Cardigans and carbon prices

I did start to wonder what sort of cardigan induced haze had descended when it was claimed that the solution to global climate change, at least from an economic standpoint, was to "internalise the externality". Obviously. Stick with me here because in the end, it should hopefully make more sense.

Externalities are by-products of processes we value but are not included in the cost to the consumer. Carbon dioxide emissions are a classic example of an externality - they are a by-product of common processes such as energy generation or transportation which are essential to the way we currently live.

Our lecturer, being a good classically trained economist, was a huge fan of a diagram. In his honour, please find one inserted below so I can illustrate where I'm going with this.

For the purposes of this exercise we'll make some assumptions (welcome to economics);
(1) Carbon dioxide emissions cause environmental damage (of x value)
(2) The price you pay for your electricity is Pmarket (determined by the point where MPC intersects with MB)
(3) The price you pay for electricity magically excludes infrastructure and other crazy real world costs which gets electricity from the generator to your house

Working on the above assumptions you are only paying for your electricity and not any environmental damage (like carbon dioxide emitted during the process which is accumulating in the atmosphere and influencing climate change).

When you put an estimate of the environmental cost (ED) into the overall cost suddenly you have the marginal social cost (MPC + ED) and, in this case a magical new red line heading to the top right hand corner of the page.

If you now recalculate the price - where the MSC line intersects with MB, and read off Pext, the new price (including the externality) is higher.

Congratulations, you now understand what will happen when the Australian Government puts a price on carbon on 1 July 2012. They have estimated that the shadow price is $23/tonne and are working on the fact that this increase in price will mean that you as a consumer will reduce the quantity of electricity you use (NB the red dashed line on the quantity axis indicates a smaller quantity). Ideally, this should mean that people are incentivised to do something about the way they use electricity and wherever possible decouple their electricity use from carbon emissions. After all, the above diagram doesn't apply if quantity of electricity does not correlate with quantity of emissions produced e.g. if your solar powered hot water system meets your household needs without additional fossil fuel boost then there is no corresponding emissions with every shower you have.

There is method in this madness.

It would be great if everyone considered whether we really have Economic hypochondria currently in Australia as we yell increasingly louder about how we can not possible afford, as one of the wealthiest nations on earth, to do something about our contribution to climate change.

Business knows they need to do something about the mega forces expected in the future, of which climate change is only one. The suite includes climate change, fuel and energy, material resource scarcity, water scarcity, population growth, urbanisation, wealth, food security, ecosystem decline and deforestation as recognised in KPMG's latest offering to the business world. Maybe we all need to  Expect the unexpected.

What I learnt over summer..

Sort of went missing during last semester. Apologies to anyone following who (a) noticed and (b) was concerned. Don't panic, I did remember to go to Uni, hand in my assessments and pass everything with flying colours. I just didn't quite manage to provide the running commentary. All that quiet reflection turned into project management with military precision as the amazing synchronicity of assessment tasks meant everything was always due at once, seemingly at regularly decreasing intervals. There remains interesting stuff to share and I plan (perhaps not with the same aforementioned military precision) to deliver the belated version in weeks to come.

The world has moved on, I'm now looking down the barrel of O'Week 2012 (with very old, sensible eyes, alas) and the end is in sight. One last subject to go...

Like all good swots I did manage to spend some time at Uni over the summer break learning the finer arts of economics and climate change (where greenhouse gases meet brown cardigans in a smog of policy objectives). Taught by the economists and influenced by the scientists, it was designed to explain why if you let good old neo-classical economics (aka the markets) do their job, we'll be able to save the planet. Of course, it was made all the more curious by the fact one of the lecturers wasn't truly convinced that climate change is man-made. In a discipline notorious for listing its assumptions, this seemed even more curious - for if that assumption does not hold, what is the point of capping and trading known greenhouse gases, let alone teaching the finer points of the economics involved! As a side note, there is an interesting recent article in The Guardian summarising the views of scientists on the seemingly unrelentless attacks on science.

