Emissions Reduction Survey 2019

I again carried out a contingent valuation study of climate change using my environmental economics class as respondents. The survey was exactly as in 2018. Participants could vote yes or no on proposals to raise the Medicare levy by 0.125% or 0.25% to help fund the Emissions Reduction Fund. I designed the survey to follow the NOAA panel guidelines. I also asked the students to explain why they voted the way they did.

The results differ from 2018. Only 42% voted for a 0.125% increase in the Medicare levy, while 53% voted for a 0.25% increase. Five people voted against the smaller tax and for the larger tax. So there was quite a lot of irrational behavior where the perfect could have been the enemy of the good if one person had voted differently on the higher tax. This kind of thinking is in large part, IMO, why Australia doesn't now have a carbon price...

Of those voting no on both proposals, there were a mix of responses. Only one seemed to be saying that they couldn't afford the tax given the benefit! And that is what such a survey is supposed to measure. Others objected to the payment vehicle, by suggesting that the government should price carbon or reduce the diesel rebate etc. or borrow/print money instead. I agree with the first two of these, but again that leads here to nothing happening on the climate front if that is what you care about. Others worried about the distributional impact. That is a valid criticism of the Medicare levy proposal, which is a tax on all ones income rather than a progressive or marginal tax. One person incorrectly thought the Medicare levy was unethical, as it was a tax on healthcare. Actually, it is just an extra income tax.

Of those voting yes to the lower tax and no to the higher tax, only one mentioned the cost. The others said that the government should find other funding (borrowing?) or polluters should pay – of course in the end it is the consumer who will pay to the degree that polluters can pass on costs…

Those voting yes on both proposals all said the tax increase was affordable, so they did consider actual willingness/ability to pay.

The bottom line, is that there is a lot of behavior going on in the responses to this survey which doesn’t fit with the model of paying for a public good model where people state their honest WTP, even with a supposedly state of the art design. There is some free-riding - other people should pay or the government should borrow – and on the other hand some altruism as well as protest votes about the policy design. There is also irrational behavior represented by voting no, yes, though we probably can assume that some of these didn't understand the potential implication of voting against the lower tax rate.

Political Bias in My Teaching?

I've long been curious about what students in my classes think about my political position. So, I finally decided to ask them. I added a bonus question for 1 point on top of the 100 points available for the final exam in my Energy Economics course. The question read:

Bonus question (1 point): 
This question relates to potential political bias in my presentation of the course material. Based on the content of the course, which political party do you think I voted for in the last Federal senate election?

a. Greens
b. Labor
c. Liberal
d. Liberal Democrats
e. Australian Sex Party
f. Christian Democratic Party

Actually, ten parties ran at the last election for the two available senate seats representing the ACT, but I thought it would be better to keep the list a little more manageable.

The distribution of answers was as follows:

Greens: 2
Labor: 5
Liberal: 5
Liberal Democrats: 5
Australian Sex Party: 0
Christian Democrats: 0

Assuming that everyone who picked Liberal Democrats knows what it is - a libertarian party - there is a perceived rightward bias. But there are a lot of foreign students who might assume it is a more centrist party. Or people might have assumed that if I listed a bunch of parties they hadn't heard of, one of those must be the right answer.

What would no bias look like? Maybe something more like Green 2, Labor 7, Liberal 7, Liberal Democrat 1 or 3,7,6,1, which is closer to the voting pattern. Or maybe even further to the left as most academics including economists in Australia probably vote for Labor, so that would be the default assumption unless they perceived a strong bias in my teaching?

What Do Crawford School Economists Do?

I'm doing quite a bit of background work for our School Review, a review of the Future of Asia-Pacific Economics etc. The following table is based on the self-identified "Fields of Research" of core Crawford economics faculty. Most people chose more than one field. If, for example, someone chose three fields, then I attributed 1/3 of an FTE to each for that person. The result looks like this:

Our research foci are economic development and growth, environmental and resource economics, and international economics and finance. The (non-geographical) fields that we rank best in globally in RePEc are: Environment 7, Energy 7, Resources 11, Agriculture 23, Growth 29, International Trade 32, Development 39. So, this focus also is where we perform well.

