Post archive – by topic

Entries in economics (32)


How much superannuation do I need?

Don’t panic about your superannuation. You probably won’t need as much as you think – 80% of current retirees spend less than ASFA’s “modest” standard, and the current Age Pension mostly covers that.

(That said, long term compound growth investment is terrific, and I encourage you to invest in your super if you can afford it.)

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The CCA's implicit social cost of carbon

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.

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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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Cost of living decreases if carbon price repealed?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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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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States of decay: Complementing the federal carbon policy

Updated on Wednesday, April 24, 2013 at 23:10 by Registered CommenterMCJ

With the centrepiece of Australia’s climate policy not even a year old, most Australians are sick of it, or sick of hearing about it – fewer than 13% trust what politicians say about major public issues like climate change. And in the shadow of the Clean Energy Future package (CEF), state and federal governments are quietly letting other climate policies slip.

This “abdication of climate policy”, as Tristan Edis calls it, wouldn’t be so bad if Australia’s climate policy were perfect. But it isn’t; no policy is. The carbon price, while worth having, is a broad, blunt tool that covers but two-thirds of Australia’s greenhouse gas emissions. The rest of the CEF fills in some gaps, but there is ample room for further complementary climate policy at a state and federal level.

I wrote last year on this topic, giving reasons why state (or other federal) climate policies could still be worthwhile under the CEF. This would mean innovative approaches:

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Economics for five-year-olds

My neighbour’s daughter asked what my job was. “I’m an economist,” I replied.
“What’s that?”

Normally I tell people that economists think about cost and benefits; the demand and supply of goods and services. I tell them we want to maximise ‘utility’, but since we can’t measure it directly or ask people, we watch what people do instead (e.g. in markets) and use prices (money) as a proxy for utility.

From there, I explain that my field – environmental economics – is about valuing things that don’t have markets, e.g. the environment. If they’re really paying attention, I may even talk about externalities.

My neighbour’s daughter, however, is five. She doesn’t understand markets, or utility, or costs and benefits in an abstract sense. So I was stumped.

Months later, I’ve got a good answer:

An economist figures out how to share things so that everyone can be as happy as possible.

You’re welcome.


Australian Carbon Demand in 2015-16

Updated on Monday, October 15, 2012 at 23:46 by Registered CommenterMCJ

Updated on Thursday, October 25, 2012 at 16:29 by Registered CommenterMCJ

In the September issue of Point Carbon’s Carbon Market Australia-New Zealand newsletter,  Cecile Langevin writes that

[Point Carbon] expect[s] the emitters covered in Australia’s emissions market will have 57 million fewer permits than they need in the year 2015-2016


the market price will be set by the international cost of U.N. Clean Development Mechanism (CDM) credits for the first two years, and then by EU Allowances (EUAs) the last three years of this decade.

Based on my rough calculations (below), the Australian market should demand 240-245 MtCO2-e in 2015-16, and the government’s (official) projections are even higher, so I’m struggling to reconcile that with Point Carbon’s 57 million estimate.

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Why Drop the Price Floor? Taking a Gamble on the EU

Updated on Wednesday, August 29, 2012 at 14:28 by Registered CommenterMCJ

Updated on Thursday, August 30, 2012 at 16:27 by Registered CommenterMCJ

I couldn’t make much at first of today’s announcement by Greg Combet, Minister for Climate Change and Energy Efficiency, that Australia was going to link its ETS with the EU ETS, and oh, by the way, we’re dropping the price floor.

That Australia and the EU will link their schemes good news, but it’s an expected development. Dropping the price floor, on the hand, had been speculated about (notably by the AFR; well done, Marcus Priest), wasn’t really part of the original plan.

As I wrote back in May, a price floor has some good things going for it, despite being technically challenging, and as it’s only regulation the government has the numbers to pass it even with Rob Oakeshott’s opposition. So my initial reaction was that the floor price had been put in the “too hard” basket and the ETS linkage was just used to hide the announcement somewhat.

I’ve since heard, however, that dropping the price floor was a condition of the EU agreeing to link the schemes. This makes more sense.

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