Post archive – by topic

The CCA's implicit social cost of carbon

At least $30/tCO2-e in 2020 AUD.

I’ve had occasion recently to review climate abatement schemes – notably the Victorian Energy Efficiency Target (VEET) – and in the course of doing so realised that Australia doesn’t have an official “social cost of carbon”.

(I also realised that in previous work I’d referenced the wrong section of legislation, but sssh.)

The social cost of carbon dioxide emissions (or greenhouse gases generally) is their cost to society. It signals what society should, in theory, be willing to pay now to avoid the future damage caused by greenhouse gas emissions.

Plenty of assumptions and models are required derive a value, but for the sake of making a cost/benefit tradeoff it’s vital to have an idea of the benefits we get from abating a tonne of greenhouse gas emissions. Moreover, it’s important to have an officially recognised figure, both for credibility and to reduce search costs.

The official USA 2013 central estimate of the social cost of carbon emitted in 2015 is US$39/tCO2-e, in 2011 USD. (Another commonly quoted figure of US$37/tCO2-e is the same estimate in 2007 USD, as far as I can tell.)

The UK has an official cost of carbon, too, though their approach has changed a little over time. In 2002, the official social cost of carbon was £19/tCO2-e, rising at a rate of £0.27/tCO2-e per year. In 2007, the UK switched from a social cost of carbon to a shadow price of carbon:

“The SPC [shadow price of carbon] is based on the SCC [social cost of carbon] for a given stabilisation goal, but can be adjusted to reflect:
- estimates of the MAC [marginal abatement cost] required to take the world onto the stabilisation goal; and
- other factors that may affect UK willingness to pay for reductions in carbon emissions, such as political desire to show leadership in tackling climate change.”

In 2009, the UK ditched the shadow price of carbon and, in a fairly baffling change of tack, decided to value carbon as a traded commodity at a level consistent with the UK Government’s domestic and international targets in the short and long term.

“This new methodology has replaced the previous approach based on damage cost estimates.”


Regardless: the USA has (and the UK had) an official social cost of carbon. Australia doesn’t, as far as I can tell.

But! Australia’s Climate Change Authority (CCA), in its 2014 Targets and Progress Review, recommended that Australia pursue a minimum reduction in GHG emissions of 19% by 2020 (vs. 2000). In modelling that target, the CCA estimated that it would involve carbon prices of up to $30/tCO2-e in 2020, in real terms. (See p. 135)

The CCA used the damage costs of carbon (i.e. the social costs) in making its recommendations. While not explicitly stated, the CCA’s preparedness to recommend an abatement target that imposes costs of $30/tCO2-e in 2020, in real terms, implies the CCA regards the social costs of carbon as ≥$30/tCO2-e.



Additionality in the VEET

When I reviewed energy efficiency trading schemes a few years ago,* the VEET was the only scheme we considered to address additionality. The section of the VEET Act 2007 we referred to was Division 2 (Prescribed Activities), §15 (2):

An activity may be prescribed to be a prescribed activity if the activity will result in a reduction in greenhouse gas emissions that would not otherwise have occurred if the activity was not undertaken.

However! I think we (I) referred to the wrong section – I think Division 2 (Prescribed Activities), §19 (2) is the appropriate one:

Without limiting the generality of subsection (1), the discount factors are to take into account any uncertainty associated with the reduction of greenhouse gas emissions that would eventuate from a specified prescribed activity or specified class of prescribed activities but for the existence of the VEET scheme.


* Betz, R., Jones, M.C., MacGill, I.M., and Passey, R. (2013). Trading in energy efficiency in Australia: What are the lessons learnt so far? [PDF]


Trading Costs and the Efficiency of Emissions Trading – Evidence from the EU ETS

I’ve lost a track a little of how the research projects I worked on at the Centre for Energy and Environmental Markets progressed since I left, but it looks as though at least one of them is proving useful: my former boss, Regina Betz, presented some of our work at the 4th IAEE Asia Conference in Beijing this September just gone.

Trading Costs and the Efficiency of Emissions Trading – Evidence from the EU ETS [pdf]

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Climate Change and Health: Speech to the MDSC

I was honoured to today sit on a panel at the University of Melbourne MD Student Conference with Professor David Griggs, Associate Professor Marion Carey, and Senator Richard di Natale. Our panel topic was Climate Change and Health: The Greatest Moral, Economic and Social Challenge of Our Time.

Professor Griggs spoke on the sciene of climate change, I spoke on the economics of climate change, A/Prof. Carey spoke on the health effects of climate change, and Senator di Natale – who was busy and missed most of our speeches – spoke across all three topics.

The text of my speech is below.

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Explainer: East coast gas price rises

In their currently-running determination for retail gas prices, IPART has received proposed price increases of 20% from gas retailers AGL and Origin. (The Independent Pricing and Regulatory Tribunal, IPART, is the body that regulates energy prices in New South Wales.) Other states are expected to face similar price rises.

A 20% rise in prices over a single year is significant, and unlike electricity price rises in recent years it has little to do with network investment. Here’s what’s going on, from the ground up (if you’ll excuse the pun):

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Cost of living decreases if carbon price repealed?

I was asked this week to pull together some information on what effects the Federal Coalition’s repeal of the carbon price could have on households, specifically as regards their income and expenses (excluding environmental costs/benefits), with the background of whether any cost of living decreases could be used to justify cutting back on other welfare programs. This is only a very quick analysis (and I’ve doubtlessly missed some more rigorous analysis that others have done), but my short answer is that cutting welfare programs due to an abolition of the carbon price is a bad idea.

