Economics

The price of emitting one tonne of CO2 in Europe fell from €30 last Monday to €16.50 on Thursday. This followed news that France, Estonia, the Netherlands, the Czech Republic and the Walloon region of Belgium all had a surplus of carbon credit, pulling down the price.

The carbon trading scheme was launched in Europe in January 2005 to limit total carbon emissions under the Kyoto Protocol.

It is good news for the environment if countries are coming in under target – it means they are emitting less carbon dioxide than predicted.

However, some countries are expected to not have enough carbon credits including Britain, Germany, Spain, Italy and Portugal. These countries have to report by the 15th May.

Will they push the price back up?

You can read more at Reuters, click here.

I am fascinated by China’s growth and wonder about the impact of all this development on the local and global environment. The ‘2006 Index of Leading Environmental Indicators: The Nature and Sources of Ecological Progress in the US and the World’ by Steven Hayward at the Pacific Research Institute has an interesting section on China as a case study with some data on air quality and land reserved. The study also suggests that environmental concern is driving political reform:

“Environmental calamities may have become the principal source of political unrest and turbulence in China. In April the New York Times reported on a major riot in the southeastern province of Zhejiang where a crowd of up to 60,000, burned police cars, smashed windows, and injured more than 30 government workers in protest of pollution from nearby chemical plants. The Washington Post followed up on the story in June, reporting that the violent protest, which apparently routed the Chinese government authorities in the region, was at least partially successful: six chemical facilities were shut down or relocated.

This protest is reportedly just one of many occurring frequently in China in the last few years. In July, the New York Times reported another environmental protest in Xinchang, a city 180 miles south of Shanghai, where an estimated 15,000 people rioted for three days “in a pitched battle with authorities, overturning police cars and throwing stones for hours, undeterred by thick clouds of tear gas.”

The object of their ire was a 10-year-old pharmaceutical plant, which the protestors wanted closed or relocated. News of environmental protests spread rapidly across the Internet, spawning imitators throughout the nation on a large—perhaps massive—scale. The Times reported that there are “government figures” showing 74,000 incidents of mass protest in China in 2004 (not all of them necessarily environmentally related). In early December, a protest against a proposed wind-power project turned deadly as Chinese security forces fired on a crowd, killing 10 people.

Hayward goes on to suggest that environmental catastrophies have driven political reform in other parts of the world:

“The Songhua River spill [in China] might be likened to the Cuyahoga River fire of 1969, which was one of the galvanizing events in the rise of the modern environmental movement in the U.S.. In a nutshell, the public outcry over the Cuyahoga River (which had experienced fires several times before with little public fanfare) showed that the affluent society no longer wished to be the effluent society. Certainly rising middle-class consciousness is involved with the popular protests about environmental calamity in China.

Perhaps the better comparison is with the 1986 Chernobyl nuclear accident in the Soviet Union, which helped galvanize political liberalization under Mikhail Gorbachev. As has been demonstrated in numerous transnational studies, there is a strong correlation between various indices of political freedom and environmental performance.24 If China responds to its environmental challenges with administrative decentralization and greater use of market mechanisms and property rights, who knows where it might lead.”

I am interested in reliable sources of information on the state of the environment in China, particularly information on surface and ground water. Is there a best reference?

I received the following note from a policy officer at the Victorian Farmers Federation:

“This may be of interest as it relates directly to your work regarding the importance of scientific accountability. It’s an extract from the Victorian Farmers Federation’s 2006-07 Pre-Budget Submission to the Victorian State Government. It can be found at www.vff.org.au.

2.4 Expansion of the Auditor-General’s Office

Environmental policies which are adopted, implemented and funded by government should always be based on credible scientific data. Unfortunately, all too often, government decisions in relation to environmental issues are made on the basis of political imperatives, rather than substantiated scientific evidence.

The Victorian farm community is extremely concerned with this changing trend in government decision making, as we believe it is a nationwide phenomenon which is affecting governments of all political persuasions. While this disquiet was initially founded upon concerns about poor policy development, we are now becoming more worried about the increasing cost of implementing and maintaining questionable environmental policies based on limited scientific justification.

A recent example of this problem in practice is the current situation facing farmers in Victorian in regards to our State’s native vegetation regulations. To date, neither the policies nor the regulations have ever been thoroughly audited by any notable authority. Despite the government’s insistence on enforcing the regulations implementation, the farm community has never been informed of what the true cost of this policy is, and if there has been any genuine attempt to quantify the environmental benefits which are supposedly to have resulted from its implementation.

It is the view of the VFF that environmental policies such as this should be subjected to a cost-benefit analysis which would investigate the true price of maintaining such a policy, with comparisons made to the expected community value attributed to its ongoing enforcement. Unfortunately, while the farm community would warmly welcome such an initiative, no organisation within government is currently equipped or empowered to undertake such a task.

As a result, the VFF would like the State Government to expand the functions, mandate and powers of the Auditor-Generals Office so that it can conduct regular audits of the scientific environmental advice and outcomes provided to and overseen by Government departments, agencies and statutory authorities.

The Auditor-Generals Office currently reports ‘to parliament and the community on the efficient and effective management of public sector resources, and provides assurance on the financial integrity of Victoria’s system of government[1]’. We believe that with adequate funding, support and direction, such an organisation would be ideally suited to conduct this important task.

Recommendation:
That the State Government expand the functions, mandate and powers of the Auditor-General’s Office to include regular audits of:
1. The scientific environmental advice provided to Government by various agencies and statutory authorities, and;
2. The environmental outcomes achieved by Department initiated programs.”

