Peter Gallagher

Transition to a non-carbon economy

2008-11-20T13:11:52-06:00

The objectives of climate-change mitigation programs such as those in the Garnaut Report or in the Australian Government's absurdly-named 'carbon pollution reduction scheme' cannot be achieved by 2020 or 2050 without a massive, and rapid, transition away from carbon-intensive energy sources of primary energy for base-load power generation, transport etc.

But forcing rapid change in the way we power production and consumption across the economy —for example, by means of carbon-quota (or tax) penalties— will cut growth and will redistribute resources to less productive sectors such as government and (probably) some households. Certainly, the emission controls will affect business and consumer plans, but the wealth impacts also risk undermining our capacity to invest in the infrastructure necessary for an eventual energy transition.

Prof. Vaclav Smil argues that the inertia of energy systems is much greater than these 'transformational' programs acknowledge. Unlike information systems that the micro-processor revolutionized within the span of half a working-life, a transition in energy systems takes generations because it requires fundamental changes in large-scale 'cooperative' infrastructure such as transmission networks as well as in the organization of production and consumption.

"The historical verdict is unassailable: because of the requisite technical and infrastructural imperatives and because of numerous (and often entirely unforeseen) socio-economic adjustments, energy transitions in large economies and on a global scale are inherently protracted affairs. That is why, barring some extraordinary commitments and actions, none of the promises for greatly accelerated energy transitions will be realized, and during the next decade none of the new energy sources and prime movers will make a major difference by capturing 20 percent to 25 percent of its respective market. A world without fossil fuel combustion is highly desirable and, to be optimistic, our collective determination, commitment, and persistence could accelerate its arrival—but getting there will demand not only high cost but also considerable patience: coming energy transitions will unfold across decades, not years." The American

Temperatures in Victoria

2008-11-19T03:40:27-06:00

An update to the previous post on the temperature record in the state of Victoria. The Australian Bureau of Meteorology says that 2007 was the hottest year on record, although satellite data show the Southern Hemisphere is not warming. The chart (above) shows their records for Victoria since 1950.

The size of the 2007 anomaly prompts the question: 'what (on earth) was going on in Victoria in 2007?'. The second chart (over the fold) shows some 'outliers' that may account for the high mean in 2007. The 'May' outlier is from that year. The outliers in June (winter in Victoria) are from 1991 and 1957, while the July outlier is from 1975. All were otherwise rather cool years.

R coode for the time-series plot


#

# Go to http://www.bom.gov.au/cgi-bin/silo/cli_var/area_timeseries.pl

# Using the instructions there, define a grid covering Victoria

# (Hint: start by clicking at Lat:142E and subsequently at Long:40S)

# Generate the time series and copy the table to a text editor

# (unfortunately this data set does not seem to be available via ftp)

# Save the table to a text file and move to R

#

#

# Read the text file ('file')

# file<-"/bom_data.txt"

# Table 'f' should have 14 Vectors of monthly mean anomalies and an annual anomaly mean

f<-read.table(file,skip=9,fill=FALSE, row.names=1, col.names=c("Year","Jan","Feb","Mar","Apr","May","Jun","Jul","Aug","Sep","Oct","Nov","Dec","Annual"))

# Create a time-series of the annual mean anomaly. Don't include the last (incomplete) 2008 series

anomalies<-ts(f["Annual"],start=c(1950,1), end=c(2007,1))

# plot them using a 'stair step' plot

plot(anomalies, type="S", col="darkorange", lwd=2, xlab="", ylab="degrees c", main="Mean Temp Anomalies (Victoria)", sub="Source:BOM, Grid=142.50: 150.50E, 35.50: 39.50S", cex.sub=0.8, font.sub=3, cex.axis=0.8)

# add a center-line for ease of reference

abline(h=0.0, lty=3, col="darkseagreen", lwd=2)

# add some tick marks -- assumes Hmisc library is loaded

minor.tick(nx=10)

#

#

R code for the box-plot (using the same data set)


#

#

boxplot(f[1:12], col="darkorange", pch=16, notch=TRUE, boxwex=0.6, cex.axis=0.8, ylab="anomaly, degrees c", main="Mean, quartiles and outliers of monthly records (1950-2007)")

#

Share the love

2008-11-16T19:25:07-06:00

According to the Reserve Bank's deputy Governor:

"The prospective earnings yield on Australian shares now stands at 11 per cent, almost double the long-term average…When the yield has risen to these levels in the past, the return on shares over the subsequent 10 years has almost always been well above average" David Uren in The Australian

Here's the Governor's speech.

