More on the climate bill

This post was written by Richard Tol

The Sunday Business Post yesterday published an op-ed by me. It’s a shortened and updated version of last week’s blog, and it sketches emission reduction options in transport:

“There is already a carbon tax on fuel, while motor tax and vehicle registration tax favour low emission cars. There are strict European rules about the fuel efficiency of new cars. Fuels are blended with biofuels. Public transport is subsidised. If the economy returns to modest growth and policies continue as they are, but the carbon tax rises, then emissions from transport in 2020 would be roughly the same as they are today. (Transport emissions doubled between 1990 and 2000, and another 20 per cent was added between 2000 and 2010.) According to the climate bill, however, transport emissions should fall by 20 per cent.

How can this be achieved?  If we ignore all the evidence that biofuels are bad for the environment and bad for poor people, and we increase the mandatory blend from 3 per cent to 10 per cent (in energy terms), emissions fall by 7 per cent. If 10 per cent of cars were all-electric, emissions would fall by 2 per cent. (This is small because electric vehicles appeal primarily to urban households with two cars.)  Some 60 per cent of commutes by car are less than 10 km long. If half cycled to work instead, emissions would fall by 7 per cent. If the sale of two-litre cars is banned from 2012, emissions would fall by 2 per cent.

These four measures together reduce emissions by 18 per cent. Even this is not enough to meet the new targets.”

The SBP dropped a paragraph: “The climate bill would also establish a National Climate Change Expert Advisory Body, which would oversee the measures to reduce emissions taken by the various departments. This is welcome in principle. Like monetary policy, climate policy is best removed from day-to-day politics. The Expert Body would be like the Central Bank. Unfortunately, the Expert Body as foreseen in the climate bill is different. Any civil servant can be declared an expert, but others are excluded. Experts can be removed at will by the minister. And the government can block any publication by the Expert Body. The Expert Body would not have the required expertise or independence to do its job.

The same edition carried another article on the climate bill, which cites the IFA and Teagasc. The IFA’s 4 billion euro is an estimate of the loss of export revenue; the cost would of course be much lower. It’s not clear where the number comes from. A 40% reduction in the herd size is probably much more than is needed to meet the 2020 target (although it is hard to imagine that the herd size would not be cut). I could not find a source for that number.

The IFA used to be firmly opposed to climate policy.  Over the last couple of years, their position has become milder as they realised that climate policy would bring new opportunities (carbon storage, bioenergy). In fact, Irish dairy is among the most climate-friendly in Europe, so EU policy might improve our competitive advantage. The publication of the climate bill seems to have reversed a positive trend.

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29 Responses to “More on the climate bill”

  1. denis Says:

    The nonsense in this climate bill knows no bounds, and the concept of joined up thinking is totally foreign to our Greens.
    They wish to reduce the number of cattle in the country, but increase the number of tourists.
    Have they done some kind of calculation, showing that tourist emmissions, both from digestive gas and transport fossil fuel use is much lower than those from cattle, and that we are going to be able to have x number of extra tourists if we reduce our cattle population by y, and still be able to reduce overall emissions ?
    I would love to know how many tourists have the equivalent emissions output of one cow.
    Come on Messers Ryan and Gormley, do tell.

  2. pongo Says:

    Great another quango, someone go poke the IMF.

  3. Andrew S Says:

    “It’s not clear where the number comes from.”
    most likely the “FITA model”, beloved of business interests everywhere ;)

    I’ve been googling / on athens for data sources from teagacs but not having much luck. As a govt. body (quasi- / whatever) they must have the numbers somewhere?

    I’ll mail the authors of course, I’m sure its obvious.

  4. Edmund Burke Says:

    @ Denis

    And of course the tourists will come in their millions to gaze at our windmill strewn landscapes.

  5. Ulick Stafford Says:

    Why do you say that the IFA’s gradual acceptance of climate policy was a positive trend? Having examined this topic for many years it is difficult for me an an uncompromised scientifically literate person (PhD in chemical engineering) to come to a different conclusion that Michael O’Leary http://www.independent.ie/business/irish/global-warming-is-bullst-says-ryanair-boss-oleary-2333336.html

    How can acceptance of sacrifices to a silly new instutiutional green religion be consdiered positive? Reducing carbon emissions to get the Earth to behave makes as much sense as the Aztecs sacrificing 20,000 pepole a year as a blood price to the war god, Huitzilopochtli.

