You are here:
Home> June 2007 editorial a web journal of urban and political
Editorial: June 2007
Value judgements, conflicting
assumptions undermine Climate Institute ‘research’
On 28 May, ABC radio
bulletins were abuzz with news of new research ‘showing power costs
would rise less if the Government moved quickly to bring in a mix of
measures, including emissions trading, than if it waited’.
The source of that research was not a university, research institution,
industry association or government agency, but rather a ‘greenhouse
lobby group’, as the ABC called it – the
Climate Institute of
Australia (CI). As a rule, the ABC isn’t in the business of
promoting lobby groups. Why then was this research accorded such
prominent coverage and presented as self-evidently true?
The habit of media outlets, particularly at the progressive end of the
spectrum, to confer authoritative status on green lobbies is a fact of
modern life. The point is made well by former British MP Dick Taverne in
The March ofUnreason:
Just as parties are a necessary part of
democracy, environmental lobbies play an important part in making people
and governments aware of environmental issues. But blind loyalty to the
cause is just as corrupting as tribalism in party politics. In fact it
is more dangerous, because the media subject the pronouncements of
parties to ruthless criticism, but treat environmental groups like The
Soil Association, Greenpeace and Friends of the Earth as independent
authorities above criticism, as if they were a sort of collective Mother
Theresa. There is a general feeling that since they are trying to save
the planet, they must be right.
To those groups mentioned by Taverne, add CI.
Journalists would deny that their positive coverage of CI’s output is
driven by shared ideological assumptions about climate change, if not
the world at large. They would argue that it is more to do with the
According to a
press release, CI was founded in 2005 ‘through a $10 million grant
from the philanthropic group, the Poola Foundation’. One of CI’s
directors, Mark Wootton, is also a director of Poola, which distributes
the bequest of the late Tom Kantor, the brother of Mr Wootton’s wife
Eve. The foundation disburses most of its money to environmental
Another of CI’s directors is Clive Hamilton, better known as Executive
Director of the Australia Institute,
a progressive think tank. The Australia Institute is also funded by
Poola. Hamilton is the author of numerous books and articles on the
theme that material affluence is incompatible with wellbeing. CI
represents an extension of Hamilton’s obsessions, since global warming
is seen as the most serious of many negative by-products of the market
For many observers, CI’s funding by a philanthropic trust attests to the
integrity and impartiality of its work. In contrast, researchers funded
by commercial concerns are routinely accused of bowing to their
paymasters. This tactic is rife when it comes to debates about climate
change. There is a knee-jerk tendency to dismiss anyone who questions
the IPCC-Kyoto-Stern orthodoxy as being in the pay of some sinister
Yet it may be reasonably argued that the type of grant made in this
case, an up-front single capital sum, will inevitably confine CI’s field
of vision to enquiries which happen to justify the grant’s purposes.
These include ‘raising public awareness and debate about the dangers to
Australia of global warming and to motivate the country to take positive
action’. As we will see, this results in a tendency to fish around for
A hermetically sealed trust like Poola isn’t subject to commercial or
political pressures. Nor is it instinctively sensitive to the day-to-day
reality of people who may be damaged by its purist agenda.
Nonetheless, it is rarely productive to prejudge the quality of research
into the implications of global warming (or anything else for that
matter) on the basis of who funds it. The public interest will only be
served if all research, whatever the source, is examined on its merits.
The principal paper’s headline story, the one that so interested the
ABC, assumes a scenario in which the government introduces emissions
trading with a ‘soft’ carbon price of $10 a tonne in 2012 and delays
‘full emissions trading’ until 2020. This is called the ‘wait and see’
scenario. If this comes to pass, says the paper, we will have
electricity ‘prices around 20 per cent higher in the 2020s, 60 per cent
higher in the 2030s and 90 per cent higher in the 2040s’.
‘This rapid price increase’, it is explained, ‘risks significant shocks
to the industry and wider economy.’
CI urges the government to go for a ‘mix of policies’ option: full
carbon pricing as of 2010, clean energy targets and comprehensive energy
efficiency. ‘A mix of policies reduces carbon price increases by around
a third and electricity price increase by around 20 per cent over the
first two decades of action [sic]’. The precise meaning of this sentence
(and many others) isn’t so clear. Apparently, prices would be 20 per
cent lower than the ‘wait and see’ scenario outcome.
(ABC newsrooms wouldn’t have appreciated that this isn’t such a dramatic
improvement, considering that CI forecasts prices rising by as much as
90 per cent in the 2040s under the wicked ‘wait and see’ scenario.)
As noted above, these findings were reported as pressing and
self-evident. Closer examination reveals that the paper is built on a
collection of gratuitous value judgments and conflicting or arbitrary
Gratuitous value judgements
Making the Switch starts with a familiar premise: ‘No other
conclusion can be drawn from the scientific assessments of Australia’s,
and the world’s, premier scientific institutions that countries like
Australia will need to reduce emissions by 60 to 90 per cent by 2050
Some researchers and a few national and international agencies have
estimated that global emissions need to be reduced by around half from
1990 levels if atmospheric carbon is to be stabilised at safe levels.