How hot has it been in Victoria?

2008-11-16T02:16:11-06:00

The Australian Bureau of Meteorology claims that 2007 was the hottest year on record for Victoria

"The year 2007 was Victoria's warmest year on record with a mean annual temperature 1.18°C above the long term norm. This is 0.37°C above the previous record, set in 1988" BOM

But, if so, Victoria must have had a dramatically different year from the rest of the Southern Hemisphere, whose land-temperatures show almost no trend over the past twenty years—except possibly a slight cooling since 2001 (click the thumbnail).

Note:The BOM uses the mean of temperatures in the period 1961-1990 as the 'baseline' for anomalies. The NASA data from RSS calculates anomalies as differences from the mean in the period 1979-2008 (for the relevant series). But in this case, the different baselines don't matter. I'm interested only in whether the BOM claim of a huge anomaly (> 1° celsius) is plausible. It sure doesn't look that way from space.

The smoothing in the graph is based on a simple, two-sided, moving average over 13 months. It's unnecessary; only a piece of eye-candy.

Here's the R script used to create the graph. It should be able to handle future updates to the RSS data. Please note that you'll need the "Hmisc" library from CRAN for the last step in the script.

Disowner: I'm an R amateur, so…this is a kludge, your milage may vary etc. etc.


#

# Load S-hemisphere (-70s to -20s) land anomalies

# Smooth them using a two-sided filter (13 years)

# Plot the anomaly time-series and the smoothed series

#

# for the tick marks on the graph

library(Hmisc)

#

# get the data: land temperature anomalies

file<-"ftp://ftp.ssmi.com/msu/monthly_time_series/rss_monthly_msu_amsu_channel_tlt_anomalies_land_v03_2.txt"

f<-read.table(file, skip=3, fill=TRUE)

# create a time-series

# f$V6 is the vector corresponding to data for 70s - 20s latitude

# Substitute: f$V3 = global; f$V4 = tropics; f$V5 = nth hemisphere

# f$V7 = nth temperate; f$V8 = sth temperate

Anomaly=ts(f$V6,start=f$V1[1], frequency=12)

#

# a vector of weights

k<-c(0.0025,0.005,0.1,0.25,0.5,1,1,1,0.5,0.25,0.1,0.005,0.0025)

# smooth the anomaly series

A_Smooth<-filter(Anomaly,(k/sum(k))) # filter the anomalies

#

# the date of the data

my_months<-c("January","February","March","April","May","June","July","August","September","October","November","December")

#

# now plot the data

plot(Anomaly, col="darkseagreen", lty=1, xlab="",ylab="degrees c", main="Southern Hemisphere Lower Troposphere (Land) Anomaly", sub=paste("Source: Remote Sensing Systems, to", 

my_months[f$V2[length(f$V2)]], f$V1[length(f$V1)], sep=" "), cex.sub=0.7, font.sub=3, cex.axis=0.8)

# overplot the smoothed series

lines(A_Smooth, lwd=3,col="darkorange")

# add a legend

legend("bottomright",c("anomaly","smoothed"), cex=0.8, lwd=2,col=c("darkseagreen","darkorange"),horiz=TRUE, bty="n", inset=0.02)

# and a 'mid-line' to make the anomaly easier to read

abline(h=0.0,lty=2,col="darkslategray4")

# some tick marks

minor.tick(nx=5)

#

#

#

Why ‘Bretton Woods’ bis won’t happen

2008-11-10T21:06:33-06:00

Although global regime management has become multipolar, multilateral collaboration has a woeful recent record.

"In fact, the emerging multilateral, multipolar world – long called for by those uncomfortable with American power – shows every sign of being highly dysfunctional." Gideon Rachman at the FT

Memoir of Keynes

2008-11-09T02:11:55-06:00

Amusing, anecdotal, accurate short memorial of the great man, now again in the news (the portrait of Keynes at work by his one-time lover, Duncan Grant).