Most Crawford economists have countries that they focus on. Using a similar approach I put together this table:

Naturally, Australia is number one, then follow China, Japan, Indonesia, and Vietnam. In RePEc, we rank 4th in the SE Asia ranking, 18th in Central/Western Asia (which actually includes South Asia), and 39th in the China subject ranking. This reflects more of our historical focus, while the current faculty is more focused on NE Asia. We don't have any current faculty with a professed interest in Thailand, for example! Of course, there is also less competition in research on SE Asia than on China and so that will also affect our ranking.

Really, What is the NBN For?

What I mean is, why do we need a new government network in urban areas? We just got a "set top box" for streaming Chinese TV channels. My mother-in-law is going to be visiting :) It operates via wifi from our Telstra "modem". TV is better than reception of free Australian channels so far. Of course, there are lots of such services from Netflix etc. which seem to work in Australia without major problems. Maybe an RBN (Rural Broadband Network) is what the government should be focusing on?

Superannuation Reform

I started writing this on Twitter but it got too long :) Peter Martin proposes taxing superannuation contributions at ordinary income tax rates and then not taxing earnings or payouts of superannuation funds. This would greatly simplify the superannuation system and is the logical progression of Costello's introduction of tax free superannuation pensions and the recent move to increase the contributions tax people earning more than $300k p.a. It is equivalent to the U.S. Roth IRA. It could, in theory make running a self-managed super fund as simple as having an ordinary brokerage account (as it is in the U.S.) as the funds wouldn't owe tax.

There is one drawback, though. Taxing up front, leaves less capital to accumulate and so super payouts and the tax collected will be smaller than if instead we followed the U.S. 401k model. This is where payouts are taxed at regular income tax rates and contributions and earnings are tax free.* But, at this point, this would be a more radical change than the Roth IRA route. Existing superannuants would have to be grandfathered or they would complain about double taxation compared to current contributors. So, it's more likely we go down the Roth IRA route.

Most likely, of course, is a relatively minor change that complicates the system further or doesn't reduce the complication such as reducing the contributions tax concession to 15% across the board. Or eliminates the up-front concession but doesn't eliminate taxing superannuation earnings.

* There are probably some equilibrium effects that reduce the difference between the two....

Hatfield Dodds et al. Nature Paper

Steve Hatfield-Dodds has published a paper today in Nature with many other CSIRO colleagues titled Australia is ‘free to choose’ economic growth and falling environmental pressures. It is the result of a integrated assessment modeling analysis of Australia and the global economy under a variety of climate policy and other scenarios.

Steve comments on the paper:

"“Our key finding is that Australia can break the links between economic growth and environmental pressure, with key pressures falling or stable while the economy more than doubles in size out to 2050.  This can be achieved through mobilising proven technologies through extensions of established policy approaches.  Our analysis suggests other countries can also ‘decouple’ economic growth from environmental damage.

We do not find, however, that environmental pressures can be reduced for free.  In most cases, reducing environmental pressure results in economic growth being a little slower than it would be in the short term, but then stronger in the long term.  In some cases – like energy efficiency – reducing environmental pressure results in stronger economic growth almost immediately.

But perhaps the most striking aspect of the results is that very large reductions in environmental pressures – including reversing the loss of native habitat in our agricultural landscapes, or achieving zero or lower net greenhouse gas emissions – have relatively modest impacts on income and living standards, whether the impacts are positive or negative.

The analysis represents a number of scientific advances, accounting for multiple aspects of resource use and environmental performance, and locating these in the context of economic activity and growth.  This allows us to explore the relationships between essential services humanity derives from nature, including energy, food, and clean water, and the environmental footprint of these services.

The analysis also explores the different kinds of choices involved in shifting towards a more sustainable future.  We find that while individual choices by businesses and households make an important contribution, policy choices are crucial.  We also find that changes in social values are
not required to make progress towards sustainability over coming decades.”

By contrast, a News and Views article in the same issue of Nature by Benjamin Bodirsky and Alexander Popp suggests that a better way forward would be " investing carbon-tax revenues in education and science, establishing markets for flexible electricity consumption, providing bicycle and public transport infrastructure and promoting healthy and sustainable diets." They argue that then less strict regulation would be needed to keep the economy within environmental boundaries. While I think this could help, I don't think it is likely to make a major contribution to the change needed by 2050.

I was asked to provide expert comment on the Hatfield-Dodds paper for a press release. I commented:

"“The paper by Hatfield-Dodds et al. is similar to many existing studies including those reviewed in IPCC reports using Integrated Assessment Models, which are simulation models of the economy and environmental impacts that result from economic development and climate policies. They claim that they include more environmental impacts and indicators than previous research.

