Blacked Out

I've managed to persuade Blogger to sort of black me out. We're all outraged of course by the "guilt upon accusation" copyright law about to come into force in New Zealand. That's section 92 of the Copyright Ammendment Act for those keeping track. See more here.
Update:Blackout now over. Russell Brown has a good discussion of the issue here. And Dean Knight begs to differ.

What on earth is going on with the Australian ETS?

As was noted by several in the NZ blogosphere, Australian Treasurer Wayne Swan recently referred the Australian Emissions Trading Scheme (the Carbon Pollution Reduction Scheme) to a lower house finance committee. Since the committee was tasked with considering whether an ETS was the correct policy response to climate change, and given that the committee was to report after the Government had previously stated the measure would be passed, everyone took this to mean that the CPRS was very much on the back burner.

Almost immediately the Government was stating that this was not the case. By the end of the week the move, a ploy to reduce the power of the Senate and back the opposition into a corner on climate change policy, had been reversed.

Dennis Atkins, who is pretty much the only person worth reading in Brisbane's Courier Mail, has a very good analysis of what on earth was going on here.

Atkins frames this issue in terms of the chaotic state of affairs in Canberra currently, with an enormous stimulus package going through Parliament in the week of the worst natural disaster in Australia for at least a hundred years. This is on top of Rudd's notorious work rate and instincts for micromanagement.

All of this was happening in what is now a permanent state of semi-chaos in Canberra. Ministers and public servants are stretched to breaking point, too much is being asked with too-tight timelines and ridiculously minor decisions are not being made until they are ticked by the office of Prime Minister Kevin Rudd.

Swan's letter to Economics Committee chairman Craig Thomson sailed through this monster mash and it was apparently not given the attention it deserved, allowing a form of words too open to mis-interpretation.

Now the politics of the CPRS is clearly far from settled. Apparently the big mining companies have only recently realised the implications of the scheme for their businesses since the shine went off the global economy. As a result the Government is coming under vastly increased pressure from business interests.

There's plenty of bark left in the emissions trading dog, as an increasing number of companies and their representatives in Canberra have been telling ministers in recent weeks and will continue to do in the weeks and months ahead. While Wong repeats the mantra that carbon reduction cannot be put on the back burner because of the global financial crisis, business is not so sanguine.

Mining companies - especially those representing coal interests - have been laying what are said to be some alarming numbers on ministers' desks, highlighting job losses and potential mine closures.

On the other hand strong ETS advocates are increasingly willing to oppose the proposed scheme as being too weak. Some are even willing to go back to the drawing board and investigate a carbon tax, as in this open letter by 10 very eminent economists.

In his article Atkins also emphasizes that the Government will certainly struggle to get this bill through the Senate. The Greens oppose the scheme as too weak, and the Liberals oppose the current measure as too onerous. The Nationals are likely to oppose regardless.

Once again we are hearing that the Government may be willing to go to a double dissolution election over this issue. So the politics of the Australian ETS still have a lot of life in them yet!

The Natural Party of Government in New Zealand

For the second half of the 20th Century National regarded itself, rightly one has to admit, as the natural party of Government in New Zealand. It did this, so far as I can tell, by representing the values of a certain kind of ordinary New Zealander and providing, so far as it could, good governance.

No party can hope to be the natural party of Government and stand for an awful lot. No party can be the natural party of Government without discovering a pragmatic and opportunist streak a mile wide. Sometimes it will seem that the natural party of Government is ready to use all means necessary to hang onto power solely for its own sake.

Helen Clark's enormous political achievement was to mount a credible claim on behalf of the Labour party for the mantle of natural party of Government in the new century. But after a single term in Government, that is all it is, a challenge.

It seems pretty clear now that John Key doesn't just want to be PM, he wants to lead the natural party of Government in New Zealand. This despite whatever advantage MMP voting may have handed to Labour in this regard.

This will require him to marginalize the idealists and ideologues and he seems willing to do that. It will require him to file the edges off his Cabinet's partisan enthusiasms, and he seems ready to do that. It will also require him to build lasting partnerships with other parties and he's definitely shown he's ready to do that.

In spirit I very much agree with Jordan Carter. We are seeing a very effective counterattack from John Key's government on this territory. (Although the idea that an agressive market liberal government would be National "reverting to type" seems too focussed on certain historically anomalous aspects of the most recent National government. I would argue that typically National has not stood for much, and the danger is precisely that they may be able to achieve this again, while forming a historic alliance with Maori politicians that could allow them to regain the electoral advantage even under MMP.)

I have this picture of John Key going off to the beach over summer with a copy of "Kiwi" Keith Holyoake's biography.

He had a pretty good holiday and it's keeping the smile on his face as he over-rules his minister and increases the minimum wage. When he goes to Waitangi to be jousled by youths and bossed around by Titewhai Harawira he's still smiling. Thoughts of his holiday are definitely keeping the smile on his face when he dances around with the drag queens at the Big Gay Out.

