Morrison's deal: Nationals rewarded for agreeing to harm the regions

Let me be sure I’ve got this right. Scott Morrison is ending his Coalition’s deep divisions over climate change by agreeing to pay billions in regional boondoggles in return for the Nationals refusing to lift their veto of any increase in Australia’s commitment to reduce emissions by 2030.

The usual way blackmail works is that the blackmailer returns to you something you really value in return for you paying the blackmailer an arm and a leg.

But the way Morrison’s deal with Barnaby Joyce and the Nationals will work is that Morrison – or rather, the taxpayer – spends billions on projects of doubtful value in return for the Nats’ agreeing to nothing more than symbolism: to reduce carbon emissions to net zero by 2050, which will be after all the signatories are dead and gone.

The first point is that agreeing to net zero emissions in 29 years’ time is a decoy and a fig leaf if that’s all you do. To make it real you have to make a commitment you can be held to: a much bigger progress payment in the next nine years to 2030.

That, of course, is what the Glasgow conference is about. The major countries agreed on net zero months ago (as have all our premiers and many of our business and industry groups). That’s just the price of admission to the room.

What you do in the room is proudly announce the big increase in your commitment over what you promised at the Paris meeting in 2016. Those few leaders unwilling to commit to a significant increase will be pilloried as “free-riders” (aka bludgers) on the other countries – and rightly so. You’re a brave man, Scott.

But the second point is more important: all of us will be worse off if Australia’s selfish delinquency damages the global effort to limit the extent of global warming, but the biggest losers will be the small businesses and voters the Nats’ claim to represent – the regions.

The regions will be the biggest losers because, of all the industries, agriculture will be the hardest hit by continuing global warming. Farmers’ loss of freedom to keep clearing land will the least of their worries.

But the regions lose also because we don’t get on with expanding our renewable energy industries – most of which happens in the regions – and lose any “first-mover advantage” in establishing the new generation of manufacturing industries processing hydrogen, clean steel, clean aluminium, and even clean cement using all-renewable electricity. This, too, will happen in the regions.

That is, we don’t get on with generating the new, well-paid and skilled jobs for mine and gas workers to move on to as the rest of the world stops buying our coal and gas.

The amazingly perverse nature of Morrison’s deal with the Nationals – we pay them for refusing to allow us to get on with protecting ourselves against the world’s turn away from fossil fuels – has been brought to our attention in a study by Matt Saunders and Dr Richard Denniss, of the Australia Institute, All Pain No Gain, released today.

They argue that whatever the final cost of the deal turns out to be – no doubt a lot more than its announced cost – it will be far exceeded by the cost to the economy of us not acting earlier to reduce emissions.

To put it the other way, modelling commissioned from Deloitte Access Economics by the Business Council of Australia finds there would be significant benefits to the economy if we lifted our target to reducing our emissions by 46 per cent by 2030.

Comparing this with other modelling by Deloitte, the authors calculate that the additional benefits over the next 50 years would have a “net present value” (the value in today’s dollars of all the incomings and outgoings over the next 50 years) of more than $210 billion.

Now, I never take modelling results too literally, but the Business Council’s argument does make sense. The higher target leads to increased investment in renewables, which increases growth and jobs, as well as greatly reducing the cost of electricity (because, once you’ve built the plant, the cost of extra solar and wind energy is negligible).

Morrison’s excuse for not increasing the 2030 target is that, without the coming new technology, this would force choices and cost jobs. But he’s got that the wrong way round.

As the Business Council (and the Grattan Institute before it) have explained, forcing the pace in industries where the technology is already well-developed – electricity and electric vehicles – leaves more time for the technology to be developed in other industries.

With friends like the chancers of the National Party, the regions need Morrison to see more sense.

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Problems abound, but we could yet emerge as winners

As we begin to lift our heads and look beyond the lockdown, it’s easy to see the many other problems we face. It’s possible to view those problems with fear and disheartenment – and it suits the interests of many groups to play on our fears.

But it’s almost as easy to see Australia as still a lucky country, with a populace that’s confident, resourceful, committed to the “fair go” and capable of co-operating to convert our problems into opportunities to flourish.

The keys to making life in Australia better rather than worse are to face up to all the change being forced upon us, and to unite in finding solutions that share both the costs and the benefits as fairly as possible.

Ideally, we’d have a political leader who offered us a more united, optimistic and confident vision of the path to a better world, but the sad truth is the two main parties are locked in a race to the bottom that we can’t even be sure they’d like to escape.

In reviewing our problems, let’s start with the pandemic. There’s a risk that we’ve opened up too soon, that our hospitals are overwhelmed and death rates rise unacceptably, forcing the premiers to backtrack.

But it’s only a risk and, assuming it doesn’t happen, I think we can be confident the economy will bounce back strongly and quickly, as it did last year. It won’t be quite as strong as last year because the feds haven’t splashed around nearly as much money as last time.

Even so, most households have saved a lot of their incomes and, as we saw last year, will spend much of the increase over coming months.

At a global level, the risk is that the pandemic continues for years more, as long delays in vaccinating everyone in the poor countries allow new variants to emerge. That the rich countries, having hogged all the vaccines, then lose interest in the topic.

Our first post-pandemic problem is that the economy will rebound only to the plodding rate of growth we were achieving before the plague arrived. Like the other rich countries, our rate of improvement in productivity – production per worker – is anaemic.

Our business people are going through a phase where the only way they can think of to increase profits is to use every tactic to keep wage rises as low as possible. The penny is yet to drop that, since wages are their customers’ chief source of income, this is not a winning formula.

Other problems abound: ever-rising house prices that can’t keep rising forever; adjusting to the ageing of the population and the growing demand for aged care; continuing digital disruption, with all its benefits to users but upheaval in affected industries; handling the growing assertiveness of China, while still taking advantage of being part of the global economy’s fastest-growing region; and the less tangible but no less worrying problem of the breakdown of trust in Australian and global institutions and relationships.

All that’s before we get to our biggest problem – responding to climate change – which, with the Glasgow conference starting in less than two weeks, is also our most pressing challenge.

No issue better illustrates the lesson that, if we want to be on top of our problems rather than crushed by them, we must face up to inevitable changes being forced on us by forces we don’t control.

We must stand up to powerful interests – our coal, oil and gas industries, in this case – hoping to stave off the evil hour as long as possible. They’ll protect their own interests at our expense for as long as we let them. We must be suspicious of political parties accepting donations from these urgers.

We must resist the blandishments of populist politicians – yes you, Tony Abbott – promising to save us from sky-high power costs (we got them anyway) because we can just let the whole thing slide.

Now we have the farmers-turned-miners National Party holding themselves out as champions of the put-upon regions and using their veto over adoption of the net zero emissions target to extort money from the Liberals.

People in the regions, we’re told, bitterly resent Liberal city slickers sitting pretty while imposing all the costs of adjustment on the bush.

This conveniently ignores two points. First, farmers are the biggest losers from climate change and the biggest winners from successful global action to limit further global warming.

Second, as Scott Morrison rightly says, coal mining jobs in NSW and Queensland will decline as other countries reduce their own emissions by ceasing to buy our coal and gas. But acting to get on with making Australia a renewable energy superpower – including by exporting hydrogen, clean steel and clean aluminium – will create many new skilled manufacturing jobs – all of them in the regions.

But only if we stop thinking and acting like losers, and do what it takes to be winners in the new, decarbonised world.

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The 'net' in net zero emissions offers a huge temptation to cheat

Perhaps the hardest part of reaching net zero emissions by 2050 is the “net”. We won’t get to zero emissions without it, but it’s tricky and presents us with a great temptation to turn the whole exercise into a rort.

The goal is “net zero” because it’s neither possible nor sensible for us to eliminate every last emission of carbon dioxide and other greenhouse gases. But that won’t be a problem provided we can offset what few emissions remain by finding ways to remove from the atmosphere an equivalent amount of carbon dioxide that’s already there.

How could we do that? By taking advantage of “carbon sinks”. Before we began burning fossil fuels – coal, oil and gas - for energy at the start of the Industrial Revolution, the amount of carbon dioxide in the atmosphere was fairly steady and so had little effect on the world’s average temperature.

There were natural emissions of carbon dioxide, but these were matched by natural processes – carbon sinks - that removed carbon dioxide from the atmosphere.

As the Grattan Institute explains in its latest report, trees, vegetation, soils and oceans absorb carbon dioxide as part of their lifecycle, and hold it for a period before releasing it again.

“Sometimes this cycle is short (for example, a plant that grows and dies within a year) and sometimes the cycle is long (for example, a tree that lives for hundreds of years and takes hundreds more to decay).

“Natural cycles tend to balance out: the carbon that is absorbed by a plant will be released when the plant dies, but will be reabsorbed by the new plant that grows in its place,” the report says.

But all our burning of fossil fuels has destroyed this natural balance. The past 250 years have seen a huge build-up of carbon dioxide in the atmosphere, which has trapped heat from the sun and caused a rise in global average temperatures, in the same way a greenhouse allows you to grow tropical plants in Europe.

We’ve reached the point where further addition to greenhouse gases in the atmosphere will cause average temperatures to become even more uncomfortable and damaging, as well as causing more extreme weather events.

The obvious solution is to move away from burning fossil fuel and get our energy from renewable sources – sun and wind – that don’t affect temperatures and weather patterns. We don’t have to stop producing and using fossil fuels immediately, but we shouldn’t get in any deeper by building new fossil-fuel power stations, coal mines and oil and gas wells.

But not all emissions come from burning fossil fuels for energy. Some come from, for instance, the coking coal used to make steel, from making cement and from burping and defecating cattle and sheep.

So, some emissions may never be eliminated and others would cost far more to eliminate than to offset by other means.

The obvious way to offset is to remove carbon dioxide from the atmosphere by beefing up our natural sinks – many of which have been diminished by economic development.