They simulate various scenarios including existing trends where current climate policies continue both globally and in Australia and a no climate policy scenario, which they call "material intensive" and strong climate policies globally and in Australia.

In common with most existing mainstream studies they find that strong policies to abate greenhouse emissions do not prevent economic growth. This is in contrast to what they call "Communitarian Limits" approaches like Tim Jackson's book "Prosperity Without Growth" that claim that economic growth must stop in order for society to have a chance at dealing with climate change.

The surprising finding in the paper is that there are scenarios where the economy doesn't just continue to grow under a strong climate policy but that income per person is actually higher than under current trends - "Win-Win". This seems to be because Australia gains from changes in the global economy under the strong climate policies. For example, other countries pay to plant trees in Australia to capture carbon dioxide.”

Having Small Government Should Never Be a Reason for Making It Bigger

It seems that the Grattan Institute argues in its submission to the National Reform Summit that because Australia's government is relatively small by the standards of other developed countries we can or should increase its size. This argument makes no sense to me, though it seems to be often made. Perhaps other countries spend inefficiently or perhaps Australians are not interested in spending on some of the things that those countries spend on. We should look first at the outcomes we have as a country and, if there are poor outcomes that Australians would like improved, we then need to ask whether government can make a difference. Only then does it make sense to ask whether spending or taxes should be higher. I don't think this is really a political statement, as I leave open the final choice on whether to increase the size of government or not. But it makes no sense to talk about increasing the size of government simply to be nearer OECD means.

As for whether we should change the taxation arrangements for superannuation the simplest, fairest, and possibly relatively efficient  approach is to use the same approach as US 401k and 403b funds and tax payouts at normal income tax rates but not tax contributions or earnings in the accumulation stage. It's simple to show that under reasonable assumptions that this approach generates higher retirement incomes than the current Australian approach. It also has the huge advantage of reducing bureaucracy. Self managed superannuation funds are costly to run in Australia because of the need for accounting and auditing to make sure that they are paying the correct taxes. In the US, an IRA is just like another brokerage account except for the rules on contributions and withdrawals, which can be managed by the broker.

Changes at ANU

Yesterday we heard the surprising news that Brian Schmidt would be the next vice-chancellor (president) of the ANU. Here at Crawford there is change too with the recent announcement that Tom Kompas would step down as School director after five years. We will be searching for a new school director and in the interim Bob Breunig will be acting director. That means that director of the International and Development Economics Program became vacant. I have agreed to be acting director of the program while Bob is directing the School (till 15 July 2016). There is more to the program that just the Masters of International and Development Economics. We also have a Masters of Environmental and Resource Economics. Effectively, though, it is the department of economics located at the Crawford Building. Crawford also has another department of economics - the Arndt-Corden Department of Economics - located in the Coombs Building. I was based there in 2009-2010. Other changes at Crawford is that Frank Jotzo is becoming deputy director of the School and John McCarthy is replacing him as READ director. I am leaving the READ group.

Telstra Internet

Back in 2010 I reported on the speed of the internet at home in Canberra and from my office on the ANU campus.

I just moved house and because service with iiNet was so bad and getting worse we switched to Telstra internet service. The speed is much, much higher:



The download speed is more than 8 times higher and the upload speed almost 4 times higher when accessing a server in Canberra. Accessing a server in San Jose, California:



downloading is more than 5 times faster and uploading 4 times faster.

Kander et al. Paper on National Greenhouse-Gas Accounting in Nature Climate Change

Astrid Kander and coauthors at Lund and the University of New South Wales have a paper in Nature Climate Change that proposes a new way to account for embodied carbon in trade that improves on existing measures of consumption based emissions. The collaboration with UNSW was sparked when Astrid gave a presentation at Crawford School in 2012 on the topic, which was attended by Tommy Wiedmann who was then at CSIRO but moved soon after to UNSW. Astrid was visiting ANU to work on our ARC project.