Being so approachable, so available, and such a good sport. It all seems of a piece with Holyoake down at the train station looking for lost luggage:

As Prime Minister he lived a few hundred yards from Parliament's gates and insisted on listing his home phone number in the directory. Gustafson records that on one occasion someone rang to report their luggage missing at Wellington railway station and the Prime Minister walked down to help look for it.

Key wants to be PM for a long time and it's going to be hard to stop him.

To answer Jordan's question:

Question is: where's the left? Do you lot agree with my view, of steely pointless pragmatism? Or do you think there is a Douglas ghost ready to ooze out? Or some combination? Or another answer altogether?

The "ghost of Douglas" won't be oozing anywhere if John Key has anything to do with it.

Finally -- surely the big question for Key this year is should he have been out getting himself a "stimulus package" rather than reading biographies on the beach?

Where Next? Conservatism is Dead

You really do have to read Sam Tanenhaus's essay by this title in the New Republic. It's a brilliant account and analysis of the rise and fall of movement conservatism in the U.S.

In the tumultuous history of postwar American conservatism, defeats have often contained the seeds of future victory. In 1954, the movement's first national tribune, Senator Joseph McCarthy, was checkmated by the Eisenhower administration and then "condemned" by his Senate colleagues. But the episode, and the passions it aroused, led to the founding of National Review, the movement's first serious political journal. Ten years later, the right's next leader, Barry Goldwater, suffered one of the most lopsided losses in election history. Yet the "draft Goldwater" campaign secured control of the GOP for movement conservatives. In 1976, the insurgent challenge by Goldwater's heir, Ronald Reagan, to incumbent president Gerald Ford was thwarted. But Reagan's crusade positioned him to win the presidency four years later and initiate the conservative "revolution" that remade our politics over the next quarter-century. In each instance, crushing defeat gave the movement new strength and pushed it further along the route to ultimate victory.

Today, the situation is much bleaker.

Tannenhaus hopes that the final demise of Bush will create a new opportunity

There remains in our politics a place for an authentic conservatism--a conservatism that seeks not to destroy but to conserve.

His view of authentic conservatism he regards as Burkean

What passes for conservatism today would have been incomprehensible to its originator, Edmund Burke, who, in the late eighteenth century, set forth the principles by which governments might nurture the "organic" unity that bound a people together even in times of revolutionary upheaval. Burke's conservatism was based not on a particular set of ideological principles but rather on distrust of all ideologies. In his most celebrated writings, his denunciation of the French Revolution and its English champions, Burke did not seek to justify the ancien regime and its many inequities. Nor did he propose a counter-ideology. Instead he warned against the destabilizing perils of revolutionary politics, beginning with its totalizing nostrums.

And he is not blind to the fact that the Democrats have just elected a guy who seems to fill this sort of description.

In the end, movement conservatives got the war they wanted--both at home and abroad. It ended, at last, with the 2008 election, and the emergence of a president who seems more thoroughly steeped in the principles of Burkean conservatism than any significant thinker or political figure on the right.

As always the Atlantic bloggers are essential reading. Andrew Sullivan is of course a dissident conservative of long standing and concurs at length here.

Ta-Nehisi Coates notes that, to hear Tanenhaus and Sullivan tell it, it would appear that many of us lefty pinko social democrats are classical conservatives too.

This is a conservatism that has militancy and radicalism, not liberalism, as its antitheses. It seems to say very little about specific policy, but a lot about how to think about policy. Martin Luther King was despised by the right-wingers of his time, but by these lights, he was likely more conservative than the people who opposed him. Moreover, Obama would be, almost certainly, a conservative. As, I think, would I.

But party coalitions are built around issues these days--not ways of thinking about issues. It's more policy, than philosiphy. Like I said, in that Burkean sense, I don't have much problem calling myself conservative. I just happen to be pro-choice, to believe government should, and can, help people, to be pro-science, and perhaps most importantly, to have a visceral disdain for bigots and people who try to manipulate bigots to suit thier ends. That goes for small town elitist, gay-bashers, and Mooslim haters.

Where Next? Kevin Rudd and the Historic Role of the Social Democrat

The Murdoch press in Australia has been in a tizzy over Kevin Rudd's seven thousand word essay on the global financial crisis in the Monthly. It declares neoliberalism dead and gives a call to arms for social democrats.

I was struck by this warning about the possible rise of various kinds of extremism if social democratic governments fail to make progress.

Social-democratic governments across the world must rise to the further challenge of developing a practical policy response to the crisis that rebuilds shattered economic growth, while also devising a new regulatory regime for the financial markets of the future. This is our immediate challenge. But if we fail, there is a grave danger that new political voices of the extreme Left and the nationalist Right will begin to achieve a legitimacy hitherto denied them. Again, history is replete with the most disturbing of precedents.

But much of the rest of the analysis is, by now, fairly conventional. The politics of tarring the Liberals with a "failed ideology" is too good to resist though of course.

