Is It True, Or Did You Read That in The Australian?
Having been exposed to it for a while now, I thought that by now I have gotten used to the, um, let’s say outlandish or cobbled together coverage of climate change and climate policy related topics in The Australian. But… I was wrong. Geoffrey Lehmann, Peter Farrell, and Dick Warburton (LFW) have taken it upon themselves to, um, again, what word to use… interpret climate science and climate policy their way in a magazine extract (Quadrant magazine, March 2011, 3(3)) printed in The Australian’s Inquirer (April 9-10, 2011, pp. 1 & 6). Of course The Australian did not waste any time supporting the misrepresentation of climate change-related facts.
Duty calls! Let’s go on a fact-finding mission.
Fact #1: None of them has a proven track-record in anything climate change-related, but they have read and build most of their arguments on the Hartwell Paper.
LFW begin their authorial “masterpiece” by declaring that Dr David Viner’s statement – or as they call it “millenarian prediction” - about snowfall becoming a rarity was “a dud”. They move on to claim that in 2000, there was a “pause” in global warming and that it has not “resumed” since then. They base their statement on a NASA satellite image showing dated January 7, 2010, showing Great Britain entirely covered in snow.
Fact #2: They should have read the entire article instead of just taking a convenience sample out of context. At the end of the article (to which they are referring to), one can read the following: Heavy snow will return occasionally, says Dr Viner, but when it does we will be unprepared. “We’re really going to get caught out. Snow will probably cause chaos in 20 years time,” he said. If anything, he got the time “wrong”, but then again, it is still in line with recent climate science suggesting a stronger-than-expected and sooner-than-expected climate forcing (e.g., UNEP Science Compendium 2009: 8).
Fact #3: Global warming has not paused since 2000. Different reports (e.g., Murphy et al., 2009) show that, overall, 2005 was one of the hottest years. Globally, the hottest 12-month period ever recorded was from June 2009 to May 2010.
Fact #4: Unfortunately, the authors’ chain of causalitydoes not extend beyond two links: snow + eyes = science and no global warming. Well, unfortunately for the authors, it is a little bit more complicated than that. Again I would like to refer to a nice summary of the climate science on skepticalscience.com: Warming causes more moisture in the air which leads to more extreme precipitation events. This includes more heavy snowstorms in regions where snowfall conditions are favourable. Far from contradicting global warming, record snowfall is predicted by climate models and consistent with our expectation of more extreme precipitation events.
LFW then actually get the explanation of an emissions trading almost right – although emissions trading scheme is not necessarily the same as a cap-and-trade systemNSW’s Greenhouse Gas Reduction Scheme, for example, is an emissions trading scheme, but one that is based on baseline-and-credit approach. Anyways, they move on to criticise the effectiveness of Clean Development Mechanisms (CDM) and claim that it is “perverse to create a reward for otherwise uneconomic activities”. One problem with this statement is their definition of a CDM: “Credits are awarded only if a certifier hypothesises before an emissions-reducing activity is undertaken, that it would not occur unless the credits were awarded: the creditable activity must be uneconomic without the credits”. This is simply too inaccurate.
Fact #5: Firstly, let’s get the definition right. Article 12 of the Kyoto Protocol defines the clean development mechanism: The purpose of the clean development mechanism shall be to assist Parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the Convention, and to assist Parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments under article 3. In layman’s terms, it allows developed countries to satisfy their obligations under the Kyoto Protocol by helping developing countries to reduce their emissions.
Moving on to the issue of “uneconomic activity”. Again, the authors are not sufficiently accurate. What they meant to say (Right, guys? Guys?) is that CDM projects must be “additional”, i.e., emission reduction projects creating those credits must be shown to be “in addition to” reductions that would have otherwise occurred. The proposed CDM project must be able to demonstrate that CDM funding played a central role in determining whether to realise the project or not. The CDM project must be unattractive due to some financial, legal, or institutional barrier without the additional economic incentive provided by, e.g., an emissions trading scheme. Given that the authors speak of rich and poor countries, this may make the functioning of the CDM even easier to understand. Ideally, this links to other UNFCCC activities related to cooperation and support, such as technology transfer to and capacity building in developing countries – which may lack the governance and/or financial structure to see through emission-reducing activities on their own. In addition, a CDM must be measurable, independently verified, address leakage and permanence, and the overall project quality.
