Showing posts with label environment. Show all posts
Showing posts with label environment. Show all posts

Wednesday, January 22, 2020

Climate change: we can't stop it by refusing to change

After Donald Horne's book in the 1960s, we all know we live in the Lucky Country. What we've forgotten until now, however, is the qualification Horne added: "Australia is a lucky country run mainly by second-rate people." We haven't been feeling so lucky this burning, smoky summer. But our present leader, Scott Morrison, has certainly been looking second rate.

This summer we've had our Pearl Harbour moment. Just as the Japanese bombing of Hawaii in 1941 stopped Americans viewing World War II as some distant threat, so our season of unprecedented drought, heatwaves, bushfires and smoke haze has woken us up to the present reality of global warming.

There we were thinking climate change would be a problem for our children and grandchildren – who, we hoped, wouldn't remember our refusal in 2013 to pay a bit more for electricity so as to reduce greenhouse gas emissions.

Now we realise it's a problem – a frightening problem – for us. One likely at least to continue for the rest of our lives at its present level of harm and unpleasantness, and more likely get much worse in the years ahead unless something decisive is done by all the major economies, including us, to reduce net emissions to zero over the next 30 years and stop us cooking.

It's a wake-up moment not just for us, however, but for the entire rich world. They've been watching in fascinated horror as global warming has punished the Aussies for their repeated refusal to take it seriously.

Ostensibly, Morrison has realised we need to change course. "We want to reduce emissions and do the best job we possibly can and get better and better at it," he said when it dawned on him we were holding him responsible for the fires regardless of what the constitution says about them being a state responsibility.

"In the years ahead, we are going to continue to evolve our policy in this area to reduce emissions even further," he said. But then he started adding qualifications. "We're going to do it without a carbon tax, without putting up electricity prices and without shutting down traditional industries upon which regional Australians depend for their very livelihood."

Really? Sounds like he's promising us all the benefits without any of the costs. Nothing needs to change to make things much better. Which, in this age of cynicism and distrust of our lengthening string of second-rate leaders, makes you fear all that's changed is the marketing spiel.

What we need is a leader great enough to seize our Pearl Harbour moment and turn it into a Port Arthur moment – the moment when a prime minister exercises true leadership and uses the horrible reality of death and destruction to win public support for big changes to stop such things becoming regular events.

John Howard, Morrison's role model and mentor, saw such an opportunity and seized it. He did so not because it offered political gain, but because it was a leader's duty to deliver something great for those he led. He did so knowing it would prompt great resistance from within the Coalition. But with the public behind him and his political opponents unlikely to oppose him, that was a risk he was prepared to take.

Just the same conditions apply to Morrison's decision on whether to turn us from laggards to leaders in the global effort to halt the rise in average temperatures to less than 2 degrees. Has he the courage to stand up to the noisy minority of climate change deniers in the Coalition, who are now so badly out of step with public opinion?

There's a central lesson to be learnt from this appalling summer. The dichotomy Morrison has so far relied on – the environment versus the economy – is false. "We'd love to help the environment, but not if that involves a cost to the economy."

Sorry, since the economy sits within the natural environment, anything that damages the environment also imposes loss – of property, businesses, jobs, wellbeing, lives and health – on the economy and the humans who constitute it.

It follows that, in our obsession with the cost of fighting climate change, we can no longer ignore the far greater cost of not fighting it. The one option that's not available is no change. We can refuse to change, but nature will change things whether we like it or not.

The economy is always changing, as some industries expand and other contract. Jobs are continuously being lost in some fields and created in others. This is the very process by which we've become far more prosperous over the past two centuries.

So the notion that our steaming coal industry can be preserved in aspic is laughable. Its days are numbered. But we don't have to kill it, the rest of the world will do that for us as – like us – they increasingly turn to renewable energy and away from fossil fuels. Business can see that; Morrison professes not to.

Second-rate leaders throw in their lot with those who fear losing from change, letting the rest of us suffer while they attempt to resist the irresistible. First-rate leaders seek out ways we can benefit from that change, restoring the luck of the Lucky Country. How? Watch this space.
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Saturday, November 2, 2019

It may upset you to think about climate change and the economy

It’s coming to something when we get so little leadership from the bloke we pay to lead us that the unelected have to fill the vacuum. Now 10 business organisations have united to urge Scott Morrison either to set out the climate policy rules to drive action by the private sector, or end up spending a shedload of taxpayers’ money fixing the problem himself.

It’s not just business that’s dissatisfied. The Morrison government may be dominated by climate-change deniers, but almost all economists accept the science of global warming and believe we should be doing our bit to help limit it.

And though our elected government may be in denial, the Reserve Bank – like other central banks – isn’t. Nor are the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.

The Queensland Treasurer, Jackie Trad, asked federal Treasurer Josh Frydenberg if the Reserve’s deputy governor, Dr Guy Debelle, could be invited to talk about climate change and the economy at the recent meeting of treasurers, but Frydenberg declined.

So what was it Frydenberg didn’t want his fellow treasurers thinking about? Well, we can get a fair idea of what Debelle would have said from a speech he gave earlier this year.

But first, why do so many economists accept the science? Because they know very little about the science and so accept the advice of the experts, especially since there’s so much agreement between them.

And there’s another reason. Economists believe they can use their expertise to help the community make the changes we need to make with the least amount of cost and disruption to the economy.

As Debelle reminds us, “the economics profession has examined the effects of climate change at least since Nobel Prize winner William Nordhaus in 1977. Since then it has become an area of considerably more active research in the profession. There has been a large body of work around the appropriate design of policies to address climate change (such as the design of carbon pricing mechanisms), but not that much in terms of what it might imply for macro-economic policies” – that is, for efforts to stabilise the macro economy as it moves through the ups and downs of the business cycle.

Debelle says the economy is changing all the time in response to a large number of forces, but few of them have the scale, persistence and risk to the system that climate change has.

Macro economists like to classify the various “shocks” that hit the economy as either positive or negative and as hitting the demand side of the economy or the supply side. For instance, they know a positive demand shock increases production (gross domestic product) and prices. The monetary policy response to such a shock is obvious: you raise interest rates to ensure inflation doesn’t get out of hand.

Shocks involving the climate affect the supply (output) side and are common. An unusually good growing season would be a positive supply shock, whereas a drought or cyclone or flood would be a negative supply shock, reducing output but increasing prices.

This is a trickier shock for monetary policy to respond to because it’s both contractionary (suggesting a cut in interest rates) and inflationary (suggesting higher rates). The Reserve’s usual response is to “look through” (ignore) the price increase, assuming its effect on inflation will be temporary.

Historically, the Reserve has assumed all climate events are temporary, with things soon returning to where they were. That is, they’re cyclical. It’s clear from the reports of the Intergovernmental Panel on Climate Change, however, that climate change is a trend - a lasting change in the structure of the economy, which will build up over many years.

Of course, though climate change’s impact on agriculture continues to be great, it presents significant risks and opportunities for a much broader part of the economy than agriculture.

Debelle says we need to reassess the frequency of climate events and our assumptions about the severity of those events. For example, the insurance industry has recognised that the frequency and severity of tropical cyclones has changed. It has “repriced” how it insures against such events.

Most of us are focused on “mitigating” – reducing – future climate change. But Debelle says we also need to think about how the economy is adapting to the climate change that’s already happened and how we’ll adapt to the further warming that’s coming, even if we do manage to get to zero net emissions before too long.

“The transition path to a less carbon-intensive world is clearly quite different depending on whether it is managed as a gradual process or is abrupt,” he says euphemistically. “The trend changes aren’t likely to be smooth. There is likely to be volatility around the trend, with the potential for damaging outcomes from spikes above the trend.”

Both the physical impact of climate change and the adjustment to a warmer world are likely to have significant economic effects, he says.

Economists know from their experience with reducing import protection that the change from the old arrangements to the new involves adjustment costs to some people (workers who have to find jobs in other industries, for instance) even if most people (consumers of the now-cheaper imports, for instance) are left better off.

Economists press on with advocating such painful changes provided they believe the gains to the winners are sufficient to allow them to compensate the losers and still be ahead. But Debelle admits that, in practice, the compensation to the losers doesn’t always happen, leaving those losers very dissatisfied.

That’s bad enough. But Debelle fears that, with climate change and the move to renewables, the distribution of benefits and costs may be such that the gains to the winners in new renewables industries aren’t great enough to cover the losses to the losers even in principle, let alone in practice.