Not for the first time in history, the international challenge for social democrats is to save capitalism from itself: to recognise the great strengths of open, competitive markets while rejecting the extreme capitalism and unrestrained greed that have perverted so much of the global financial system in recent times. It fell to Franklin Delano Roosevelt to rebuild American capitalism after the Depression. It fell also to the American Democrats, strongly influenced by John Maynard Keynes, to rebuild postwar domestic demand, to engineer the Marshall Plan to rebuild Europe and to set in place the Bretton Woods system to govern international economic engagement. And so it now falls to President Obama's administration - and to those who will provide international support for his leadership - to support a global financial system that properly balances private incentive with public responsibility in response to the grave challenges presented by the current crisis. The common thread uniting all three of these episodes is a reliance on the agency of the state to reconstitute properly regulated markets and to rebuild domestic and global demand.

The second challenge for social democrats is not to throw the baby out with the bathwater. As the global financial crisis unfolds and the hard impact on jobs is felt by families across the world, the pressure will be great to retreat to some model of an all-providing state and to abandon altogether the cause of open, competitive markets both at home and abroad. Protectionism has already begun to make itself felt, albeit in softer and more subtle forms than the crudity of the Smoot-Hawley Tariff Act of 1930. Soft or hard, protectionism is a sure-fire way of turning recession into depression, as it exacerbates the collapse in global demand. The intellectual challenge for social democrats is not just to repudiate the neo-liberal extremism that has landed us in this mess, but to advance the case that the social-democratic state offers the best guarantee of preserving the productive capacity of properly regulated competitive markets, while ensuring that government is the regulator, that government is the funder or provider of public goods and that government offsets the inevitable inequalities of the market with a commitment to fairness for all. Social democracy's continuing philosophical claim to political legitimacy is its capacity to balance the private and the public, profit and wages, the market and the state. That philosophy once again speaks with clarity and cogency to the challenges of our time.

Economic crisis to delay U.S. carbon trading?

In more recent comments Chu is open to considering a carbon tax, rather than cap and trade, a good thing perhaps.

More importantly perhaps he seems to indicate that the current economic crisis will delay either cap and trade or other carbon pricing mechanisms.

He said that while President Obama and Congressional Democratic leaders had endorsed a so-called cap-and-trade system to control global warming pollutants, there were alternatives that could emerge, including a tax on carbon emissions or a modified version of cap-and-trade.

Dr. Chu said reaching agreement on legislation to combat climate change would be difficult in the current recession because any scheme to regulate greenhouse gas emissions would probably cause energy prices to rise and drive manufacturing jobs to countries where energy is cheaper.

“The concern about cap-and-trade in today’s economic climate,” Dr. Chu said, “is that a lot of money might flow to developing countries in a way that might not be completely politically sellable.”

Chu Back to Speaking His Mind

It's great to see Nobel Prize winning physicist and U.S. Energy Secretary Steven Chu back to speaking his mind. Here from an interview in the L.A. Times he discusses the effects of reduced snow-pack on California.

In the pessimistic scenario, the snow pack will decrease by 70 to 90 percent. Well, let me tell you what California does when there's a two-year in a row 20 percent decrease in snow pack: They water-ration.

Q: So you're looking at a scenario of permanent water rationing?

CHU: No, you're looking at a scenario where there's no more agriculture in California.

You may have noticed that during his confirmation hearing he walked back an earlier comment that coal was his "nightmare", describing it only as a bad dream, (NYTimes) but maybe one only needs to be circumspect in front of the Senate committee?

In the L.A. Times interview Chu presents the case for action against climate change despite uncertainties in our knowledge. He has a particularly good analogy to the dangers of old electrical wiring.

Carbon dioxide is a global problem. The cost of the carbon emissions are things that, number one, won't show up immediately in one year, or even in 10 years. They have begun to appear. The real costs are hard to estimate because we don't know to what extent, how bad it's going to get, in all honesty. There are projections... You can make a best guess on what might happen. I prefer - there are people who say, since we're not sure, we really shouldn't do about it - I think, in my opinion, a more measured way of dealing with this is, it's all about the risk, the potential risk, the downside risk of not doing something, or maybe doing it in a very moderate way.

The analogy I like to use is, suppose you buy a house, and then in the inspection, the structural engineer says, well, this House is a fine house, but understand, you have to rewire the house, because it's an old wiring and there's a chance of an electrical fire. It's going to cost a lot of money, but you should rewire... So you get an estimate of whether you really need to rewire the house, or whether you can go another, safely for another 20 years or 10 years. Suppose, just pretend, that the next person comes and says, essentially, I think the wiring is shot. I can't guarantee if it's going to be this year or five years from now, but you run the risk of an electrical fire. So now you have many options. You can continue to shop for the answer you want: your house is safe. Or you can say, I know the solution.... let's pretend it's $20,000, a lot of money, that's going to come out of your budget, an you can't - you're going to have to forgo a lot of other things. You could say, well, I could just get better fire insurance. You're probably not going to do that. Because there's a chance the house could burn down when you're asleep and your kids are asleep in the house. So eventually, you might be led to say, if there's a 50 percent chance my house might burn down in five years, I better do the rewiring. Then you have to bite the bullet. No one is telling you there's a 100 percent chance this is going to happen.

