Monday, 6 May 2019

Climate change policy scare campaign does the rounds again

A scary headline from 7 West Media and Kerry Stokes**….

Fossil fuel industry analyst and economist  Dr. Brian Fisher has issued another warning about what he apparently believes is the folly of tackling climate change……

The Sydney Morning Herald, 2 May 2019, p.1:

Opposition Leader Bill Shorten is facing an explosive political row over his climate change policy as industry warns of rising costs and a new economic study predicts 167,000 fewer jobs by 2030 under the Labor plan.

Business groups backed the ambition to reduce greenhouse gas emissions but said they deserved more detail given they would pay for the scheme, in a rebuke to Labor's claim it was "impossible" to model the costs of its policy on employers and the economy.

The new warning from economist Brian Fisher, which is hotly disputed by Labor and countered by other experts, marks a dramatic escalation in the political fight over the cost of taking action on climate change compared to the cost of inaction.

Dr Fisher concluded that the Labor emissions target would subtract at least 264 billion from gross national product by 2030 and as much as26 4billion from gross national product by 2030 and as much a s542 billion, depending on the rules for big companies to buy international carbon permits to meet their targets.

"Negative consequences for real wages and employment are projected under all scenarios, with a minimum 3 per cent reduction in real wages and 167,000 less jobs in 2030 compared to what otherwise would have occurred," he concluded.

"Labor's plan results in a cumulative GNP loss over the period from 2021 to 2030 that is over three times larger than that occurring under the Coalition policy. Turning to other results, the wholesale electricity price under Labor's climate policy is around 20 per cent higher than that resulting from the Coalition policy."

Labor has been bracing for Dr Fisher's report after weeks of conflicting claims over the cost of its policies.

But Australian National University professor Warwick McKibbin cautioned against some of the claims, telling the Herald two weeks ago that the impact of Labor's proposals would be a "small fraction" of the economy by 2030.

Professor McKibbin estimates the Coalition and Labor policies would subtract about 0.4 per cent from the economy by 2030.

The cumulative value of economic output has been broadly tipped to be about $30 trillion by 2030, which means Dr Fisher's worst-case scenario equates to less than 2 per cent of output over that period.

An earlier version of Dr Fisher's modelling triggered headlines of a "carbon cut apocalypse" in March but was questioned by other economists, who said he had assumed very high costs for renewable energy generation and the cost of reducing emissions.

ANU professor Frank Jotzo said in March that Dr Fisher's work had used "absurd cost assumptions" about emissions abatement.

Dr Fisher was the executive director of the Australian Bureau of Agricultural and Resource Economics for many years and conducted the modelling at his firm, BAEconomics. He said this was not commissioned or paid for by the government.
While heavily disputed, Mr Morrison is expected to use the results to mount an escalating campaign against Mr Shorten ahead of the May 18 poll….

Fisher gets called out….

Mirage News, 2 May 2019:

THE CLIMATE COUNCIL is calling on Brian Fisher to come clean about his links to the fossil fuel industry, following the release of his “independent” modelling looking at the cost of Labor’s climate policy.

“Mr Fisher has a history of working closely with fossil fuel industries. How can his research be ‘independent’?” asked the Climate Council’s Head of Research, Dr Martin Rice.

“Mr Fisher’s work has been at odds with credible economic literature which shows that strong action on climate change can be achieved at a modest price, while the costs of inaction are substantial,” said Dr Rice.

“We should be having a conversation about the escalating costs of climate change and the very real economic pain Australia will suffer for failing to act,” said Dr Rice.
“Since the Coalition has been in government, greenhouse gas emissions have gone up and up and up. Meanwhile, Australians are on the frontline of worsening extreme weather as the climate is changing,” he said.

“We urgently need to reduce our greenhouse gas emissions There’s credible, independent research that finds Australia can drive down its emissions by more than 45% with minimal impact on the economy,” he said……

The first report in a nutshell….

Climate Council, 20 March 2019:

What’s the story?

Fossil fuel industry consultant Brian Fisher has released so-called “independent” modelling looking at the economic cost of reducing greenhouse gas emissions, but his research is deeply flawed.

Who is Brian Fisher?

Brian Fisher is the fossil fuel industry’s go-to consultant. The industry has paid for much of Fisher’s so-called ‘research’.

Is the modelling credible?

No. Fisher’s report fails to consider the economic benefits for Australia from investing in renewable energy and new technologies as well as failing to quantify the costs of not acting to prevent climate change. 