Nah, all too hard. Let’s just ignore it and hope it goes away.
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Wednesday, August 21, 2019

Recycling is all about being taken for a ride

Another day, another crisis. The crisis in kerbside recycling has been building since China effectively refused to take any more of our rubbish about 18 months ago. Then we sent it to other Asian countries, but now they’re jacking up, too.

The disruption to the local recycling industry has caused one company that accepted recycled material from local councils in Victoria and South Australia to collapse, leaving five big warehouses stuffed with baled paper and plastic that no one wants.

But then Scott Morrison took charge. At a meeting with the premiers, they agreed to establish a timetable to ban the export of waste plastic, paper, glass and tyres. In the meantime, he committed $20 million for “innovative projects to grow our domestic recycling industry”.

Morrison said Australia needed to take responsibility for its own waste, but this moral act should be seen as a money-making opportunity rather than a new economic burden. The changes should “not have to cost us more – in fact, hopefully, it’ll cost us less”.

Minister for Industry Karen Andrews said: “Boosting our onshore recycling industry has the potential to create over three times as many jobs as exporting our plastic waste, ensuring a more sustainable and prosperous future.”

Really? Sounds delusional to me. The truth is that most of what we put out each week is of little value to business – especially after you’ve had to move it, sort it, move it again, clean it up, melt it down or whatever.

It’s not clear that the cost of making our waste attractive to local businesses would be less than they were prepared to pay for it. If not, we’d pay through higher taxes. Of course, governments could compel businesses to use recycled materials, but if this increased their costs we’d pay through higher prices.

This is why, until now, so much of our waste – and that of the Americans, Japanese and Europeans – has been shipped around the world to Asian countries. That’s where wages are low enough to make feasible all the work involved in recovering waste materials.

But even they are now deciding it’s not worth all the air pollution, chemical emissions, discharge of untreated water and damage to workers’ health involved. A fair bit of the plastic can’t be recycled and gets burnt.

So we could spend a lot more than we do at present ensuring that we recycle a high proportion of our own household waste, but before we do we ought to ask ourselves how we’ve come to believe that recycling most of the stuff we discard is absolutely central to our efforts to reduce the damage we’re doing to the natural environment.

Why are we putting recycling on a higher pedestal than reducing carbon emissions? Because it’s easier? We’re learning it’s not as easy as it seems.

If the amount of household waste is such a problem, why are we emphasising recycling rather than reduced packaging? Because governments don’t like telling big business what it can and can’t do?

It amazes me that we’ve put recycling up there with motherhood and never stop to question whether it’s the best use of our time and money in the “environmental space”.

I think recycling involves a high degree of self-delusion (and don’t worry, I’ve been known to completely repack our bin so as to fit more in). It’s more about feeling good than doing good.

We’ve taken to recycling because, with just a small effort on our part, we’re able to convince ourselves we’re doing our bit to save the planet. (I remember shopping at a supermarket in California, with all its indulgences and absurd degree of choice. At the checkout, you were asked whether you wanted your stuff packed in “paper or plastic”. All you had to do was say “paper” and you emerged with a clear conscience.)

With kerbside recycling, it’s out of sight, out of mind. I played my part, what happens after that is up to the government. Turns out, we’ve been sweeping our dust under the carpet and only now are noticing the bulge.

Governments have found it easier to play along with our delusions – see above – than tell us the disillusioning truth. Green groups and ecologists also play along because they think it gives us something to do and keeps us engaged with their issue.

Nobody actually wants the stuff, so the authorities have been shipping it off to Asia on the q.t. Much of the stuff that doesn’t get shipped away ends up in landfill anyway.

What do we imagine recycling achieves? How much further use of fossil fuel, water, chemicals and other damage to the environment is justified to ensure the last bit of paper or bottle cap is recycled?

Recycling’s total effect on the environment is a far more complicated sum than it suits governments and experts to tell us.

For instance, we know how bad single-use plastic bags are. What we’re not told is that, according to a British government study, you have to use a paper bag three times – or a cotton bag 131 times – to be sure that, once the effect of producing the bag is taken into account, you’ve contributed to fewer carbon emissions.

We need to be sure we’re directing our effort and expense towards the most environmentally beneficial ends.
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Wednesday, August 7, 2019

One day the world's population will start falling

For those who worry about global warming and all the other damage humans are doing to our planet, the latest news on world population growth doesn’t seem good. Fortunately, however, the relationship between population and the environment is paradoxical.

The United Nations Population Division updated its projections in June. From its present 7.7 billion, the world’s population is projected to have grown by 2 billion in 2050. It should reach a peak of nearly 11 billion at about the end of this century, before it starts to fall.

Fortunately, projections are just projections, based on a lot of assumptions that may or may not prove to have been accurate. Some prominent demographers believe the UN’s assumptions are too pessimistic.

It’s a mistake to imagine that controlling world population growth is just a matter of access to effective contraception. Economic development also plays a big part.

It’s the activity of humans that generates greenhouse gas emissions and does other damage to the natural environment, using up non-renewable resources, over-using renewable resources such as fish stocks and forests, damaging soil and waterways, and making species extinct.

So the more people, the more damage. Most human activity is economic – people earning their living. And, the way economies are organised at present, the richer people become, the more damage they do.

But here’s the paradox: the richer people become, the fewer children they have.

As my favourite magazine, The Economist, noted in an article, before the Industrial Revolution the typical woman probably had seven or more children. In 1960, the global fertility rate was six children per woman. Today it’s 2.5.

Within that global average, the fertility rate in rich countries is 1.7 children, below the replacement rate for a stable population of 2.1. In middle-income countries it’s 2.4, not far above replacement. In poor countries, however, it’s 4.9 children.

The first economic factor to reduce family size is urbanisation. When you leave the farm, you don’t need as many kids to help with the work. (Both my parents grew up on farms early last century. Dad was one of 14, and Mum one of eight. Their four children, however, had an average fertility rate of 2.5.)

But perhaps the most important factor is the spread of education, particularly of girls. It’s well established that the more years girls spend at school, the fewer babies they have.

“Education reduces fertility by giving women other options,” The Economist says. “It increases their chances of finding paid work. It reduces their economic dependence on their husbands, making it easier to refuse to have more children even if he wants them.

“It equips them with the mental tools and self-confidence to question traditional norms, such as having as many children as possible. It makes it more likely they will understand, and use, contraception.

“It transforms their ambitions for their own children – and thus the number than they choose to have.”

Worldwide, the proportion of girls completing primary school has risen from 76 per cent in 1997 to 90 per cent today. The proportion completing lower secondary school is nearing 80 per cent.

Fertility rates are low in Europe – particularly in Italy (1.33) – and in Japan (1.37). They’re below replacement rate in New Zealand (1.9), Australia (1.83) and the US (1.78).

But the lowest fertility rates are in emerging Asia: Taiwan (1.15) and South Korea (1.11). In the world’s most populous country, China, it’s 1.69, thanks to the one-child policy. After the relaxation of that policy it rose only briefly. Flats are too small and childcare too limited.

By contrast, India’s rate is 2.24, pretty close to replacement. And it varies greatly from 1.8 in wealthy states such as Maharashtra, to more than 3 in poor states such as Uttar Pradesh. Even so, India's population is expected to overtake China’s in 2027.

Because fertility rates cover the whole child-bearing lives of women, it takes a long time for the population of a country that's a bit below the replacement rate to start falling – assuming they don’t top up with immigration, as we do.

Even so, 27 countries’ populations have fallen since 2010 – sometimes with low fertility rates reinforced by high emigration. Over the next 30 years, 55 countries’ populations are projected to fall – almost half of them by more than 10 per cent. China’s may fall by about 31 million, or 2 per cent.

So what’s the problem? In a word: Africa. Its painfully slow rate of economic development leaves it still with fertility rates of five or six, including big countries such as Nigeria, the Congo, Ethiopia and Tanzania.

The best hope that the world’s population will stop growing sooner than the UN projects is that it has underestimated the rise of girls’ education in Africa (and India and Pakistan).

Of course, economic development is two-edged. It may stop population growth, but it makes everyone else richer and thus makes more demands on the environment.

Just as we can limit climate change without reducing energy use by switching to renewable sources, so we could reorganise the economy in ways that ensured continued economic growth didn’t involve continued destruction of the environment. If we had the will.
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Saturday, July 20, 2019

Change is inevitable. If we embrace it we win; resist it we lose

Will Australia’s future over the next 40 years be bright or pretty ordinary? It could go either way, depending on how we respond to the challenges facing us. So what do we have to do to rise to the occasion?