Finally this

Dr. Chu said he was still adjusting to his surroundings and title after most of a career spent as an academic scientist. Asked whether he preferred to be called “Dr. Chu” or “Mr. Secretary,” he answered, “Steve is fine.”

Given what I have heard about the workrate Chu expects, I wonder if some at the Department of Energy will be in for a period adjustment also.

U.S Coal Reserves

I've noted before that people such as David Rutledge at Caltech and the Energy Watch Group believe that economically extractible world coal reserves are enormously overstated. Rutledge believes the situation is sufficiently serious that it will ultimately limit CO2 emissions to below the IPCC scenarios.

The EWG has emphasized the enormous writedowns in recent years of coal reserves by many countries, who have been motivated to look into the matter by declining coal production.

Climate Progress notes that the United States Geological Survey have finally joined this trend. They have done a thorough analysis of a single coal field that provides 37% of U.S. coal production.

Coal reserves are the portion of the recoverable coal that can be mined, processed, and marketed at a profit at the time of the economic evaluation. With a discounted cash flow at 8 percent rate of return, the coal reserves estimate for the Gillette coalfield is 10.1 billion short tons of coal (6 percent of the original resource total) for the 6 coal beds evaluated.

In 2006 production at the Gillette coalfield was 436 million short tons or 4% of the economically extractible resource. Unsurprisingly then that the National Research Council is calling for research into the size of reserves.

It is clear that there is enough coal at current rates of production to meet anticipated needs through 2030, and probably enough for 100 years, the committee said. However, it is not possible to confirm the often-quoted assertion that there is a sufficient supply for the next 250 years.

The report recommends a federal-state-industry initiative to determine the size and characteristics of the nation's recoverable coal, with the goal of providing policymakers with a full account of these reserves within 10 years. The initiative should be led by the U.S. Geological Survey (USGS), in cooperation with the U.S. Department of Energy's Energy Information Administration, states, and industry, and will require additional funding of approximately $10 million per year.

The group Clean Energy Action has just released a pessimistic report on U.S. coal.

In an extensively resarched report using publicly available data, Clean Energy Action member Leslie Glustrom says "we were quite shocked to find that most of the coal in the United States is buried too deeply to be accessible in large quantities or at reasonable prices."

Assumptions about the cheap price of coal figure critically in utility planning decisions including the option to choose renewable energy to generate electricity.

She documents that US coal supplies are not in the 200 year range as commonly assumed, but more likely in the 50 year range. Key supporting data includes a US Geological Survey report - Open File Report 2008-1202 - indicating that only 6% (or about 10 billion tons) of the original coal resource in the Gillette Coal Field of the Powder River Basin of Wyoming is economically accessible.

Expansion of Nuclear Power in Europe

The combination of aggressive carbon emission reduction targets and concerns about the security of gas supplies from Russia is driving a pretty rapid expansion of nuclear power in Europe.

The Swedes have just repealed a law requiring them to phase out nuclear power and seem likely to join the list of countries building new plants.

Several European countries are opting for nuclear energy and there is concern about the reliability of Russian-supplied fuel after Moscow's gas dispute with Ukraine last month.

Poland wants its first nuclear plant by 2020 and Britain decided last year to replace its ageing nuclear reactors and create new sites. France has ordered its 61st nuclear generator and Finland is building the largest reactor in the world, which is expected to open in 2011.

Sweden has some of the most ambitious greenhouse-gas targets in the world and plans to become carbon neutral by 2050. It wants to abolish fossil fuels as a heating source by 2020 and use half of its energy from renewable sources by 2030.

"The nuclear phase-out law will be abolished," a government spokesman said yesterday. "The ban in the nuclear technology law on new construction will also be abolished."

As Larvatus Prodeo notes, even the enormous cost blowouts we associate with nuclear power are not dampening enthusiasm in Finland.

The Australian Liberal Party and Agricultural Greenhouse Gas Emissions

Yesterday Australian Liberal Party leader Malcolm Turnbull gave an interesting speech on climate change policy to the Young Liberals conference. The associated change in policy direction was leaked to the Saturday newspapers, here for example.

Turnbull has been under pressure from the Nationals who are opposed to an emissions trading scheme. As a result we get this:

The Opposition Leader, Malcolm Turnbull, will announce a three-pronged policy of greenhouse gas reduction that will impose no direct costs on businesses or homes and require no behavioural change, and aims to eradicate divisions in the Coalition over climate change.

It's astonishing that a serious response to climate change can be advertised as requiring "no behvioural change" but there you go.

The speech itself is interesting, with three major policy proposals.

