A few months ago on this blog I reviewed the current alarming state of climate change denial pushed by big business interests, which scientists need to debate vigorously beyond uttering the evident truth that climate change is real. The Australian government, supported by the Greens and independent members, has “committed” itself to a carbon tax, or what Treasurer Wayne Swan now calls an interim price on carbon as a step towards a future emissions trading scheme. Scientists need to help support, explain and strengthen this initiative.
The proposal is good news but there is still a long way to go, with the opposition promising to fight “the great big tax on everything” all the way. The Coalition fails to mention that the proposed price on carbon will be combined with measures to support lower-income groups, small businesses, and renewable energy. Voters need to understand that structural change in the taxation and subsidy system is part and parcel of what must happen. Estimates of a $300 electricity price hike, petrol costs rising by 6.5 cents a litre, and $150 increases in the annual gas bill that have been canvassed by Coalition members such as Greg Hunt are premature when nothing has yet been decided on the carbon price, or the associated reforms. An extensive consultative process will follow, in which scientists have an evident role.
Further scientific advocacy can be based on the failure of GDP statistics to capture real well-being. It is increasingly recognized that genuine progress is not well related to the conventional measure of economic growth. Nobel Prize-winning economists Joe Stiglitz and Amartya Sen, with Jean-Paul Fitoussi, reported to President Sarkozy in 2009 on the inadequate measurement of economic performance and social progress. The economics of climate change was a prominent component.
ABC’s Four Corners on 21 February featured the burgeoning development of hydraulic fracturing (“fracking”) in Queensland and other parts of Australia, to make coal seam gas flow more easily. Quite apart from contamination by a range of at least 36 different toxic chemicals, one worrying consequence was reported to be a significant lowering of the Great Artesian Basin (see map). The Basin is clearly a major environmental and ecological asset to be depleted at our peril, as well as providing an essential resource in arid and semi-arid areas for Indigenous people, pastoral and agricultural activities, small mining enterprises, and tourism.
The Great Artesian Basin contains enough water to fill Sydney Harbour 130,000 times, water that is up to 2 million years old. But it is not inexhaustible. The information collected in the Four Corners report is disturbing enough to warrant a thorough study, in parallel with current plans of the United States EPA. As usual, powerful corporate interests are involved, notably the Queensland Gas Company (QGC), a subsidiary of the multinational BG Group.
The jury may still be out on “fracking”. As in the case of mineral extraction, the issue of paying for the depletion of ancient and irreplaceable resources is becoming increasingly relevant. The Australian government motivated its attempt last year to introduce a super-profits tax as follows: “Increasing the tax on high profit resource projects will allow us to redistribute the benefits of extracting Australian resources across the whole community. These are resources that belong to the community and can only be extracted once.”
The proposal was made at a time when the terms of trade (ratio of export to import prices) were at an all-time high, due to mineral exports – a situation that still applies. This multinational industry is in an excellent position to carry a super-profits tax in Australia, to be distributed to renewable energy developers, and to consumers and small businesses to help them cope with the changes.
This still doesn’t tell all. As Stiglitz and his colleagues discuss at length, the conventional GDP indicator does not allow for depletion of non-renewable resources. It is a gross, not a net, measure which fails to account for the cost of lost resources. Water is treated as a free resource, just like the atmosphere is, at least until an adequate carbon price or cap-and-trade scheme is introduced. GDP exaggerates the rate of real economic growth which benefits short-term interests, but Nicholas Stern’s reference to climate change as the greatest market failure ever remains true. Development of renewable energy is penalized when hydrocarbon prices are kept artificially low, and income distributions are skewed by the power of big corporations. Reaching “peak oil” will help increase these prices to the eventual benefit of renewables, but how quickly when competition is also emerging from other hydrocarbons? The need to strive for better economic, social and environmental data remains important for all our communities.
Coal seam gas is a case in point, judging from the evidence to date. No payment is envisaged for depleting Australia’s greatest water resource, which will benefit natural gas at the expense of pastoral, tourism, and small mining ventures, and Aboriginal communities – that is, potentially massive market failure.
Scientists should do more to address the issue of market failure advocating better data on industries like coal seam gas extraction, and a thorough review of the inadequacies of conventional economic statistics, taxes and subsidies, and general impact on the economic well-being of our communities.
Hans Hoegh-Guldberg is Managing Director of Economic Strategies Pty Ltd, which specialises in applied cultural and ecological economics with a focus on the economics of climate change. He is the author of of major socioeconomic study for NOAA, Climate Change and the Florida Keys (2010) and a major contributor to climate change related studies in the Pacific (2000), Great Barrier Reef (2004), and the Coral Triangle (2009).