The challenges, choices and likely consequence we face are spelt out in the report, Australian National Outlook 2019, produced by the CSIRO in consultation with 50 leaders from companies, universities and non-profits. The group was chaired by Dr Ken Henry, former Treasury secretary, and David Thodey, former boss of Telstra.

The report identifies six main challenges we face between now and 2060. First is the rise of Asia and the way it is shifting the geopolitical and economic landscape.

Asia’s middle class is growing rapidly, but unless we improve our ability to compete and also diversify our exports, we risk missing out on this opportunity and will be vulnerable to external shocks.

Next is the challenge of technological change, such as artificial intelligence, automation and biotechnology, which is transforming existing industries and changing the skills required for high-quality jobs.

Third challenge is climate change, the environment and loss of biodiversity. These pose a significant economic, environmental and social threat to the world and to us. We could be on a path to 4 degrees global warming by the end of the century unless significant action is taken.

Then there’s the demographic challenge: at current growth rates Australia’s population may approach 41 million by 2060, with Sydney and Melbourne housing 8 to 9 million people each. At the same time, ageing means the population’s rate of participation in the workforce could drop from 66 per cent to 60 per cent. (I don’t accept that such a rate of population growth is either inevitable or desirable.)

The fifth challenge is that trust in governments, businesses, other organisations and the media has declined. Without a lot of trust, it will be much harder to agree on the often-tough measures needed to respond to all these challenges.

Finally, measures of social cohesion have fallen in the past decade, with many Australians feeling left behind. Inequality, financial stress, slow wage growth and poor housing affordability may be contributing to this.

The report develops two plausible but opposite scenarios of how things may develop over the next 40 years. The “slow decline” scenario is the muddle-through future, in which we resist change for as long as we can. In the “outlook vision” scenario we agree to bite the bullet, resist the lobbying of declining industries, make the needed policy changes and exploit the benefits of new technology and trading opportunities.

Under the low-road scenario, real gross domestic product grows at an average rate of 2.1 per cent a year, whereas under the high-road scenario it grows by 2.8 per cent. This would cause average real growth per person to be 39 per cent higher than under the low-road.

Real wages would be 90 per cent higher in 2060 than today, compared with 40 per cent higher under the low-road.

The low-road approach would allow cities to continue to sprawl, whereas the high-road would involve increasing the density of cities by about 75 per cent compared with today. This would keep our cities highly liveable.

Urban congestion could be reduced by higher density. Vehicle kilometres per person would fall by less than 25 per cent under the low-road, compared with up to 45 per cent under the high-road.

Net carbon emissions would fall by only 11 per cent under the low-road, with total energy use increasing by 61 per cent on 2016 levels, and only a modest improvement in energy productivity (efficiency).

By contrast, net zero emissions would be reached by 2050 under the high-road, with a doubling of energy productivity per unit of GDP and total energy use increasing by less than 45 per cent.

Whereas returns to landowners would increase by about $18 billion a year under the low-road, they’d increase by up to $84 billion a year under the high-road.

There’d be minimal environmental planting in 2060 under the low-road, but between 11 to 20 million hectares under the high-road, accounting for up to a quarter of intensive agricultural land. This “carbon forestry” explains why net zero emissions could be achieved without significant effect on economic growth.

More biodiverse plantings and better land management could help restore our ecosystems. And low-emission, low-cost sources of energy could even become a source of comparative advantage for us, with exports of hydrogen and high-voltage direct-current power.

The report says we need to achieve five key shifts to get us on to the high road. First, Industry. We need to allow a change in the structure of our industry, by increasing the adoption of new technology and so increasing productivity. We need to invest in the skills of our workers to keep their labour globally competitive and ready for the technology-enabled jobs of the future.

Second, urban sprawl. We need to plan for higher-density, multicentred and well-connected capital cities to reduce sprawl and congestion. We need to reform land-use zoning, so diverse high-quality housing options bring people closer to jobs, services and amenities. We must invest in transport infrastructure, including mass-transit, autonomous vehicles and "active transit", such as walking and cycling.

Third, energy. We must manage the shift to renewable energy, which will be driven by declining technology costs for generation, storage and grid support. We need to improve energy productivity using new technology to reduce the waste of power by households and industry.

Fourth, land. We need to use digital and genomic technology to improve food technology and to participate in new agricultural environmental markets to capitalise on our unique opportunities in global carbon markets. This will help to maintain, restore and invest in biodiversity and ecosystem health.

Finally, culture. We need to rebuild trust, encourage a healthy culture of risk-taking and deal with the social and environmental costs of reform policies.

Trouble is, a public that’s willing to re-elect the reactionary Morrison government seems more likely to settle for the low-road than strive for the best we could be.
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Wednesday, June 19, 2019

Kiwis go one up and bring happiness to the budget

Like the past, New Zealand is a foreign country. They do things differently there. While we’ve just had a budget promising what seems like the world’s biggest tax cut, the Kiwis have just had what may be the world’s first “wellbeing budget”. Bit of a contrast.

I’ve long believed that all government politicians everywhere, when they’re not simply delivering for their backers, are trying to make voters happy and thus get themselves re-elected. They just differ in how they go about it.

Like governments everywhere, our governments of both colours have seen delivering economic growth - and the jobs and higher material living standards it’s expected to bring - as the chief thing we want of them to make us happier.

To this end they’ve adopted as their chief indicator of success the rate of growth in GDP – gross domestic product – which measures the nation’s production of goods and services during a period.
They’ve largely assumed that the extra income produced by this growth is distributed fairly between us - though, in recent decades, the share going to those near the top has grown a lot faster than the shares of everyone else.

This, presumably, is Australian voters’ “revealed preference”, since we’ve just rejected the party promising to cut various tax breaks going mainly to high income-earners and use the proceeds to increase spending on hospitals, schools and childcare, in favour of the party offering tax cuts worth an immediate saving of $1080 a year to middle income-earners and delayed savings of up to $11,640 a year to those of us on $200,000 and above.

According to the Liberal winners, voters in outer suburbs and the regions turned away from Labor because it would have dashed their “aspirations” to one day be earning two or three times what they’re earning today and so be raking it in from family trusts, negatively geared investments and, above all, refunds of unused franking credits.

But if our aspirations to happiness revolve around more money in general and less tax in particular, our cousins across the dutch aspire to a radically different brand of happiness.

According to their Finance Minister Grant Robertson, in his budget speech, New Zealanders were asking “if we have declared success because we have a relatively high rate of GDP growth, why are the things that we value going backwards - like child wellbeing, a warm, dry home for all, mental health services or rivers and lakes we can swim in?

“The answer to that question was that the things New Zealanders valued were not being sufficiently valued by the government . . . So, today in this first wellbeing budget, we are measuring and focusing on what New Zealanders value – the health of our people and our environment, the strengths of our communities and the prosperity of our nation.

“Success is making New Zealand both a great place to make a living, and a great place to make a life.”

According to the nest of socialists who’ve overrun the NZ Treasury, “there is more to wellbeing than just a healthy economy”. So GDP has been moved from its central place, replaced by Treasury’s “living standards framework”, based on the four sources of capital: natural capital (land, soil, water, plants and animals, minerals and energy resources), human capital (the education, skills and health of the population), social capital (the behavioural norms and institutions that influence the way people live and work together) and human-made capital (factories, offices, equipment, houses and infrastructure).

The living standards framework covers 12 “domains”: income and consumption, and jobs and earnings (which two cover GDP), and “subjective wellbeing” (the $10 term for happiness), plus health, housing, knowledge and skills, the environment, civic engagement and governance, time use, safety and security, cultural identity and social connections.

The wellbeing budget then set out five government priorities: improving mental health, reducing child poverty, addressing inequalities faced by Maori and Pacific island people, thriving in a digital age, and transitioning to a low-emission, sustainable economy.

I’ve often thought this would be the right way for governments to go about increasing “aggregate happiness” – by focusing on reducing the main sources of un-happiness.

To make a start, the budget provides almost $1billion over five years to improve the wellbeing of children, including extra funding for low-income schools, more help for children affected by domestic and sexual violence, and indexing family benefits to wages rather than prices.

The budget’s expensive mental health package includes creation of a new frontline service and funds to help people with mild-to-moderate mental health problems rather than making them wait until their problems worsen. Helping people with addictions is also seen as a health issue.

A “sustainable land-use” package works on the environmental challenges facing agriculture, including excess nutrient flows into iconic lakes and rivers.