Our plan captures three gigantic opportunities for CO2 abatement that the Rudd Government has ignored:
· A Green Carbon Initiative - a comprehensive biocarbon strategy ofinvesting in the health of our landscape, restoring soil carbon by reversing over-grazing and excessive tillage, embedding CO2 in biochar (charcoal fertiliser), tree planting, and revegetation;
· Dramatically increasing energy efficiency, especially in buildings;
· Constructing at least two industrial scale carbon capture and storage power stations deploying industrial scale solar energy and geothermal energy and harnessing the energy of the oceans through tidal and wave power.

The Green Carbon Initiative aims to address the issues of terrestrial carbon sequestration discussed in my previous post. Turnbull has been talking to serious people about this and the measures he proposes seem worthwhile. Of course the small matter of the structure of the incentives in the Kyoto protocol and its successors needs to be addressed so that Australia gets full credit for any moves in this direction. It's hard to know how to weigh the contributions of serious thought and political opportunism in this proposal.

As to the second point, increased energy efficiency should be the FIRST priority of policy makers and politicians in response to the twin challenges of climate change and the need for economic stimulus. Here I would fault Turnbull only for inappropriate emphasis.

His third point which mainly emphasizes carbon capture and storage at coal fired power stations needs a serious caveat. CARBON CAPTURE AND STORAGE IS AN UNPROVEN TECHNOLOGY. On the other hand the various sources of alternative energy generation are already technologically feasible and even economic in the right circumstances. Again the emphasis is all wrong.

Finally the implication that the Rudd Government is not thinking about any of these approaches seems a little unfair!

Nevertheless the politics of climate change and emissions trading in Australia look to be very interesting in the coming year.

Things I've Learnt About Agricultural Greenhouse Gas Emissions

While on holiday on in Nelson I engaged in some blogging back and forth with Charles Finny at Dear John on the subject of agricultural greenhouse gas emissions and Kyoto.

Since then I have been trying to get up to speed on some of the questions we discussed so as to reach a non-holiday, informed, opinion on the issues.

One good resource for information is the UN Food and Agriculture Organisation's 2006 report Livestock's Long Shadow. Despite being a product of the dreaded UN, and one that has come in for some political criticism, this seems to me a generally informative and well referenced report. In particular Chapter 3 addresses agriculture's impact on the carbon cycle.

Firstly: we spent some time on arithmetic. Charles wanted to estimate the savings if agricultural methane emissions were discounted under the assumption that every atom of carbon in emitted methane originated from grass that had recently absorbed CO2 from the atmosphere due to photosynthesis. This resulted in a reduction in CO2 equivalent emissions equal to about 10% of agricultural methane emissions.

Whatever the merits of the premise I would argue that this shows that New Zealand policy makers should pay very close attention to the provisions related to agriculture in any Kyoto successor with a view to improvements that could also constitute significant savings to the New Zealand taxpayer. And it goes without saying that more attention could probably have been paid in the negotiation of the original treaty.

Finally on this point I'll just mention that Kyoto apparently regards the CO2 emissions from livestock respiration as being offset by the CO2 absorption of the grass they eat but charges in full for methane emissions from enteric fermentation and the decomposition of dung. This is addressed in section 3.2.2 of the report.

That said, I still don't know what is wrong with the argument that every C atom in CH4 emitted by livestock also originated in CO2 recently absorbed by the grass they ate.

Secondly: this discussion assumed farming was going on in a steady state. The report highlights the fact that land use changes, in particular cutting down forests for agriculture, result in much of the carbon emissions related to agriculture. Deforestation in New Zealand in favour of dairy farming has been a significant source of carbon emissions as we all know.

Thirdly: on a related point we also ignored the fact that farm land, like forests, can be significant carbon sink and the stored carbon can be increased by appropriate farming practices. It's estimated that one quarter of the international response to climate change could involve storing carbon on land (terrestrial carbon sequestration). Of this it seems that about a third could be carbon storage in agricultural land rather than new forests or avoided deforestation. (For information about this you should take a look at the recent Lowy Institute talk by Ralph Ashton, video here and podcast from the Lowy Institute.)

Typically the conversion of natural ecosystems to agriculture results in the loss of 20 to 50% of the stored organic carbon in the top metre of soil. However there is evidence that at least 50% of this lost carbon storage can be restored by appropriate farming practices. These include agricultural intsensification, conservation tillage and erosion reduction. This is discussed in section 3.5.1 of the FAO report. It seems that Professor Rattan Lal at the University of Ohio is at least one of the world experts on this and those of you with access to a Science subscription may be interested in his review article on soil carbon sequestrtion, global warming and food security.

The hook here is that, unlike sequestration in forests, avoided deforestation and agricultural sequestration are not included in Kyoto. So while they have a positive effect on climate change they do not contribute to a nation's responsibilities under Kyoto. A high level group the Terrestrial Carbon Group, which includes Nobel Prize winning economist Joseph Stiglitz and Australian environmental scientist Tim Flannery, have a proposal for how to fix this in any Kyoto successor. This proposal is discussed in Ashton's talk.

Surely if the New Zealand government wishes to put flesh on the bones of its statement at Poznan it should be advocating for efforts like this and in particular a fuller accounting of agricultural emissions and carbon storage?