    Our new blog, http://www.turn180.ie is up and running.

  6. Richard Tol Says:

    @Ulick
    One could argue that constructive engagement is often the best way to keep an influence over policy, in this case climate policy. Regardless of what you think, climate policy is here to stay. It is enshrined in the Lisbon Treaty.

    I’ve studied climate change for 20 years now, and as far as I can see, climate change is real, really caused by humans, and a problem that will need to solved.

    There is an agreement, by the way, that this blog is for economic issues. I’d be happy to discuss these points elsewhere.

  7. Ossian Smyth Says:

    According to the climate bill, however, transport emissions should fall by 20 per cent.

    Can you show us where the Climate Bill refers to transport emissions?

  8. Ulick Stafford Says:

    @Richard
    The issue is economic. It would not be such a problem if there were no costs imposed on us as a result of so many daft policies justified by climate change.

    What are the costs and benefits of mitigation measures? What are the costs and benefits of business as usual? Higher CO2 in the atmosphere improves plant yields and allows plants to become more drought resistant. Is this obvious benefit included in economic models? And if there is actual warming as a result (something I am a lot less convinced of than you having examined all the evidence) this has more positive benefits than negatives because they say the effects will occur more in temperate and colder climes.

    Bad treaties need to be opposed not accepted. This could be changed in a new treaty. I did oppose Lisbon for this reason though the issue barely got a mention during either referendum campaign. When no one else continues to believe that the sky is falling down I expect some industry groups will try to get the message to change into the sawdust in the heads of Eurocrats. The Japanese will not renew Kyoto if everyone else doesn’t and I doubt if anyone outside of Europe will.

    But sure if we forget about climate policy and just look at fuel from a supply cost benefit point of view (the best course) there will be fewer jobs for economic analysts examining carbon mitigation plans. You have a vested interest in believing :-).

    The assumption of AGW is wrong in economic models. Thankfully, the Stern report seems to have suffered the fate it deserved. I never hear of it now.

  9. pongo Says:

    I somewhat agree with Ulick
    The Green/environmental agenda got hijacked by quazi-religious nutcases who have done and will do great damage to the debate :(

    There was recently a good documentary on channel4 and debate afterwards on the issue which is worth watching > http://www.channel4.com/programmes/what-the-green-movement-got-wrong

    Basically the Greens worldwide are now split into the ideological Luddites and the pragmatists, I myself fall onto the pragmatic side,
    assuming that man made climate change is real then we need to get real and embrace technologies such as GM and Nuclear power asap to get us out of the end of the world scenarios we keep getting scared about by the Greens.

  10. Richard Tol Says:

    @Ossian
    The climate bill does not refer to transport emissions. I assumed that the effort would be spread equally over the sectors.

  11. Richard Tol Says:

    @Ulick
    Those are valid issues for this blog. I’d argue that it’d be better to discuss more specific points.

    By the way, I’ve advocated a climate-tax-and-nothing-but-a-climate-tax for almost 20 years now. It’s a simple policy that would not require a lot of analysis.

  12. Paul Hunt Says:

    Since we’re being confined to economics, my understanding is that the ‘carbon tax’ v ‘cap’n'trade’ debate may be informed by the relative slopes of the marginal benefit and marginal cost functions where they intersect as suggested by Martin Weitzman (“Prices vs. Quantities”, The Review of Economic Studies, Vol. 41, No. 4, October 1974, pp. 477-491.) in another context. I recognise that there is huge uncertainty about the specification and values of these functions and that work has been done in the climate change context, but does it provide a guide to the policy choice/mix?

  13. Richard Tol Says:

    @Paul
    Sure. See Pizer (1999, Resource and Energy Economics). Essentially, the benefits of climate policy are insensitive to doing a little bit more or less in a single year in a small corner of the world. The costs of climate policy are sensitive to doing more or less now and here. Therefore, the marginal benefit curve is shallow (almost flat in fact) while the marginal cost curve is steep. Ergo, taxes are better than permits.