Despite all this, the budget sticks to the government’s budget responsibility rules, with surpluses forecast and reduction of public debt. According to Saint Jacinda of Ardern, the wellbeing budget “shows you can be both economically responsible and kind”.

So, those uppity Kiwis think they can walk and chew gum at the same time. Fortunately, we Aussies know not to try.
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Wednesday, March 6, 2019

How to lose water, waste money and wreck the environment

If you want a salutary example of the taxpayers’ money that can be wasted and the harm that can be done when governments yield to the temptation to prop up declining – and, in this case, environmentally damaging – industries, look no further than Melbourne’s water supply.

The industry in question is the tiny native-forest logging industry in Victoria’s Central Highlands. The value it adds to national production of goods and services is a mere $12 million a year (using figures for 2013-14).

The industry's employment in the region was 430 to 660 people in 2012 – though it would be less than that by now. Few of those jobs would be permanent, with the rest being people working for contractors, who could be deployed elsewhere.

Successive state governments have kept the native-timber industry alive by undercharging it for logs taken from state forests. The state-owned logging company, VicForests, operates at a loss, which is hidden by grants from other parts of the government.

Coalition governments are urged to keep propping up the industry by the National Party; Labor governments by the Construction Forestry Maritime Mining and Energy Union.

What’s this got to do with Melbourne’s water supply? Ah, that’s the beauty of a case study by David Lindenmayer, Heather Keith, Michael Vardon, John Stein and Chris Taylor and others from the Australian National University’s Fenner School of Environment and Society.

I’ve written before in praise of the United Nations’ system of economic and environmental accounts (SEEA), which extends our long-standing way of measuring the economy (to reach gross domestic product) to include our use of natural resources and “ecosystem services” – the many benefits humans get from nature, such as photosynthesis.

Lindenmayer and co’s case study is one of the first to use the SEEA framework to join the dots between the economy (in this case, native forestry) and the environment (Melbourne’s water supply).

Melbourne’s population of 5 million is growing so rapidly it won’t be long before it overtakes Sydney as the nation’s largest city.

So many people require a lot of clean water, a need that can only grow. Almost all of Melbourne’s water comes from water catchments to the city’s north-east.

Logging of native forests has been banned in all those catchments except the biggest, the Thomson catchment, which holds about 59 per cent of Melbourne’s water storage.

Trouble is, the water that runs off native forests is significantly reduced by bushfires – and logging.

This is the consequence of an ecosystem service scientists call “evapo-transpiration” – the product of leaf transpiration and interception and soil evaporation losses.

This means the oldest forests produce the most water run-off. When old trees are lost through fire or logging, the regrowth that takes their place absorbs much more water.

Logging done many years ago can still reduce a forest’s water run-off yield today. The Fenner people calculate that past logging of the Thomson catchment has reduced its present water yield by 26 per cent, or more than 15,000 megalitres a year. They calculate that, should logging continue to 2050, this loss would increase to about 35,000 megalitres a year.

Assuming the average person uses 161 litres of water a day, the loss of water yield resulting from logging would have met the needs of nearly 600,000 people by 2050.

The SEEA-based case study shows the economic value of the water in all of Melbourne’s catchments is more than 25 times the economic value of the timber, woodchips and pulp produced from all Victoria’s native forests.

This is partly because, thanks to past fires and overcutting, only one-eighth of the native timber logged in Victoria is good enough for valuable sawlogs, with the remainder turned into low-value pulp and woodchips for making paper. (This is true even though the trees being logged include lovely mountain ash, alpine ash and shining gums.)

Turning to the Central Highlands alone, in 2013-14 the annual economic value of water supply to Melbourne was $310 million, about the same as the value of its agriculture. Its tourism was worth $260 million – all compared to its native timber production worth $12 million.

But the main thing to note is the trade-off between the different uses to which land can be put. Use it to produce water supply, and it’s very valuable. Use it to produce water supply and native timber, however, and you reduce the value of the water by far more than the chips and pulp are worth.

And why? To save a relative handful of workers the pain of moving to a different industry in a different town. And save the mill owners the expense of adapting their mills to chipping plantation wood rather than native wood. When did they deserve the kid-glove treatment the rest of us don’t get?

As for all the water that won’t be available to meet Melbourne’s growing needs, how will we replace it? Not to worry. We’ll get it from the desalination plant. It will cost $1650 more per megalitre than catchment water, but the Nats and the CFMMEU know we won’t mind paying through the nose to continue wrecking our native forests.
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Saturday, January 19, 2019

Squaring the world's waste circle ain't that easy

If you think we’ve been standing still – even going backwards – on reconciling the economy with the natural environment, that’s not wholly true. While our refusal to get real on climate change drags on, we’ve started our journey to the nirvana of a “circular economy”.

Never heard the term? Heard of it, but not sure what it means? Really? It’s the great intellectual fashion statement of 2018.

And, since it has more merit than I suspect many of its advocates realise, we must hope it doesn’t fall out of fashion long before it’s done any good.

Governments around the world are doing things about it. Mainly, saying what a nice idea it is, writing reports and designing “road maps”.

The Organisation for Economic Co-operation and Development has taken up the cause in its RE-CIRCLE project. And no lesser bunch of worthies than the World Economic Forum (the Davos brigade) is enthusiastic.

Here in Oz, last year saw a favourable report from a Senate committee. The Victorian, South Australian and NSW governments have recently signalled their support, with the latter issuing a “circular economy policy statement” in October.

Some of my information comes from an explainer by the Victorian Parliamentary Library, written as recently as October. Circularity is hot, hot, hot.

The explainer explains that, as presently organised, market economies are linear. You take natural resources, process them into many and varied goods – from food to fancy electronic gizmos – which you and I consume before eventually disposing of them. Then we take more natural resources and start the process again.

In contrast, the goal of a circular economy is to keep natural resources in use for as long as possible, extract the maximum value from them while in use, then recover and regenerate products and materials at the end of their serviceable life.

Get it? The ultimate goal is to “decouple” economic growth from the consumption of natural resources.

The OECD points out that, over the last century, global use of raw materials grew at almost twice the rate that the population grew.

To minimise the – to some extent irreparable - damage that economic activity does to the natural environment, we need to ensure it involves less net use of natural resources.

The idea that natural resources should be recycled is one Australians – and people throughout the rich world – happily embraced ages ago. Almost all of us divide our garbage between recycling and the rest before we put it out.

But the concept of a truly circular economy requires us to go a lot further than that. We need to repair the durable products we use rather than throwing them out and buying another.

But that means changing the design of those products from disposable to repairable – and upgradeable. It means making much greater use of recycled materials in the manufacture of “new” products, as well as doing something sensible about all that packaging.

In my limited reading of all the circular economy bumf, I haven’t seen it explained that the basic problem arises from the first law of thermodynamics, which says that matter can be transformed from one form to another, but can be neither created nor destroyed.

In other words, something has to happen to all the natural resources we use to produce and consume. They don’t cease to exist, they just change form. They turn into multiple forms of waste, which we dispose of down the sewer and in landfill.

One important form of waste created by the economic process – particularly if it involves burning fossil fuels – is the emission of greenhouse gases. For more than 200 years we couldn’t see this happening, so we didn’t think it was a problem.

Now we know the gases hang around in the upper atmosphere, trap the earth’s heat from the sun like the roof of a greenhouse, and raise the earth’s temperature.

When you consider how much trouble we’re having agreeing on a solution to that small part of our waste problem, don’t kid yourself dealing with the rest of the waste will be a simple matter of everyone seeing the light and doing the right thing with a bit of encouragement from the government.

What worries me about the circular-economy push is not the objective – it’s dead right - it’s the naivety of those doing the pushing. They want to radically transform the economy, but haven’t seen the need to consult any economists about how you might go about it.

All the governments know better, of course, but they seem to have decided that, as long as it stays on the level of appealing to people to Do The Right Thing, it could keep the greenies diverted without doing much harm.

No one seems to have asked the obvious question: just why is the economy presently linear not circular? Answer: because all the powerful economic incentives push us in that direction.

Because the resources the environmentally aware care about – natural resources – are relatively cheap, whereas the resource they don’t think about, but everyone else does, labour, is relatively dear.

Why do you think the nation’s local councils have been taking most of our recycling and shipping it off to China? Because processing that stuff in a rich country like ours is uneconomic.

Why have the Chinese been taking it? Because their wages were low enough to make processing profitable (that is, economic).

Why have the Chinese now stopped taking it? Because their economic success has raised wage rates and made it no longer profitable.