A modest proposal for the ‘G-20’ summit

2008-11-09T15:02:24-06:00

The IMF's Managing Director should not try to talk down expectations for next weekend's summit. We deserve much more from these leaders that, so far, have done little to match their promises of reform of global governance over the past decade.

The G-20's role should be to set up the best conditions for a recovery in real markets, not just in financial markets. But, on their past behavior, it is likely they'll re-cycle yet another low-credibility statement about completing the noxious Doha deal that was on the table last July.

A more modest program to open world markets that is not burdened with the second-thoughts, exceptions and safeguards would do much more to lift global market confidence if it could be quickly implemented. Here's a blast-from-the-past idea that could also set up a still more effective resumption of Doha when the new U.S. administration (and the new EC Commission and Indian Government) is ready to deal

A proposed market-opening initiative for the G-20

Summary: the G-20 Meeting in Washington should agree on an immediate across-the-board measure to open goods markets using the Uruguay Round modalities (pending eventual conclusion of the Doha Round).

Rationale

Considering that the world economy now faces a serious recession, G-20 governments should open markets quickly in a co-ordinated, multilateral action to encourage the recovery of trade flows.

The conclusion to the complex Doha Round negotiations is too far off and too uncertain to help with rebuilding the global economy now.

If, as seems likely despite the anti-globalization rhetoric of its campaign, the Obama Administration agrees to restart the Doha Round negotiations speedily, it is very unlikely that those negotiations can be concluded before the end of 2009, well into the projected global economic downturn. Elections in India and the cycling of the EC Commission also suggest agreement on Doha is at least a year away.

A different approach¾but an old technology¾could bring about an early multilateral trade agreement on an effective response to the economic crisis. G-20 governments should agree to immediately implement an across-the-board tariff cut in agricultural and non-agricultural products using the same approach as the Uruguay Round:

Uruguay Round: cuts to bound rates of duty

	Agriculture tariff cut (average across all lines)	Minimum tariff cut per tariff line	Tariff quotas	Non-Agriculture* cut (average across all lines)
Developed countries	36	15	Expand in-quota volumes by 4% of domestic consumption	(33.3)
Developing Countries	24	15		(25.0)

* There was no formula tariff cut for non-agricultural products. The Quadrilateral Trade Ministers announced in July 1993 that they were looking for a 50 percent reduction in bound rates over 15% (with certain exceptions) and negotiated cuts averaging at least one-third. The target for developing countries was an informal understanding in Geneva.

Impact assessment

Agriculture: A review of the latest WTO data on average bound rates of duty (see graphs based on WTO Tariff Profiles, 2008) suggests that this level of cut could be agreed by most of the G-20 governments without significant disruption to current trade policies. In these economies, bound rates of duty in the agriculture sector that are more than 33% above than the trade-weighted (applied) rate of duty. Those economies where the bound rate is less than 133% of the applied rate (highlighted) would see a cut in the overall applied average duty. The biggest impacts would be in Korea (a 52-point cut in the t/w average rate) and Mexico (an 11-point cut). China would see its t/w average cut by 6 percentage points.

All agricultural tariff quotas should be expanded by the same amount as in the Uruguay Round (or some substantial fraction; e.g. by 2%).

Non-agriculture: The latest WTO data on bound rates of duty (see graphs) shows that all G-20 countries could meet the Uruguay Round target without cutting their t/w applied rates of duty.

A positive contribution

The apparently non-disruptive character of this tariff cut may seem to be an argument against it. There are, however, two factors that stand in its favour in addition to its simplicity:

It will cut the bound rates on which any resumed Doha Round tariff cut will be based, increasing the leverage of whatever modalities are finally agreed in Doha
It can be implemented without any explicit provision for sensitive or special products. The Uruguay Round tariff cut is an average across all tariff lines (not a cut in the overall tariff average; a much stronger result). This means that participants can reduce the incidence of the tariff cut on sensitive tariff lines¾but not below the minimum rate of cut¾while raising the incidence on other lines to meet the overall average. In other words, the modality has built in flexibility.

