The Morrison government’s biggest economic problem? Climate change denial



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The government’s stubborn commitment to coal is alienating it from its natural supporters in the business community.
Wes Mountain/The Conversation, CC BY-ND

Judith Brett, La Trobe University

Last week Peter Costello accused Malcolm Turnbull of failing to develop an economic narrative to unite the Coalition. Turnbull promised this when he challenged Tony Abbott for the leadership of the Liberal Party, but, said Costello, it never came, and the result is a government struggling to manage deep differences over social issues. There was “jobs and growth”, but this is really just a goal without much of a story about how to get there, except for the company tax cuts.

The big question, though, is why the government does not have a coherent economic narrative.

One possible answer is that it has been too preoccupied with social issues such as religious freedom and before that, same-sex marriage, to give the economy sufficient attention. There is something in that.

But this does not get to the heart of the problem, which is the inability of the Coalition to face the reality of climate change and its stubborn determination to live in a parallel universe of business as usual. It is climate change denial that is preventing the government from developing a coherent economic narrative.




Read more:
The pro-coal ‘Monash Forum’ may do little but blacken the name of a revered Australian


To be sure, those who doubt the seriousness of climate change are now more likely to describe themselves as sceptics rather than outright deniers, but the effects are the same. Doubting the risks of climate change, opposing serious counter measures and believing in coal’s long-term future is an identity issue for many Coalition politicians.

Then-treasurer Scott Morrison brings a lump of coal to question time in February 2017. Climate change denial is holding back the government from a clear economic strategy.
AAP/Mick Tsiakis

As an identity issue, it is largely impervious to evidence, as we saw in government ministers’ hasty dismissal of the recent Intergovernmental Panel on Climate Change report – before they had even read it, one suspects. Identity issues are also resistant to the normal processes of bargaining and compromise with which many political conflicts are resolved. The National Energy Guarantee was the last of the government’s energy policies to founder on the suspicion that a market mechanism might damage coal. Chief Scientist Alan Finkel’s Clean Energy Target met the same fate.

So now, some members of the party of private enterprise and the free market, which argued for and oversaw the privatisation of most of Australia’s power utilities, are seriously advocating that the government develop a coal-fired power station. Barnaby Joyce has been at it again in recent weeks.

When AGL announced the planned closure of its ageing Liddell coal-fired power station last year, the government strenuously tried to dissuade it, keep it running for longer or to sell it to rival power company Alinta. The pressure was very public on AGL to “do the right thing”, but also private, with Prime Minister Malcolm Turnbull ringing AGL Chairman Graeme Hunt. It was to no avail, and AGL persisted with its commercially based decision to close the plant and invest instead in the generation of renewable energy, as it had every right to do.




Read more:
The true cost of keeping the Liddell power plant open


To state the obvious, the stubborn commitment to coal is pulling the government’s economic policy towards the sort of state socialism it is supposed to abhor. No wonder it is having difficulty developing a coherent economic narrative.

Further, it is alienating the government, and the Liberal Party in particular, from its natural supporters in the business community. With the collapse of the NEG, the government has no energy policy to provide certainty to business and investors. The focus of the new minister for energy, Angus Taylor, has contracted to reducing power prices for consumers. Climate policy has been shifted back into the portfolio of the Minister for the Environment, separating energy from emissions and further demonstrating the identity denialism that distorts the government’s economic narrative. Faced with doubts about Australia’s capacity to meet its agreed to Paris targets, the government blithely says we are “on track”.




Read more:
Australia is not on track to reach 2030 Paris target (but the potential is there)


But most big business outside the fossil fuel industries is not in denial about the real risks of climate change, nor the imperatives of international action. Since Turnbull walked away from the NEG in a vain attempt to appease his critics and save his leadership, the Australian Industry Group and the Business Council of Australia have both been discussing ways to “go it alone” on emissions reduction.

Australian Financial Review journalist Phil Coorey last week quoted a member of the Business Council of Australia’s Energy and Climate Change Committee:

Someone has got to do something. This has to be industry-led unless government wants to take over the markets.

Industry needs certainty to invest, and to maintain and create the jobs that are central to the government’s focus on “jobs and growth”. That certainty needs to last beyond the tenure of one government or even two, and have bipartisan support.




Read more:
Big firms voice lack of faith in ‘cumbersome’ and ‘impractical’ Emissions Reduction Fund


Yet the government is unwilling to provide that certainty. As Angus Taylor told an AFR National Energy Summit last week:

There is no room for bipartisanship when we have a 26% [reduction target] and the other side has 45%.

But because climate policy has become an identity issue for some members of the Coalition, and they fight on it tooth and nail, is has been removed from the normal processes of policy formation.

No wonder the government can’t develop a coherent economic narrative.The Conversation

Judith Brett, Emeritus Professor of Politics, La Trobe University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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What’s the economic value of the Great Barrier Reef? It’s priceless


Neil Perry, Western Sydney University

Deloitte Access Economics has valued the Great Barrier Reef at A$56 billion, with an economic contribution of A$6.4 billion per year. Yet this figure grossly underestimates the value of the reef, as it mainly focuses on tourism and the reef’s role as an Australian icon.