  14. Paul Hunt Says:

    @Richard,

    Thank you. I assumed what you advance to be the case and, equally, that your advocacy of a carbon tax is well-grounded from an economics perspective. However, I’m not going to cast aside my affection for ‘cap’n'trade’ that lightly. In my view markets provide the most effective tools we have to assemble and process massive volumes of economic information and to frame and execute millions of choices efficiently; and governments, in particular when it comes to taxation, are flaky.

    When one looks beyond the pure economics to take account of the institutional and political aspects I retain my affection for ‘cap’n'trade’.

  15. Richard Tol Says:

    @Paul
    Uncertainty is only one consideration. It is much easier to link national market in emission permits than it is to harmonize taxes.

  16. Ulick Stafford Says:

    The choice of carbon tax or cap’n'trade is a bit like the choice of being shot or hung. Wouldn’t an acquittal be better? There should definitely be a retrial of CO2 and its effect on global warming because it is now clear that the case was more cooked that the trial of the Birmingham 6. This will happen eventually and should be allowed for in economic models and energy plans.

  17. Neil S Says:

    @Richard,

    On an earlier posting:

    http://www.irisheconomy.ie/index.php/2011/01/11/draft-submission-on-climate-bill/

    you and Gorecki propose that the EU target of a 20% reduction in emissions by 2020 be adopted.

    Is this to comply with our EU obligations? Elsewhere you have proposed an EU wide carbon tax of approx €10/ton Co2 with the revenue directed to labour tax reductions. And some R&D.

    In terms of emissions reductions achieved by 2020, how would your low carbon tax approach compare with the official EU target?

    I hope I have interpreted your policy recommendations correctly but, on the face of it, it would seem that the EU policy is grossly more expensive than the ‘optimal’ policy.

  18. Neil S Says:

    Sorry, it was a bit smart to refer to the co2 tax option as the ‘optimal’ one. It should have been added that a low co2 tax is in line with all of the peer reviewed assessments of a global climate policy (hence optimal).

  19. Richard Tol Says:

    @Neil
    If one believes the impact assessment of the European Commission, then a carbon tax that tracks the ETS permit price would achieve the target. Why would we disbelieve the Commission? If we miss the target, than we can honestly say to the Commission that we acted on their best advice.

  20. Neil S Says:

    Thanks,

    It will be interesting to see what unfolds over the next few years vis a vis the permit price.

  21. Oliver Vandt Says:

    @All
    Odds on climate bill passing have improved significantly tonight and GP show every sign of staying right till the end. From p.ie:
    “It is actually possible that FF will withdraw from the Government in protest against FF before the Greens do.”

  22. veronica Says:

    @All,

    The Oireacthas Agriculture Committee have called for the Bill to be shelved:

    Committee Chairman, Johnny Brady TD said;
    “There is consensus among Committee members that the Bill as it presently stands will not serve the best interests of the agriculture industry and could significantly hold back Ireland’s economic recovery. The stipulations in the bill will hinder the targeted €4bn increase in exports in the next four years and put the expected job increases in the sector in at risk.

    Of course we are all in agreement that greenhouse gas emissions must be curbed and we advocate that Ireland adhere to the EU target of a 20% reduction by 2020. However, we believe that the price to be paid by the agriculture sector for the additional excessive targets laid down in the bill, which exceed the agreed EU reduction goals, is far too high.”

    The full committee membership comprises:
    Johnny Brady, TD, Fianna Fáil (Chairman)
    Thomas McEllistrim, TD, Fianna Fáil, (Vice Chairman)
    Mattie McGrath, TD (Fianna Fáil)
    Christy O’Sullivan, TD (Fianna Fáil)
    Bobby Alyward, TD (Fianna Fáil)
    Noel Coonan, TD (Fine Gael)
    Martin Ferris, TD (Sinn Féin)
    Andrew Doyle, TD (Fianna Fail)
    Eamon Scanlon, TD (Fianna Fáil)
    Tom Sheahan, TD (Fine Gael)
    Shane McEntee, TD (Fine Gael)
    Seán Sherlock, TD (Labour Party)
    Ned O’Keeffe, TD (Fianna Fáil)
    Senator Paul Bradford, (Fine Gael)
    Senator John Carty, (Fianna Fáil)
    Senator Michael McCarthy, (Labour Party)
    Senator Francis O’Brien (Fianna Fáil)

  23. veronica Says:

    … And given what has happened in the Dail today, it looks more and more unlikely that the FF part of the coalition will want to upset their rural constituents by supporting the passage of this Bill as it currently stands.