The Grattan report says we can avoid further land clearing, manage our forests better and restore forest to land that’s been cleared. We can manage fires better by doing planned burning earlier in the season.

We can store more carbon in soil by changing management practices – no-till agriculture, crop rotation, stubble retention on cropping land and sowing more productive grass varieties on grazing land. We can store more carbon – “blue carbon” – by encouraging more mangroves, sea grasses and tidal marshes.

But the report warns “there is still considerable uncertainty about the costs, permanence and measurement of many offsetting activities”. For this reason, offsetting should be used as a supplement to, not a substitute for, reducing emissions.

When governments encourage carbon removal by paying farmers and others who do it – or permit a market in which businesses required to reduce their emissions buy carbon credit certificates from others who’ve removed carbon from the atmosphere – they must ensure these transactions have “integrity”. That they’re ridgy-didge.

Grattan lists six requirements for certification: establishing a credible baseline for measuring progress; assessing how long the carbon will stay locked up; assessing whether, without payment, the activity would have happened anyway; ensuring no double-counting by people on both sides of the transaction; ensuring no adverse environmental side-effects; and requiring adequate monitoring, reporting, record-keeping and verification.

Many people fear carbon credits will be used to avoid reductions in the production of fossil fuels. And when you hear Energy Minister Angus Taylor assuring people in the coal, oil and gas industries that they “have a great future”, it makes you think such fears are warranted.

The Australia Institute recently ran a TV ad saying net zero is a fraud if the fossil fuel industries continue expanding. True.

And the sad truth is that Scott Morrison doesn’t have clean hands when it comes to using carbon credits to mislead us. He’s claimed repeatedly that our emissions are falling and we’re on track to “meet and beat” our target of a 26 per cent reduction by 2030.

In truth, emissions from the non-land sectors are continuing to grow. He’s able to say total emissions are down only because of a huge once-only reduction in emissions from land clearing that occurred before the 26 per cent reduction was promised in 2015.

Research by the Australia Institute and the Australian Conservation Foundation has found there was a massive surge in applications to clear native forest before the NSW government imposed limits on land clearing.

Since little of this approved clearing has actually happened, the administrators of the federal Emissions Reduction Fund have counted the difference as “avoided deforestation”, even though it’s quite implausible that anything like that much land could have been cleared in the time available.

Encouraging farmers to remove carbon from the atmosphere is a good idea. But there’s great scope for the unscrupulous to turn it into a fraud and another National Party rort.

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Cheapest, easiest way to reach net zero is to put a price on carbon

If Scott Morrison fails to front for the Glasgow climate conference at the end of the month, his preference to stay home while we’re dismantling the lockdown will be only one reason. The other’s that the conference isn’t looking like it’ll be a roaring success.

You wouldn’t know it from all Morrison’s agonising over signing up to net zero carbon emissions by 2050, but it’s the easy bit. The hard part about Glasgow is the expectation you’ll make an improved commitment on how much you’ll have done to reduce carbon emissions by 2030.

Unlike us, most of the big players have already put their revised commitments on the table. That’s the problem with Glasgow. So far, those commitments add up to much less than needed to hold the global average temperature rise to the “well under 2 degrees” agreed on at Paris in 2015, let alone the 1.5 degrees the poorer countries demand.

As many of us now realise, we wouldn’t be trembling in our boots over the enormity of getting our emissions down to net zero by 2050 – and making big strides long before then – had we not abolished after only two years the perfectly good carbon pricing scheme the Gillard government introduced in 2012.

By 2014, people had realised the carbon tax accounted for only a little of the huge increase in electricity prices we experienced, and that the Coalition’s talk of $100 legs of lamb was just a fairy story.

Of course, the carbon price would be higher by now, and we’d have had to extend it beyond electricity and gas to all other sources of emissions.

The series of studies the Grattan Institute’s Tony Wood is doing on how we can reduce emissions in other parts of the economy – transport, manufacturing, agriculture – shows that without the help of a carbon price it’s much harder going.

And it strikes me that insufficient reliance on a carbon price may explain much of the trouble the other parties to the Paris Agreement are having in making adequate progress. Indeed, it could be we won’t make it to net zero without the biggest emitters making greater use of emissions pricing.

In a recent paper, Ian Parry, of the International Monetary Fund, says more than 60 carbon tax or emissions trading schemes have been introduced at sub-national, national or multi-country levels. In recent months, China and Germany have launched major initiatives, the carbon price in the European Union has risen above €50 ($80) a tonne of carbon dioxide, and Canada announced its price would rise to the equivalent of $185 a tonne by 2030.

Even so, only about a fifth of all global emissions are covered by pricing schemes, and the global average price is only about $4 a tonne. Parry says that’s a far cry from the global price of about $US75 (more than $100) a tonne needed to reduce emissions sufficiently to keep global warming below 2 degrees.

Does $100 a tonne sound expensive? It is in the sense that the price increase built into the prices of emissions-intensive goods and services needs to be big enough to produce sufficient change in the behaviour of consumers and businesses.

But it’s cheap when you realise that the purpose of a carbon tax (or, equivalently, the proceeds from the government auctioning emissions permits to businesses who need them) is not to raise additional revenue but to change behaviour.

So the proceeds can be used to make equivalent reductions in other taxes, especially income tax. Thus people pay more for some of the goods and services they buy, but pay less income tax. People on welfare benefits have them indexed to cover their higher living costs.

As we discovered in 2012, introducing a carbon tax or emissions trading scheme (ours was the former that, after a few years, would become the latter) is a relatively simple business. You don’t tax emissions directly, but use scientific estimates of the average amount of carbon dioxide the production and use of that class of product emits.

But almost all economists recommend using a carbon price to decarbonise the economy also because they think it’s the policy instrument likely to achieve the objective with the least disruption to the economy and least loss of growth in the production of goods and services.

That’s what economists really mean when they say a carbon price is the cheapest way to get to net zero. They know that sufficiently large changes in relative prices will change people’s use of fossil fuels.

Get this: a carbon tax is a tax the government actually wants people to find ways to avoid having to pay. It’s intended to discourage people from using fossil fuels. How? By using electricity, gas and petrol less wastefully.

By switching to renewable energy (which is untaxed) because it’s relatively cheaper. By making sure that the next car or appliance or production machine people buy is more energy-efficient than the last. By increasing the monetary incentive for businesses to come up with less-polluting ways of doing things and inventing less-polluting machines.

To save face, Morrison has set his face against using the price mechanism to save the planet. But economic reality – or pressure from other, more sensible countries, or even voters – may yet change his tune.

One worry about putting a price on carbon is whether it would put our exporters at a disadvantage. A new and opposite worry is whether countries that have one when we don’t will protect their industries by slapping a “carbon tariff” on our exporters.

But the International Monetary Fund has come up with a solution to these worries that would also allow every country to use carbon pricing to make greater progress towards net zero. It proposes that the G20 countries (including us) phase in a uniform carbon minimum or “floor price” of $US75 a tonne of CO2 by 2030. Smart idea.

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Farmers have most to lose - or gain - from climate change

Doesn’t it strike you as strange that the born-again Scott Morrison – by now, presumably, deeply ashamed of his public fondling of a lump of coal during his unregenerate days – is being held back from signing up to the target of net zero carbon emissions by that fierce defender of farmers and rural Australia, the National Party?

Farmers are, if you’ll forgive the expression, at the coal face of the damage climate change is doing and will keep doing to Australia. They’ll also be among the chief beneficiaries of successful international action to stop further increase in global warming.

By now there’d be few farmers who didn’t understand that. Certainly, all the main farming lobby groups, from the National Farmers Federation down, have endorsed the net zero target and want to get on with it.

So what’s the National Party’s problem? Just that it sees itself as champion of two regional industries, agriculture and mining. Trouble is, the miners have always seen their interests as lying in fending off action to reduce the use of fossil fuels for as long as possible.

The Nats’ allegiance to mining gets stronger as you move north, and reaches its peak in Queensland. And it’s not hard to guess which of the two industries has the deeper pockets when it comes to generous support for the party cause.

But not to worry. The Nats’ method of operation within the Coalition has long been to blackmail the Libs into shifting more money from the city to the bush. It doesn’t have to be well spent as long as there’s more of it. And all the nudging and winking coming from the chief national Nat, Barnaby Joyce, suggest the Nats (or most of them) will surrender their principled position as long as the price is right.

One part of the price could be to exempt agriculture from any effort to reduce its own emissions. But a recent report from the Grattan Institute says that would be a mistake for two reasons. Agriculture accounts for 15 per cent of our total emissions, so we won’t make it to net zero if it isn’t pulling its weight like other industries.

But also, now the big countries are serious about climate change and are requiring their own industries to shape up, they’ll be using a carbon tariff to punish exporters from those countries that aren’t doing likewise. Any excuse to protect their own farmers from our more-efficient operators would not go unused.

So let’s start at the beginning. Farmers are disproportionately affected by climate change, including by higher temperatures, changing rainfall patterns and increasing drought, bushfires and floods.

As Grattan’s James Ha reminds us, federal government research says changes in rainfall have cut farm profits by 23 per cent compared to what could have been achieved in pre-2000 conditions.

Cropping farmers have done worst, but if global warming reaches 3 degrees, livestock in northern Australia are expected to suffer heat stress almost daily. As the climate continues to change, the value of some farming land may fall considerably and some properties may become increasingly expensive to insure.

Agriculture’s emissions of greenhouse gases have fallen somewhat in recent years, but this is a result of the drought. As herd size is rebuilt, emissions will increase – until the next big drought.

About three-quarters of agriculture’s emissions come from cattle and sheep. Most of this is our 24 million cattle and 64 million sheep burping methane (which causes a lot more warming than carbon dioxide), and then the nitrous oxide (also worse than CO2) that comes from their poo.