This submission seems rather relevant in the context of the following recent blog posts:
1. Exaggerated salinity predictions and absence of auditing of spending on salinity.
2. Spending on environmental flows to the Macquarie marshes given the levies on private land preventing water getting to the southern and northern nature reserves.

Following is a note from Phil Done, a reader and regular commentator at this blog:

“A recurrent theme on the blog in the great battles of good versus evil is that that free markets are wonderful efficient mechanisms and economic growth is a good thing. But is a big fat Gross National Product the meaning to life.

Does the GNP represent the environment, our heritage, our culture and our true happiness?

The New Economist reports:

“The hippies, the Greens, the road protesters, the downshifters, the slow-food movement – all are having their quiet revenge. Routinely derided, the ideas of these down-to-earth philosophers are being confirmed by new statistical work by psychologists and economists.

First, surveys show that the industrialised nations have not become happier over time. Random samples of UK citizens today report the same degree of psychological well-being and satisfaction with their lives as did their (poorer) parents and grandparents. In the US, happiness has fallen over time. White American females are markedly less happy than were their mothers.

Second, using more formal measures of mental health, rates of depression in countries such as the UK have increased. Third, measured levels of stress at work have gone up.

Fourth, suicide statistics paint a picture that is often consistent with such patterns. In the US, even though real income levels have risen sixfold, the per-capita suicide rate is the same as in the year 1900. In the UK, more encouragingly, the suicide rate has fallen in the last century, although among young men it is far greater than decades ago.

Fifth, global warming means that growth has long-term consequences few could have imagined in their undergraduate tutorials.

None of these points is immune from counter-argument. But most commentators who argue against such evidence appear to do so out of intellectual habit or an unshakeable faith in conventional thinking.

Some of the world’s most innovative academics have come up with strong evidence about why growth does not work. One reason is that humans are creatures of comparison. Research last year showed that happiness levels depend inversely on the earnings levels of a person’s neighbours. Prosperity next door makes you dissatisfied. It is relative income that matters: when everyone in a society gets wealthier, average well-being stays the same.

A further reason is habituation. Experiences wear off. …Those who become disabled recover 80 per cent of their happiness by three years after an accident. Yet economics textbooks still ignore adaptation.

A final reason is that human beings are bad at forecasting what will make them happy. In laboratory settings, people systematically choose the wrong things for themselves.”

Economic theory has a concept called utility. If I give you $1M you’ll be really happy. $2M even happier. But as you go up with incremental millions your happiness does not keep increasing linearly. It tails off (except for Joe).

Most people of course don’t get off the linear part of the curve -like me!

But it’s more than that – our decisions need other values than economics built in.

Like http://www.globalideasbank.org/site/bank/idea.php?ideaId=3257.

Led by its young king, King Jigme Singye Wangchuck, the kingdom of Bhutan is the only country in the world to measure its wellbeing by Gross National Happiness (GNH) instead of Gross National Product (GNP). This unorthodox approach is a serious attempt to question the values of unbridled economic progress, and foreground the importance of maintaining a balance between tradition and modernisation. Bhutan has followed a cautious path of development since the 1960s, with the intention of preserving its heritage and culture and protecting its environment.

GNH is an official policy of the kingdom, having been passed in parliament, and it is perhaps best illustrated by some examples from Bhutan which prove that happiness really does take precedence over economic prosperity there. The country limits the number of tourists that are able to visit it, because the Bhutanese had complained that the environment was being affected and sacred lands were being spoiled. The limiting was therefore aimed at increasing the ‘happiness’ of these people. Similarly, demonstrating that the concept of GNH is inextricably connected to accountability, anyone with a grievance can go to the king himself and get a hearing.

The policy of GNH, as well as focusing on cultural promotion and good governance, also aims to put an end to ‘spiritual hunger’. Material and technological progress is not rejected or banned, but it must not be to the detriment of the value of human life, and humanity’s soul. So the new policy has a spiritual aspect to it, as well as an eminently sensible accountability aspect. Mental and psychological wealth are genuine considerations in Bhutan. Happiness is more important than monetary wealth.

Should we in Australia replace the GNP with the GNH?

Or even better Ian Mott should enshrine the GNH as the prime statistic for the new happy state of Tropicana.

I reckon this blog being the innovative forum that it is (this obsequious grovelling should stop me getting deleted for a week) could lead a national revolution on use of the GNH. We could use it as a mediating concept in environmental disputes. No more taking greenies to court or chaining yourself in front of bulldozers – we would simply use a GHM (global happiness model) to optimise a mutually compatible and happy solution using multiple ensemble runs to explore the happiness chaos space under a variety of future happiness growth scenarios using a model of appropriate happiness sensitivity.

We would ask Ian Castles as the special envoy representing the stats office as a post-retirement fellow (having sorted out those SRES chappies and feeling very happy) to conduct a “basket of goods” type survey on happy indicators. You wouldn’t ask the Land and Water Audit or the IPCC as happiness might be going up when they tell you it’s going down?

Maybe happiness is affected urban heat islands? Would Warwick Hughes be happy with our happiness measurements? Would Louis insist there was an abiotic theory of happiness? Could Motty define happiness on the back of envelope. Would Ender insist on renewable happiness. And would Thinksy explore the inner semantic nature of happiness. Joe would be happy trading derivatives in higher happiness. If all else fails – Detribe could implant us with genetically engineered happiness.

And you would have to compensate for Rog being happy to be unhappy.

Be happy!“

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Thanks Phil.