The most recent and comprehensive source of information on this is the Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 Explanatory Memorandum. I’ve only skimmed it, but the gist is:

  • The carbon price will be removed
  • Household compensation will be kept at current levels, but no longer increased
  • The ACCC will have new powers to investigate failure to pass through carbon price reductions for regulated supply (i.e. gas and electricity)

Taking these in turn:

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Carbon Pricing: It Works, Bitches (redux)

I dragged the sign out for yesterday’s climate change rallies, and while I wasn’t parading it as prominently as in 2011, pictures of me ended up online again. I suppose I shouldn’t be surprised. Reddit, at least, has a much higher standard of economic debate than Andrew Bolt’s blog, though some of the comments could have come straight out of AB’s bilgewater:

Congratulations on grasping one of the most simplistic and basic economic concepts, first 3 weeks of undergraduate commerce degree level of knowledge right here… the smugness on that guys face is overwhelming.

Thanks for the nostalgia, internet!

In other coverage, I’m kind of okay with the verdict an “economist from a major financial institution” gave my sign:

‘A Bit Arrogant, But Totally Correct’

Potential epitaph, right there.


How I'm voting (election resources)

(Note: This post suggests a decion-making-process, not a particular decision.)

For my lower house vote I’m going to Below the Line to check out my candidates and draw up a list. There are few enough candidates that I can just remember what order to put them in.

For my upper house vote I’m putting a bit more effort in. I’m using Senate IO instead of Below the Line here. Senate IO  also lets your start from a party’s registered preferences list, but it also lets you start with a blank ballot and add parties one at a time. I prefer that, since it’s easier to see which parties you still need to make decisions about, and easier to compare them to existing choices. So you can, e.g.:

Start with a blank ballot, then add the parties you’re most familiar with:

Major Party 1
Major Party 2
Major Party 3

From there, I’m looking at each party in turn, and looking up their positions on Butterfly’s Wings’ incredibly useful 2013 Election Summary Guide, supplemented by Lindy Penguin’s Minor Parties Vote Compass mapping. If you don’t know where you stand, perhaps try the ABC’s Vote Compass, too? It’s not on a blog named after an animal, but don’t let that scare you. Finally, SBS has an overview of the three major parties’ policies with links to more detail.

I’ll take a particular party and ask myself, “Would I prefer these guys in the Senate to <Party already considered>?”  If yes, they go above; if no, below. If you don’t want put a lot of effort in, you could simply decide whether each minor party is better or worse than the major parties. So you might end up with broad categories:

Awesome Minor Parties
Major Party 1
Good Minor Parties
Major Party 2
Maybe OK Minor Parties
Major Party 3
Shitty Minor Parties

If you’ve got more time, you can sort within those categories. For example, my Senate list has ended up like this:

Major Party – good policies, known quantity
Minor Parties – good policies, unknown quantity
Major Party – ok policies, known quantity
Single Issue Parties – with issues I support
Minor Parties and Single Issue Parties – that are fine, whatever, I don’t care
Major Party – bad policies, known quantity
Single Issue Parties – with issues I reject
Minor Parties – bad policies, unknown quantity
Loonies – quite a few of these.

 Save as PDF, print, done!


Myki wants to fine me for hypothetical trips

Updated on Saturday, June 1, 2013 at 17:39 by Registered CommenterMCJ

“You would be fined because you may have on a previous journey been travelling on an invalid ticket.”

Excuse me? I want you to be very sure of what you’re saying to me, I told the operator: you’re suggesting that, if I get ‘caught’ on a tram with six-monthly Zone 1+2 ticket, but don’t touch on, you might fine me because on a previous day I might have travelled in Zone 3?


You’d would fine me for the possibility of previous invalid journeys?



Astonishing. Ludricrous. And so wholly without justifiable rationale it’s both laughable and insulting. The primary purpose of a ticketing (enforcement) system is to make sure passengers pay for the trips. Everything else is secondary. Fining people for taking a trip they have paid for is outrageous – it’s not fare evasion, it’s “tracking-system-evasion” at worst. Public Transport Victoria – don’t be dickheads. The problem I’m seeing isn’t one of technology, or infrastructure – it’s a “them’s the rules” culture lacking flexibility and compassion toward your consumers.. No wonder people don’t like Myki.

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Equivalised Income: How do you compare to other Australians?

Updated on Wednesday, April 3, 2013 at 17:46 by Registered CommenterMCJ

Updated on Thursday, April 4, 2013 at 11:49 by Registered CommenterMCJ

Updated on Tuesday, May 14, 2013 at 16:49 by Registered CommenterMCJ

Per Capita recently released their latest report into public attitudes toward taxation and government expenditure. Between this and the federal government’s contemplation of increasing superannuation tax rates for high earners, there’s been another round of discussion about incomes and who is “rich”. One of the aspects that, as always, struck me was the disconnection between how well off people are and how well off they think they are.

The ABS publishes data on household incomes, both gross (pre-tax) and equivalised disposable. I’ve pulled this data together so you can see where your weekly (household!) income falls relative to other Australian households. I guess it’s then up to you to decide how many people you want to be earning more than before you consider yourself “rich” (or high income, at least).

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