So, how on earth could we make our economy circular?

Ask economists to figure out a plausible way of reversing our incentive structure. That's the kind of job they do when asked.
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Tuesday, January 1, 2019

What the economy really needs more of: trees

I think the first economist must have been named Horatio. He’s the one who had to be reminded there were more things in heaven and earth than dreamt of in his model.

I try to keep my horizons wide by regularly consulting my second-favourite website, The Conversation (with academics who know a lot of interesting things about a lot of topics), to which I’m indebted for most of what follows.

We’re meant to know all about photosynthesis, but did you realise it means that, “with a bit of sun, a tree uses the natural miracle of photosynthesis to combine a little water with carbon dioxide from the air to produce the building blocks for its own growth, as well as oxygen,” according to Associate Professor Cris Brack, of forest measurement and management at the Australian National University?

So, to oversimplify a little, we breathe in oxygen and breathe out carbon dioxide, whereas trees breathe in carbon dioxide and breathe out oxygen – making them useful things to have around when we have a problem with excess carbon emissions.

But trees do far more for us than help with our greenhouse problem. For a start, they cheer us up. Academics at the universities of Melbourne and Tasmania examined 2.2 million messages on Twitter and found that tweets made from parks contained more positive content - and less negativity - than tweets coming from built-up areas.

Why are people in parks likely to be happier? Because parks help them to recover from the stress and mental strain of living in cities, and provide a place to exercise, meet other people or attend special events.

The world is becoming more urbanised. There’s now more than half the world’s population living in cities. In Australia, two-thirds of us live in capital cities and nine out of 10 of us live in urban environments.

There are sound economic reasons why so many of us are piling into big cities, but it seems there are also health and social problems. According to the experts, cities are becoming the epicentres for chronic, non-communicable physical and mental health conditions.

But there’s growing recognition of the crucial role of urban green spaces in helping reduce these health problems. More than 40 years of research shows that experiences of nature are linked to a remarkable breadth of positive health outcomes, including improved physical health (such as reduced blood pressure and allergies, less death from cardio-vascular disease, and improved self-perceived general health), improved mental wellbeing (such as reduced stress and better restoration), greater social wellbeing and promotion of positive health behaviours (such as physical activity).

Our cities are getting hotter, more crowded and noisier, while climate change is bringing more heatwaves, according to environmental planners at Griffith University. The obvious answer is more air-conditioning, but this brings more carbon emissions, so a better answer is more infrastructure – “green infrastructure”, otherwise known as street trees, green roofs, vegetated surfaces and green walls. In reality, however, vegetation cover in cities is declining, not increasing.

Planting trees in parks, gardens or streets has many benefits, helping to cool cities, slowing stormwater run-off, filtering air pollution, providing habitat for some animals, making people happier and encouraging walking.

According to those environmental planners, shading from strategically placed street trees can lower surrounding temperatures by up to 6 degrees – or up to 20 degrees over roads. Green roofs and walls can naturally cool buildings, substantially lowering demand for air-conditioning.

By contrast, hard surfaces – including concrete, asphalt and stone – increase urban temperature by absorbing heat and radiating it back into the air.

But though scientists have much evidence that trees and other greenery improve our mood and health, they know less about the actual mechanisms by which this occurs. Japanese research, however, suggests that when we walk through bushland we breathe in three substances: beneficial bacteria, plant-derived essential oils and negatively-charged ions.

We live our lives surrounded by beneficial bacteria, breathing them in and sharing our bodies with them. Gut-dwelling bacteria break down the food we can’t digest and produce substances that benefit us physically and mentally.

Plants and the bacteria living on them produce essential oils that fight off harmful micro-organisms when we ingest them.

And despite the nonsense talked about negative-ion generating machines, there’s evidence that negative air ions may influence our mental outlook in beneficial ways.

This may sound very new and scientific to some (or pseudo-scientific to others) but, as Hugh Mackay observes in his latest book, Australia Reimagined, being connected to nature is a traditional source of relief from anxiety: gardening, bushwalking, strolling in a park, walking the dog, climbing a tree, swimming in the sea or sailing on it, picnicking in a tranquil and beautiful setting, playing games that take you outdoors and into a natural environment.

We know instinctively that “grass time” – running on it, rolling in it, throwing and catching a ball across it – is vital for the health and wellbeing of children. Particularly if they’ve been cooped up indoors, glued to a screen. But adults are no different, the wise man says.
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Saturday, October 27, 2018

Growth in world economy will take a toll on the environment

If the world’s population keeps growing, and the poor world’s living standards keep catching up with the rich world’s, how on earth will the environment cope with the huge increase in extraction, processing and disposal of material resources?

It’s a question many people wonder and worry about – without much sign it’s even crossed the mind of the world’s governments.

Until now. The Organisation for Economic Co-operation and Development is about to publish a Global Material Resources Outlook, which uses much fancy modelling to make an educated guess about what’s likely to happen in the future.

The report projects that, over the 50 years to 2060, annual global use of materials – including metals, fossil fuels, biomass (food and fibres) and non-metallic minerals (mainly sand, gravel, limestone and other building materials) – will more than double, from 79 gigatonnes in 2011 to 167 Gt in 2060. Gosh.

So how did the report reach that figure? It started by estimating the likely growth in the world’s population. Although its rate of growth is expected to slow, the world population could increase from 7 billion to 10 billion by 2060.

At the same time, material living standards in the developing countries are expected to continue converging on those of the developed countries.

Gross domestic product per person is expected to continue growing at a much faster rate in the poorer countries than the rich ones. So much so that, by 2060, the global level of real GDP per person is expected to have reached where it was for just the (richer) OECD countries in 2011.

This implies a tripling in global income per person to about $US40,000 a year – after adjusting for PPP, purchasing-power parity, to allow for one US dollar buying a lot more in a poor country than it does Stateside. The fastest catch-up will be in China and, to a lesser extent, India and south-east Asia.

That’s good news for the world’s non-rich. It would be a bit rich for the well-off countries to expect the poor countries to stay poor just to reduce pressure on the natural environment in a way we’re not prepared to.

Multiply world population by world income per person and you get world GDP. It’s expected to quadruple.

Even so, its rate of growth may slow. Whereas at the turn of the century world GDP was growing at an average rate of about 3.5 per cent a year, it’s expected to stabilise at a rate of less than 2.5 per cent well before we reach 2060.

(Why? Partly because of arithmetic. It’s much easier for a small number to grow by a high percentage than for a big number to. But also because, when you’re way behind, it’s relatively easy to catch up with the world’s technological frontrunner, the US, by adopting its better existing technology. Once you’ve done the easy bits, however, it gets harder to grow as fast. China will account for much of the global slowing.)

But hang on. If world GDP is expected to quadruple, how come materials use is expected only to double?

It’s because other things – helpful things – will be going on at the same time. The first is that the world economy is “dematerialising”.

Machines and gadgets are getting smaller and using less metal, but more to the point is the “servitisation” of the world economy (there’s a new ugly buzz word to add to your collection) – the tendency for more of each dollar we spend to go on services rather than goods.

Services have lower materials “intensity” – materials use per unit of output - than goods. The shift in the mix from goods to services is a function of economic development. When you’re poor the main thing you want is more goods, but as you get richer there’s a limit to how much you want to eat or wear and how many cars and TV sets you need. But there’s no limit to how many things you’d like to pay other people to do for you.

This shift is already well advanced in the rich countries, but the poor countries have a lot of infrastructure and housing to build (and a lot of cars and TV sets to buy) before they begin to approach material satiation.

The share of services in world GDP is projected to rise from 50 per cent to 54 per cent over the 50 years.

A second helpful factor is that technological advance should increase the efficiency with which materials are used. The two factors are projected to reduce the materials intensity of world GDP at the faster average rate of 1.3 per cent a year.

So, the report finds, were materials use to keep up with economic growth, annual use would increase by 283 Gt to 362 Gt. But the shift to services will reduce that increase by 111 Gt and technological advance will reduce it by 84 Gt, meaning materials use rises to just 167 Gt in 2060.

Note, however, that this is growth in “primary” materials extraction, not “secondary” use of recycled materials, which the report says is likely to become more competitive and grow at the same rate. So increased recycling is another factor helping to explain the lesser growth in primary extraction.

With GDP growing faster than materials use, the report is expecting a partial “decoupling” of the two.

Of course, there’ll still be a big increase in pollution. Greenhouse gas emissions, but also acidification, freshwater aquatic ecotoxicity, terrestrial ecotoxicity, human toxicity via inhalation or the food chain, photochemical oxidation (smog), ozone layer depletion, and not forgetting increased land fill to dump the materials when we’re done with ’em.