Then come emissions from the use of diesel to fuel most farm equipment, emissions from the use of chemical fertilisers and lime, and emissions from plant matter left after harvest.

All this makes farm emissions difficult to reduce. There are vaccines and dietary supplements to reduce methane belching, but they are not yet well developed and are hard to use on wide-ranging animals.

Farm equipment has not yet been adapted to use electric motors. Even so, there are practices that could be changed to manage farms more efficiently and with fewer emissions.

State agriculture departments have spent much over many years teaching farmers how to bring their practices up to date, and they need to spend a lot more teaching farmers how to adapt to climate change and reduce emissions.

Similarly, the CSIRO has spent taxpayers’ money on advancing farm technology over many decades. We should be investing in technological solutions to limit methane emissions. Where farmers need to buy expensive new equipment, the government could help them with “income-contingent” loans similar to HECS loans to uni students.

Farmers will gain directly from emission-reducing practices that also increase their productivity. They’ll be enormously better off from whatever the global effort does to limit further warming.

And, remembering the “net” in net zero, they’ll benefit greatly from doing things that allow them to sell “carbon credits” to firms in other industries – so long as it’s not just another National Party boondoggle.

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How Morrison can get going towards net zero - if he wants to

Scott Morrison seems keen to keep his job as Prime Minister, but not so keen to do the job PMs are paid to do: make tough decisions in the nation’s interests. So it’s up to the rest of us to step into the breach. And when it comes to the decision Morrison fears most – getting to net zero emissions by 2050 – no one’s keener to help out than Tony Wood and his team at the Grattan Institute.

Wood begins where everyone with any sense begins: by noting that the best way to reduce emissions at minimum cost to the economy - and all the people in it - would be to introduce a single, economy-wide price on carbon emissions.

But the temptation to win elections with populist bulldust about “a big new tax on everything” proved too great and so, with that off the table, we must find other, more interventionist, sector-by-sector ways to skin the cat (many of them requiring additional government spending, which will have to be paid for somehow).

The basic strategy for reducing our emissions is clear: move from fossil fuels to renewable ways of producing electricity (plus the use of batteries to store it), then meet all other energy needs with electricity. In practice, it’s more complicated, of course.

Official projections foresee emissions from electricity falling substantially over his decade, while the next four largest sources of emissions either grow or, at best, plateau. Grattan is producing a series of five reports proposing relatively easy and obvious ways of achieving early reductions in emissions in each sector.

Its thinking is to get early progress because, even if we were to reach net zero emissions just before 2050, that wouldn’t be sufficient to stop the increase in the global average temperature being a lot greater than 1.5 degrees – which is about as much as we can take without major social and economic disruption, not to mention personal discomfort.

If we take as many easy shots as we can now, that buys more time for technological advances to help us with the harder stuff. Getting some momentum going should help build public acceptance of the need for more, as well as giving business a clearer picture of where we’re heading and the risks it runs if it ploughs on regardless.

In any case, the latest report of the UN’s Intergovernmental Panel on Climate Change isn’t likely to be the last telling us temperatures are rising faster than earlier thought. It wouldn’t be surprising to see the 2050 deadline brought forward.

Wood’s first report in Grattan’s five-part series covered the transport sector. It proposed measures to achieve an early move to electric cars, while we wait for hydrogen technology to help with heavier transport.

Wood’s second report, on the industrial sector, was released on Sunday. This covers emissions arising from the production of coal, oil and gas – as opposed to their customers’ use of their products – emissions from the mining and processing of other minerals and metals, and emissions from processing in manufacturing.

As well as burning fossil fuels to help extract fossil fuels, coal, oil and gas production involves “fugitive” emissions of greenhouse gases during the extraction process.

The sector’s emissions have increased significantly since our base year, 2005, mainly because of our foolish decision to permit three different companies to build huge liquefaction plants on an island off the coast of Queensland and turn us into one of the world’s largest exporters of liquid natural gas. Liquefaction, it turns out, involves massive emissions.

The entire industrial sector accounts for almost a third of our total emissions, which are projected to be little changed over the decade. The good news is that 80 per cent of its emissions come from just 187 large facilities. Most of these are subject to the federal government’s existing “safeguards mechanism”, which sets a baseline – or maximum - for each facility’s emissions.

So Wood’s chief proposal is for this mechanism to be modified and extended. Existing facilities should be required to use technologies now available to gradually reduce their emissions. New facilities should be required to meet benchmarks substantially lower than existing ones.

“From now on,” Wood says, “every decision to renew, refurbish or rebuild an industrial asset potentially locks in emissions for the coming decades. Getting these decisions right will be critical for reaching net zero.”

Of course, when it comes to the many facilities producing fossil fuels for export, their future prospects will be affected more by other countries’ climate-change policies than by ours. Good luck finding customers for fossil fuels as the reality of global warming catches up with them as well as us.

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Global warming is too 'wicked' to just muddle our way through

It’s probably always true that democracies take too long to accept the need to act decisively to avert foreseeable problems. We never do it well, but always manage to muddle through. We wait until the problem’s reached crisis point. Everyone’s panicking, and thus willing to accept the tough remedies needed. But I fear climate change is too “wicked” a problem to be solved this usual way.

An extra problem for Australia is that we have a government rendered impotent by its internal divisions. The good news – of sorts – is that when the captain of the ship goes AWOL, the crew take over. The premiers – Liberal and Labor – are stepping in to fill the gap. And business can see the writing on the wall and is taking evasive action.

It’s obvious the world is moving to renewable energy and, before long, oil, gas and coal will become “stranded assets” selling a product for which demand can only decline. Here and overseas, banks are worrying about the security of their loans to fossil-fuel businesses, pension funds and investment managers are worrying about their members’ distaste for investing in polluting businesses, and energy businesses such as AGL and now BHP are dividing themselves into good bank and bad bank, so to speak.

Much of the wake-up call to finance and business is coming from financial regulators. Our Australian Prudential Regulatory Authority (APRA) has initiated a climate vulnerability assessment for banks, encompassing scenarios up to 3 degrees of average global warming, and has issued draft guidance for companies to stress test their own finances against scenarios of up to 4 degrees warming.

But in the report, Degrees of Risk, released this week by the Breakthrough – National Centre for Climate Restoration, and written by David Spratt and Ian Dunlop, the authors warn that if by these actions the climate-risk regulators imply warming of 3 to 4 degrees is manageable, or could be adapted to, APRA risks doing more harm than good.

Why? Because with warming of that extent, it’s doubtful we’d still have any banks. The authors say scientists consider 4 degrees of warming to be an existential threat, incompatible with the maintenance of human civilisation. And 3 degrees would be catastrophic, perhaps leading to outright chaos in the relations between nations.

If warming was anything like that bad, applying “stress tests” and doing “scenario planning” would be largely irrelevant.

The authors quote one professor saying that a 4-degree future is “incompatible with an organised global community, is likely to be beyond ‘adaptation’, is devastating to the majority of ecosystems and has a high probability of not being stable”.

Another prof says “it’s difficult to see how we could accommodate 8 billion people or maybe even half that . . . it will be a turbulent, conflict-ridden world”.

Among other impacts, the authors say, 4 degrees would in the long run melt both polar ice caps, with a sea-level rise of about 70 metres. Even 3 degrees would be catastrophic and make some nations, and regions, unliveable.

The authors say most people don’t understand what “global mean [average] warming” implies. As a general rule, global average warming of 4 degrees – covering land and ocean – is consistent with 6 degrees over land (that is, warming over the ocean would be a lot lower, bringing the average down) and with average warming of 8 degrees over land in the mid-latitudes.

That, in turn, risks an average warming of 10 degrees in summer. Or perhaps 12 degrees during heatwaves. All this is packed inside a tolerable-sounding global annual average warming of 4 degrees.

The authors say that Western Sydney has already reached heatwaves of 48 degrees. Add 12 degrees to that and you get summer heatwaves of 60 degrees. Phew.

Now, remember that psychologists and communications experts have been warning climate change campaigners that, if they make their message too frightening, the reaction of many people won’t be to rush out and join Extinction Rebellion, but to close their ears and do nothing.

Remember, too, that the modelling and projections of the climate scientists are far from certain sure and, as with the virus modelling of the epidemiologists, are based on assumptions that keep changing as our understanding of the phenomenon improves.

For these reasons, the UN’s Intergovernmental Panel on Climate Change has long erred on the side of understatement. But the risk with all this is that sensible people with the best intentions – such as regulators of the financial system – don’t realise how bad things could get.

The authors of Degrees of Risk say the science of climate change is inherently complex because it describes the dynamics of a multi-dimensional, “non-linear” system, involving many sub-systems and networks of adverse “cascade effects”.

“Some responses to increasing levels of greenhouse gases are relatively linear and able to be projected well by climate models” but other responses are “non-linear, characterised by sudden changes, rather than smooth progress, which take the system from one discrete state to another, possibly with system cascades” where one change touches off a chain of changes.

“Factors contributing to this non-linearity include the existence of tipping points – polar ice sheets [melting], for example – where a threshold exists beyond which large, system-level change will be initiated, and positive feedbacks [that is, self-reinforcing loops] drive further change.

“In a period of rapid warming, most major tipping points, once crossed, are irreversible on human time frames”.

The authors’ message to regulators of the financial system is that the risk to banks and businesses at degrees of warming of anything like 3 or 4 degrees are huge, but so uncertain as to be unmeasurable. We need to act on the precautionary principle of significantly reducing emissions now, so we never get to find out how bad it could be.

The more prosaic message I draw is that we mustn’t kid ourselves that climate change is just another problem with unpopular solutions that we’ll muddle through as we always do.

