Whitaker’s excellent, The Australian Weather Book, Second Edition, 2001 define climate as the probability distribution of the various elements of day-to-day weather. To determine this probability distribution, for weather patterns as variable as those for Australia, the authors suggest that it is necessary to draw on rainfall records dating back 150 years and temperature records drawing on 50 years (page 156). Second, there may well be medium term deviations from warming trends due to climatic effects related to cooling of the oceans. This is the reason I am strongly opposed to viewing the current drought as a reflection of climate change. If the public come to accept that medium term droughts reflect climate change they may falsely believe that medium term reductions in average temperatures imply that anthropogenic global warming arguments are false.

The difficulty with the foolish reasoning presented in The Australian is that it may cast sufficient doubt in the minds of the public and in politicians to forego activist climate change policy particularly given the current economic difficulties.

In fact the current cooling trend has been analysed at length by the Bureau of Meteorology. Their December 23, 2008 ENSO Wrap-Up states:

The equatorial Pacific has continued to cool during the past fortnight, with large areas in the east and centre of the basin between 0.5°C and 1.5°C cooler than normal. This raises the possibility of indicators reaching La Niña levels, even if only briefly, if the cooling persists. In the atmosphere, Trade Winds have been persistently stronger than normal for some months across the western half of the basin, cloudiness is suppressed along much of the central and eastern equatorial Pacific, and the SOI remains strongly positive, with an approximate 30-day value of +13 as of 21st of December.

Given current conditions and recent trends, the development of a La Niña during the southern summer cannot be ruled out. However, for the first quarter of 2009 the majority of climate models forecast neutral conditions, but with a cooler than normal equatorial Pacific. Historically, it is unusual for La Niña thresholds to be reached during the southern summer, though this did occur as recently as the summer of 1999/2000.

Thus there is the possibility of a cooling related to a La Niña event during the current summer.

Further comments on The Australian’s arguments are provided at Deltoid.

Farmers facing drought & climate change

A lot of my research efforts over the past year or so have been devoted to thinking about the implications of climate change for managing biodiversity. In part this reflects my ‘greenie’ orientation which I think is consistent with my general conservative political philosophy.

Gradually however I have come to see conservation issues as part of a broader range of economic management problems including water resource management issues and agriculture as key auxiliary problems.

I posted here on climate change and biodiversity – a paper eventually published in revised form in Agenda (preprint here), here on agriculture business opportunities from climate change, here on joint agricultural and biodiversity management issues in relation to climate change – this resulted in this academic paper which is as yet unpublished, here on a remarkable paper by Terry Hillman on water resource management (not necessarily related to the issues of providing environmental flows) in the Murray-Darling to protect the environment, here on the proposed cap and trade scheme, here on the nexus between food supply, energy and climate change issues and most recently here and here on the water buyback policies.

I was pleased this evening to see a Four Corners show on the human dimensions of climate change and drought for six families in mallee country in north-western Victoria. It is all too easy for unthinking economists to treat struggling farmers much as they treat the unemployed as an inevitable ‘problem’ that inevitably arises as a consequence of economic and environmental changes. I hope I don’t ever come to even indirectly do this.

The picture was of a group of fairly optimistic farmers – perhaps overly optimistic - who have faced an 11 year drought and borrowed increasingly using their property as security in the hope that next year will be a good season. This optimism is often sustained by rejecting the hypothesis of climate change – the presumption is that the current drought will end and things will return to normal. One argument against this view is that the current drought is hotter than previous long droughts.

There is also a picture of experimentation and adaptation in response to climate change – new crop varieties being trialled, new land use technologies (‘farming systems’) employed and so on. The presumption is that it is the flexible well-managed properties that will do well.

The Commonwealth government is subsidising half the interest costs faced by farmers in difficulty – a policy widely disliked among economists on ‘moral hazard’ grounds – it encourages poor performers to hold on. Surprisingly to me there were strong divisions within farming communities over exactly this issue.

Also interesting to me is the fact that certain supply effects – for example increases in grain prices globally – are inducing farmers to ’hang on’. There is also a possibly related move of large corporations into the farming sector. These corporations can diversify their land holdings across different regions to smooth their cash flows – and in the case of livestock truck animals away from drought affected areas. These avenues are not so easily open to family farms suggesting one rationale for the increasing corporatisation of this sector (I posted on one such Australian company in the past).

My overriding impression from this show is that the optimism of some of the farmers seemed misplaced. Many too seemed very happy to depend on public handouts to keep them operating even though their businesses seemed at best marginally viable. Hanging on too long deletes a farmer’s equity in his or her property and carries a longer-term penalty. I strongly agree with Dr. Brian Fisher (who appeared on the show) that the decision to exit an agricultural business should be left to the market.

I'd be interested to hear from readers - particularly those with connections to rural Australia - whether I have caught the flavor of rural issues accurately or not in the remarks above.

Amartya Sen on food shortages

Amartya Sen argues that droughts such as that being experienced in Australia, high economic growth in some developing countries as well as the diversion of grains into biofuelds servicing the needs of the wealthy has created a surge in the demand for foods that has driven up food prices and endangered the world's poor.

