Will anyone who really understands emissions trading please speak up

Can anyone remember a piece of legislation about which there has been so much ignorance, so much misinformation, so little reliable expert opinion, and so much politicking, than the emissions trading scheme legislation now known as the carbon pollution reduction scheme?

The problem is that so very few understand how the CPRS is designed and how it might work.  Those who believe they do seem unable to articulate it in a way that might inform the average citizen. [more]

It seems as if there are multiple reasons the CPRS is so poorly understood.

First, it is unique.  There is almost no experience of how a CPRS such as proposed by the Government might work.

Because of this, theoretical modelling is needed to predict the effect of the CPRS.  All modelling, no matter how sophisticated, no matter how powerful the computers are that crunch the data, depend on the assumptions that are fed into the modelling.  If these are not valid, the output will be invalid.  Peter Costello said just this when asked to comment on Malcolm Turnbull’s Frontier Economics modelling – the assumptions determine what comes out.  The assumptions are as important as the conclusions, but we seldom hear about them.

Next, while there are many commentators on the CPRS and alternative schemes, very, very few know enough to make their opinions and predictions useful.  Those who might know are diluted by scores of columnists who take a shot at informing the public, but fail dangerously because of the misinformation and confusion they spread.  As was the case during the GFC, we have bevies of economists pontificating about the CPRS but succeeding in adding uncertainty to an already complicated debate.  As with the GFC, they seem unable to grasp the complex dynamics of interactive systems.  The complexity of the CPRS is even greater than the GFC.  It will have to operate in a highly dynamic multi-facetted system that intertwines ongoing changes in the physical world, the changes needed to mitigate carbon pollution, world economics and politics and geopolitical dynamics.  Add to that competing emission abatement schemes, and you have a complex mix that defies explanation by almost everybody, especially columnists.  They would serve us better writing about something else or by confining their offerings to what they see as the politics of the debate, not the technicalities of carbon mitigation.

This morning on ABC’s Insiders we saw the confusion in full flight with Michael Stutchbury canvassing a rethink on the carbon tax idea instead of an ETS, Brian Toohey being generally critical of aspects the CPRS, and Lenore Taylor, as usual, taking a balanced approach, while Barrie Cassidy looked on somewhat bemused.  It was patently clear that public debate among those we might expect to be well informed has not advanced much.

So where can anyone who wants valid and reliable information get it?

In July last year I had a shot at explaining an ETS on Possum Box in A plain man’s guide to an emissions trading scheme.  It was down-to-earth rather than sophisticated, but even today it still makes sense.  Then in November there was The CPRS, Treasury modelling, and the predictable reaction and Will world leaders do a climate change Nero? and in December The convoluted politics of climate change all of which focussed more on the politics than the technicalities of an ETS.   In February this year there was The Turnbull ETS wild card written at the time he tried to up the ante on carbon targets, and in July there was Is the CPRS really a dog?  Again these were pieces related to the politics rather than the details of the scheme.

So what is there around to help the thoughtful person who wishes to make an informed decision about an ETS?  Joshua Gans made a valiant attempt in How do CPRS schemes work? in Crikey on 12 August but even after reading it three times I was not much wiser.  I can’t name any other columnist that has tried to explain the technicalities comprehensively.  If any reader has a reference, please inform us all.

If you want information, as it were from the horse’s mouth, there is a Government climate change website A subsection on the White Paper gives a useful Executive Summary which is detailed and comprehensive.  Then there are over 30 Fact Sheetsone of which is Emissions Trading How it Works that gives a simple two page summary.  There are a vast number of Climate change publications

Frankly, there is more than enough information to satisfy most.

There is another website offered by the EPA Victoria, the Victorian Government, Global Sustainability, and RMIT Carbon Offset Guide Australia that helps commerce and industry to find and choose carbon offsets

If anyone is interested in the Frontier Economics modifications to the Government’s proposed CPRS, click here (1.59 mb).

So where do we go from here?  Frankly I hope columnists give up their attempts to explain the technicalities of ETS schemes and the Government’s CPRS.  They appear incapable of doing so in the detail appropriate for the average citizen.  As they seem not to understand what they’re talking about, by writing they can only add to the confusion.

Next, I believe that the Government should, in the next three months, blitz the public with simple, down-to-earth communications on the CPRS – short, well illustrated brochures to every household, a variety of TV ‘commercials’ about the CPRS, a short documentary, and perhaps community meetings to explain the scheme.  The Opposition will protest about the expense, but this is too important a matter on which to skimp - to hell with the expense.

The public is very supportive.  Recent surveys show that about three out of four want action on climate change and want the Opposition to support the Government scheme; a Morgan survey last week showed 58% say if we don’t act it will be too late and another 11% say it’s too late already. 

So there’s a receptive audience out there that would respond to a clear explanation of the ins and outs of the scheme.  It’s a perfect selling situation that the Government should grab with eager hands.

Finally if any visitor can point us to an existing lucid exposition of the CPRS, please do.




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Sir Ian Crisp

16/08/2009"Finally if any visitor can point us to an existing lucid exposition of the CPRS, please do." Your appeal would seem to rule out the witch, Penny Wrong. She seems out of her depth and very insulting to our trading partners. Has she called any of the Chinese officials 'deniers' and 'Canutes'? She seems to rely on such labels when she is floundering.