The most common way to compute carbon emissions is based simply on where the emissions are produced. These are called production based emissions (PBA). It is often argued though that this approach overly penalizes countries that export emissions intensive goods and makes countries that import these goods look like their emissions are low when they benefit from emissions intensive production elsewhere. Consumption based emissions (CBA) count all the emissions produced by a country's consumption wherever in the world the goods consumed were produced. Usually, developed countries look more carbon intensive and developing countries less carbon intensive on this basis than when using production based emissions. The following Figure from Kander et al. shows that in the European Union and the USA consumption based emissions exceed production based emissions and vice-versa in China:

But if developed countries tried to produce all their imported goods at home, it is likely that their production techniques would be less emissions intensive than those in the countries that they are importing from. So, consumption based emissions accounting gives a biased view of how much developed countries have managed to reduce emissions by offshoring production. Also, if consumption based emissions were used to apportion world responsibility for reducing emissions the only strategy an importer would have to reduce emissions accounted this way is to stop importing and produce domestically which might not be economically efficient, while the exporter has no incentive to cut these emissions.

However, accounting for emissions embodied in imports based on how much carbon would be emitted if they were produced in the importing country will underestimate total global emissions and so if we want a system of apportioning emissions fairly and usefully for global climate policy purposes it is not so useful.

Kander et al.'s approach deals with the incentive issue. They measure embodied emissions in imports in the same way as conventional CBA. However, they account for exports using the world average emissions intensity for the given good to deduct emissions from exporters instead of deducting the actual emissions produced. This reduces the emissions total for exporters who produce in a low emissions intensive way and increase the emissions of emissions intensive exporters compared to CBA. These technology adjusted consumption based (TCBA) emissions do sum to world total emissions. All exporters now have an incentive to reduce their exports emissions intensity if they were held responsible for their TCBA emissions. The resulting TCBA per capita emissions are shown in the map below and the graphs above.

On this basis emissions per capita in Europe are even less than production based emissions while in the USA they are similar to consumption based emissions. Australia also doesn't look too good on the map. On the other hand, in China TCBA emissions are intermediate between CBA and PBA emissions. The strong performance of Europe is because they have lower than average emissions intensity for the products they export. The latter means that world average emissions for those products is deducted from Europe's balance but their actual emissions for producing those products is lower than that.

The biggest "winners" are Austria, Ireland, and Belgium, which look much more emissions intensive under CBA than under PBA but much less emissions intensive under TCBA.

Astrid discusses the rationale for their approach further in this news article.

How Has Research Assessment Changed the Structure of Academia?

Does measuring something change it?  In quantum mechanics measurement disturbs what is being measured, which is referred to as the observer effect. The same is often true in social systems, especially of course when measurement is attached to rewards. The UK and Australia have been conducting periodical research assessment exercises - the REF and ERA. In the case of the UK, research assessment started almost three decades ago. In Australia, the first research assessment was only conducted in 2010 but the founding of the ARC in 1988 and its independence in 2001 are both milestones in the road to increased emphasis on competition in research in Australia.

Johnston et al. (2014) show that the total number of economics students has increased in UK more rapidly than the total number of all students, but the number of departments offering economics degrees has declined, particularly in post-1992 universities. Also, the number of universities submitting to the REF under economics has declined sharply with only 3 post-1992 universities submitting in the latest round. This suggests that the REF has driven a concentration of economics research in the more elite universities in the UK. BTW the picture above is of the Hotel Russell, which the Russell Group of British universities is named after.

Neri and Rodgers (2014) investigate whether the increased emphasis on research in Australia has had the desired effect in the field of economics. They investigate the output of top economics research by Australian academics from 2001 to 2010. By constructing a unique database of 26,219 publications in 45 top journals, they compare Australia’s output internationally, determine whether Australia’s output increased, and rank Australian universities based on their output. They find that Australia’s output, in absolute and relative terms, and controlling for differences in page size and journal quality, increased and, on a per capita basis, is converging to the levels of the most research-intensive countries. Finally, they find that the historical dominance of the top four universities is diminishing. The correlation between the number of top 45 journal articles published in 2005-2010 and the ERA 2012 ranking is 0.83 (0.78 for 2003-8 and ERA 2010).

References

Johnston, J., Reeves, A. and Talbot, S. (2014). ‘Has economics become an elite subject for elite UK universities?’ Oxford Review of Education, vol. 40(5), pp. 590-609.

Neri, F. and Rodgers, J. (2014). ‘The contribution of Australian academia to the world’s best economics research: 2001 to 2010’, Economic Record.