Recent Reading: Where Next?

The New York Review of Books has had interesting comments on the literary personae of Barack Obama. Colm Toibin compares his autobiographical writings to those of James Baldwin.

It seemed important, as both men set about making their marks on the world, for them to establish before anything else that their stories began when their fathers died and that they set out alone without a father's shadow or a father's permission. James Baldwin's Notes of a Native Son, published in 1951, begins: "On the 29th of July, in 1943, my father died." Baldwin was almost nineteen at the time. Barack Obama's Dreams from My Father, published in 1995, begins also with the death of his father: "A few months after my twenty-first birthday, a stranger called to give me the news."

While Zadie Smith in their most recent podcast claims this comparison is obvious and contributes many further interesting comments.

Michael Tomasky reviews one item on Obama's reading list "Unequal Democracy: The Political Economy of the New Gilded Age" by Larry M. Bartels.

But the importance of these and some other findings in the book—for example, the aggressively negative impact on equality of the 2001 and 2003 Bush tax cuts—is that they use scholarly methods to provide political explanations for economic problems. Social scientists don't usually see things this way. To most economists, income levels, like periods of expansion and contraction, must have explanations rooted in the business cycle.

But Bartels now joins Paul Krugman and others—Jacob S. Hacker and Paul Pierson come notably to mind[7] —in the growing number of liberal social scientists who acknowledge the power of the conservative political apparatus aimed at achieving ideological goals such as minimally regulated markets and low taxes for the well-to-do. That such goals could not be justified as socially fair or economically effective did not matter. In his book The Conscience of a Liberal,[8] Krugman announced his conversion to the view that political decisions by Republicans, not the vagaries of the economic cycle, were the cause of inequality, and he pressed the need for a major political challenge to the conservative forces responsible. Now, writes Bartels, "the most important lesson of this book is a very simple one: politics matters."

Agriculture and Kyoto

Most scientists would argue that the Kyoto agreements have many serious deficiencies but are the only framework we have for international efforts to curb greenhouse gas emissions and minimize the risk of catastrophic, or just very damaging, climate change.

From New Zealand's point of view the most serious questions about Kyoto and its successor agreements relate to the impact of agriculture on greenhouse gas emission.

Readers of this blog, if there are still any, might like to take a look at my discussion about some aspects of this with Charles Finny over at Dear John.

Can I Just Say?

Bad news as always from the Middle East, take a look at the Washington Note, and commentary by Michael Oren in the New Republic.

If I say that this New Year's I willl try to be mindful of the people of Burma, Darfur and Congo as well as Palestine, you will know that I regard much of the reaction to the tragic events in Gaza as, yes, disproportionate. I remain more than a little queasy about those of us on the left that rail against "the Zionists" avoiding mention of that well-known UN member "Israel".

Yes, my attitudes to Israel are based on personal factors, "tribal" if you like; those factors include my friendship with residents of Tel Aviv and Jerusalem and with many American Jews, the fact that Israel is the only country in the Middle East where gays and lesbians can live together in safety with their relationships properly recognised by the state, the fact that Israel is a secular liberal democracy.

Be that as it may.

Again, take a look at Daniel Levy's account of where things are going wrong.

Update: And Mustafa Barghouthi also at the Washington Note.

Political Emissions

The soft Australian target of a 5% reduction of year 2000 emissions by 2020 has been received with dismay in many quarters. The various corporate hand-outs for "trade exposed emissions intensive industries" along with various offsets for the consumer that look like yet more middle class welfare, also seem pretty unappealing to me. The whole point is supposed to be to create economic incentives to reduce emissions and achieve increases in growth while reducing carbon dioxide emissions per dollar of GDP. This scheme looks to be minimizing those incentives at every turn.

I don't agree with everything there but Anna Rose has a good summary in New Matilda. There have been dramatic shifts since the Green paper, for example

It's worth noting that LNG companies like Woodside and Santos are huge winners from the scheme, as they had been excluded from receiving assistance in the Government's Green paper in July. Now, they'll receive 60 per cent of their permits for free, despite being well positioned to make windfall gains from emissions trading since LNG is a less polluting fuel than coal and oil.

Writing in the Australian Financial Review, John Quiggin, takes issue with the Garnaut/Rudd-Labor argument for low per-centage but high per-capita emissions reductions. The AFR has some pernicious new trick though that stops me cutting and pasting the most apposite part. Shame!

Where next? First in an occasional series.

The global financial and economic crisis is only one of the developments that make 2008 appear to be a bit of a watershed. There's clearly a lot of thinking internationally about this new era and I'm just going to link to some of it.

In the realm of ideas, things are up for grabs in a way they haven’t been for several decades now. That is what makes the present both an anxious and an exhilarating time.

That from Francis Fukuyama, courtesy of The Washington Note.

Fukuyama is among those who see a possible end to the Reagan era in US politics. Specifically on financial deregulation, tax cuts and foreign policy. The first two aspects might be relevant to other countries.