Final point: this “baseline scenario” assumes no change in government policy. That’s the point: it’s intended to show the world’s governments how great is the need for them to make a policy response.

Such as? I’d like to see a tax on materials use, with the proceeds used to reduce the tax on labour income. Similar to a price on carbon, this would do much to encourage recycling, repair and renovation, and economising in the use of materials.
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Saturday, June 30, 2018

Economic growth doesn't have to wreck environment

Do you care about the natural environment and the damage our economic activity is doing to it? What if an official agency published some good news on the subject? Would you be interested? Would you be pleased?

Apparently not. Two weeks ago the Australian Bureau of Statistics published its “Australian environmental-economic accounts” for 2015-16, which contained what certainly looks like good news, but they attracted minimal interest from the media and environmental groups.

Perhaps had the news been bad there’d have been more interest. Instead, the bureau found that, in 2015-16, the Australian population grew by 2 per cent and the economy – measured by the quantity of goods and services produced during the year – grew by 3 per cent.

But our emissions of greenhouse gases grew by just under 1 per cent, while our consumption of energy increased by less than 1 per cent and our consumption of water actually fell by 7 per cent.

Get it? We increased our output of goods and services – the amount of our economic activity – but increased our inputs of some key natural resources by less. Our generation of a particularly pernicious form of waste, greenhouse gas emissions, also increased by less.

In other words, we improved the economy’s ecological productivity. Is that not worth noting?

Actually, those figures need to be examined a lot more closely before we pop too many champagne corks. But first, we need to remember why, whether the news they bring is good or bad, it’s worth taking a lot more interest in the annual “national environmental-economic accounts” than we have been.

Which raises a less conspiratorial explanation for our lack of interest in the environmental-economic accounts: because, as associate professor Michael Vardon, of the Australian National University, has pointed out, they’re still a work in progress, with not many people knowing of their existence and even fewer knowing how to extract from their raw numbers the message they’re sending about how much progress we’ve made on the path to ecological sustainability.

That the economy exists within the natural environment, and depends on it for the renewable and non-renewable natural resources we put into our production process, for the “ecosystem services” that grow our food, among many other things, and even for somewhere to dump all the material and airborne waste we generate, is undeniable.

Yet from the moment people started thinking about “the economy”, they viewed it in isolation from the natural environment that sustains it.

A hundred years ago, this seemed sensible. The world’s human population was a fraction of what it is today and we were much poorer than we are now, so it seemed human activity was having only a small impact on the huge natural world.

We knew little about soil erosion and salinity, the wider effects of fertilisers, damming rivers and overfishing, let alone that too much burning of fossil fuels and land clearing could change the climate.

Our economic national accounts and their bottom line, gross domestic product, rest on the happy assumption that we can measure the economy without reference to the natural environment that sustains it.

As greenies never tire of pointing out, GDP takes little or no account of the environmental costs that come with the economic benefits. It even counts spending to remedy environmental damage as another benefit.

Little wonder so many people have been looking for ways to bring the two sides into reconciliation, getting them into the same box, putting their measurement on a comparable basis, so economic benefits can be weighed against environmental costs.

Under the auspices of the United Nations Statistical Commission, the world’s official statisticians have been working to expand the long-accepted rules for measuring GDP, the “system of national accounts”, into a “system of environmental-economic accounting”, or SEEA.

Our bureau of statistics has been active in this project and in 2012 the official SEEA “central framework” was published by the UN. The bureau has been working on the huge task of carrying out and integrating all the physical and monetary measurements needed to put flesh on that framework for Australia.

Progress has been slow, especially because the government’s extraction of annual alleged “efficiency dividends” from the bureau's budget has reduced the work it can do.

But now let’s examine the news that we increased our ecological productivity in 2015-16, presumably leaving us better off both economically and environmentally.

First, this is a caution for all those environmentalists who keep repeating that, in a natural world of fixed size, it’s impossible for the economy to keep growing every year forever.

They’re right, of course, but the economic growth they’re thinking of – growth in the throughput of natural resources – isn’t the growth that GDP measures. Much GDP growth comes not from increased physical throughput in the economic machine, but from increased efficiency in the machine’s conversion of inputs (the greatest of which is not natural resources, but human labour) into outputs of goods and services, aka improved productivity.

So it is conceptually possible for GDP to grow while the use of natural resources doesn’t, or even declines. If that happens, it’s good news all round.

Second, these relationships are far too complex for it to make sense to look just at the change over a period as short as a year. The accounts show that, over the nine years to 2015-16, our population grew by 16 per cent and real GDP by 28 per cent, while energy consumption increased by only 6 per cent and water consumption decreased by 2 per cent.

Emissions of greenhouse gases decreased by 13 per cent relative to 2006-07. But generation of material waste seemed to be growing at about the same rate as GDP. Not good.

Finally, we need to know a lot more about the factors driving these changes, and whether they’re lasting or temporary, before we can conclude we’re making ecological progress.

And remember we need our consumption of fossil fuel energy to be falling rapidly if we’re to make the contribution we should to global efforts to halt global warming.
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Monday, March 19, 2018

Immigration the cheap and nasty way to grow the economy

The ABC's temerity in hosting a debate about the merits of high population growth has drawn predictable repostes from the economic establishment. Shades of the legendary note in the margin of a politician's speech: "shout here - argument weak".

There are at least four counts against the advocates of high immigration. First, their refusal to engage with the academic environmentalists arguing that we've exceeded the "carrying capacity" of our old and fragile land. Scientists? What would they know?

Second, they keep asserting high immigration's great economic benefits, blithely ignoring the lack of evidence. Whenever the Productivity Commission has examined the issue carefully it's found only small net effects, one way or the other. Its latest modelling found only a "negligible" overall impact.

Third, the advocates not only decline to admit the high social and economic costs that go with high rates of immigration, they decline to accept their share of the tab, doing all they can to shift it to the young, the poor and those on the geographic outer, including many of the migrants.

You rarely hear pro-immigration economists acknowledging the clearest message economic theory gives us on the topic: more population requires more spending on additional public and private infrastructure if material living conditions aren't to deteriorate.

The more we invest in such "capital widening" to stop the ratio of capital to labour declining, the less scope for investment in "capital deepening" to keep the ratio increasing, and so improving the productivity of our labour.

When we fail to invest sufficiently in capital widening – which we have – the decline in living conditions is manifest in overcrowding, traffic congestion and long commuting times.

Why have we failed to invest sufficiently? Partly because a high proportion of the promoters of high immigration are also promoters of Smaller Government, never acknowledging the two are incompatible.

A bigger population requires a bigger government, with more debt, not less. When you persist with high population growth, but put the clamps on government, you end up with overcrowding, congestion and the rest.

Another truth the high immigration advocates refuse to acknowledge is that a much bigger population must lead to much bigger cities and higher-density living in those cities.

The Reserve Bank's estimates of the huge addition to Melbourne and Sydney house prices caused by state governments' acquiescence to resistance to higher density in inner and middle-ring suburbs, are partly a consequence of successful attempts to shift the spatial cost of high immigration onto the less well-placed.

The fourth criticism of high immigration is that it's the cheapest and nastiest way to pursue economic growth. You get a bigger economy, but not the promised benefits. The studies repeatedly fail to show high immigration leads to a significant increase in real income per person.

Of course, the business lobby has no reason to care whether high immigration yields economy-wide benefits. All they're after is a bigger domestic market, allowing them to sell more widgets, make a higher profit and justify a bigger salary package.

Few economists can see this is a cop-out. An escape hatch. As a way of achieving corporate growth, it's even easier than taking over your competitors. And it sure beats the hard graft of trying to increase profits by being more efficient and contributing to national productivity improvement.

As we've seen, high immigration probably comes at the expense of productivity-enhancing (capital-deepening) business investment and public infrastructure. To the extent that inadequate capital-widening leads to overcrowding and congestion, it worsens productivity.

In principle, one productivity-enhancing effect of high immigration is that you get greater human capital on the cheap by pinching it from other (mainly poor) countries.

After foreign students have come here and paid full freight for Australian qualifications, you let them stay and work. You select permanent immigrants on the basis of their skills, or you let skilled workers on temporary visas stay on.

But as Dr Bob Birrell, of the Australian Population Research Institute, has shown, there's a big gap between the claims made for our skilled migration program and the reality. We let in people whose skills aren't in high demand, and plenty of them end up driving taxis because the local professions' gatekeepers refuse to recognise their qualifications.