When you include aspects of the reef that the report excludes, such as the ecosystem services provided by coral reefs, you find that the reef is priceless.

Putting a price on the Great Barrier Reef buys into the notion that a cost-benefit analysis is the right way to make decisions on policies and projects that may affect the reef. For example, the environmental cost of the extension to the Abbot Point coal terminal can be compared to any economic benefits.

But as the reef is both priceless and irreplaceable, this is the wrong approach. Instead, the precautionary principle should be used to make decisions regarding the reef. Policies and projects that may damage the reef cannot go ahead.

How do you value the Great Barrier Reef?

The Deloitte report uses what’s known as a “contingent valuation” approach. This is a survey-based methodology, and is commonly used to measure the value of non-market environmental assets such as endangered species and national parks – as well as to calculate the impact of events such as oil spills.

In valuing the reef, surveys were used to elicit people’s willingness to pay for it, such as through a tax or levy. This was found to be A$67.60 per person per year. The report also uses the travel-cost method, which estimates willingness to pay for the Great Barrier Reef, based on the time and money that people spend to visit it. Again, this is commonly used in environmental economics to value national parks and the recreational value of local lakes.

Of course, all methods of valuing environmental assets have limitations. For example, it is difficult to make sure that respondents are stating realistic amounts in their willingness to pay. Respondents may act strategically if they think they really will be slugged with a Great Barrier Reef levy. They may conflate this environmental issue with all environmental issues.

But more importantly, the methodology in the report leaves out the most important non-market value that the reef provides, which are called ecosystem services. For example, coral reefs provide storm protection and erosion protection, and they are the nurseries for 25% of all marine animals which themselves have commercial and existence value.

The Deloitte report even cites (but does not reference) a 2014 study that values the ecosystem services provided by coral reefs at US$352,249 per hectare per year. The Great Barrier Reef Marine Park covers 35 million hectares with 2,900 individual reefs of varying sizes. This means the ecosystem services it provides are worth trillions of dollars per year.

That is, it is essentially priceless.

The problem with putting a value on the Reef

Valuing the environment at all is contentious in economics. Valuation is performed so that all impacts from, say, a new development, can be expressed in a common metric – in this case dollars. This allows a cost-benefit analysis to be performed.

But putting a price on the Great Barrier Reef hides the fact that it is irreplaceable, and as such its value is not commensurate with the values of other assets. For instance, using Deloitte’s figure, The Australian newspaper compared the reef to the value of 12 Sydney Opera Houses. But while they are both icons, the Opera House can be rebuilt. The Great Barrier Reef cannot. Any loss is irreversible.

When environmental assets are irreplaceable and their loss irreversible, a more appropriate decision-making framework is the Precautionary Principle.

The Precautionary Principle suggests that when there is uncertainty regarding the impacts of a new development on an environmental asset, decision makers should be cautious and minimise the maximum loss. For example, if it is even remotely possible that the extension to the Abbot Point coal terminal could lead to massive destruction of the reef, then precaution suggests that it shouldn’t go ahead.

Assigning a value to the reef might still be appropriate under the Precautionary Principle, to estimate the maximum loss. But it would require the pricing of all values and especially ecosystem services.

While the Precautionary Principle has been much maligned due to its perceived bias against development, it is a key element of the definition of Ecologically Sustainable Development in Australia’s Environment Protection and Biodiversity Conservation Act 1999.

For a priceless asset like the Great Barrier Reef, it is perhaps better to leave it as “priceless” and to act accordingly. After all, if the Precautionary Principle is ever going to be used when assessing Ecologically Sustainable Development, in contrast with cost-benefit analysis and valuations, it is surely for our main environmental icon.

The ConversationUltimately, the protection and prioritisation of the Great Barrier Reef is a political issue that requires political will, and not one that can be solved by pricing and economics.

Neil Perry, Research Lecturer, Western Sydney University

This article was originally published on The Conversation. Read the original article.

AUSTRALIA: THE NORTH MARINE REGION


Peter Garrett, Australia’s Minister for the Environment, Heritage and the Arts, today released a report on the biodiversity, ecosystems and social and economic uses of the oceans of northern Australia. The report entitled ‘The North Marine Bioregional Profile,’ brings together and explores the available knowledge of the Arafura and eastern Timor Seas, from the Northern Territory/Western Australia border to Torres Strait, including the Gulf of Carpentaria.

The report is expected to assist the government to better understand and protect our marine environment, conserve biodiversity and determine the priorities in our marine conservation efforts. It will also assist industry to better plan and manage their activities in the region.

A Marine Bioregional Plan for the region covered in the report is expected to be handed down in 2010. In total there will be five plans covering Australia’s marine regions.

View The North Marine Bioregional Profile at:
http://www.environment.gov.au/coasts/mbp/north/index.html