Its a sensible argument - in my own household I have felt the increase in food prices clearly in terms of its impact of our household budget - it is a real impact but as a household we spend less much less than one third of the budget on food. At most I might have to cancel that mid-winter holiday and forgo that new set of golf clubs! For families already spending most of their low incomes on food the issue is of life-threatening seriousness - particular since high food prices are seen as likely for at least another decade. In South America alone 71 million extremely poor people face hunger as a consequence of rising food prices. Globally 850 million people suffer from hunger caused by poverty.

Global economic development has been a success story in recent decades. This should not induce complacency. While levels of absolute poverty have fallen dramatically it is important not to forget those 1 in 10 people of the world's population who are left behind and who suffer the adverse effects of economic growth on such things as food prices.

China's peasants

China's peasants have lived difficult lives for centuries. Mao treated them as a source of surplus to fund his revolutionary armies and, of course, to provide cannon fodder. He also used their existence as an input into the set of ideological lies that helped him grab power.

I have been reading Chen Guidi and Wu Chuntad's, Will The Boat Sink the Water? which provides a peasant-level view of life in China over recent years. It describes a set of incidents where innocent Chinese peasants were persecuted - and in some cases murdered - by local officials who were often little more than thugs. It also describes the courage and ingenuity of the very poor people in China's countryside in seeking to ensure justice is done.

The book sees China's peasants as largely left behind by the Chinese miracle of glittering Shanghai sky-scrapers. Indeed the authors see the modernisation that is occurring as funded by the tax surpluses extracted from the sweat and blood of the peasants. The peasants, as their reward, are being cheated, lied to and deceived by local officials of the Communist Party. If anything it is only the central party organisation that gives them a glimmer of hope in their search for justice from corrupt dishonest local officials.

There are no grand theories in this book - just truth by vignette - a series of true stories of aching injustice to those at the bottom of China's class-based society. The book was banned by the government just two months after it was published - it was amazing to me it was not banned immediately.

There is interesting economics here. An essential part of the story is the way corrupt taxes are levied, phony agricultural targets are met during droughts and how free labour movements are restricted within China to the disadvantage of its poorest. The role of auditing and accountability become issues of major social importance. Many of the agricultural reforms designed to boost productivity are being undone by corrupt taxes that wipe out peasant incentives.

The book is well worth reading as an alternative to the standard eulogistic views on the development prospects of China.

Urban water

In a moment of idleness I analysed my water bill on this blog and decided that, with current pricing rules in place, I had low incentives to change my household's relatively high usage. John Quiggin in today's Australian Financial Review (subscription required) nicely analyses the case for using price rather than quantity restrictions to manage urban water use in Australia. This is topical as the Victorian Government announced today scaled up fines for using water 'wastefully' and a program of moral exhortation to cut Melbourne's water consumption by 30%.

In resource economics quantity restrictions are often advocated for dealing with short-term emergencies while pricing is often seen as a more efficient way of managing use longer-term. This is John's approach and I agree 100%. Particularly if price increases rise steeply enough with increasing household usage. The failure to impose a steep gradient on prices in Melbourne is the reason that, as discussed above, I am rather slack in limiting my family's water use.

John's argument too, is that using price to balance supply and demand in the longer-term leaves open the option to use quantity restrictions to deal with short-term issues shocks such as droughts. Otherwise draconian restrictions or price increases are needed during shocks which hurts all. Moreover, attaching a price to water encourages appropriate cost-efficient investments in water conservation in urban and rural sectors. Currently, driven by quantitative restrictions, excessively expensive conservation investments are occurring in urban areas when cheaper conservation measures could be initiated in the country.

John's aricle is posted at the new RSMG blogsite he has set up.

Global warming web resources

Formerly a skeptic of the global warming hypothesis my expectations have changed over the past few years. The consensus of scientific evidence is that warming is a reality that must urgently be addressed by policy. A BBC survey summarises recent work. It includes recognition that current climatic irregularities can be attributed to global warming. Anthropomorphic greenhouse gas emissions can explain freak weather patterns, changes in sea ice, glaciers, droughts, floods, ecosystems, ocean acidification and new patterns of wildlife migration.

The new Intergovernmental Panel on Climate Change (IPCC) report will be released soon and will be worth reading. The Third IPCC Assessnent Report is available online. Australia's CSIRO climate change model (here) is used as input by the IPCC. Already released is the Avoiding Dangerous Climate Change report presented by scientists at a conference hosted by the UK Meteorological Office in February which identifies sharply scaled-up damage estimates. An excellent Australian information sheet is here.

An excellent economic survey of climate change resources available on the web are the Envirolink pages here. Another is Climate Arc which includes references to a number of climate change blogsites. An excellent local blogsite is Tim Lambert's Deltoid which contains regular posts on global warming and an amusing Global Warming Skeptic Bingo.

I'll try over future months to collate more systematically web resources on climate change that are relevant to environmental economics students and post them here. I welcome suggestions.

An excellent 'Instant Expert' from NewScientist is here.