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How Morrison can claim emissions are falling when they aren’t really

Other world leaders have treated this week’s report by the UN Intergovernmental Panel on Climate Change as a “wake-up call,” whereas our leader, Scott Morrison, has mumbled something about how we’re on track to “meet and beat” our emissions reduction target, and gone back to sleep.

The report finds that whereas the world’s increase in average temperatures since the start of the industrial era is 1.1 degrees, our average land temperature has risen by 1.4 degrees over the past century – which does much to confirm the impression most of us have that droughts, floods, bushfires, heatwaves and cyclones are now bigger and more frequent than they used to be.

Climate change isn’t coming, it’s arrived.

At the UN climate change meeting in Paris in 2015, countries agreed to each reduce their emissions of greenhouse gases sufficiently to limit the rise in average temperatures to 2 degrees, and preferably no more than 1.5.

The report’s wake-up call was its revised prediction that warming of 1.5 degrees could be reached by the early 2030s, much sooner than formerly expected. So we’ve got even less time than we thought.

At the Paris meeting, each country announced its “nationally determined contribution” to the reduction in global emissions. It was agreed that each country would review and increase its contribution every five years.

The first round of increases will be announced at the next “conference of the parties” in Glasgow in November. In preparation for the conference, almost all of the world’s 20 biggest emitters – including the G7 countries, China and us – have committed to reach net zero emissions by 2050.

But 2050 is a long way off – perhaps too far off. What matters more is the increases countries make in their contribution targets in Glasgow. At their summit meeting in Cornwall in June, the G7 members agreed to increase their reduction targets to between 40 and 63 per cent over the same period.

It’s possible Morrison will decide to accept the net zero emissions target by 2050, and possible he’ll go to Glasgow promising an improvement on our original Paris contribution of a 26 to 28 per cent reduction on 2005 emission levels by 2030.

This week, however, he was promising nothing. Why not? Because we’re already set to “meet and beat” our original target. Indeed, the most recent figures show our emissions are already down 20 per cent on 2005, he said.

And, as he’s told us many times, we’re world-beaters when it comes to moving to renewable, wind and solar energy.

Now, you’ve probably heard there’s something sus about these wonderful don’t-you-worry-about-that figures Morrison and his ministers keep tossing around. The people who know and care about climate change say our emissions are getting worse, not better.

The doubters are right. But we’re indebted to the Australia Institute think tank for producing a careful report spelling out how the government’s figures are able to be so misleading. The Australian National University’s noted emissions analyst, Hugh Saddler, tests Morrison’s claims that, when it comes to reducing fossil fuels use and transitioning to renewable energy sources, we’re at the front of the pack.

Saddler compares our performance with 22 other decent-sized members of the Organisation for Economic Co-operation and Development, plus Russia, on a number of key indicators of energy transition.

Examining our performance relative to the others between 2005 and 2019, Saddler found that we started at the back of the pack in 2005, and either maintained that position or had slipped even further by 2019 on all the indicators.

Australia remains among the highest emitters on a per-person basis, and on the basis of emissions per dollar of gross domestic product. On those indicators where our performance has improved over the period, the others have improved just as much as we have, if not more.

The “emissions intensity” of our energy system – that is, emissions per unit of energy consumed – is the highest, except for Poland. Why? Because both countries were, and still are, heavily reliant on coal for generating electricity.

Despite all Morrison’s boasting about how much we’re spending on wind and solar power, the others are also spending more. Our share of electricity generated from renewables has slipped back relative to the others.

But here’s the killer punch: we were one of only three countries out of the 24 whose emissions from energy use actually increased between 2005 and 2019. By 18 million tonnes of carbon dioxide equivalent a year, according to Saddler.

How can this possibly be reconciled with Morrison’s claim that our emissions have fallen by 20 per cent? It’s simple when you know. Saddler is talking about emissions from energy use, whereas Morrison is also including emissions from what the UN calls LULUCF – land use, land use change and forestry. In short, land clearing and logging.

This source of emissions has been included in the official calculations since Australia insisted on it at the Kyoto conference in 1997. And be clear on this: so it should be. I have no patience with greenies who think taking account of what’s happening to “carbon sinks” is somehow immoral. Tell that to the people who worry about the deforestation of the Amazon.

No, the point is not that land clearing should be ignored, but that we wanted it counted solely because we knew it would make our figures look a lot better than they really were. Why in 2015 did we want to set 2005 as the starting point for our promised cut in emissions? Because we already knew the cessation of land clearing in Queensland would make our performance look good even if we didn’t do anything much to reduce our use of coal and gas.

Trouble is, this long-passed, once-only improvement in land use does nothing to transform our energy use away from fossil fuels and towards total reliance on renewables. It thus does nothing to get us to net zero emissions.

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Getting to net-zero emissions an easier ride than some want to think

I have a mate who – in normal times, anyway – gives me a lift to the gym in his new all-electric Mercedes. He loves its lack of engine noise and amazingly fast acceleration when the lights change (not that I’m implying he’s a rev-head hoon the police should be watching). I’m no car lover, but it’s certainly a smooth, quiet ride.

Most of us accept that, as part of the world’s move to net-zero emissions by 2050, we’ll all be moving to electric cars. Other countries are already further down this road than us.

We’ve made big strides in shifting electricity generation to renewables, and our emissions are falling. But electricity production accounts for only a third of our total emissions. Transport, in all its forms, accounts for about 20 per cent of total emissions, so its move away from fossil fuels is another part of the transition we should get on with.

In all the years we’ve been arguing about climate change, people have tried to convince us how costly it will be. How disruptive to industry and our way of life. All the higher prices, the tax we’ll pay, the jobs we’ll lose.

So far, however, there’s been little extra cost or disruption. The rise of wind and solar power has happened without much pain. And a report this week from Tony Wood and colleagues at the Grattan Institute think tank suggests the move to electric vehicles can be achieved without angst.

More than 60 per cent of the transport sector’s 20 per cent of total greenhouse gas emissions comes from the tailpipes of cars and light commercial vehicles, including our two biggest selling cars, Toyota HiLux and Ford Ranger utes. That leaves trucks accounting for 20 per cent of the sector’s emissions and domestic aviation for about 10 per cent.

Australia has about 18 million light vehicles, up from fewer than 15 million in 2010. And we’re driving bigger, heavier cars than we were a decade ago. (All those appalling SUVs. One day they’ll run over my little Toyota Yaris.)

At present, electric vehicles make up just 0.7 per cent of new sales in Australia. This doesn’t count hybrid electric/petrol cars which, because of their continued use of fossil fuel, can’t be a lasting part of the shift, Wood says.

Our tiny all-electric share of new sales compares with 2 per cent in the US, 3 per cent in New Zealand, 11 per cent in Britain and 75 per cent in Norway.

Because it takes more than 20 years to replace our light vehicle fleet, for our transport sector to make a sufficient contribution to the target of net-zero total emissions by 2050 we’ll need to get to the point where all new light vehicles are electric by about 2035, he estimates.

Government projections suggest that, if the market is left to itself, the move to electric vehicles will cause light vehicle emissions in 2030 to be 7 per cent lower than they were in 2019. This isn’t good enough.

So what can be done to speed the shift? Wood says governments should reduce the main barriers to buying an electric car. First, the high cost of switching and limited choice and, second, the lack of charging points.

We pay an average of about $40,000 for a new car. But we have fewer than 30 electric models to choose from – much lower than overseas – and of these, just three models retail for less than $50,000.

As with all innovative products, the price of electric cars is coming down as the novelty wears off and sales increase. They’ll fall further as batteries become cheaper to make. But the point where the price of an electric car falls below an equivalent conventional car is still some years away.

So Wood proposes removing several taxes on the purchase of new electric cars. Scrapping state stamp duty would cut the price by up to 6.5 per cent, he estimates. Remembering that, these days, all vehicles are imported, removing federal import duty would cut the cost by up to a further 5 per cent.

Exempting electric cars from the federal luxury car tax – a tax of 33 per cent of the price exceeding the first $80,000 – until 2030 would also help.

Australia is alone among the rich countries in not having mandatory fuel efficiency and emissions standards. And there’s a suspicion some foreign makers send us only the high-emissions conventional models they have trouble flogging in other markets.

So to these carrots, Wood adds a stick: to phase out petrol and diesel cars, the feds should impose an emissions limit on light vehicles and reduce it to zero by 2035.

Many people hesitate to buy an electric vehicle because they worry about finding places to recharge. Wood says governments should require all new buildings with off-street parking to make provision for vehicle charging.

Getting everyone into electric vehicles wouldn’t solve our emissions problem, but it would help. And it’s another indication that the fears of huge costs and disruption are greatly exaggerated.

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Reality is catching up with our freeloading, populist climate deniers

Don’t be taken in by the Morrison government’s outraged cries of “protectionism” against the EU plan to impose a carbon tariff on our exports to Europe. It’s we who are in the wrong, failing to do what we should have to reduce emissions, in favour of politicking and populism.

What we’re seeing is just the reality of the world’s need to act to limit climate change catching up with a government and federal party which, since Tony Abbott used denialism to seize the party’s leadership from Malcolm Turnbull in 2009, decided to make global warming a party-political football: a way to beat your opponents, not a need to tackle the nation’s biggest problem.

It’s a condemnation of our business people that, when their own side of politics offered them a way to postpone the inevitable costs of adjusting to a low-carbon world, they happily embraced it.

It’s a condemnation of Australian voters that they were willing to allow their preferred party to tell them whether they cared or didn’t care about their children’s future. It should have been the other way round. “It’s all too hard; you do my thinking for me.”

But the game has moved on since those bad days, and now it’s not just the rest of the world that’s realised there’s no future in denying the reality of climate change and the need to act. As each day passes, we see more evidence that our own financial regulators, banks, investors and businesses are accepting the inevitable and modifying their behaviour.

