Friday, December 31, 2004

Global Warming and Kyoto

Genius proposes a somewhat draconian solution for global warming. It's a refreshing change from the "holocaust denial" of some right-wing commentators but goes further than is prudent and, more importantly, further than necessary.

Genius suggests that we should treat oil (and presumably other fossil fuels) similarly to cocaine or other harmful substances and simply use all necessary means to prevent "pushers" from harvesting it. If only life were that simple. We did of course come up with a (hopefully) successful cold turkey solution to the use of CFCs but this was relatively non-controversial, the science was clear-cut and undeniable and the economic costs minor. Global warming is complex and ubiquitous and the economic impact of cutting down on fossil fuels is substantial. More importantly the opposition to freezing oil production will not come only from third world oil despots but also from Western oil companies. If we contemplate a preemptive strike against the middle-east oilfields must we launch our first cruise missiles from the gulf of Texas?

Genius rightly calls for more evidence before deciding on a future course of action but it is notoriously difficult to predict human actions 100 year ahead. This link gives a good summary of the current evidence. The IPCC originally split the question into two parts -
(1) What is the likely future increase in human CO2 emissions with time
(2) What will be the global temperature response to thechanged levels of CO2 emissions.

The first question was addressed by the IS92 model scenarios. These modelled global fossil fuel consumption and CO2 emissions to 2100 under different population, economic and technical assumptions. The scenarios do not anticipate any specific policies (such as Kyoto) but do involve assumptions of future technologies impacting on nuclear, Biofuel and solar prices and supply. The mid-range scenario (IS92a) is the most likely and this would lead to the following by 2100
(1) a trebling of CO2 emissions from fossil fuel
(2) a temperature increase of 2.5 C degree
(3) cumulative (1990 to 2100) CO2 fossil fuel emissions of 1500 Gt
(4) a "committment" to a further 2.5 degrees of warming even if all fossil fuel consumption stopped at 2100.
(5) an atmospheric CO2 concentration of 730 ppmv (cf 360 ppm 1990).
(6) a sea level rise of 64cm by 2100.

The second question the effect of increased CO2 emissions is complex. Not all CO2 emitted remains in the atmosphere and atmospheric warming is a complex process. The question is addressed by a second set of models whuch operate over a longer time span. IPCC introduced a second set of scenarios which envisage stabilising atmospheric CO2 concentrations at various levels. The S650 scenario stabilises CO2 concentrations at levels from 350-750 ppmv (mid-range 550 is just on twice the pre-industrial level). Greenpeace suggests that this could lead to a temperature rise of 2.0 C degrees from 1990 to 2100 and a further 0.6 degrees long-term. Sea-level rise would be about 33cm by 2100 or about 1m long term. Effects on agriculture and natural ecosystems would be material (we are long past the point of doing anything about that) but not catastrophic. We can achieve this by keeping total CO2 emissions to 2100 materially below the IS92a prediction of 1500 GtC and reducing more drastically in subsequent years eventually reaching a value of about 3 GtC/yr. We can make up for inadequate cuts in one decade with proportionately deeper cuts in the following decade and so we can afford to negotiate sound policies, do the science and allow orderly economic transitions.

Global CO2 emissions are currently about 6.2 GtC per year from a population of 6.4 billion. Annex 1 (industrialised) countries account for 3.7 GtC from a population of 1.1 billion. A post-Kyoto regime would then express future limits as a fraction of these levels. Future industrialised countries can be brought in by pro-rating the base (2000) populations to the mean limit for current Annex 1 countries. If we then adopted standard limits of 80%, 70%, 50%, 30% and 15% of the baseline by 2030, 2050, 2100, 2150 and 2200 respectively China would, for example, probably come into the scheme around 2030 with a notional baseline of 4370 GtC/yr and hence an initial target of 3496 GtC/yr from 2030. If China's emissions grow at a rate equal to gdp growth (about 10%) over the same time they would have grown to about 5000 t/ha by 2030 and so China's participation would be essential. On the other hand a more stringent target than that suggested would be unfairly restrictive to the emerging economies. If we assume the above structure and make reasonable assumptions as to GDP growth in non-Annex 1 countries then the total emissions to 2100 are close to 1090 GtC which corresponds to the IPCC S650 stabilisation scenario.

The scenario outlined is a natural progression from Kyoto. It makes relatively minor savings (compared to IS92a) in
the first half of the twenty first century but requires more substantial cuts subsequently. Kyoto will lead to the establishment of a "Carbon market" and to the imposition of Carbon taxes by at least some governments. It will also simplify/reinforce the use of countervailing sanctions against "unfair competition" from non-Kyoto countries should this happen. A large part if not all of the global economy will operate a regime where CO2 emissions carry a known cost and this will favour the emergence and development of alternative energy, energy saving and CO2 sequestering technologies in an economically rational way.