  24. Ulick Stafford Says:

    @Veronica,
    Thanks for this. It is interesting that committee found it necessary to plead their continuing belief in warmism and cutting emissions by 20% by 2020. They just don’t want to cut by the extra proposed by the greens in the Climate Change Bill. The difference between being devout warmists and a fundamentalists, I suppose.

    I expect if it is amended to the EU proposed reduction it will sail through the Dail unopposed. I suppose we would all prefer to serve a 20 year jail rather than 30 even if we believe we are innocent.

    I read elsewhere (Bishop Hill and WUWT) that the European commission has suspended carbon trading because of corrupt dealings in Eastern Europe. You have to wonder why stupidity is the norm rather than the exception.

  25. Richard Tol Says:

    @Ulick
    That’s confirmed. The registry was hacked and trade suspended. Late last year, the UN suspended Bulgaria (because of lax monitoring) but the EU did not. This created a legal conundrum because permits used to double as EU and UN permits. Earlier last year, we had carousel fraud.

    The root cause is simple. Environmental regulators are too often natural scientists, who are clueless about markets. The European Commission consulted widely on the design of the ETS, but people who asked hard questions were removed from the process.

    There is more and bigger fraud to be revealed, as enforcement has yet to be tested.

  26. veronica Says:

    @Ulick

    I don’t know if it was accidental or deliberate, but on Prime Time tonight, Tanaiste Mary Coughlan let it slip that in the meeting between the FF team and the Green trio yesterday, the difficulty with securing the support of Fianna Fail backbenchers for the Climate Bill was one of the items raised by the Taoiseach and his team.

    Perhaps the Greens no longer have confidence that their Bill willcommand the full support of their government partners? I think they may be justified in that, since all concerned seem to be losing their heads at a dizzying rate in any case.

  27. Ger Says:

    Ultimately, climate change is a global problem. We must be ambitious in addressing these problems at the global level.

    But there is no benefit to anyone from putting ourselves into a unilateral hairshirt. That will have zero impact on emissions and a significant negative effect on our economy.

    Indeed, even EU efforts are questionably effective. With a fixed amount of oil reserves, and a supply fixed by OPEC, all the EU’s efforts do is reduce the price of oil on international markets, thereby subsidising oil addiction in other economies. The fact that the oil is being burnt in the US, China and India instead of Denmark is of little consequence to the climate issue.

    Unilateral efforts simply do not succeed in this area. The absolute amount of carbon being emitted remains constant despite our efforts.

  28. Neil Says:

    There are two issues here that I believe should be interlinked.
    Firstly there is the issue of achieving energy security and supply at reasonable cost and secondly there is Climate Change issue. The U.S. and Richard
    China ignore Climate change issues while simultaneously signing up to cooperation agreements to develop alternative energy technologies or reducing carbons emissions for existing technologies (e.g. CCS). You can be damned sure that when such technologies are commercially developed that we will have universal and legally binding treaties on GHG emissions and conservation of fossil fuels while we will still be debating the merits of Climate change. We for the first time in our history have an abundance of natural resources to develop alternative energy technologies so a focus on developing them and creating economic opportunities for indigenous business would be much more productive. Letter in SBP is summary of my Blog http://cremltd.wordpress.com/

  29. Ossian Smyth Says:

    Epilogue-

    * Transport emissions fell 27% from 2007 to 2012 while GDP fell just 7.3% according to data from the SEAI.
    * The number of cycle commuters in Dublin increased 25% in 5 years, as measured by the 2011 national census.
    * The proportion of vehicles purchased in the A & B emissions bands changed from 20% in 2007 to 90% in 2012
    * FF refused to support the climate change bill despite a written commitment to do so
    * The new FG/Labour government introduced their own climate change bill which contains no targets - just aspirations and has not yet been passed after nearly three years deliberation.

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