I respect that academics are suppose to develop the contrarian in all of us and I could probably argue for hours that not enough of us regularly question the state of the world and how we can address our small patch of humanity. I just wonder, increasing aloud, whether the fear of change is more powerful than that of scientific reason.

All this quiet reflection...

...makes one a silent blogger.

Somehow got side-tracked by a spot of project management assignment completion. Finally, well into week 4, I have finally dispatched that wretched Winter School subject, just in time for Spring! I have a new found respect for real project managers and the power of Gantt charts although, quite frankly, I cannot see myself becoming a true believer! The highlight of the entire adventure was using all my risk analysis experience to write a  risk analysis and control plan for none other than a wedding planning business, although save a section on natural disaster management, climate change in particular and sustainability in general, didn't get a look in.

This semester is turning out to be quite a difference experience to last semester. Away from the methodical focus of the engineering type subjects, I have been introduced to the warmer, fuzzier, green glow of the humanities. All which lead to last week's reflection piece looking something like this...

"Labels, riots and religion – never a dull moment in sustainability! As we continue to debate about typologies and also learn the meaning of more obscure words, such as epistemological, the green hue of sustainability becomes murkier. The examination of the two national case studies – the Australian National Strategy for Ecological Sustainable Development as compared to the UK Sustainable Development Strategy was most striking given the widely reported civil unrest in the UK and the extreme volatility of the world money markets of this week. The semantics of seeking appropriate sustainability indicators appeared moot when parts of English society were rioting over an undefined number of issues. 
Away from the civil unrest, a very thought provoking tutorial discussion was had about sustainable development by inviting religion, culture and inevitably sex into the room. I sat bemused and thinking that we only need to throw in politics and we were breaking every rule I was ever taught about polite conversation in society.  In particular the discussion examined the strengths of taboos in prevention of environmental damage and the interdependence of marriage, children and status in many societies."

However as the week has rolled on I have wondered whether we are not breaking enough rules about polite conversation...

Climate Change - a wicked problem?

"Wicked" you ask? Don't panic, this is not a continuation of my previous post regarding whether as inanimate object such as coal could be evil per se and I definitely haven't picked up the parlance of the youth, despite my daily exposure to the young and impressionable.

"Wicked problem" is a phrase coined by Rittel and Webber in 1973 and was originally used to describe an issue in public or planning policy. Summarised below are characteristics of a "wicked problem";

• it is difficult to define
• it has interdependencies and is multi-causal
• attempts to address it may result in adverse unforeseen circumstances
• it is often not stable
• it often does not have a clear solution
• it is socially complex
• it hardly ever sits conveniently with the responsibility of any one organisation
• it involves changing behaviour
• it may sometimes be characterised by chronic policy failure.

Unsurprisingly the majority of issues in the environmental and the greater sustainability space may be described as "wicked". For the curious, the same authors labelled those problems which although difficult could be solved in a systematic and somewhat linear way as "tame". A wit in our class today noted that if you love a challenge, you'd want all your problems to be "wicked" in the other sense of the vernacular..

"Wicked problems" need multi-faceted treatment from the variety of stakeholders (the literature likes to throw around the term "actors" - but after the fuss Cate Blanchett accidentally achieved, perhaps not appropriate in this case) and on-going attention. You manage an evolving wicked problem rather than ever truly solve it. The key challenge is successfully convincing everyone to make the right behavioural changes to make that difference. 

If that could be achieved in my lifetime, that would be truly "wicked"!!

This week, upon reflection...

One of my new subjects requires us to submit a reflective piece at the end of semester, a vignette reflections for each week of the course put into perspective at the end. Being the studious swot that I am, I have followed the lecturer's advice and each week I have taken a little time to document my reflections. However, if this week's anything to go by, it may be the thoughts which are left out which may be more telling.

Today someone actually articulated that as coal was a gift from God (not sure which one or who's claiming responsibility), it could not be evil. Actually I was under the perhaps false impression that evil and inanimate objects tend to be mutually exclusive. Coal is lots of things but I'm pretty sure it's not too harsh to say it's soul-less, just the way I like my inanimate objects (blessed or not). That observation didn't make the reflective cut..