All our state governments – most notably the Berejiklian Coalition government of NSW – have embraced the target that all other rich nations have embraced, net-zero emissions by 2050. Everyone can see that our refusal to take climate change seriously is wrong-headed and unsustainable.

So, apart from being a national embarrassment – we’re the person stopped for not wearing a mask, so to speak – it’s no bad thing that even other countries have stepped in to oblige our national government to shoulder its responsibilities.

As part of their plan to reduce their emissions by 55 per cent by 2030, the Europeans are toughening up the emissions trading scheme they introduced in 2005, which imposes a price on the carbon emissions of European industries.

To prevent this putting their industries at a disadvantage against imports from countries that don’t impose a similar carbon price on their own industries, the Europeans plan to use a “carbon border adjustment mechanism”, a tax on imported cement, fertilisers, aluminium and iron and steel to bring their carbon costs up to those faced by local producers.

This not only levels the playing field for local industry, it eliminates the incentive for producers to move their production to countries without carbon pricing.

These problems are ones we ourselves worried about when designing Kevin Rudd’s original carbon pollution reduction scheme (which the Coalition and the Greens voted down in 2010) and Julia Gillard’s carbon pricing scheme of 2012 (which was repealed by Abbott in 2014).

So what the Europeans want to do can’t honestly be called protectionism. It bears no similarity with the new import duties China’s imposing on some of our exports.

What’s true is that it’s a messy but necessary way of solving the “wicked” problem of climate change which, being global, can only be fixed by all of the world’s big emitting countries doing their bit. This is why we can expect many other big countries – starting with America, and maybe extending to Japan − to impose similar carbon border taxes on those countries that try to freeload on those doing the right thing, while helping to sabotage the good guys’ efforts in the process.

So there’s no reason for any of us who believe climate change is real and must be countered to have any sympathy for the Abbott-Turnbull-Morrison government. All its sins of expedience and populist politicking are finding it out. It took a bet that the rest of the world wouldn’t get serious, and we lost.

The point is, had we stuck with either the first or the second version of our own emissions trading scheme – which were actually designed to fit with the Europeans’ scheme – we wouldn’t have this problem.

By now our exporters would be paying our carbon tax to our government (or, if they weren’t yet, we could easily fix it) rather than paying the same tax to foreign governments. Why’s that a good idea?

From the beginning, this government has used climate change as nothing more than an opportunity to attack the other side of politics by pushing populist delusions that taxes are always and everywhere a bad thing. Bad for the economy. Yeah, sure.

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Reform not a dirty word when it benefits the many, not the few

The idea that the economy needs to be “reformed” has been hijacked by the business lobby groups. Their notion of reform involves making life better for their clients at the expense of someone else. But that doesn’t mean there aren’t things that could be changed to make the economy work better for most of us, not just the rich and powerful.

Trouble is, Scott Morrison shows little interest in any kind of reform, whether to advance business interests or anyone else’s. Reform involves persuading people to accept changes they don’t like the sound of, and increases the risk they’ll vote against you at the next election.

Morrison’s government is making heavy weather of our most urgent problem – getting all of us vaccinated against the virus ASAP – so maybe it’s not such a bad time for him to Keep it Simple, Stupid.

But we do have an election coming up, in which it’s customary to think about what improvements could be made over the next three years. And it’s not illegal for us to dream about what could be improved if sometime, somewhere we ever found leaders interested in doing a better job as well as staying in office.

Next to the pandemic, the most important problem we need to be working on is climate change. That’s stating the obvious, I know, but not to Morrison and his Treasurer, Josh Frydenberg, whose recent intergenerational report paid lip service to the issue but then proceeded to project what might happen to the economy and the federal budget over the next 40 years without taking climate change into account.

What’s surprising is that another Coalition government, Gladys Berejiklian’s in NSW, did take account of global warming in its state intergenerational report. It found that more severe natural disasters, sea level rises, heatwaves and declining agricultural production would reduce incomes in NSW by $8 billion a year in 2061 under a high-warming scenario compared to a lower warming one.

Clearly, climate change will be bad for everyone in the economy – some people more than others – while acting to reduce our emissions of greenhouse gases will be a cost to our fossil fuel industries.

But the world’s demand for our coal and gas exports is likely to decline whatever we do. Our government doesn’t believe climate change needs to be taken seriously but, fortunately for more sensible Australians, the rest of the world does, and is in the process of forcing “reform” on our obdurate federal government.

In the meantime, however, our electricity industry is finding it hard to know what to do because the Morrison government won’t commit itself to a clear plan on how we’ll make the transition to all-renewable power.

Worse, our abundance of sun and wind relative to most other countries makes us well placed to become a world renewables superpower – exporting “clean” energy-intensive manufactures, maybe even energy itself - if we act quickly.

Right now, however, our need to choose between being a loser from the old world or a winner in the new world is sitting in the too-hard basket.

Moving to less strategic issues, Danielle Wood, chief executive of the Grattan Institute, gives a high priority to lowering barriers to workforce participation by women, by making childcare more affordable and improving paid parental leave.

We’ve long seen the benefits of free education in public schools. Making “early childhood education and care” free would not merely make life easier for young families, it would get more of our kids off to a better start in the education system and allow women to more fully exploit the material benefits of their extensive education, not just to their benefit but the benefit of all of us.

The benefits of getting an education greatly exceed getting a better-paid job – education broadens the mind, don’t you know – but it makes no sense for girls, their families and the taxpayer to put so much effort and money into gaining a better education, then make it so hard for them to do well in the workforce when they have kids.

One factor that’s widening the gap between rich and poor in the advanced economies is years of “skill-biased” technological change, which is increasing the wages of highly skilled workers while doing little to increase the wages of unskilled workers. Indeed, many routine jobs are being replaced by machines.

This says one way to ensure Australian workers prosper in the digital future of work is to ensure our workforce is well educated and highly trained. We must be willing to spend – to invest – however much it takes to have a workforce capable of providing the more analytical, caring and creative skills employers will be demanding.

We need to do more to help our teachers teach better so that fewer kids leave school early without having acquired sufficient education to survive in the world of work. Some teachers are better at it than others; they need to be used to train younger teachers on the job and rewarded accordingly.

Universities need to be better funded by the federal government, so they can afford to give students a higher quality education, vice-chancellors aren’t so eternally money hungry, unis stop exploiting younger staff with insecure employment and aren’t so dependent on making money out of overseas students and thus obsessed by finding ways to game the international university league tables.

How’s all this to be afforded? By all of us paying somewhat higher taxes, how else? By politicians giving up their election-time pretense that taxes can come down without that leading to worse quality government services rather than better.

Throwing money at problems doesn’t magically fix them, you must use the money effectively. But when mindless cost-cutting is the source of much of the problem, nor is it possible to fix problems without spending more.

If our politicians would speak to us more honestly along the lines of “you get what you pay for”, that itself would be a welcome reform.

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Sorry, I'm too old to believe an ageing population is a terrible thing

If ever there was an exercise that, since its inception, has overpromised and under-delivered, it’s the alleged Intergenerational Report. A report on relations between the generations, on the legacy the present generation is leaving for the coming generation?

No, not really. If it was, it would be mainly about the need for us and the other rich countries to be acting a lot more seriously and urgently to limit climate change. The document Treasurer Josh Frydenberg unveiled on Monday is our fifth five-yearly Intergenerational Report.

Initially, the report made no mention of climate change. These days, following the obvious criticism, it always includes a brief chapter on the topic, before moving on to matters considered more pertinent.

This year the chapter runs to nine of the report’s almost 200 pages, in which the seriousness of the problem is acknowledged, along with the assurance “but don’t worry, I’m on it”. On every admitted dimension of the issue, we’re assured that reports have been commissioned, committees established and the government is spending $100 million on this and $67 million on that.

Another issue of relevance to relations between the generations is the ever-declining rate of home ownership as the price of houses rises ever higher. Can the aggrandisement of one generation at the expense of following generations continue? And are we content to witness the trashing of the Great Australian Dream? I found no discussion of this.

The sad truth is the Intergenerational Report is a creation of the Charter of Budget Honesty Act so, despite its grandiose name, it’s really only interested in the future state of the federal budget and in attempting to predict the size of the budget balance in 40 years’ time.

According to Frydenberg, the latest report delivers “three key insights”. First, our population is growing slower and ageing faster than expected. Second, the economy’s growth will be slower than previously thought. Third, while the federal government’s debt is sustainable and low by international standards, the ageing of our population will put significant pressures on both government revenue and its spending.

Get it? The real concern of this report – and its four predecessors – is what the ageing of the population looks likely to do to the federal budget over the next four decades. It thus echoes a longstanding concern of all the rich countries that the retirement of the Baby Boomers will put huge pressure on their budgets.

When you read the document minus the spin successive treasurers always put on it, this year’s version tells us what all five reports have told us: compared with the Europeans and Americans, we don’t have much of a problem.

The report’s big news is that our decision to close our borders as part of our response to the pandemic means our annual level of net immigration – foreigners arriving minus locals leaving – isn’t expected to return to normal until 2024-25.

According to Frydenberg, this is the first report “where the size of the population has been revised down”. But this is misleading. It doesn’t mean our population will fall, only that it won’t keep growing as fast as it has been and was expected to continue doing.

We’re now expected to have four years of below-normal net immigration, with no subsequent catch up. So whereas the previous report projected that the population would reach almost 40 million by 2055, it’s now expected to be no more than 39 million in 2061.

Since almost all the nation’s business people, economists and politicians believe too much population growth is never enough, this news will worry them. It doesn’t worry me. And I suspect most Australians will regard it as good news, not bad.

Frydenberg argues it’s bad because, since immigrants tend to be younger than the average Aussie, it will cause the population to age faster than was expected. This is arithmetically correct, but Frydenberg has given us an exaggerated impression of its extent.