There are three core Reaganite ideas that need to be reformulated or discarded altogether if the United States is to navigate the current crisis and restore its credibility in the new era. The first has to do with deregulation and the role of the government in the economy more broadly. The Wall Street collapse and the big recession we are heading into occurred for reasons intrinsic to the Reagan model, that is, because the government had permitted the emergence of an enormous, wholly unregulated shadow finance sector under the belief that this sector would be self-correcting. Financial market liberalization had proven highly dangerous in any number of earlier cases, most notably the Asian economic crisis of 1997-98 and the Swedish banking collapse of the early 1990s, but these warning signs were not heeded and no one imagined that this could happen to the United States itself. In this the Democrats were fully complicit, not just in their support for loan expansion by Fannie Mae and Freddie Mac, but in Clinton Treasury Secretaries who pushed financial market liberalization on the developing world. The current crisis of course has many other causes, such as the more than $5 trillion of excess savings pouring into the country from China and other Asian countries after 2002, but the idea that history was on the side of ever-expanding deregulation was ultimately an important cause of the collapse. The Reagan-era joke, “Hi, I’m from the government and I want to help” doesn’t sound so ironic in light of the Fed and Treasury’s heroic efforts to keep the economy from walking further off a cliff.

The trick in redefining the model is not to overdo it on the regulatory side. The financial sector is very different from other parts of the economy because failure there imposes enormous spillover costs on everyone else, and is why Congress ended up having to vote for the $700 billion bank bailout in September. Labor market deregulation, by contrast, has had very beneficial effects in driving down unemployment rates and permitting much more rapid adjustment to changing conditions. American income distribution has gotten excessively skewed towards the wealthy, but we don’t want to fix that problem by returning to a trade union dominated labor market.

The second big Reaganite idea that needs to be rethought concerns taxes and spending—i.e., fiscal policy. Reagan introduced the notion that tax cuts would be self-financing because all taxes smothered growth; he was also responsible for promoting the idea that virtually all new government spending outside of defense would necessarily be wasteful. While there is some rate of taxation for which this is true, the actual tax cuts enacted both in the 1980s and in the early 21st century have simply served to deepen fiscal deficits and further skew income distribution to the wealthy. The impact of these deficits was for many years masked, however, by the fact that foreigners were wanted to hold their ever-mounting reserves in dollars, a phenomenon that put off the final reckoning but ensured that the fiscal crisis would be much more severe when it finally arrived.

This attitude towards taxes and spending has rendered the American political system incapable of confronting, first, the huge looming entitlement crisis over social security and Medicare, and second, energy. The single best thing we could have done for ourselves in the past generation was to impose a stiff carbon tax in periods when energy prices were relatively low; it was also something that no politician had the courage to take on. No one is going to be talking about increasing taxes until we are out from under the current recession, but in the long run Americans will have to learn to pay their own way.

Secondly, take a look at Ian Macfarlane's lecture to the Lowy Institute last week. Macfarlane was for a decade the Governor of the Reserve Bank of Australia. He reviewed the financial crisis and its effect on Australia before discussing possible regulatory developments.

When it is time to rebuild the regulatory system, I have no doubt that it will have to be more all-encompassing than formerly, but I don't see any likelihood of us returning to the old price-control type system that we had 30 years ago. To me the major challenges will be to:

- rein in what is left of the "shadow banking system";
- be able to measure the aggregate gearing ratio of the financial system and use this as a guide to policy;
- incorporate the risks arising from the reward structure of management into the regulatory framework;
- do something to address the inherent pro-cyclicality of conventional risk management frameworks and systems of bank supervision;
- resist the calls for self-regulation. As one astute commentator observed -- "self-regulation is to regulation as self-importance is to importance";
- bring some of the derivative instruments, particularly credit default swaps back onto an exchange so we can at least measrue their extent and the risks embedded in them, as well as reduce counterparty risk.

Australasian Contributions to International Climate Change Negotiations

While we await Kevin Rudd's statement on the Australian Government's carbon emission targets on Monday, much attention has turned to the international negotiations on future climate change agreements.

Ross Garnaut wrote a very useful op-ed in the Australian this week. He notes that these negotiations will be much more difficult than either trade or arms control agreements, and proposes some warning signs for difficulties in such talks.

If you hear negotiators from the respective countries arguing that Australia needs high per capita entitlements because it is big and lightly populated, or Canada because it is cold, or Japan because it has few opportunities for geo-sequestration of emissions from fossil fuel combustion, or China because it is the workshop of the world, you will know that the world has lost the battle to avoid dangerous climate change.

It's a cheap shot but I can't resist pointing out that some of New Zealand's statement in Poznan sounds exactly like this

New Zealand is unique among Annex 1 countries. With nearly 50% of our total emissions coming from agriculture, no other developed country comes close to having such a large percentage of its emissions arising from food production.

(Hat-tip: Charles Finny)

Given the ACT party's clutch on climate change policty, some aspects of the New Zealand statement were reassuring. But would Rodney Hide agree with this?