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16/08/2009Sir Ian, I suspect that Penny Wong knows as much as anybody about the CPRS, but I expect she has lost her tolerance for explaining it to those who either don’t have the capacity to learn or aren’t interested in doing so. She may not be the best one to explain it to the general public as she is too close to it, too familiar with it, to be able to put it into simple terms. Someone used to communicating complex concepts to ordinary folk should be engaged to bridge the gap. There’s tendency to can Penny because of her tedious and listless presentations, but I suspect there’s a pretty sharp intellect behind that bland exterior, and she lacks nothing in dogged persistence.


17/08/2009I think the passionate arguments about the CPRS, are not actually about global warming itself and how to deal with it, but about something else. This is not really a discussion about science and economics and technology, but about something grander. I suspect the issue is about people's worldview. This is why there is so much passion involved and too little logic. It seems that the people opposed to the CPRS are defending a worldview that essentially believes that nothing much changes in the world, and more importantly, that nothing of great significance should change. The world is sweet is their view, and our grandchildren will live in a world much the same as ours, maybe with smaller and faster mobile phones. CPRS threatens this view; insisting that a great upheaval may be in store for us, and this view therefore is to be resisted. You can explain the CPRS scheme until you turn blue, but these people are not going to listen; the premise that this is built on is unacceptable to them. These people's emotions are engaged on this issue, not their intellect. The same applies to many of those who are the biggest boosters of the CPRS scheme. Many groups, especially the people who are having a hard time in the current world, are seeing the promise of a great upheaval as a means either of getting revenge on their better off compatriots, or as a way of upending the hierarchy to put themselves higher up. That's why some greens, who a generation ago would have been anarchists or communists, now are most motivated by damaging our industrial society. Remember that whether Australia does nothing at all or adopts the world's best greenhouse gas reduction practice, will do nothing measurable to improve things - we are just too small a pollution emitter. Australia's contribution will always be too small to measure, whatever we do - the only citizens who really matter are in the USA, Europe, China and so on. An alternate, and seemingly less numerous, group of reformers are dealing with the problem in a sensible and realistic manner, and these people are mostly in charge of the CPRS system. Penny Wong and others in the government and bureaucracy, and many climate researchers, are in this group (as am I). But they realise that rational explanations are not getting traction. They are doing the best thing, by keeping their heads down and putting a sensible system in place that will support the efforts going on overseas, and globally. The general public according to opinion polls, seem to be supporting this approach. But the extremists shouting from the sidelines are living their own dream, and are not much interested in compromise and practical solutions.

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17/08/2009Cavitation, Your argument is convincing. As I wrote the piece, it occurred to me that, since there is such strong community support for doing something about climate change, and doing it now, maybe the best course for the Government would be to just get on with the CPRS it has developed, that is once the legislation is passed. No one can be certain about how it will turn out. The Government thinks it has ‘got the balance right’; its notion is at least as good as any alternative that’s been proposed, so it might be best to just press on. Of course there are lots of deniers and pessimists, the radicals who want to go further, and the usual rent-seekers, but they can and should be ignored. Your last paragraph queries whether a public educational programme would get enough traction. As an educator, I believe a programme to educate the public would be worthwhile, not so much about the need to do something to combat climate change as most people seem to be already convinced, but to familiarize them with how it will affect them. This would also have the affect of countering the misinformation that the opponents of the scheme, or parts of it, will continue to promulgate wildly. Thank you for your balanced contribution to this thorny debate.

Just Me

17/08/2009"the radicals who want to go further,... but they can and should be ignored. " All indications currently are that the latest IPCC report has substantially [i]underestimated[/i] the speed of climate change in particular, and possibly its effects. Those on the pro-climate change side of the debate who currently seem like radicals and pessimists, look increasingly likely to have been right all along. I think the simple ugly truth is that we humans are probably in pretty deep shit, of our own making. We are seriously running out of time to deal effectively with this problem.

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17/08/2009Just Me, I take your points. Since the ‘radials’ (Greens) will likely turn out to be right, what a pity it is that they have allowed themselves to be dealt out of the game so far by taking such a radical approach. I wonder how they would handle the complexities of climate change if they were in Government. Would they, as has been asserted, close the coal mining industry down virtually overnight? Or would they take a phased approach that allowed enough time for the economic and employment adjustments to occur without major disruption? How soon do they believe they could create and distribute the green jobs that they say would outnumber those in the coal industry? How well could the new industries compensate for the loss of revenue from the old? These are questions to which we hear no definitive answers from them, just generic claims. I’m sympathetic to the argument that climate change is proceeding faster than anticipated, but am conscious of the need for government to manage this in a way that on the one hand avoids the ‘tipping point’, yet on the other avoids catastrophic dislocation of the economy and the labour market. Those who take the extreme stance seem incapable of getting that balance right. I can see that my use of the word ’pessimist’ has caused confusion. I meant that word to apply to those who are predicting catastrophe with the Government’s CPRS, despite all the compensatory measures that it contains.


17/08/2009My own view. I think permits to emit carbon get created, much like money to trade goods is created. Current emitters get some for free. Lets get the dam thing introduced so we can find out. There are having a shot at it, I am sure there will be problems and I am sure they will be ironed out.
How many Rabbits do I have if I have 3 Oranges?