Several of his findings are implausible. For example, his findings on electricity prices are contrary to a range of detailed Australian studies showing more renewable energy means lower wholesale electricity prices.

This is a distraction.

The Federal Government has a poor record on climate change and is running a scare campaign to distract from this. Since the Liberal National Party has been in government, pollution has gone up, electricity and gas prices have gone up and extreme weather events have worsened.

An explanation of how economic modelling is used….

The Guardian, 21 February 2019:

Whenever Australia starts to have a serious conversation about addressing climate change, headlines appear in newspapers of an economic apocalypse. This happened again in the Australian this week based on work by a long-standing economic modeller of climate policy, Brian Fisher.

So, what do economic modelling exercises tell us of the impact of reducing Australia’s contribution to global warming, and more importantly, what do they not? Should we cower in fear of action or embrace the inevitable change and manage the human and economic costs of transition?

Firstly, economic modelling results are not predictions. They are based on hypothetical future worlds. Economists try to capture the dynamics of economic systems in their models to understand the relative impact of different policy options. This means they are always wrong because economists can’t predict the future. 

Economic modellers are not the crystal ball gazers we read about in fantasy books……

This does not mean the economic models are not useful, it just means they should be used to test the relative impact of different policy options and not be presented as predictions of the future. They have a long history of overestimating the costs of environmental regulations because people and markets can innovate faster than they often expect.

Secondly, the way economic modelling results are presented is very important. Industry groups in particular like to attach themselves to particular results and scream that thousands of jobs will be lost, or wages will be slashed. This is designed to scare people into not acting on climate change by making them feel insecure in their lives. The headlines in the Australian did just this.

It is also dishonest because they also don’t clearly put the results in the context of the broader change in the economy. (David Gruen, one of Australia’s top economic officials gave a great speech about this in 2008 to illustrate how long this silliness has been going on.)

To illustrate my point, the economic impacts Fischer has projected for different emissions targets are in the same ballpark of those projected for work commissioned by the Department of Foreign Affairs and Trade a few years ago. This work also presented results in a similar way to the Australian. However, what is also showed is that the economy, jobs, income, etc continued to grow regardless. We keep getting richer and have more jobs, we just do so at a slightly slower rate.

Thirdly, because Australia exports a lot of coal and other emissions-intensive products to other countries, what they do matters an awful lot to the Australian economy. As other nations reduce emissions, demand for these products falls regardless of what we do. It has been established for some time that a significant part of the economic impacts of climate change on Australia comes from things we can’t control and this is generally presented in the results (see here for an example). While he does not report this, Brian Fisher knows this because he spearheaded economic analysis in the 1990s that was targeted at convincing Japan, one of our major coal markets, it would be too costly for them to reduce emissions.

Lastly, whenever these headlines are blasted across the papers one point is always lost: these results don’t include the cost of climate change itself. This summer, we have again seen a glimmer of what climate change will mean for Australia. Recent economic analysis indicates the benefits of limiting global warming far outweigh the cost of doing so, in one case by 70-1 (a good summary is here). (Again, this is something Fisher has considered in the past as he once said it would be cheaper to move people from the Pacific and put them in condos on the Gold Coast than act on climate change.)

So, as we head into another cycle of climate change politics in Canberra, beware the economic doomsayers and the threats from industry groups that credible action will be a “wrecking ball” to the economy. To be glib, no one said saving the Earth would be free. Acting on climate change will have costs but the costs of not acting will be far, far larger. Better that we come together and manage a fair and effective transition than continuing to delay and pay a much, much greater bill later…..

Dr Fisher feels the heat....

Fisher now accuses the Morrison Government of sitting on a second report modelling cost to the mining and resources sector of climate action, which was commissioned in the lead up to the federal election campaign and, which the Department of Industry, Innovation and Science confirms it has received.

Fisher appears to believe that this report to which he was a contributor will buttress his claims and silence his critics.

However, to date Morrison and Co have not released this report so two possiblities exist: (i) the report's conclusions tend to support Labor climate action policy or (ii) the report's conclusions are based on such flawed assumptions that it will be easily unpicked by genuinely independent experts.

* Mr Stokes is the Executive Chairman of Seven Group Holdings Limited, a company with a market-leading presence in the resources services sector in Australia and formerly in north east China and a significant investment in energy and also in media in Australia through Seven West Media. Mr Stokes has held this position since April 2010. He is also Chairman of Australian Capital Equity Pty Limited, which has substantial interests in media and entertainment, resources, energy, property, pastoral and industrial activities.

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