The battle of the climate change numbers resumes today with the lunchtime release of the long-awaited Treasury modelling on the impact of an emissions trading scheme. ETS opponents are already girding their loins to attack Treasury’s work, but it should provide a welcome reality check for the flow of biased and wholly-unreliable “modelling” predicting economic doom coming from rentseekers.
First cab off the rank for those wanting to undermine the Treasury analysis is the financial crisis. As Ken Henry explained at Estimates last week, since the modelling goes out to 2100, the impact of current events is irrelevant. This led to a splendid Spinal Tap-like moment when Ron Boswell insisted that the modelling wasn’t long-term at all, because an ETS would start in 2010.
BOSWELL: You cannot say that it is going to impact long term. It is going to impact in 2010.
HENRY: Sure, but I am saying that our modelling is long term in its focus. The modelling work that are engaged in… is long term. It is modelling of the long-term economic impact. I am not denying at all there would be a short-term economic impact. I am just saying that our modelling… is focussed very much on the long-term economic impact.
BOSWELL: With respect to you, the impact of this will be felt in 2010.
Mind you, Boswell is presumably working hard at his plan for dealing with global cooling. A snow shovel for every household, perhaps.
The Australian Conservation Foundation and the ACTU made their own contribution to the numbers debate with a joint report called Green Gold Rush, which claims that 500,000 “green-collar” (yes, I hate that term too) jobs could be created in six green industries by 2030.
Having previously complained about the mainstream media failing to look behind the numbers offered in consultants’ reports, consistency requires I make the same lament about coverage of the ACF-ACTU effort, although Lenore Taylor in The Oz gives a flavour of the assumptions. The ACF-ACTU consultant, Cambiar, based its modelling on arbitrarily-selected targets for Australia’s share of “green” industries (renewable energy, energy efficiency, water, biomaterials, waste and recycling, and green buildings) — e.g. reaching 5% of the global renewable energy market by 2030, or establishing seven biorefineries by 2030. Reaching those targets relies on a high carbon price under an ETS a range of government “innovation” programs, targeting of skills and training and tax expenditures.
The economic purist in me bridles at the long list of assistance measures advocated by the report, but in the context of a government willing to commit billions to an unviable local car industry — including for the manufacture of hybrid vehicles — such measures look a whole lot better than programs intended to keep the AMWU and a few Labor strongholds happy.
But however heroic the assumptions underpinning the optimistic scenarios presented in the ACF-ACTU report, even the “business as usual” scenario demonstrates the key point that there are substantial growth prospects in green industries. The report’s BAU scenario assumes an ETS from 2010 and the Government’s Mandatory Renewable Energy Target and nothing more, but still yields over 200,000 additional jobs — the bulk in renewable energy — and a five-fold expansion in those industries by 2030.
Emerging as it does from a cooperative effort between the ACTU and a leading environmental group, the report also short-circuits the traditional assumption that union and environmental interest are mutually exclusive. ACTU head Sharan Burrow has worked out that emissions trading is hardly the jobkiller alleged by industry. It’s a time a few of her colleagues in the union movement made the same connection.
Good news for me! Bring on the green jobs boom! We’ve only been talking about it for 15 years.
I shake my head in disbelief at all this political spinning. I shall have to have a cup of tea, a Bex and good lie down. How can a new tax be construed as a positive for the economy and “growth friendly”? Didn’t Howard try that with the GST. You remember the tax that the Labour Government swore to dismantle the fist whiff they had of the Lodge’s largesse? Maybe we should just increase the GST and wallow in all the growth that it generates. After all taxes are good for growth. Aren’t they?
And another thing; if all this Treasury modelling is all it is cracked up to be, how come the current economic models didn’t see the Global Financial Crisis coming? Surely if you trust one you must trust the other. Oh, I forgot about the assumptions. For assumptions read spin! The assumptions in the GFC model must have consisted of a question about whether there is going to be a GFC. Tick the box and pray.
Forget it! I am going to walk around with my fingers in my ears and hum – and, oh, take another Bex.
Aldebaran – if that is your real name – you miss the point of models. They’re not crystal balls. They’re attempts to approximate, at a very simple level, how the economy works. They depend entirely on the assumptions and parameters used by the modellers. But they allow you to examine what happens when you change one or some factors, which is the point of the ETS modelling exercise.
The GST as a matter of fact did drive growth because it replaced a bunch of less efficient taxes. If it covered food it would be even better.
There may well be a “green revolution” in the making with developing technologies such as solar and hot rocks. But as with all modeling it depends on what was fed into the computer by the modelers.
Thanks Bernard BTW.
Aldeberan you also miss another point about modelling economic systems, and for that matter the climate. They are inherrently chaotic, and so have ‘an extreme sensitivity based on the initial conditions’. Ie, if you get the inputs slightly wrong it can have a large difference at the other end. You know, butterflies and hurricanes. So models, even the best ones, will always be a little bit wrong. So the intent then is to model the gist of the system, not the specifics.