This agreement could be agreed all G-20 Members for immediate application. It would be an MFN agreement to which other WTO Members outside the G-20 (and Russia) would be encouraged to adhere. But its implementation by G-20 Members would not be conditional on any other WTO Member taking the identical action. In other words, the G-20 would consider that implementation by all G-20 Members comprised a critical mass that allowed them to extend the benefits of the agreement on an MFN basis.

This agreement would not be a substitute for eventual completion of the Doha Round.

Liberalization of services trade is equally important but no formula has been found to open services markets. G-20 Members could commit to an early re-start of the Doha Round services plurilateral process.

More details for agriculture:

(a) There would be no modalities that differentiate among products on the basis of their sensitivity or special character; tariff cuts will be across the board.

(b) Developing countries will have fewer obligations as a consequence of the Uruguay Round targets but no other categorical exceptions would be made

(c) There will be no new safeguard mechanisms (Article XIX safeguards will remain available, the SSG could remain as is until further considered in the Doha negotiations)

(d) The EC and USA should be asked unilaterally to cut their domestic supports in line with the offers that they made during Doha Round negotiations in July 2008.

(e) Those governments that have more ambitious agendas may make separate plurilateral agreements as long as they are prepared to offer the benefits of those agreements, once reached, to all WTO Members on an MFN basis

(f) The Hong Kong Ministerial Conference decision on export subsidies should be made final.

Things that don’t change

2008-11-07T15:42:17-06:00

"By tapping Rahm Emanuel, a fierce partisan of Israel who volunteered as a mechanic in northern Israel during the first Gulf War, it is fair to say that process has already begun" from FP Passport

Emanuel's father has not heard, apparently, that Obama defeated racism.

Automobile tariff cut irrelevant

2008-09-16T04:44:57-05:00

Why it's impossible to get too excited about the planned cut in automobile tariffs from 10% to 5% in 2010. Despite the howls of capital and the unions, the volatility of the Australian exchange rate makes a 5% margin irrelevant. Already in 2008 the trade-weighted index has fallen more than 7 percent. Click the thumbnail for a larger image.

Dissenters Day

2008-09-11T03:55:59-05:00

September 11 is a day of infamy, but also the anniversary of a triumph for Gallilean empricism.

Bombs or bridges?

2008-09-11T03:49:16-05:00

Billions of dollars spent on armaments would be more productively spent on infrastructure. This would be a less wasteful and much more certain way to maintain Australia's supposed global 'middle power' status (Is that a 'status'? Or is it a bunch of diplomats exercising their vowels?). Our balance of payments plunged back into the red this month because—among other reasons—we cannot ship the minerals and coal ordered by our customers on time and in the volumes required. Our export performance—not to mention our national productivity—is held back by decades of neglect of essential infrastructure. But the Prime Minister, according to reports, wants to give priority to keeping up with an arms race.

Some analysts have described this as a "catching up" exercise, suggesting more investment would be necessary. Mr Rudd appears to agree.
"For the government, a major priority is to ensure we have enough naval capabilities in the future, enough naval assets, enough naval performance, and therefore enough funding put aside to invest in that, long term," he said.
Mr Rudd also insisted in his speech that Australia, which is a close ally of the United States, wanted to maintain its status as a global "middle power". [From BBC NEWS | Australia fears Asian arms race]

Garnaut Review Economic Model

2008-09-05T01:56:48-05:00

On a quick first reading of the supplementary report, this seems to be the key data related to the modeling results. For the more moderate 550ppm CO₂ objective, the costs of a 10% cut in 2000 carbon emissions to 2020 are estimated at 1.1% of GDP (1.8% cut to consumption) comprising a net decrement of about 0.1+% of GNP per year. In other words, the expected net benefits are somewhere toward the end of the century (and seem to comprise assumptions about 'avoiding catastrophies').

Despite the boost to growth in the second half of the century, the sacrifice in the first half of the century is substantial, though the loss to GNP is fully recovered with a margin by the end of the century. The benefits that are purchased by this sacrifice take several forms. One is insurance against the effects of severe and possibly catastrophic outcomes on material consumption during this century. Another is increased protection against loss of non-market services this century. Yet another is avoidance of all of the rapidly increasing costs in through the 21st and into the 22nd century and beyond: the rapidly increasing negative impact on material consumption; the risk of outcomes much worse than the median expectations from the applied science (although beyond the 21st century, the median outcomes include more and more of the severe and possibly catastrophic); and the impacts on non-market values.