As for the “hypothesising” part, CDM projects have to go through a set of defined milestones from the conceptual idea through to actual project realisation, and be approved by the CDM Executive Board. An overview of the entire CDM process can be found on the UNFCCC’s CDM website.
Is the system perfect? Certainly not. But LFW compare apples with oranges when they link emissions trading to the causes of the Global Financial Crisis and the collapse of Enron and Lehman Brothers. They claim that the market is not the best mechanism for setting a carbon price because Enron and Lehman Brothers were active participants in the international carbon market.
Fact #6: While it is true that both companies have been involved in emissions trading, it seems highly unlikely that emissions trading alone led to the demise of those two companies. Enron’s collapse had to do with recorded assets and profits being inflated or even nonexistent. The company established numerous limited liability special purpose entities, allowing Enron to place liability so that it would not appear in its accounts. Lehman on the other had faced significant losses subprime mortgage crisis, holding on to large positions in subprime and other lower-rated mortgage tranches when securitising the underlying mortgages. And of course, some ‘creative accounting’ was also involved towards its end.
Have financial services firms been dissolved since then, given the risk of fraudulent behaviour? Have the accounting scandals around the big consulting companies stopped? The E&Y’s, pwc’s, etc., are all still around. Insurance policies are still being sold, despite cases of insurance fraud. What then is the argument? That because there have been cases of fraudulent or wrongful behaviour, this does not permit a generalising statement about the entire market/system? Hmm…
The authors also fail to mention that despite incidents in the EU, such as the phishing scam last year, or the suspension of the spot market early this year as the result of allowances theft, the EU is improving its registries and their security. One would wish for the same level of transparency in other markets. Emissions trading is an emerging marking, and thus more likely to be at risk to fraud as rules and regulations for operating those markets are – for now – less developed or standardised. And despite all the criminal activity, US$118.5 billion worth of emissions permits were still traded across the EU ETS in 2009.
What is more, emissions trading was never really intended to be a money-making market, but a finite market to ensure an environmental outcome.
Furthermore, according to LFW, the European Union’s Emissions Trading Scheme market crashed three times since 2005.
Fact #7: Setting the cap for an ETS right, the maximum number of allowances available, requires good knowledge of historical emissions of the entities covered by the scheme. This was not the case in the first phase of the EU ETS (2005 - 2007). As a result, the EU’s ETS market crashed once. In 2007 – after the release of verified emissions data in March 2006 for 2005. Actual emissions were much lower than expected, meaning that the EU ETS was in fact over-allocated. There were fewer emissions than allowances, the price for permits dropped to nearly zero. This problem has been rectified in the second phase of the EU ETS 2008 – 2012) with actual emissions data being available, National Allocation Plans being carefully assessed by the European Commission, and allowances not allowed to be banked between phases I and II.
The risk of an over-allocation of permits in Australia seems rather low, given the existence of the National Greenhouse and Energy Reporting System, which was introduced in 2007 to underpin the the introduction of an emissions trading scheme. Wait, 2007? Wasn’t that the Howard government? Yup. The issue in Australia is going to be about industry and household support.
LFW also put forward that businesses need certainty, and that neither emissions trading nor a carbon tax can provide that certainty.
Fact #8: In December 2009, Mr Wharburton has actually expressed his preference for the introduction of a carbon tax, claiming it provides the certainty businesses need/want.
Businesses already know that a price on carbon is very likely to come in the near future, be it in form of a carbon tax or an emissions trading scheme. But rather than coming to grips with the two different approaches and working proactively towards reducing any potential liabilities, any opportunity to randomly rant about the impacts of a “big bad tax on everything” on the poor Australian families is being used.
The selection and implementation of either emissions trading or a carbon tax depends on what is to be controlled: emissions or costs. Under an emissions trading scheme, companies will have to decide whether it is more economical to reduce their emissions or buy additional allowances from elsewhere. Thus, emissions trading provides companies with an incentive to reduce their emissions and to improve and invest in low-carbon technology to reduce emissions and costs.A carbon tax might provide certainty in the cost of compliance and lower administrative costs, making it possibly easier to plan long-term investments, that is, if the tax rate remains fixed or known for the period of the investment. However, under a carbon tax, there is no limit on the amount of emissions. In other words, there is no connection between released emissions and the degree of the tax because there is no cap on emissions. This potentially sacrifices environmental certainty for price certainty.