He tells us that, in 1982, there were 6.6 people of traditional working age for every person over 65. Today, the ratio is down to 4.1, and by 2061 it will have fallen to 2.7. Wow. And what did the previous report tell us it would be down to by 2055? 2.7. Oh, no significant change.

Even so, isn’t that a worry? Not when you remember what economics teaches: that the economy adjusts in response to changing circumstances.

As Jenny Goldie, president of Sustainable Population Australia, has explained to the Treasurer, “as the working-age population shrinks and the labour market tightens, fewer people will be unemployed, and employers will improve wages and salaries to attract job seekers.

“This will have the effect of drawing more people into the workforce who were not working, or keeping people who would otherwise have retired.” Employers will no longer be able to afford their prejudice against hiring older workers.

If your instincts tell you not to believe those trying to convince you that people now living longer than they used to is a real worry, your instincts are right.

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My new hero, Mathias Cormann, now valiant for truth

I find it hugely encouraging. Don’t know if you’ve heard the glad tidings but, on his road to Damascus – or, in this case, Paris – our own Mathias Cormann, former senator and minister for finance, has experienced a miraculous conversion. He’s gone from persecutor of those who care about climate change to being a leader of the cause.

As we said in my Salvo youth, there is much joy in heaven over one sinner that repenteth. I bet Brother Scott’s joy is unconfined.

And it’s clear from Cormann’s first speech as Secretary-General of the revered Organisation for Economic Co-operation and Development that he’s seen the light on a lot more than climate change. Indeed, the new man is exhibiting a distinct air of wokefulness. He’s now valiant for “stronger, cleaner, fairer economic growth”.

Speaking to a meeting of the OECD’s 37 rich and wannabe-rich member-country Council at Ministerial Level last week, Cormann said: “We need to continue to overcome the immediate health challenge, including by pursuing an all-out effort to reach the entire world population with vaccines.

“This is not just an act of benevolence from advanced economies. It is about sustained virus protection for all of us and about giving ourselves the best chance of a sustained recovery.”

Enlightened self-interest. I love it.

Cormann hasn’t changed his tune on chasing down slippery multinational tax avoiders. “It is very important we [the OECD] continue to lead the global fight against tax evasion and multinational tax avoidance and to ensure that digital businesses and all large businesses pay their fair share,” he said.

“We need to complete this work, including by facilitating agreement on an appropriate minimum level of global taxation and by minimising the profit-shifting that has accompanied the digitisation of our globalised economy.” All well and good.

On other matters, where I come from, there was nothing we enjoyed more than hearing some reformed Trophy of Grace testifying to his former wicked ways. As finance minister, Cormann led the Coalition’s repeated cuts to our overseas aid budget which, as a poor country with a big debt, we were told, we could no longer afford.

The reborn Cormann sees it differently. “We [the rich OECD countries] must also continue to strengthen our development co-operation. Low-income countries need our co-operation more than ever – to ensure access to vaccinations, to trade, to financing to help them deal with the climate challenge,” he said.

Cormann, you recall, was one of Tony Abbott’s lieutenants in abolishing Labor’s (already watered-down) minerals resource rent tax and its “price on carbon”.

At the time we were led to believe Julia Gillard’s carbon tax was the reason the retail price of electricity had risen so steeply. Turned out it was just a small part of the story. Prices stayed high.

But, in any case, new insight has come to Cormann in a blinding flash. “Market-based economic principles work,” he now sees. “Global competition at its best is a powerful engine for progress, innovation and an improvement in living standards.”

True, he admits, competition can be uncomfortable. “It can lead to social disruption which, collectively, we need to better manage.” Love that new thought that we ought to do more things “collectively”. Doesn’t quite roll off Cormann’s tongue, but he’s getting there.

“We need to ensure access to high quality education, upskilling and reskilling to ensure everyone can participate and benefit. We need the necessary social supports for those who struggle,” he said.

Amen to that. No hanging the unis out to dry during the pandemic. No spending a decade starving technical education of funds.

On climate change, he tells us that “more and more countries are committing to net-zero emissions as soon as possible and by no later than 2050.

“The challenge is how to turn those commitments into outcomes and to achieve our objective in a ... way that will not leave people behind.”

It’s easy to be cynical. In my youth, working in a big private-sector bureaucracy and watching people fighting their way to the top, I formed the view that many people were happy to adjust their views to fit their new role in the organisation.

When, with much assistance from the Morrison government, Cormann was travelling the world canvassing support for the top OECD job, many environmental groups were loudly opposing his candidacy. They failed to anticipate the fluidity of his views.

In my limited contact with the man, I found this Rocksolid Roarer of the Right friendly to the point of charming. Remembering how successful he was at getting crossbench Senate support for the government’s controversial measures – and at so little cost to the exchequer – I think he has just the right qualities to succeed in bringing the OECD’s divers members to agreement.

And, after all, he wouldn’t be the first person lately to realise that the climate worm has turned and fossil fuel’s days are ending.

Benediction from the Apostle Mathias: “Protecting ourselves from competition and innovation does not stop it from happening elsewhere – it just means that, over time, those who find themselves behind those protective walls fall further and further behind.”

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Top economists think much further ahead than Morrison & Co

If Scott Morrison and Josh Frydenberg are looking for ideas about what more they could be doing to secure our economic future – after all, they’ll be seeking re-election soon enough – they could do worse than study the views of the 56 leading economists asked by the Economic Society of Australia to comment on this month’s budget.

Two points stand out. First, almost all the economists were happy to support the budget’s strategy of applying more fiscal stimulus to get unemployment below 5 per cent. They were pleased to see the government abandon its preoccupation with surpluses and debt.

As Professor Fabrizio Carmignani, of Griffith University, said, “the good thing about this budget is that it was not about repairing the deficit and debt accumulated in 2020”. Professor Sue Richardson, of Flinders University, said: “the debt and deficit mantra was never justified”.

Second, with one notable exception, the economists were critical of the government’s choice of things to spend on. The exception was its big spending on the “care economy” – aged care, childcare, disability care and mental health care – which most respondents welcomed. Indeed, quite a few thought there should have been more of it.

After that, the economists had plenty of constructive criticism of the government’s priorities. For instance, quite a number were happy to see big spending on “infrastructure”, but critical of the government’s narrow conception of what constitutes infrastructure.

Carmignani said: “there is in this budget – as in the past – an almost blind confidence in the power of investment in physical infrastructure to drive future growth and development. In fact, the future prosperity of Australia depends on innovation that requires social rather than physical infrastructures”.

Professor Gigi Foster, of the University of NSW, said: “childcare should be viewed as the social infrastructure that it is, and invested in as such. Instead, when we heard ‘infrastructure’, it was mainly code for transportation”.

So even in the area of physical infrastructure, the budget shows a lack of imagination. Professor Michael Keane, also of the University of NSW, said very little of the infrastructure money was “allocated to such urgent needs as renewable energy, climate change adaptation, environmental sustainability, water resources, etcetera. This shows a real lack of ambition.”

Richardson agrees. “The future is one of zero net greenhouse gas emissions,” she said. “The transformation of the energy, agricultural, transport and manufacturing systems that this requires is enormous, will require unprecedented levels of investment and needs to start now.“

Now that’s interesting. Historically, treasurers and their advisers have regarded the budget as the place for discussion on finances and economics, not the state of the natural environment nor the challenge of climate change.

The economy in one box, the environment in some other box. The natural environment has been seen as of such little relevance to topics such at the budget and the economy that it has barely rated a mention in the five-yearly supposed “intergenerational report”.

But that’s not how our leading economists see it. At least a dozen of them have criticised the budget’s failure to respond to the challenge of climate change. Professor Warwick McKibbin, of the Australian National University, warned that “the world is likely to be taking significant action on climate change which will substantially impact Australia’s fossil fuel exports and the future structure of the Australian economy”.

Another topic barely mentioned in the budget – one of the industries much damaged by the pandemic – was universities. Unsurprisingly, more than a dozen respondents noticed the omission. They’re self-interested, of course, but they make a good case.

Dr Leonora Risse, of RMIT University, said succinctly: “investment in the university sector [is a] generator of productivity-enhancing skills, knowledge and research”. Meanwhile, McKibbin added that “a key ingredient is an investment in human capital”.

But the academics’ concern is wider than their own patch. Risse has called for more attention to the long-running drivers of growth, such as “investment in the workforce capabilities, resourcing, wages and working conditions of high-need, high-growth sectors” such as the care economy.

Dr Michael Keating, a former top econocrat, said restoring past rates of economic growth won’t be possible without addressing the structural problems in the labour market. “This will involve much more investment in education, training and research” but “the extra money in this budget for apprentices and trainees only makes up for past cuts.”

Notice a theme emerging? Budgets should be about investment – spending money now, for payoffs to the economy later – but investment needs to be in people, not just in physical and traditional things such as roads and railways.

It’s easy to accuse academics of pontificating atop their ivory towers, but they seem able see much further into the economy’s future needs than our down-to-earth politicians.

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Water reform report’s big smile hides its big teeth: much more to do

A quick look at the Productivity Commission’s draft report on national water reform reminds me of the repeated judgment from old Mr Grace, the doddering owner of the department store in Are You Being Served? as he headed for the door: “You’ve all done very well!”

Its review of the progress of the National Water Initiative signed by the federal and state governments in 2004 – encompassing agreements on the Murray-Darling Basin – is terribly polite, understated and relentlessly upbeat.

Apparently, governments have made “good progress” in having “largely achieved” their reform commitments. All that remains is just the need for a teensy-weensy bit of “policy renewal”.