Drought in the “Sunburnt Country”

2008-09-05T00:28:14-05:00

Ian Castles has published—as a tribute to Dorothea Mackellar's poem, My Country (often known from a line in its second verse as 'A Sunburnt Country'), published just one hundred years ago today—a typically well-mannered but meticulous criticism of the CSIRO's paper on the future incidence of drought in Australia. Ian detects, and documents, the CSIRO authors' habits of ignoring pertinent but inconvenient criticism and points to some not-quite-credible claims that the CSIRO authors have previously published—in the IPCC's Fourth Assessment report.

It defies belief that the range of rainfall change in 2080 (relative to 1990) from all of these scenarios and models could be from minus 27 per cent to plus 54 per cent for “Northern NSW, Tasmania and central Northern Territory” - and yet be from minus 80 per cent (i.e. one-fifth of the 1990 level) to nil “within 400 km of western and southern coasts” [From One hundred years of drought and flooding rains - On Line Opinion]

Precautionary principle, misleading and undemocratic

2008-09-05T00:25:20-05:00

The "precautionary principle" makes a dishonest claim (I don't say that people who invoke it are dishonest) because it pretends to be one thing—a justification—while being, in fact, a very different thing—an explanation. I say it justifies, at best, a wager and that wagers should not be the basis of public policy in democracies, certainly not when we are debating a decision that will cost us billions of dollars in taxes and probably still more in lobbying and tax-avoidance.

No doubt we will shortly see a lot more about the 'precautionary principle' as a reason for embarking on carbon emission taxes. In Australia, the publication of the final report of the Garnaut Review later this month is sure to bring out a lot more rhetoric about urgency, precaution and 'running out of options'. We already see this line of argument from some industry organizations such as the Minerals Council of Australia that is, no doubt, having a difficult time managing differences among its members about whether the 'carbon pollution' plans of the Australian government make economic sense.

We can anticipate still stronger appeals to the 'precautionary principle' because it is often used to put an end to debate; 'Look, we'll commit to carbon reductions without detailed reasons (that we cannot agree), just in case the worst case turns out to be true'. I don't know if that is happening inside the MCA. But it is clear that Ross Garnaut has already nailed his standard to the precautionary principle (he called it 'Pascal's wager') and it is likely that we'll hear more of the same from the Rudd government as they approach the point where they must turn their Green Paper into legislation.

So what's wrong with the 'precautionary principle'? Many people respond very positively to the idea of taking action to avoid an unquantified risk because they're naturally inclined (see the section of that paper on what does explain risk aversion: it isn't a rational utility function) to anticipate the worst outcome from any risk considered on its own. Individuals recognize in their own behavior that they act with precaution and they consider it just common sense: 'prudence'. But government is not the action of an individual. We need to look at the idea of precaution more carefully when we talk about collective action and ask just what the 'principle' implies .

A 'precautionary' action is taken without the sort of justification that we would otherwise require for a given decision. It is an expression of our concern about the unknown and, we fear, unlimited risk we may face. We take actions that we believe will avert some or all of this risk, although we don't know how much risk these actions will avoid because we cannot or have not evaluated the actual risks---that is, the probabilties---involved. The so-called 'principle' of precaution originated in European environmental regulations and had it's classical, convoluted, expression in "Principle 15" of the 1992 Rio Declaration of the United Nations Environment Program:

"Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation."

Many commentators then and since have pointed out that this statement is no help in dealing with uncertainty. 'Scientific certainty' is a very rare animal so this aspires to be a quasi-universal guideline. The obvious question is how well, in the absence of scientific knowledge, can we evaluate claims of 'serious or irreversible damage' and, consequently, how confidently can we make decisions about which measures are 'cost-effective'? The answer is: 'not very well' and 'not confidently'.

The 'precautionary principle' appears to be a justification for action, but it's really only an explanation of our reasons for taking an action; a psychological statement about our state of mind. It cannot be a justification in the way we normally use that word. A 'justification' is a statement of a rational balance between ends and means. Rational, here, literally means 'measured'. So a justification is a balance (it might be wrong; justifications can be in error) struck between what we pay and the value of what we pay for; or between the crime and the punishment; or between god's ways and mans hopes (remember Milton).