The problem is that when implementing a carbon tax, the government must decide on the level at which the tax should be set, particularly in the case of pre-existing taxes, or other potential distortions such subsidies to certain industries, fuels, or technologies. How will the tax be used? Should the tax income go directly into Greg Combet’s coffers? Should it be used to offset other taxes (i.e., the double-dividend effect)? Maybe it should be transferred across national boundaries to an international body and allocated to those most adversely impacted by either the costs of emission reduction or damage from climate change (i.e., adaptation and mitigation funding – yes, I know, that’s a good one)? Or should it be invested in specific abatement projects, such as renewable energy? Or as Mr Tony Abbott suggests, planting millions of trees? And if the tax is intended to achieve a given overall emissions limit, the tax rate will need to be increased to offset the impact of inflation, new technological progress, and new emission sources. Furthermore, it is unlikely that political gamesmanship in the form of debates on industry support or exemption would be eliminated. There would still be the temptation to change taxes or push through (politically motivated) manipulations designed to benefit certain companies or industry sectors, undermining any long-term certainty and hindering necessary investments in low-carbon technologies.
As mentioned above, many opinions are actually based on the London School of Economics and Political Science Hartwell Paper, a report demanding a radical change of approach to international climate policy. Of course, the authors conveniently chose to conceal the fact that principal Funding was provided by the Japan Iron and Steel Federation and Japan Automobile Manufacturers Association, the Nathan Cummings Foundation, and the Foundation Hoffmann. I leave it to you to closer investigate the two latter foundations, but the first two should be interesting. Especially given Japan’s reluctance to extend the Kyoto Protocol and ambition to develop an “alternative” to the Kyoto Protocol.
I will not go into too much detail here, but in my opinion, the Hartwell Paper offers little insight into how this alleged needed change is to be achieved, let alone how it is going to be financed. It focuses on criticising the sobering outcome of the COP15 in Copenhagen in 2009 (we conveniently ignore events in 2010), stating that the Kyoto Protocol has failed – influenced by Japanese interest much? Instead, they call for credible long-term global commitments and methods to invest in energy innovation (Hartwell Paperp.34). Energy innovation in this context refers to an article by Galiana and Green published in Nature, in which they argue that a fostering technology revolution, not setting emission targets is the key to addressing climate change. How is this different to the Kyoto Protocol and UNFCCC? How is replacing one global agreement with another one be the better option? You still would have to deal with 195+ countries (195 parties to the UNFCCC plus any other countries that would want to join the credible commitment). And don’t the Kyoto Protocol and UNFCCC have mechanisms that are intended to trigger that technological revolution?
A discussion of the technological and commercial viability of renewable energy will not be part of this little post, but I am surprised to see LFW taking a critical stance towards carbon capture and storage technology – and rightfully so.
LFW also mention Bjorn Lomberg, author of “The Skeptical Scientist”, saying that there are many worthwhile cause to fund with our taxes and philanthropic dollars that rank ahead of global warming, such as ensuring safe drinking water and educating both sexes in poor countries, eliminating malaria and other tropical diseases, maintaining biodiversity and cleaning up real pollutants. That, by the way, is the same Bjorn Lomberg who is now is urging world leaders to invest heavily in clean energy.
Fact #9: Many of these worthy causes have to deal with challenges of climate change. according to the Climate Change Synthesis Report by the University of Copenhagen, the observed temperature rise to date, about 0.7oC, is already affecting health in many societies. Beyond the direct impacts on health, climate change also affects the underlying determinants of health – quantity and quality of food, water resources, and ecological control of disease vectors. The risks arise from direct stresses (e.g. heat-waves, weather disasters, workplace dehydration), from ecological disturbance (e.g.altered infectious disease patterns), and disruptions of ecosystems on which humanity depends (e.g. health consequences of reduced food yields), from population displacement and conflict overdepleted resources (water, fertile land, fisheries). Biodiversity is at risk because of changed weather and climate patterns (see, e.g., UNEP Climate Change Science Compendium 2009). And “real” pollutants? seriously?
What do they think we are trying to achieve? Just trying to adapt because adaptation to adverse climate change, if and when it does occur, may be the best and only viable strategy? Having to adapt to climate change may mean that it is already to late, while mitigation may provide us with the opportunity to alleviate some of the worst effects, to prevent a runaway effect of dangerous climate change.