This mild-mannered stuff and congratulatory tone bear no resemblance to my memories of meetings of angry farmers railing against stupid greenies and other city slickers; of their insistence that the immediate needs of irrigators and irrigation towns along the river take priority over the river system’s ultimate survival; of each state government’s insistence on favouring their own irrigators over those in states further down the river; of federal and state National Party ministers happy to slip farmers a quiet favour, avoid enforcing the rules and turn a blind eye to blatant infringements; of federal Labor ministers who, even with no seats to lose in the region, were unwilling to make themselves unpopular by standing up for the rivers’ future.

I remember that the Howard government spent billions of city slickers’ money helping individual farmers make their irrigation systems more resistant to evaporation and seepage when all the benefits went to the farmer and none to the river system.

I remember all the infighting between government water agencies, and the mass fish kills during the recent drought in NSW and Queensland, for which the managers of the system accepted no responsibility.

Fortunately, reporters are adept at ignoring all the happy flannel up the front of government reports and finding the carefully hidden bad bits. And fortunately, we have the assistance of long-standing water experts, including the economist Professor Quentin Grafton, of the Australian National University, whose summary of the report on The Conversation website is headed: “Our national water policy is outdated, unfair and not fit for climate challenges.”

“The report’s findings matter to all Australians, whether you live in a city or a drought-ravaged town. If governments don’t manage water better, on our behalf, then entire communities may disappear. Agriculture will suffer and nature will continue to degrade,” he says.

The report’s proposal to make “water infrastructure developments” a much larger part of the National Water Initiative is a critical way to keep governments honest. For years, state and federal governments have used taxpayers’ dollars to pay for farming water infrastructure that largely benefits big corporate irrigators, Grafton says.

Last year the Morrison government announced a further $2 billion for its Building 21st Century Water Infrastructure project. Such megaprojects, he says, perpetuate the simplistic myths of the early 20th century that Australia – the driest inhabited continent on Earth – can be “drought-proofed”.

When governments signed the original initiative in 2004, they agreed to ensure investments in infrastructure would be both economically viable and ecologically sustainable. But many projects appear to be neither.

The report notes, for example, that the construction of Dungowan Dam in NSW means “any infrastructure that improves reliability for one user will affect water availability for others”. The “prospect of ‘new’ water is illusory”.

The report warns that projects that aren’t economically viable or ecologically sustainable can “burden taxpayers with ongoing costs, discourage efficient water use and result in long-lived impacts on communities and the environment”.

Equally disturbing is that billions of dollars for water infrastructure are presently targeted primarily at the agriculture and mining industries, while communities in desperate need of drinking water that meets water quality guidelines miss out, Grafton says.

Fortunately, the report isn’t so house trained as to avoid mentioning the gorilla the Morrison government prefers not to notice. There’s a lot about the consequences of climate change. It says droughts will likely become more intense and frequent and, in many places, water will become scarce.

In Grafton’s summary, the report says planning provisions were inadequate to deal with both the millennium drought and the recent drought in Eastern Australia. The 2012 Murray-Darling Basin Plan, for instance, took no account of climate change when determining how much water to take from rivers and streams.

The present federal government actually dismantled the National Water Commission in 2015, meaning we no longer have a resourced, well-informed agency to “mark the homework” and make sure the reforms were being implemented as agreed, Grafton says.

In 2007, the worst year of the millennium drought – and the year John Howard feared he’d lose the election if he didn’t match Labor’s promise to introduce an emissions trading scheme – Howard remarked that “in a protracted drought, and with the prospect of long-term climate change, we need radical and permanent change”.

Grafton says we’re still waiting for that change. “If Australia is to be prosperous and liveable into the future, governments must urgently implement water reform.”

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Canberra's latest innovation: politics without policy

The most remarkable development since we returned to work this month is Scott Morrison’s barefaced announcement that the government has enough on its plate rolling out the virus vaccine and getting unemployment down, and so there’ll be no attempt to deal with any of our many other problems before the election late this year or early next.

There could be no franker admission that we live in an era of leaders who lack the ambition and courage to lead. Only on those problems so acute the mob is baying for the government to “Do Something!” will something be done – or grand announcements made that give the appearance it’s being done.

It’s Prime Minister as odd-job person. You don’t look for ways to secure our future, you sit there waiting for pressing matters to turn up: a light bulb that must be changed, a dripping tap that needs a new washer. Acute problems, yes; chronic problems, through to the keeper.

It’s the confirmation of what all but the rusted-on voters have long suspected: that our politicians are motivated far more by the desire to attain and retain office than by any great desire to make the world a better place for us to live and bring up our kids.

The opposing political parties continuously accuse each other of being “ideological” – of being mad free-marketeers or tax-and-spend socialists – but this serves mainly to con along their side’s true believers and conceal from the rest of us the political class’s overriding objective: to win the next election by fair means or foul.

It’s not hard to decipher Morrison’s thinking. Like the premiers, his popularity has soared following our successful containment of the pandemic, so his prospects of re-election are high – provided nothing goes wrong between now and then.

That does mean he must ensure there are no major glitches in the rollout of the vaccine – to which he will have to pay much attention – but he needs no further achievements to improve his chances of winning.

Indeed, anything else he attempts to fix offers more chance of losing the votes of the disaffected than of adding votes to his existing pile. According to informed sources (aka well-briefed gallery journalists), there’s little enthusiasm for “reform” of taxation, religious freedom, industrial relations or superannuation.

The government’s existing proposals for modest changes to industrial relations rules – about which the unions are making such fuss at present – will be put to the Senate next month but, should they fail to pass, will be dropped.

Some Liberal backbenchers’ urgings that the legislated phased increase in compulsory employer super contributions from 9.5 per cent of wages to 12 per cent be reversed (which I support) and the success of the non-profit industry super funds be sabotaged in other ways (which I don’t), have yet to be decided on, but will probably be rejected.

We’re told that Morrison’s thinking in turning away from any further policy improvement is that, after all the upheavals of 2020, the voters just want everything to calm down for a while. But that’s probably always true of many politician-weary voters. Sounds to me like a convenient rationalisation for a deeply cynical and self-serving political calculation.

You might expect this to hugely disappoint a policy wonk like me, but I confess my feelings are divided.

Morrison’s decision strike cuts both ways. He won’t be doing many things he should, but he won’t be doing many things he shouldn’t. The need for tax reform, for instance, is always with us – and urgent only in the minds of tax economists, who think of little else, and those well-to-do urgers hoping it will involve them paying less while others pay more.

There are, of course, many big problems he’ll be doing nothing to improve: the misregulation of aged care, the need for better-considered mental healthcare, the way the universities have been hung out to dry during the pandemic, the neglect and destruction of technical and further education, the many respects in which governments help oldies (including their parents) screw the younger generation.

The most urgent and important area of neglect is, of course, our response to climate change. But the federal Coalition is so deeply divided on the issue – and Morrison so hog-tied by loudmouth Liberal backbenchers and the Neanderthal Nationals – that it’s a delusion to expect genuine progress without a change of government.

And maybe not much then. As we speak, Labor is working on how many of its own policies to throw overboard. As Labor was reminded by its shock defeat in 2019, the trouble with policies is that they’re much harder for you to sell than for your opponents to misrepresent.

A big part of the reason politicians have become so lacking in policy courage is the way election campaigning has become so negative. After last time, the coming election is shaping as the battle of the scare campaigns.

Bulldust will fly on both sides. Both sides are readying themselves by having as few policies as possible. An unthinking electorate is being rewarded with policy-free elections. How edifying.

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Sorry, the economy's bum does look big. We've put on a lot of weight

If you’re like many readers, you think economists and business people are obsessed with gross domestic product and dollars, dollars, dollars. So, as a never-to-be-repeated offer, today I’m going to write not about what Australia’s production of goods and services is worth, but what it weighs.

Believe it or not, Dr Andrew Leigh, a federal Labor politician and former economics professor, is just publishing the paper Putting the Australian Economy on the Scales in the Australian Economic Review.

Using a lot of ancient statistics and making various assumptions – so that his figures are, on his own admission, “rough” but still indicative – Leigh estimates that the physical weight of the nation’s annual output of goods and services has gone from 55,000 tonnes in 1831, to 6 million tonnes in 1900, 62 million tonnes in 1960, 355 million tonnes in 2000, and 811 million tonnes in 2018.

Of course, our population has grown hugely in that time, but the weight of output per person is also way up. It was less than a tonne in 1831, six tonnes in 1960 and 32 tonnes per person in 2018. That’s a 47-fold increase.

Well, that’s nice to know. But who in their right mind would bother working out all that? What does it prove? More than you may think – especially if you worry about the impact all our economic activity is having on the natural environment.

You’ve heard, I’m sure, about our big and growing “material footprint” caused by our production and consumption of raw materials. It, too, is measured by weight. The United Nations Environment Program International Resource Panel publishes estimates of the footprints of 150 countries, with the Australian figures coming from the CSIRO and industrial ecologists at the universities of Sydney and NSW.

In measuring a country’s footprint, they take account of four kinds of raw materials: biomass (from grass to timber), metals, construction materials and fossil fuels. It turns out, for instance, that the footprint of a kilo of beef is 46 kilos.

The UN takes a great interest in countries’ material footprint because one of its sustainable development goals is to decouple economic growth from environmental degradation. Ecologists worry that, particularly as poor countries lift their living standards up towards those the rich countries have long enjoyed, the pressure on the globe's natural environment will be . . . well, unsustainable.

But whereas the ecologists’ figures show all countries’ material footprints getting bigger, a lot of economists argue that as economic growth and advances in technology continue, the economy is “dematerialising” – getting lighter.

This is because most of the growth in GDP has come from more provision of services rather than more production of goods through farming, mining and manufacturing. Human labour has no weight, even though it may involve more use of electricity and fuel.

But also because the physical weight of many goods is falling. Leigh reminds us that houses and vehicles are built from lighter materials. Domestic appliances are more compact. Transport networks are more energy-efficient. Software makes it possible to upgrade devices – from games to cars – that might previously have required new physical parts or total replacement.