Peer Review vs. Citation Analysis in Research Assessment Exercises

Existing research finds strong correlations between the rankings produced by UK research assessment exercises (RAE) and bibliometric analyses for several specific humanities and social science disciplines (e.g. Colman et al., 1995; Oppenheim, 1996; Norris and Oppenheim, 2003) including economics (Süssmuth et al., 2006). Clerides et al. (2011) compare the 1996 and 2001 RAE ratings of economics departments with independent rankings from the academic literature. They find RAE ratings to be largely in agreement with the profession’s view of research quality as documented by independent rankings, although the latter appear to be more focused on research quality at the top end of academic achievement. This is because most rankings of departments in the economics literature are based on publications in top journals only, which lower ranked departments have very few of.

Mryglod et al. (2013) analyse the correlations between the values of Thomson Reuters Normalised Citation Impact (NCI) indicator and RAE 2008 peer-review scores in several academic disciplines, from the natural to social sciences and humanities. The NCI computes the normalized impact factor across a unit of assessment (an academic discipline at a given university) in the RAE based on only the publications actually submitted to the RAE. Mryglod et al. (2013) compute both average (or quality) and total (or strength) values (average multiplied by number of staff submitted to the RAE) of these two indicators for each institution. They find very high correlations for the strength indicators for some disciplines and poor correlations at for the quality indicators for all disciplines. This means that, although the citation-based scores could help to describe institution level strength (which is quality times size), in particular for the so-called hard sciences, they should not be used as a proxy for ranking or comparison of research groups. Moreover, the correlation between peer-evaluated and citation-based scores is weaker for the “soft” sciences. Spearman rank correlation coefficients for their quality indicators range from 0.18 (mechanical engineering) to 0.62 (chemistry). However for strength the correlations range from 0.88 (history and sociology) to 0.97 (biology). This is because quality is correlated with size and so the two factors reinforce each other.

Mryglod et al. (2014) attempt to predict the 2008 RAE retrospectively and the 2014 Research Excellence Framework (REF) before its results were released. They examined biology, chemistry, physics, and sociology. Of the indicators they trialled, they found that the departmental h-index had the best fit to the 2008 results. Departmental h-index is based on all publications published by a department in the time window assessed by the relevant assessment exercise. The rank correlation ranged from 0.83 in chemistry to 0.58 in sociology. They find that the correlation with the RAE for the immediate h-index is as good as the correlation in later years with the h-index of the same set of publications.

Bornmann and Leydesdorff (2014) argue that one of the downsides of bibliometrics as a research assessment instrument is that citations take time to accumulate while research assessment exercises are designed to assess recent performance:

“This disadvantage of bibliometrics is chiefly a problem with the evaluation of institutions where the research performance of recent years is generally assessed, about which bibliometrics—the measurement of impact based on citations—can say little…. the standard practice of using a citation window of only 3 years nevertheless seems to be too small.” (1230)

They argue further that bibliometrics:

“can be applied well in the natural sciences, but its application to TSH (technical and social sciences and humanities) is limited.” (1231)

But rather than assuming that peer review is the preferred approach to research assessment and citation analysis should only be used to reduce cost, we can ask whether the review conducted by research assessments such as the REF and the Australian ERA meets the normal academic standards for peer review. Research does show that peer review at journals has predictive validity for the citations that will be received by accepted papers compared to those received by rejected papers. However, evidence for the predictive validity of peer review of grant and fellowship applications is more mixed (Bornmann, 2011). Therefore, further research is warranted on the use of citation analysis to rank academic departments or universities in research assessment exercises. Sayer (2014) argues that the peer review undertaken in research assessment exercises does not meet normal standards for peer review. He compares university and national-level REF processes against actual practices of scholarly review as found in academic journals, university presses, and North American tenure procedures. He finds that the peer review process used by the REF falls far short of the level of scrutiny or accuracy of these more familiar peer review processes. The number of items each reviewer has to assess alone means that the review cannot be of the same quality as reviews for publication. And reviewers will have to assess much material outside their area of specific expertise. Sayer argues that though metrics may have problems, a process that gives such extraordinary gatekeeping power to individual panel members is far worse.

Given the large number of items that panels need to review they are likely to focus on the venue of publication and at least in business and economics handy mappings of journals to REF grades exist (Hudson, 2013). Regibeau and Rockett (2014) build imaginary economics departments entirely composed of Nobel Prize winners and evaluate them using standard journal rankings geared to the UK RAE. Performing the same evaluation on existing departments, they find that the rating of the Nobel Prize departments does not stand out from other good departments. Compared to recent research evaluations, the Nobel Prize departments’ rankings are less stable. This suggests a significant effect of score “targeting” induced by the rankings exercise. They find some evidence that modifying the assessment criteria to increase the total number of publications considered can help distinguish the top. But if departments composed entirely of Nobel Prize winners perform worse than current departments then it is hard to know what such assessment means.