An explanation is a very different thing from a justification. We can readily explain Mohamed Atta's actions on 11 September, 2001 in driving a plane full of people into the North Tower of the World Trade Center. He held a distorted vision of the world that demonized the United States and the West as the enemy of Islam. He held an insane hope that his actions would lead to the destruction of the U.S. and an end to the perceived threat. But this psychological explanation is not a justification. We can find no justification for killing thousands of innocent people. The explanation of Atta's psychology is completely unsatisfying as a justification for his actions because it offers no rationality. (Unfortunately, President Bush did not seem to grasp that while the action had no possible justification, this did not mean that the explanation could be ignored).

What happens when a government takes an action that has a (psychological) explanation but not a justification; that is a 'precautionary' action? Some people are inclined to accept that governments should do that because they place themselves in the role of the government and think, 'now how would I act when faced with this threat'. They answer as they would answer personally: I'll make sure I never face the threat whatever it might be. That's the personally prudent course. But what's OK for an individual is not OK for a government.

Acting without justification on a risk is exactly what gambling is. It's what happens when you put the roulette chip on the red 33 instead of on the black 72. It's just a wager. We don't allow gambling with public stakes (our GDP, billions of tax dollars) in a democracy because democracy is all about deliberation and consent; it's why democracies have parliaments that are supposed at least to have a rational debate and, in theory, to reached reasoned decisions (except that they are all too often mushroomed by the dictatorship of the Executive in our current democracy). Its why we demand a free press and free speech. Not to explain our phobias but to promote the reasoned debate that helps us to take balanced decisions on the basis of evidence, not influenced by personal agendas or subjective evaluation.

The temptation to gamble is more common than you may think. Governments are frequently asked to make decisions that rely on a scientific assessment in conditions of scientific uncertainty. It's not an unusual phenomenon and there have been many examples over the years---especially since environmental protection issues began to be prominent public concerns in the 1970s. Decisions based on uncertain science happen every day in the management of quarantine risk, drought funding, or the release into commercial use of foods or pharmaceuticals with novel compounds.

There may be no completely satisfactory rule of thumb for these decisions except to say that there is a world of difference between acting on dread and acting from prudence on the basis of partial assessments. In order to make good decisions, decision makers need to understand the nature of scientific uncertainty and to be aware of its well-attested tendency (see the references in the Peel article, below) to encourage subjective judgements—and personal or interest-group motivations—to creep into decision making. We see plenty of such subjectivism in the policy debates surrounding the uncertain climate science.

None of this is to say that governments should not act prudently when offered partial information about risk. Prudence usually means taking measures proportional to the harm that you can quantify and continuing to seek better information on the risks that you cannot quantify. It almost certainly means making no provision at all for undefined fears or 'worst case outcomes' for which you have no reliable probabilities. As your mother always told you; your worst fears will turn out to be groundless. She was right.

For more on the shades of difference between prudence and precaution, I strongly recommend an article from the 2004 Volume of the Melbourne Journal of International Law by Jacqueline Peel that draws on the treatment of the 'precautionary principle' in international tribunals. Peel's last sentence reaches a well-founded conclusion from a decade of international experience of the 'precautionary principle' that should stand as a warning to all who, like the Garnaut Enquiry in my view, want to make a wager based on inconclusive climate science:

"Precaution should not require decision-makers to achieve the impossible and reach the ‘right’ decision in advance, regardless of uncertainties. Rather, the best chance for the international community to prevent serious environmental degradation in the future lies in imposing particular procedural constraints on regulatory decision-making that are designed to ensure scientific uncertainty is factored into the process and that science itself is not extended beyond the limits of its utility and capacity to inform decisions on risk regulatory measures."

Chroming the Internet

2008-09-01T21:32:34-05:00

I find it much easier to believe the first part of this statement than the second part.

"So why are we launching Google Chrome? Because we believe we can add value for users and, at the same time, help drive innovation on the web." [From Official Google Blog: A fresh take on the browser]

I'm guessing that it's mostly about the money.