As a consequence we are reviewing our suite of climate change policies. The objective here is not to step back from Kyoto. The Government fully understands and accepts its long-standing international obligations under Kyoto for the first commitment period.

Prior to the election Hide stated his preference for leaving Kyoto.

In any case, Garnaut has become convinced that the eventual target for international negotiations must be equal per capita emmissions from all nations, and that progress should be measured in terms of per capita emissions reductions rather than reductions of particular nations or groups of nations from benchmarks in 1990 for example. This seems pretty sensible to me.

I was happy to see the mention of research on agricultural emissions mitigation in New Zealand's statement, and the emphasis on forms of agreement that will be satisfactory for developing nations. These aspects are very consistent with Garnaut's thinking about ways in which developed countries can contribute initially.

My work on The Garnaut Climate Change Review (Cambridge University Press, 2008) has led me to the view that any allocation of emissions entitlements with a prospect of being accepted by most developing countries must be based on convergence towards low levels of per capita entitlements at some time in the future. There will need to be headroom for rapidly growing developing countries. Through a transition period, the commitments of lower-income developing countries would be one-sided, with compliance encouraged through incentives rather than penalties.

The agreement over emissions entitlements would need to include developed country commitments to public support for research, development and commercialisation of low-emissions technologies. The agreement could embody firm commitments by developed countries to cover additional development assistance for complying developing countries to adapt to the climate change that will inevitably be faced in the period ahead. It could be supported by a proposal for World Trade Organisation rules to constrain individual countries' measures to restrict trade with countries that are not reasonably complying with the requirements of an international mitigation effort.

At the centre of the agreement would be an understanding on the allocation across countries of a diminishing total of annual emissions entitlements. These would be allocated on the basis that emissions would converge towards equal per capita entitlements at some time in the future.

The difference between the basis of allocation of emissions entitlements proposed here, and the Kyoto approach of fixed but differentiated reductions, is large. Within principles designed to reduce global emissions through convergence over time towards equal per capita entitlements, a reduction of 10 per cent from 2000 levels by 2020 in Australia would represent a full proportionate contribution to a global effort to hold concentrations of carbon dioxide equivalents to 550 parts per million. It would represent a larger per capita reduction than was required of the US or the European Union. It would represent a larger per capita reduction for Australia than the EU's implementation of its proposed unconditional commitment to reduce emissions by 20 per cent from 1990 levels.

Chinese economy

There is increasing concern in Australia over the health of the Chinese economy and the impact this will have here. The collapse in commodity prices seems to suggest rough times ahead in Australia.

Reserve Bank governor Glenn Stevens this week suggested that the striking economic fact of the past few months was not the expected downturn in the US. It was that "China's economy has slowed much more quickly than anyone had forecast".

China reports many of its key indicators in ways that obscure what has actually happened most recently. Stevens said the Reserve Bank's analysis indicated that Chinese industrial production went backwards over the four months to October. He was "not sure that many economic forecasters have fully appreciated this yet". "There is every chance that the rate of growth of China's (gross domestic product) is currently noticeably below the 8 per cent pace that is embodied in various forecasts for 2009," he said.

Stevens did not spell out what "noticeably below" meant but the word is that this could be as low as 4 per cent. That's a very big deal for a mega-economy that, until only months ago, was supposed to be marching ahead at a double-digit pace but which already had been clubbed by a home-grown property bust.

Select committee terms of reference

It seems that since the order paper was published earlier in the week the following clause has been added to the terms of reference for the climate change select committee

identify the central/benchmark projections which are being used as the motivation for international agreements to combat climate change; and consider the uncertainties and risks surrounding those projections

Good on you Rodney! And a great performance on Morning Report this morning, arguing as usual that there is no rational evidence for human impacts on global temperature.

Some would call this arse-backwards when many years of scientific observations and modelling have led the world's climate scientists to exactly the opposite conclusion. But as we all know the entire scientific community has been captured by an unthinking infatuation with Al Gore who invented the idea of climate change (along with the internet) while conspiring at the UN to institute a world socialist government back in the Clinton Administration.

Seriously, this clause is much better than the original one in the confidence and supply agreement. It should be possible to get reputable scientists and economists to greatly enlighten the committee about the observations and projections that form the basis of international concern on this issue. It is also true that there are uncertainties and risks in our current knowledge. Many of these are on the "down-side" as John Key would say.

The previous demand for opposing views on the science was merely an invitation for poorly credentialed cranks to waste the select committee's time.

Great News on Climate Change and Energy

President-Elect Obama is set to appoint Nobel Prize winning physicist Secretary of Energy.

For those of us in the science community wondering how to communicate the urgency of the situation to politicians and the wider community this seems to indicate that scientists who dedicate themselves to working on this issue can have an impact.

I hope it is also a sign that the Obama administration will be able to make some progress, despite the global financial and economic crisis.

Chu used to work in my field of atomic, molecular and optical physics before shifting to the top job at Lawrence Berkeley Labs to work on alternative energy sources several years ago. Some of Professor Chu's thoughts on climate change can be found here.