This is not to say, however, that there are scientific grounds to
suggest Australia ‘will need to’ do so. There are no scientific grounds
for Australia to do anything. Extinguishing our 1.4 per cent
contribution to global emissions will scarcely affect the world’s
climate systems. If CI believes there are other grounds for Australia to
act, they are not spelt out in the paper. The need to act now is
asserted as obvious.
CI, like other green groups, insists the debate on whether Australia
should take early action to cut emissions is over. The subject is far
from closed, however. Considering our minuscule share of global
emissions, and the severe impact such action would have on our fossil
fuel dependent, energy exporting economy, the issue ought to be
subjected to continuing scrutiny. A model approach is found in the
submission to the prime minister’s task group on emissions trading,
which contains critical examination of various rationales for early
action like avoiding climate change, meeting the Kyoto target, being a
good world ‘citizen’ and influencing others, reducing investment
uncertainty, and facilitating the transition to a lower emissions
In contrast, CI prefers to indulge in gratuitous value judgments.
‘It is inevitable’, says the paper, ‘there will be winners and losers in
the transition to a low carbon economy …’ CI, unlike other green
lobbies, concedes that ‘certain greenhouse intensive trade exposed
industries such as aluminium production and iron and steel may suffer
disproportionate impacts from domestic carbon pricing’. But CI claims
the right to decide that some industries deserve to flourish at the
expense of others, without any consideration of alternative policy
frameworks. The prospect of losers ‘should not be an excuse for inaction
across the wider economy’, it says.
CI is cold on nuclear energy because, amongst other things, of ‘public
opposition’. On the other hand, public opposition to the closure of
power stations or steel and aluminium plants doesn’t rate.
The modelling behind CI’s benign ‘mix of policies’ assumes there will be
emissions trading as of 2010 and a concurrent, if transitional, clean
energy target (CET) scheme. This flies in the face of most other
commentary on emissions trading.
The paper explains that CET is a market-based mechanism that ‘operates
like the Government’s Mandatory Renewable Energy Target (MRET) through
tradable permits to drive the lowest cost technologies to market’.
However, national emissions trading is advocated by many, including the
Commonwealth Treasury, precisely because a single all-embracing scheme
will eliminate economic distortions produced by piecemeal state and
federal abatement measures like MRET. The paper itself says an important
purpose of carbon pricing is to ‘create a level playing field for
business and consumers’. That message is delivered by several
submissions to the PM’s task group, as well as their final report.
Neither Making the Switch nor the supplementary report, however,
comments on the potential for emissions trading and CET to cancel each
other out. Nor do they attempt to quantify this possibility. Perhaps CI
is just ideologically committed to renewable energy and doesn’t trust
the market forces generated by emissions trading.
At any rate, this represents a significant rupture in the logic of CI’s
As noted, the ‘wait and see’ horror story assumes the government will
impose a ‘soft’ carbon price of $10 a tonne from 2012 to 2020 and aim to
reduce emissions by 80 per cent from 1990 levels by 2050. The paper was
timed to pre-empt the PM’s task group’s final report, and these figures
reflect speculation about the report’s recommendations. In the event,
the task group didn’t specify a carbon price or target, so CI’s exercise
is purely hypothetical. It can be consigned to the category of political
tactics rather than economic analysis.
(This may explain another gaping hole in the paper – at no stage does it
nominate the appropriate carbon price for ‘full’ emissions trading.)
Nevertheless, it is striking that CI chose the high emissions reduction
target of 80 per cent. This served to deliver the alarming figures, but
positions CI way out on a limb. Almost everyone else, including the IPCC,
Stern, the G8 and Labor, talk about 50 or 60 per cent.
Clearly, CI wants to exert maximum pressure on the government to take
strong action now. Perhaps it fears the heat will go out of the issue
if, over time, adverse climate predictions are modified or if giant
emitters such as the US, the EU and China take matters in hand and let
bit players like Australia off the hook. Stressing the need for urgent
measures, the paper asserts ‘the costs of inaction through climate
change are expected to far outweigh the costs of action’. The sentence
bears a footnote to Sir Nicholas Stern's Review.
True to form, however, there is no attempt to balance the discussion by
acknowledging the criticisms of Stern’s methodology. A cash sum will be
worth less at some future date than it is now. In finance and economics,
the discount rate is a percentage by which the current value is reduced
to reflect that future lower value. Stern used a low ‘social’ discount
rate of 0.1 per cent per year (virtually zero), so that any future costs
of climate change emerge as more significant today in financial terms
than if he used a higher (and arguably more realistic) discount rate.
Stern’s approach supports the contention that we should bear the costs
of abatement action now rather than later. But he has many detractors.
Sterling Professor of Economics at Yale University, a foremost expert on
the economics of climate change, is but one of those who have
questionedStern’s arbitrary choice of discount rate.
Therein lies a lesson for media outfits like the ABC. Early action is
particularly unwise when ascribing authority to green lobbies like the