DPF takes exception to my use of the term "holocaust denier" to describe "global warming sceptics". I can only reiterate here that I consider "holocaust denier" morally neutral as it makes no value judgement that the holocaust was "a good or even remotely defensible thimg" but merely a mistaken belief that it did not happen. It is guilty of gross error, obstinate refusal to consider evidence and absurdity but nothing else. The holocaust denier is above all absurd in his reusal to face the obvious. There are of course many global warming sceptics who ask entirely legitimate questions and, of course, the evidence for global warming is much less clear-cut than that for the holocaust yet there are some global warming "deniers" who refuse to accept evidence in front of their eyes, treat every disagreement between "experts" as a refutation of the scientific concensus and every agreement betwen those experts as evidence of conspiracy that they cut a figure scarcely less absurd or pathetic than the classic holcaust denier.

Sunday, December 19, 2004

Tax and Welfare - A Window of Opportunity

In an earlier post I mentioned that I was reworking figures on Universal Basic Income schemes taking into account the impact of the Working for Families package. I have now completed the analysis and you can download the results from this spreadsheet and Word document. The interesting thing is that it now looks as though the transition could be made (ie in FY 2008) to a Basic Income system with almost no one losing from the transition. The exception is income-splitting married superannuitants with more than $40,000 other taxable annual income each and (even then the worst case is an increase of $110 at an "other income" of $60,000 each - compared to $360 if we reintroduced the surtax). This is for a system that automatically includes a universal student allowance, reduces mean effective tax rates for most New Zealanders to 39% (from typically about 50-70%, marginal can be over 90% see SageNZ), can be converted to a strict UMR system with all income subject to an effective marginal rate of 36% (33% if we index NZ super to cpi rather than average wage) in another 20 years of normal growth).
The Working for Families package did a lot of good things but has generated a ruinously high set of marginal effective rates for families on moderate to higher incomes. Something has to be done to fix this and it looks like a Basic Income / Flat Tax option could be the answer.



UPDATE 22/12/2004
If you're not familiar with the concepts of Universal Basic Income (aka Basic Income, Negative Tax or Universal Marginal Rate) I'll try and give a brief outline (you can download the documents on the sidebar if you want more details. Basic Income systems look at the combined effect of Welfare (menas-tested benefits) and Income Tax and "reanalyze" it into a Basic Income component (the level of benefit paid to someone with zero earnings) and an "effective income tax" which includes both tax and abatement of the benefit. To take a simplified example imagine income tax was charged at 20% for the first $20,000 and 30% thereafter and that unemployment benefit was paid at $12,000 per year abated by 60% of earned income. Then under a Basic Income analysis we would say the combined scheme had an effective tax rate of 80% (20% tax plus 60% abatement) for the first $20,000 and 30% thereafter. Under a Universal Marginal Rate (or Basic Income / Flat Tax) scheme we would introduce a single flat tax rate of 40% (or whatever was needed to balance the budget. The graph above shows the effective tax rates that will apply to a number of different NZ families by 2008. Note that these are the AVERAGE effective rates. The four child family earning $80,000 doesn't pay 76.8% on just the last few dollars (as it happpens their top marginal effective rate is 88%) they pay $61456 total.

Friday, December 10, 2004

Pro Populi Libri

I was going to title this "God 2 Bigots 0" but that seemed unseasonably negative. So here's a warm "God bless us all" to everyone but especially the good Dominican friars and their distinguished guest.

Wednesday, December 01, 2004

Treaty and Constitution - Further Thoughts

My earlier post has drawn some references from Holden Republic and Other Che. Che refers to my work as an overanalysis with some justification. Certainly it is a premature analysis but I "analysed" only a small portion in fine detail. My intention was

1) to illustrate what a "constitution giving effect to the treaty" might look like
2) to identify issues that such a constitution must address
3) to offer a specific solution (the codification of "Mana Whenua") to some of these issues.

The position of the Treaty of Waitangi is closely analogous to that of the US Declaration of Independence. It is an affirmation of the principles that drive us and that define the sort of society New Zealand ought to be but it's language is too imprecise to be enacted as law or to form a constitution. The founding fathers did not seek to "exlude the principles of the declaration from the constitutional debate" or let the declaration remain "slightly aloof" from the whole thing. They did the hard work and developed a legally sound framework that gave practical effect to the principles of the declaration. And where necessary the "inalienable rights" to life and liberty became rights that could not be forfeited "without due process".

I do not understand why the NZPSA or anyone else should wish to exclude the treaty from the "constitutional debate" for it is the treaty issues that are of the greatest urgency. Nor, I hope, is it a desire to confine the discussion of treaty issues to a specific group for ALL constitutional issues require a broad concensus for successful resolution.

What I would most like to see is some Maori opinion on these issues (even if it's just to tell me to butt out of matters I don't understand). I've opened this Blog to public (anonymous) comments so please fire away.