Posts by George Darroch
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Hey-o, I'm really hesitant about blaming the wonks on this one
Yeah, pulling out a butter knife and handing it to the chef without telling him it's not good for carving steak is slightly problematic. You'd rightly expect him and his advisors to recognise the limitations of the report, however.
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I have to say that a lot of the blame also sits squarely on the shoulders of Helen Clark. They spent almost the entire 2000s trying to come up with an emissions instrument, but kept going back to the drawing board looking for something that would impose very minimal pain on all sectors of the economy (and thus pose little political risk). And something that Peter Dunne would support.
Which is the antithesis of a ETS or tax - they're supposed to impose a significant price signal, in order to impose costs on emissions and incentivise other behaviour.
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"It won't be 40 per cent," Key said yesterday.
"The OECD [Organisation for Economic Co-operation and Development] average is 15 per cent, Australia is 14 per cent. My guess is that New Zealand will be somewhere in that benchmark. We don't intend to be a world leader when it comes to climate change. We'll do our bit."
A 40 per cent reduction would "absolutely decimate our economic activity", he said.
"We can't afford to write that cheque."
Bad economic modelling, which asssumes allocations as a shock, does not try to model the costs and benefits of pre-2020 adaptation to medium and high price signals, and leaves out forestry and other sequestration entirely , wins out.
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This
Which is probably illegal under the Privacy Act, according to Mr NoRightTurn.
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Whoops, that was run 7, as presented in table 9.
Although, now that I look at it again, I can't see the sense in declaring that "parameter and elasticity values may not be valid" at $262 because of the shifts this would induce in the economy, and declaring them valid at $200.
These values are then fed into our CGE models as shocks, to determine the overall economic impacts
Assuming carbon prices as shocks, for which we are unable to prepare or adapt to, seems like a very inadequate way of understanding the impacts of carbon pricing.
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Danielle, I reckon think of our nation as a teenager. In a world mainly full of grown-ups.
All nations have insecurities, at least all nations that I've seen. Most are recently defined, in transition, and at least in some way incoherent. We're not the only ones afflicted with a great desire for recognition.
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The figure Nick Smith is using might not be the cost of reducing emissions, but it is the cost of meeting the target, with emissions reductions both here and overseas.
And that is exactly the point. "40%" in the context of this report does not mean a reduction in domestic emissions of 40% as Smith has tried to lead us to believe, but is a reduction in our AAUs by that amount. A significant difference.
The only part of the report which deals entirely with domestic emissions, and thus tries to quantify the cost of their reduction, is table 7, where international trading is assumed to not be part of the agreement. This part however rightly notes
stress, however, that at carbon prices of this magnitude the models’ parameter and elasticity values may not be valid
as significant economic and technological shifts would occur with this high carbon price, as would changes in forestry (which Gareth has already noted is not considered by this report).
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From the table on pg 3 it seems that only a $200/t scenario has been done for the 40% case.
Apples and pears...
The assumption seems to be that a 40% reduction is equivalent in price to $200. Which isn't unreasonable, it just isn't noted as one. Every paper I ever read written by economists consists of assumptions, few of them explicitly noted.
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You can see how they might have come to the conclusions they did if they assumed the conditions that apply to only table 9, applied them to the rest of the report, and ignored the huge caveat below that scenario on the likely effect of such a high carbon price.
I've seen plenty of cherry picking by politicians. Taking a report or academic paper and making it say something it really doesn't say. But not usually on something as large as this. As should be evident from the numbers here, climate change policy has significant economic and social implications.
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Sigh. I'll take it.
Don't bend over just yet. I'm looking at the report and haven't yet reconciled it with the statements Smith has made.