These shifts led Alan Greenspan, former chairman of the US Federal Reserve, to claim in 2014 that “the considerable increase in the economic wellbeing of most advanced nations in recent decades has come about without much change in the bulk or weight of their gross domestic product”. Without question, he argued, the economy “has gotten lighter”.

So the point of Leigh’s calculations is to check who’s right: those economists claiming the economy is dematerialising, or the ecologists calculating that our material footprint is getting heavier.

Clearly, he comes down on the side of the ecologists. Although his method gives an estimate of the economy’s weight that’s about a fifth lower than the ecologists’, he confirms the general trajectory of their continuing increase. He estimates that a 10 per cent increase in real GDP is associated with a 12 per cent increase in its weight.

Now, you could argue that Australia’s huge “natural endowment” of minerals and energy makes us quite unrepresentative of the advanced economies. Our mining industry has been booming, on and off, since the late 1960s. All you need to know is that our production of (heavy) iron ore – most of it for export – has risen ninefold since 1990.

But Leigh believes all the rich economies have expanding material footprints. The goods they consume may have been getting lighter per piece, but they’ve gone on consuming a lot more of them. Planes may be more fuel-efficient, but far more people are flying far more often (when we’re allowed). Clothes may be lighter, but we buy more of them. Food packaging may be thinner – I can remember when fruit and veg arrived at the greengrocers in wooden boxes - but we’re eating more takeaway meals.

Leigh concludes that, like the paperless office, the weightless economy remains surprisingly elusive. Which doesn’t change the need for us to put the economy on an ecological diet.

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We should stop backing losers in the Climate Change Cup

The big question for Scott Morrison and his colleagues is whether they want to be a backward-looking or forward-looking government.

Do they want to enshrine Australia as the last giant of the disappearing world of fossil fuels, and pay the price of declining relevance to the changing needs of our trading partners, with all the loss of jobs and growth that would entail?

Or do they have the courage to seize this opportunity to transform Australia into a giant in the production and export of renewable energy and energy-intensive manufactures, with all the new jobs and growth that would bring?

In recent weeks, the main customers for our energy exports – China, Japan and South Korea – have done something we’ve so far refused to do: set a date for their achievement of "carbon neutrality". Zero net emissions of greenhouse gases.

Faced with this, and the free advice from fellow conservative Boris Johnson that he should get with the program, Morrison has defiantly declared that Australia would make its own "sovereign decisions".

This is infantile behaviour from someone wanting to be a leader, like the wilful child who shouts, "You’re not the boss of me!"

It goes without saying that Australia will make its own decisions in its own interests. No other country has the ability or desire to force its will on us. But nor can we force our will on them. They will go the way they consider to be in their best interests, and it's clear most are deciding to get out of using fossil fuels.

We remain free to change our export offering to meet our trading partners’ changing needs, or to tell them all to get stuffed because producing coal and gas is what we’ve always done and intend to keep on doing. Our sovereignty is not under threat. No one can stop us making ourselves poorer.

A report issued on Monday by Pradeep Philip, head of Deloitte Access Economics, called A New Choice attempts to put figures on the choices we face in responding – or failing to respond – to global warming. I’m not a great believer in modelling results, but the report does much to illuminate our possible futures.

In last year’s election, Morrison made much of Bill Shorten’s failure to produce modelling of the cost to the economy of his plan to reduce emissions in 2030 by much more than the Coalition promised to do in the Paris Agreement.

Had he been sufficiently dishonest, Shorten could easily have paid some economic consultancy to fudge up modelling purporting to show the cost would be minor, but for some reason he didn’t. However, Morrison didn’t resist the temptation to quote the results of someone who, over decades of modelling the cost of taking action to reduce emissions, had never failed to find they would be huge.

It’s true that the decline of our fossil fuel industries will involve much expensive disruption to those businesses and the lives of their workers, as they seek out new industries in which to invest their capital and find employment.

But what’s a lot more obvious today than it was even last year is that this cost will be incurred whether it happens as a result of government policy, or because the decline in other countries’ demand for our fossil fuel exports leaves us with what financiers call "stranded assets" – mines and other facilities that used to turn a profit, but now don’t.

Last year it was possible for the cynical and selfish to ask why we should get serious about climate change when no one else was. Today the question is reversed: how can we fail to act when everyone else is?

One of Morrison’s great skills as a politician is his ability to draw our attention away from some elephant he doesn’t want us to notice. In the election he got us to focus on the cost of acting to reduce our emissions. The bigger question we should have been asking is, what’s the cost to the economy if we and the others don’t act to stop future global warming?

Whatever number some modeller puts on that cost, our "black summer" should have left us needing little convincing that climate change is already happening and already imposing great destruction, pain and cost on us. Nor is it hard to believe the costs won’t be limited to drought, heatwaves and bushfires, and will get a lot worse unless we stop adding to the greenhouse gas already in the atmosphere.

On a more positive note, Deloitte adds its support to those experts – including Professor Ross Garnaut and the Grattan Institute’s Tony Wood – finding that "in a global economy where emissions-intensive energy is replaced by energy from renewables, Australia can be a global source of secure and reliable renewable power. Countries such as Japan, South Korea and Germany have already come to Australia asking for us to export renewable hydrogen for their own domestic energy consumption."

We have a "once-in-a-lifetime opportunity to simultaneously boost economic growth, create sustainable jobs [and] build more resilient and cleaner energy systems".

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The greenie good guys are wrong to oppose economic growth

Only a few sleeps to go before our annual Festival of Growth – otherwise known as the unveiling of this year’s federal budget. People will want to know whether Treasurer Josh Frydenberg has done enough to “stimulate” growth. And whether the government’s forecasts for growth are credible. But not everyone will be on the growth bandwagon.

A lot of people who worry about the natural environment will be dubious and disapproving. “Don’t these fools know that unending growth is physically impossible?” “What kind of wasteland is all this growth in the production of stuff turning the planet into?”.

I’ll be banging on next week about the need for growth, but I know I’ll be getting emails from reproving readers. “I thought you were one of the good guys. I thought you cared about the environment and had doubts about all the growth boosterism.”

Sorry, I do care about the environment and I do have doubts about the popular obsession with eternal growth. But I will still be marking the government down if it hasn’t done enough to foster growth over the next year or three.

The anti-growth lobby is half right and half wrong. They know a lot about science and they think this means they know all they need to know about economics. What they don’t know is the growth that scientists know about isn’t the same animal as the growth economists measure and business people and politicians care so much about.

And I have a challenge for the anti-growth brigade: don’t you care about the big jump in unemployment?

Let’s start with the immediate crisis. The pandemic and our attempts to suppress it have led to a fall of 7 per cent in the size of the economy in the June quarter – as measured by the quantity of Australia’s production of goods and services (real gross domestic product).

This massive contraction in production has involved a fall of more than 400,000 in the number of jobs, almost a million people unemployed and a jump in the rate of underemployment from 9 per cent to 12 per cent. Most of the people affected are young and female.

If you’re tempted to think that this fall in our production and consumption of “stuff” is a good thing and there ought to be more of it, what’s your plan for helping all those people who’ve lost their livelihood? Put ’em on the dole and forget ’em?

The standard plan for helping them get their livelihood back (or find their first proper job after leaving education) is to get production back up and keep it growing fast enough to provide jobs for those in our growing population who want to work.

Until we’ve instituted a better way of securing the livelihoods of our populous, that’s the solution I’ll be pushing for. And the growth we end up with won’t do nearly as much damage to the natural environment as the growth opponents imagine.

That’s because what our business people, economists and politicians are seeking is growth in real GDP, and growth in GDP doesn’t necessarily involve growth in our use (and abuse) of renewable and non-renewable natural resources. Indeed, as each year passes, GDP grows faster than growth in our use of natural resources.

What many environmentalists don’t understand is that increased digging up of minerals and energy, and increased damage to tree cover, soil, rivers and biodiversity as a result of farming and other human activity accounts for only a small part of the growth of GDP.

It’s wrong to imagine that growth in GDP simply involves growth in the production of “stuff” – things you can touch. What economists call “goods”. No, these days (and for decades past) most – though not all - of the growth in GDP has come from the growth in “services”.

That is, people - from the Prime Minister down to doctors, teachers, journalists, truck drivers and cleaners - who run around doing things for other people. Some of this running around involves the use and abuse of natural resources – including the burning of fossil fuels – but mostly it involves using a resource that’s economic but not environmental: the time of humans. And, of itself, human time doesn’t damage the environment.

The production of goods – by the agricultural, mining, manufacturing and construction industries – accounts for just 23 per cent of GDP, leaving the production of services accounting for the remaining 77 per cent.

Next, remember that a significant proportion of the growth in GDP over the years has come not from the application of more raw materials, land, capital equipment and labour, but from greater efficiency in the way a given quantity of those resources is combined to produce an increased quantity goods and services.

Economists call this improved “productivity” (output per unit of input). And it’s the main source of our higher material standard of living over recent centuries, not our use of ever-more natural resources per person.

In my experience, many people with a scientific background simply can’t get their head around the concept of productivity – which helps explain why many economists dismiss the anti-growth brigade as nutters. They can’t take seriously people who appear to think increased efficiency must be stopped.

A final point is that growth in population adds to environmental damage – although this is a moot point when most of the growth in a particular country’s population comes merely from immigration.

Now, let’s be clear: none of this is to dismiss concerns about the immense damage we’re doing to the natural environment, nor to imply that the global environment could cope with the world’s poor becoming as rich as we are.

No, the point is that concern should be directed to the right target: not economic growth in general, but those aspects of economic growth that do the environmental damage: world population growth, use of fossil fuels, indiscriminate land clearing, irrigation, over-fishing, use of damaging fertilisers and insecticides, and so on.

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