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……
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….
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….
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….
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 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.