We danced around the edges of neo-liberalism and it seemed to be the pin-up for all that is wrong environmentally, socially and economically, yet we also seemed to struggle with the recognition that for many, the neo-liberal and liberal view best fits what we have known even if we recognize that its extremes will not serve our vision of the future.


However it was the probing question "Is Sustainable Development an oxymoron?" which appeared to leave the debate in tatters. Defining oxymoron was a highlight - picks of the examples were "giant shrimp" and "smart government". The discussion was informed by the tutorial reading - a synopsis on a book written giving the 30 year update on "The Limits to Growth" and really, the conclusions appeared to waiver from "barbed wire firmly puncturing the buttocks" to "it's probably too late".


So I ask myself, if we genuinely believe it is too late then what is the point of sustainability? Are we merely learning the dark arts of environmental and social pallative care disguised as solutions so as the world dies slowly, at least some of us will be comfortable....


So on that note, armed with the knowledge that population is the elephant in the room, I went off to visit one of the earth's newest citizens just up the road where both he and his mum are recovering from the trauma that is child birth. He was small, sleepy, content and totally convinced that he was in safe hands. Only time will tell...

Greenhouse gas, skepticism and the common good?

Earlier this week I watched an interesting and completely surprising debate in one of my new subjects. In a typical introductory workshop, we were given the PLEA 2009 Quebec Manifesto and a number of questions were posed to generate discussion.

One of those questions, paraphased, was is there a relationship between climate change and carbon emissions?
The group assigned to comment on that question simply stated "no". The lecturer teased out their reasoning which included the fact that they believed that the effect of man-made carbon emissions were insignificant compared to the natural climate cycles and contributions of natural disasters such as volcanoes and bush fires. The reasoning also included that while there appeared to be facts about carbon dioxide generation, they were not convinced they were linked to climate change. For them, the scientific link was not compelling enough.

Given that the next 12 weeks would be based on methods used to measure and reduce the production of greenhouse gas production in commercial buildings, it made sense that the lecturer then turned to the room and simply asked, "how many people here believe there is a link between greenhouse gas emissions and climate change?" I was surprised as I counted less than 50% of the room in agreement.

This was a room of future decision makers, still in their early twenties, who are tertiary educated and who do not believe the science is compelling enough. There is no doubt in my mind why the Australian Government is struggling to sell their carbon price and eventual emissions-trading scheme. Have we taught our society to be so skeptical that we do not even consider the precautionary principle?

The science of the debate has become extremely political and divisive in Australia and I wonder whether the discussion our group had is symptomatic of that and the growing weariness of a federal government which as a minority government has opened our eyes to how difficult it is to govern when every decision is the culmination of much compromise.

In many ways I felt like an outside in my class earlier this week - nearly a generation older, with a firm conviction that even if the science is not rock-solid we are still compelled to act and despairing at the vehemence with which the majority of my fellow countrymen and women rail against change for the sake of the common good. It was with interest I read Richard Lambert's piece Unravelling a few of Australia's Climate Myths written from the view of an outside looking into this country's current debate.

It would be interesting to know what other people think of us in the global community.

In celebration of biodiversity..

Semester two kicked off on Monday so last weekend I studiously ignored my pending project management assignment and headed south to celebrate the end of the mid-semester break.

What better way to prepare for the coming semester than spend some time marvelling at the amazing biodiversity at our back door.  In this part of the world, it is whale watching season from May to September and we were not disappointed, sighting a very happy whale frollicking off the coast at Victor Harbour. For those with a keen interest in whale watching, I would recommend checking out the South Australian Whale Centre website which includes a log of recent sightings. We think the whale recorded as ID#1154 on the 23 July was the same one we saw about that time (but didn't log with the centre).

However it wasn't just about whales. My delighted Englishman had a close and harmless encounter with a lone echidna which was dawdling along the cliff top path and sighted both a dolphin in the bay as well as a seal playing off the rocks.

With the batteries recharged and the warm glow of biodiversity in my veins, I am ready to take on second semester.