Sgroi and Oswald (2013) examine how research assessment panels could most effectively use citation data to replace peer review. They suggest a Bayesian approach that uses prior information on where a item was published combined with observations on citations to derive a posterior distribution for the quality of the paper. We could then estimate, for example, what is the probability that a paper belongs in the 4* category given where it was published and the early citations it has received. Stern (2014) and Levitt and Thelwall (2011) show that the journal impact factor has strong explanatory power in the year of publication but that this declines very quickly as citations accumulate. So, this approach would be most useful for papers published in the last year or two before the assessment, but for earlier research outputs the added value over simply counting citations would be minimal.

References

Bornmann, L. (2011) ‘Scientific peer review’, Annual Review of Information Science and Technology, vol. 45, pp. 199‐245.

Bornmann, L. and Leydesdorff, L. (2014). ‘Scientometrics in a changing research landscape’, EMBO Reports, vol. 15(12), pp. 1228–32.

Clerides, S., Pashardes, P. and Polycarpou, A. (2011) ‘Peer review vs metric-based assessment: testing for bias in the RAE ratings of UK economics departments’, Economica, vol. 78(311), pp. 565–83.

Colman, A. M., Dhillon, D. and Coulthard, B. (1995) ‘A bibliometric evaluation of the research performance of British university politics departments: Publications in leading journals’, Scientometrics vol. 32(1), pp. 49-66.

Hudson, J. (2013). ‘Ranking journals’, Economic Journal, vol. 123, pp. F202-22.

Levitt, J.M. and Thelwall, M. (2011). ‘A combined bibliometric indicator to predict article impact’, Information Processing and Management, vol. 47, pp. 300–8.

Mryglod, O., Kenna, R., Holovatch, Y. and Berche, B. (2013). ‘Comparison of a citation-based indicator and peer review for absolute and specific measures of research-group excellence’, Scientometrics, vol.97, pp. 767–77.

Mryglod, O., Kenna, R., Holovatch, Y. and Berche, B. (2014). Predicting Results of the Research Excellence Framework Using Departmental H-Index, arXiv:1411.1996v1.

Norris, M. and Oppenheim, C. (2003) ‘Citation counts and the research assessment exercise V: Archaeology and the 2001 RAE’, Journal of Documentation, vol. 59(6): pp. 709-30.

Oppenheim, C. (1996) ‘Do citations count? Citation indexing and the research assessment exercise’, Serials, vol. 9, pp. 155–61.

Regibeau, P. and Rockett, K.E. (2014). ‘A tale of two metrics: Research assessment vs. recognized excellence’, University of Essex, Department of Economics, Discussion Paper Series 757.

Sayer, D. (2014). Rank Hypocrisies: The Insult of the REF. Sage.

Sgroi, D. and Oswald, A.J. (2013). ‘How should peer-review panels behave?’ Economic Journal, vol. 123, pp. F255–78.

Stern, D.I. (2014). ‘High-ranked social science journal articles can be identified from early citation information’, PLoS ONE, vol. 9(11), art. e112520. 

Süssmuth, B., Steininger, M. and Ghio, S. (2006) 'Towards a European economics of economics: Monitoring a decade of top research and providing some explanation', Scientometrics, vol. 66(3), pp. 579-612.

Odds of Becoming a Professor

This graphic is from a 2010 UK report and is based on UK data. Only 0.45% of PhDs eventually become a full professor. I didn't think the odds were quite that low. Of course, as in Australia, full professor is a higher rank than it is in the US as we have 4 rather than 3 academic ranks. Another interesting report I recently saw on Australian PhDs. Apparently in 2011 Australia graduated about 7000 PhDs which is about 1/7 of the US figure, even though Australia has 1/15 of the US population. And the number of students starting PhDs in the year was 11,000.

Interested in Graduate Study at ANU?

Come along to the information evening next week at University House. At 6:30pm in the Common Room, Frank Jotzo, Amanda Smullen, Paul Burke, and Sue Thompson will talk about what you can study and why at the Crawford School.

Frank Jotzo Responds to Danny Price

Frank has an op ed in today's Australian Financial Review - responding to Danny Price's op-ed last Wednesday which I also commented on, on this blog, last week. Here is a non-paywalled version of Frank's op-ed.