So it's not clear the benefits of our skill-pinching program exceed the cost of discouraging businesses from incurring bother and cost training enough of our own young people, when you can always get the government to let you bring in someone ready-trained.

High immigration may suit our rent-seeking business people, but it's a hell of a way to pursue the professed benefits of economic growth.
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Wednesday, February 21, 2018

Governments only pretending to fix Murray-Darling

Genelle Haldane, my desk calendar tells me, has said that "only until all of mankind lives in harmony with nature can we truly decree ourselves to be an intelligent species". I've no idea who Haldane is or was, but she's right.

And you don't need to be terribly intelligent to realise it. Even most economists get it. It's blindingly obvious that the economy – that is, human production and consumption of goods and services - exists within the natural environment.

The economy is sustained by the natural resources the environment supplies to it and by the natural processes that are part of the human production process. We rely on the ecosystem also to deal with the mountains of waste and emissions we generate.

It's equally clear that economic activity can damage the environment and its ability to function. We're exploiting the environment in ways that are literally unsustainable, and must stop doing so before the damage becomes irreparable.

But if it's all so obvious, why are we having trouble doing what we know we should? Why, for instance, has more fighting broken out over our use and abuse of the Murray-Darling river system, a problem we've been told our governments – state and federal – are busy fixing?

One reason is that some people – not many of us – earn their living in ways that damage the environment, and don't want their businesses and lives disrupted by being obliged to stop.

Often, they don't bear the cost of the damage they're doing. It's borne by farmers downstream, or by the wider community, or the next generation.

Those bearing the direct and immediate cost of stopping invariably fight harder to keep going than those affected only indirectly and to a small extent.

In the case of the Murray-Darling, it's only the costs being born by downstream irrigators – and downstream water drinkers in Adelaide – that keep the fight alive.

Since it's hard to be sure when damage to the environment has reached the point of no return, there's a great temptation to say doing a bit more won't hurt. I'll be right, and the future can look after itself. Business people think that; politicians even more so.

Democracy has degenerated into a battle between vested interests. Get in there to fight for your own interests, and don't worry about whether it all adds up or what happens to those who lose out.

The political parties have succumbed to this approach. They're too busy keeping themselves in power by oiling enough of the squeakiest wheels to worry about showing leadership, about the wider community interest or about any future beyond the next election.

I don't trust any of them, nor the Murray-Darling Basin Authority they appointed, which seems to see its job as assuring us everything's fine, when clearly it isn't.

Just how bad things are – how little progress has been made, how little has been done and how much spent on subsidies to irrigators – is made clear in a declaration issued this month by a dozen academics - scientists and economists - led by professors Quentin Grafton and John Williams, of the Australian National University, who've devoted their careers to studying water systems and water policy.

The decades of degradation of the Murray-Darling Basin, exacerbated by the Millennium drought, finally led John Howard to announce a $10 billion national plan for water security (since increased to $13 billion) in the months leading up to the 2007 election. Its intention was to return levels of water extraction for irrigation to environmentally sustainable levels.

It took until late 2012 for federal and state governments to agree on a basin plan to reduce water diversion by 2,750 gigalitres a year by July 2019, even though this was known to be inadequate to meet South Australia's water needs.

So far $6 billion has been spent on "water recovery", with $4 billion going not on buying back water rights but on subsidies to irrigators to upgrade to more efficient systems which lose less water.

Trouble is, those loses were finding their way back into the system, but now they don't. This has left the irrigators better off, but it's not clear there's much benefit in greater flows down the river. And no one has checked.

Federal figures show that buying water from willing sellers is 60 per cent cheaper than building questionable engineering works.

But little money has been spent helping communities adjust to the effects of adverse changes.

There's little evidence of much environmental improvement as a result of all the money spent, and river flows have been declining since 2011.

Until the ABC's 4 Corners program in July last year, many Australians were unaware of alleged water theft, nor of grossly deficient compliance along the Darling River.

State governments don't seem to be trying hard to fulfil their commitments under the 2012 agreement. Nor did the feds seem to take much interest when Barnaby Joyce was the minister.

The blow-up over the Senate's refusal to go along with a new round of reductions in the amount by which water extraction from the river is to be reduced – supposedly to be offset by increased spending on dubious engineering projects – is just the latest in the various governments' pretence of fixing the environmental problem, while quietly looking after their irrigator mates.
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Wednesday, December 27, 2017

Why going to a park is better than going to the beach

My father was always disapproving of people who excused their failure to turn up to his Sunday meeting by saying they'd been "worshipping God in the great outdoors". But the older I get, and the more I read, the more I think it's not such a bad idea.

I'm much attracted by the American biologist Edward O. Wilson's hypothesis of biophilia, that humans have an innate tendency to seek connection to nature, for its calming effects.

While most people will be heading for the beach in the next few weeks, I usually head for a national park, to lift my quota of trees, bush, grass and anything else that's green.

This time, however, we're heading for a jungle – otherwise known as Manhattan – to do babysitting duty. Ideally, this means I'd be virtually living in Central Park, but that may be a bit too snowy.

My regular reading of the universities' blogsite, The Conversation, has garnered a fair bit of evidence for biophilia.

According to a survey conducted by the Australian Bureau of Statistics in 2007, each year one in five Australians experiences a mental disorder. Most common are anxiety disorders, such as panic attacks or obsessive-compulsive disorder.

Zoe Myers, an urban design specialist at the University of Western Australia, says research shows that city dwellers have a 20 per cent higher chance of suffering anxiety and an almost 40 per cent greater likelihood of developing depression.

Fortunately, research also shows that people in urban areas who live closest to the greatest green space are significantly less likely to suffer poor mental health.

Myers says more than 40 years of research shows that exposure to nature increases calm and rumination, decreases agitation and aggression, and improves concentration, memory and creative thought.

But it's not emptiness or quiet that has these good effects, she says. "Nature in its messy, wild, loud, diverse, animal-inhabited glory has most impact on restoring a stressed mind to a calm and alert state.

"This provides a more complete sense of 'escape' from the urban world, however brief."

Many studies have attested to the restorative effects of forests but, though holidays in national parks are nice, we need something closer to home.

Melanie Davern, of RMIT University, with colleagues from Melbourne University, say recent research on the benefits of urban greening has found, for instance, lower rates of anti-depressant prescriptions in neighbourhoods close to woodlands in Britain, happier people living in areas with more birdlife, and better health in areas with increased neighbourhood tree coverage in the United States.

Planting trees in parks, gardens or streets has many benefits: cooler cities, slower stormwater run-off, filtering of air pollution, habitat for some animals (such as birds, bats and bees), making people happier and providing shade that encourages more walking.

Professor Pierre Horwitz, of Edith Cowan University, is a great advocate for urban bushland – a bush park of native trees, a wetland, or any native vegetation characteristic of the local region.

"With its undisturbed soils and associated wildlife, urban bushland is more diverse than other types of green spaces in our cities, like parks. The more unfragmented the landscape, or unaltered the bushland, the more likely it will be to retain its biodiversity," Horwitz says.

"Exposure to biodiversity from the air, water, soils, vegetation, wildlife and landscape, and all the microbes associated with them ... enhances our immunity. This is thought to be key to the health benefits of nature."

Horwitz says we know that wealthier people tend to live in greener suburbs, and that wealthier people tend to be healthier. So is it wealth rather than nature that's doing the good work?

Fortunately, no. Many studies have controlled for wealth but still found direct health benefits from exposure to biodiversity.

The benefits go not just to individuals, but to the wider city. Forests and woodlands clean our urban air by removing particles and absorbing carbon dioxide. This reduces premature death, acute respiratory symptoms and asthma across the city.

As well, urban bushland improves city water. Wetlands and the vegetation around them clean water by filtering, reducing exposure to pollutants carried in groundwater or surface run-off.

And not forgetting that vegetation moderates extremes of temperature, providing shade when it's hot and less exposure when it's cold, thus reducing heat- or cold-related illnesses.

Trouble is, urban bushland shrinks as new suburbs are developed on the outskirts of our cities. Worse, bigger houses and more high-rise living is causing backyards to be shrinking, too, even though they contribute to our health and our kids' development.

Not to worry. There's a lot of urban roof space, and we're getting more rooftop gardens. Sara Wilkinson and Fiona Orr, of the University of Technology Sydney, studied the use of a rooftop garden at St Vincent's Hospital in Sydney as part of two "horticultural therapy" programs for people recovering from mental illness.

