Climate policy

Over at VoxEU, a bunch of economists challenge the current consensus in climate policy circles and suggest a range of policies that may actually reduce emissions.

In the forthcoming ESRI Research Bulletin, David Anthoff and I offer some thoughts on how a country may set a carbon tax.

Climate bill (ctd)

The Climate Change Response Bill was debated in the Seanad yesterday. You can read the various interventions here.

Minister Cuffe is not very clear on the 2020 target, but seems to argue that the climate bill does not go beyond the current EU obligations. He offers two arguments. Second, Ireland will overcomply on its ETS obligations, and this will count towards Ireland’s non-ETS obligations. This is an accounting gimmick. Ireland would export its excess ETS permits to offset undercompliance elsewhere in Europe; emissions would not fall. Note that Ireland will just about meet its ETS targets according to the EER2010.

Third, Minister Cuffe seems to use the EU accounting method for land use emissions in 2020, and the UN accounting method for 2008. The increase in the carbon sink is much smaller than the Minister suggests if one uses the same method for both years.

Senator Glynn of Fianna Fail states that “[t]he Bill does not impose any legal obligations on Government to achieve the emissions targets set in the Bill and it allows for these targets to be changed.” That’s a remarkable position.

IBEC has published its analysis of the climate bill, including an estimate of the costs. That cost estimate is exceedingly optimistic for the following reasons:

  1. IBEC assumes that emissions from land use are accounted for according to the yet-to-be-enacted EU rules.
  2. IBEC takes the EPA’s with-additional-measures scenario as its starting point. That scenario is rich in wishful thinking, and IBEC does not count the costs of the “additional measures”.
  3. IBEC’s numbers are based on an engineering model. Such models are notorious for underestimating the costs of emission reduction.
  4. IBEC assumes that the marginal cost of -30% by 2030 is the same as the marginal cost of -30% by 2020. This would be true if the capital stock has an average life time of one year.
  5. The cost estimate assumes that the emission reduction burden is shared optimally between ETS and non-ETS.  As I’ve argued before, the extra burden would fall on the non-ETS.
  6. The model covers emissions from energy only. The IBEC estimate therefore omits the costs of reducing non-energy emissions (methane from cattle).

Even so, IBEC reckons that the cost will run to €400 million per year. I do not know what the cost would be, but it would certainly be much higher than that.

Draft submission on climate bill

As the introduction of the climate bill may be imminent, I thought it would be appropriate to make public at least part of the consultation. Our latest draft is here. It omits one crucial part as we’re still trying to get our heads around estimating the costs of the proposed targets.

All comments are welcome.

This is the summary: [W]e are grateful for the opportunity to comment on the draft Climate Change Response Bill 2010. There are a few ambiguous statements in the draft bill that will need to be clarified in the next version, particularly with regard to the emissions target for 2020 and the definition of carbon sinks. A unilateral adoption of a 30% emission reduction target for 2020, as proposed in the draft bill, would be problematic, as EU legislation would oblige Ireland to bridge the gap between the EU target (-20%) and the Irish target (-30%) through emission reduction in the domestic non-ETS sectors (mostly agriculture, households, small and medium-sized enterprises, and transport). The proposed targets for 2030 and 2050 are extraordinarily ambitious. The draft bill omits to introduce an appropriate framework for policy measures to meet the proposed targets. The establishment of a National Climate Change Expert Advisory Body is a welcome proposal but the climate bill should guarantee that the people on the body are indeed experts and that the body is independent. The Regulatory Impact Assessment adds little to our understanding of the impact of the proposed climate bill.

We recommend the following changes to the Climate Change Response Bill 2010:

  • Adopt the EU target of a 20% emission reduction by 2020.
  • After 2020, the target should be to intensify climate policy such that the (nominal) marginal abatement costs of emission reduction increases with the rate of discount (i.e., the nominal interest rate) until carbon dioxide emissions are zero.
  • Create a framework for policy interventions of greenhouse gas emissions, with single regulation and equalization of marginal abatement costs as important criteria.
  • Guarantee that the National Climate Change Expert Advisory Body is independent and has the required expertise.

Furthermore, we recommend that the impacts of the proposed climate bill will be assessed before the bill is introduced.

UPDATE: Interesting comments in today’s Irish Times. Ciaran Cuffe may need to check his math.

First estimates of the costs of the climate bill

As another sign of the rushed introduction of the climate bill, the first estimates of the costs of the climate bill are published in a newspaper. O Gallachoir’s estimates are based on a model which is still under active development (rather than on a model which has been vetted and peer-reviewed — this is due to the starting date of the modelling project). Note that UCC is way ahead of the ESRI here: We still have to figure out how to estimate the economic impacts of targets this deep; the measures included in our model are not sufficient. The regulatory impact assessment has no cost estimates.

So, we are essentially asked to sign up to something we do not understand.

UPDATE: The IFA argues, rightly, that it is peculiar to introduce the climate bill next Wednesday when the public consultation is still ongoing. This reminds me of the waste bill, also imminent, for which the results of consultation are still not made public. Which is the party again that “believe[s] […] in a political system that is transparent“? (Hint: click the link.)

Cuffe in Cancun

Minister of State Ciaran Cuffe represents the government at the international climate negotiations in Cancun. His speech is here. This visit is part of the normal business of government.

Mr Cuffe announced a contribution of 23 million euro to a new UN fund. This contribution follows from earlier commitments and it is appropriately stingy. The new UN fund is a bribe for developing country negotiators to behave. I have yet to see evidence that the money will be put to good use. Although the Irish contribution is a logical result of earlier decisions, it is a tad insensitive to announce a 23 mln euro reward for bad behaviour at the same day as you are cutting the benefits to the blind. Fortunately for Mr Cuffe, bankers got a bigger reward for worse behaviour on the same day.

Mr Cuffe said more. He announced legislation for climate policy, continuing the Green charade of being in and out of government at the same time. He announced support for new research by the World Resources Institute — a project that still has to go to tender as far as I know — although funding for Irish research on environmental matters has been severely cut.

Mr Cuffe also said “Ireland supports the case for strong urgent action to reduce greenhouse gas emissions in order to stay as far below a 2 degree Celsius increase in global temperature. We know from the scientific advice that this is a necessity in order to avoid the worst effects of climate change.” In other words, Mr Cuffe argued that science necessitates action. This is not true. Science will tell you what if. If you do not like the prediction, you should do something about it. That is a value judgement, however, rather than a scientific fact. There is a long tradition of politicians hiding behind climate science. It is the root cause of politically motivated attacks on the science of climate change, and the consequent politicization of climate science. It is unfortunate that, a year after climategate and glaciergate, Mr Cuffe chose to reinforce the problem.