New ANU Open Access Policy

ANU researchers are now required to submit all published research outputs to our institutional open access repository. Details of the policy are here. Material should be submitted here. Previously, this was on a voluntary basis. Holders of ARC grants would have needed to justify why outputs of their project were not available on an open access basis. As in economics we have a very strong working paper culture this seems unnecessary. But that isn't the case in other disciplines and I guess a one size fits all policy is easier to implement and enforce.

Direct Action vs. Carbon Pricing

There was an op-ed in yesterday's Australian Financial Review by Danny Price criticising the 59 economists including me who agreed to sign a statement in favour of carbon pricing and praising direct action. First, a clarification. By signing that statement we were not endorsing the previous Labor government's Emissions Trading Scheme. We were simply endorsing some pricing mechanism on carbon. Price criticises carbon pricing because of the "cost to the broader economy of any tax". Here he seems to be referring to the tax interaction effect. Where there are existing distorting taxes,  a new tax interacts with these and increases the costs of the new tax beyond the amount of the direct costs involved with abating pollution. The advantage of a carbon tax is that the revenue from the tax can allow the government to cut existing distorting taxes and reduce of offset this effect. This is known as a "green tax reform" and was much discussed in the so-called "double dividend debate". But imposing a regulatory cap on emissions (and issuing free tradeable permits) results in the same increased costs in the presence of existing distortionary taxes. So, this is why economists generally recommend auctioning emissions trading permits rather than giving them away.* This raises revenue allowing other distortionary taxes to be cut. Direct action is effectively a cap on emissions where the government subsidizes firms reducing emissions through a reverse auction. But this uses government revenue and doesn't allow the cutting of other taxes unless the government budget is cut drastically, which doesn't look like happening. If other spending isn't cut at all then the government will have to increase the existing distortionary taxes. So, direct action is worse than a carbon tax or traded permits on this basis. However, Price says that under direct action the government only imposes one dollar of costs on the economy for every dollar spent. This seems to be incorrect.

On top of that are the problems of the incentives for firms to inflate the baseline from which they claim they will reduce emissions.

So, I'm still in favor of carbon pricing of some sort though I think there are also important problems with emissions trading schemes that only provide a very volatile short-term price signal. The article by Ottmar Edenhofer in the latest issue of Nature Climate Change discusses some of these issues.

* I've argued that the Australian scheme failed because due to objections by the Greens, not enough free permits were given away allowing the scheme to be characterised as a "huge tax". The Australian scheme was less generous than the European scheme. But any such giveaway should be a transitory policy that would be replaced by more auctioning of permits over time.

Top Twenty Carbon Emitters, Coal Consumers, and Coal Producers

Some slides from my upcoming introductory lecture for my Energy Economics course:

This slide uses CDIAC data on the top twenty countries by emission of carbon dioxide globally in 2010. Carbon dioxide emissions here include only those from fossil fuel combustion and cement production. I also have summed up the emissions from the European Union and added it as if it was a single country (as the EU negotiates as a bloc) in addition to including all its member countries in the ranking. The three big emitters stand out clearly from all the rest. Emissions are measured by mass of carbon. To get carbon dioxide multiply by 3.66.

 

Of course, coal use is a big driver of CO2. This chart shows how China consumers so much more coal than any other country and after the US and India, the rest look pretty inconsequential.

 

On the whole, coal is consumed where it is produced with two important exceptions - Indonesia and Australia - the two biggest coal exporters. China produces the overwhelming majority of the coal it uses despite large imports. The majority of Australian exports are coal for iron smelting, so-called "metalurgical coal".

Economists Statement on Carbon Pricing

My name is included in the list of economists supporting a statement on carbon pricing released by WWF Australia. The statement is a little vague I think to maximize the number of people who would be willing to sign up. I think a price on carbon is a very useful part of a climate change policy. It can provide an incentive for finding cost-effective solutions, which otherwise might not be found. I favor a carbon tax now over emissions trading but the statement leaves that open. This seems to be where mainstream opinion is now heading.

Canberra is the Best Place to Live in the World According to the OECD

Australia is the best country and the ACT is the best region in Australia. I checked the OECD website, and giving equal weight to each of the criteria the OECD ranks, the ACT is the highest scoring region in the world. Of course, that is not how most Australians see it. I met an Australian woman at JFK airport last week while waiting to take the train and she asked me where I lived. When I answered: "Canberra", she said: "Why would you do that to yourself?"