Among the many benefits participants identified were regular connection with others, developing friendships, experiencing enjoyment and restoration of health.

And if you don't have a spare rooftop, you can join the latest trend and install a vertical garden.

Sorry, I'm getting a bit over-excited here. I wonder if "green space" still counts as green when its covered in snow? Hope the apartment we're renting at least has some indoor plants.
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Wednesday, December 20, 2017

We should change the culture of Christmas

Christmas, we're assured, brings out our best selves. We're full of goodwill to all men (and women). We get together with family and friends – even those we don't get on with – eat and drink and give each other presents.

We make an effort for the kiddies. Some of us even get a good feeling out of helping ensure the homeless get a decent feed on the day.

And this magnanimous spirit is owed to The Man Who Invented Christmas, Charles Dickens. (You weren't thinking of someone else, surely?)

According to a new survey of 1421 people, conducted by the Australia Institute, three-quarters of respondents like buying Christmas gifts.

Almost half – 47 per cent – like having people buy them gifts. And 41 per cent don't expect to get presents they'll never use.

Well, isn't that lovely. Merry Christmas, one and all!

Of course, there's a darker, less charitable, more Scrooge-like interpretation of what Christmas has become since A Christmas Carol.

Under the influence of more than a century of relentless advertising and commercialisation – including the soft-drink-company-created Santa – its original significance as a religious holy-day has been submerged beneath an orgy of consumerism, materialism and over-indulgence.

We rush from shop to shop, silently cursing those of our rellos who are hard to buy for. We attend party after party, stuffing ourselves with food and drinking more than we should.

All those children who can't wait to get up early on Christmas morning and tear open their small mountain of presents are being groomed as the next generation of consumerists. Next, try the joys of retail therapy, sonny.

But the survey also reveals a (growing?) minority of respondents who don't enjoy the indulgence and wastefulness of Christmas.

A fifth of respondents – more males than females – don't like buying gifts for people at Christmas. Almost a third expect to get gifts they won't use and 42 per cent – far more males and females – would prefer others not to buy them gifts.

The plain fact is that a hugely disproportionate share of economic activity – particularly consumer spending – occurs in one month of the year, December.

And just think of all the waste – not just the over-catering, but all the clothes and gadgets that sit around in cupboards until they're thrown out. All the stuff that could be returned to the store, but isn't.

At least the new practice of regifting helps. Unwanted gifts are passed from hand to hand, rather like an adult game of pass-the-parcel, until someone summons the moral courage to throw them out.

Still, buying things that don't get used is a good way to create jobs and improve the lives of Australians, no?

Not really. The survey finds only 23 per cent of respondents agree with this sentiment, while 62 per cent disagree.

One change since Scrooge's day is that those who worry most about waste – at Christmas or any other time – do so not for reasons of miserliness, but because of the avoidable cost to the natural environment.

Rich people like us need to reduce our demands on the environment to make room for the poorer people of the world to lift their material standard of living without our joint efforts wrecking the planet.

This doesn't require us to accept a significantly lower standard of living, just move to an economy where our energy comes from renewable sources and our use of natural resources – renewable and non-renewable – is much less profligate.

This is the thinking behind the book Curing Affluenza, by the Australia Institute's chief economist – and instigator of the survey – Dr Richard Denniss.

He says we can stay as materialists (lovers of things) so long as we give up being consumerists (lovers of buying new things). We can love our homes and cars and clothes and household equipment – so long as that love means we look after them, maintain and repair them, and delay replacing them for as long as we reasonably can.

The survey shows we're most likely to repair cars, bikes and tools and gardening equipment, but least likely to repair clothing, shoes and kitchen appliances, such as blenders, toasters and microwaves.

What would encourage us to get more things repaired? Almost two-thirds of respondents would do more if repairs were covered by a warranty. More than 60 per cent would do more if repairs were cheaper. And 46 per cent if repairs were more convenient – which I take to mean if it was easier to find a repairer.

How about making repair work cheaper by removing the 10 per cent goods and services tax on it? Two-thirds support the idea; only 19 per cent oppose.

Point is, there are straight-forward things the government could do to encourage us to repair more and waste less. Were it to do so, this would help restore older attitudes in favour of repairing rather than replacing.

Trouble is, politicians tend to be followers rather than leaders on such matters. So the first thing we need is a shift in the culture that makes more of us more conscious of the damage our everyday consumption is doing to the environment. That putting out the recycling once a week ain't enough.

We could start by changing the culture of Christmas.
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Wednesday, November 15, 2017

What we can do to cure affluenza

If our grandparents could see us now, what would they think? They'd be amazed by our affluence, but shocked by our wastefulness.

You'd never know it to hear us grousing about the cost of living, but most of us are living more prosperous, comfortable, even opulent lives than Australians have ever lived.

We live in a consumer society, surrounded by our possessions. We're always buying more stuff, more gadgets, an extra car, more TVs for other rooms, more laptops, iPads and smartphones.

We update to the latest model, even though the old one's working fine, and make sure our car is never more than a few years old.

We buy new clothes all the time – a lot on impulse – filling our wardrobes with stuff we wear rarely, if ever.

We buy more food than we can eat, chucking it out when it's no longer fresh so we can buy another lot.

Why do we keep buying and buying? Short answer: because we can afford to. Long answer: because, for a host of reasons, we've become addicted to consumption, whether or not it provides lasting satisfaction. We suffer from "affluenza".

Many of us engage in "conspicuous consumption" so as to impress other people with our wealth – with how well we're doing in the materialist race. Can't have the neighbours thinking we can't afford the latest model.

Other people use their hairstyles or the clothes they wear to express their individuality or, paradoxically, to signal their membership of a particular tribe.

I heard about a partner in a law firm remarking with disapproval that whenever any young person was made a partner they immediately went out and bought a black Volvo. But, someone asked, don't you have a black Volvo yourself? Oh, no, he said, mine's blue.

In his new book Curing Affluenza, Richard Denniss, chief economist of The Australia Institute, observes that, these days, much consumption is done for symbolic, signalling reasons, not because we actually need the stuff.

And then there's retail therapy – stuff we buy purely for the fleeting thrill we get from buying some new thing.

If something's telling you all this needless consumption can't be a good thing, you're not wrong. What's less obvious is why: because of the damage it does to the natural environment.

Not only the extra emissions of greenhouse gasses, but also excessive use of natural resources – both non-renewable and renewable, when usage exceeds the rate at which they can be renewed (think fish in the sea).

The richest 15 per cent of the globe's 7.6 billion population can continue living the high life only for as long as we have the wealth to commandeer more and more of the other 85 per cent's share of the world's natural resources.

But as the world's poor, led by India and China, succeed in raising their material living standards towards ours, this will get ever harder. It is not physically possible for all the world's population to live the wasteful lives we do. Nothing like all the world's population.

How can we stop using more than our fair share of the globe's natural resources? Denniss says we can start by distinguishing between consumerism, which is bad, and materialism, which isn't. Huh?

He defines consumerism as the love of buying things, whereas materialism is just the love of things. Meaning the latter is a cure for the former. The more we love and care for the stuff we've already got, repairing it when it breaks, the less we're tempted to buy things we don't need.

It's true the capitalist system invests heavily in marketing and advertising to con us into believing we need to buy more and more stuff.

But we're free to resist the system's blandishments. Indeed, I often think the people most successful in the system are those who most resist.

Unusually for an economist, Denniss argues that much of what we do – and buy – we do for cultural reasons. Because it's the normal, accepted thing to do.

But, just as our grandparents weren't as spendthrift as we are, culture can change. And you need less than a majority of people changing their behaviour to reach the critical mass that prompts most other people to join them and, by doing so, cause an improvement in the culture.

If we all stopped buying stuff we don't need, however, wouldn't that cause economic growth to falter and unemployment to shoot up?

Yes it would – if that's all we did. The trick is that every dollar we spend helps to create jobs. So we need to keep spending, but we don't need to keep spending wastefully.

There are a host of things we could spend on – better health, better education, better public infrastructure, better lives for the disabled and the elderly, less congestion, less pollution – that would yield us more satisfaction while doing less damage to the environment.

I have a feeling, however, that the cure to affluenza will require more than just changed behaviour by enough individuals. We replace rather than repair many things because the cost of repairers' labour greatly exceeds the cost of the material parts we throw away.

We need to rejig the tax system so we reduce the tax on "goods" – labour income – and increase the tax on "bads" – use of natural resources.
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