Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
DCC ROUNDTABLE ON ECONOMIC INSTRUMENTS FOR CLIMATE CHANGE ADAPTATION 27 AUGUST 2008 Climate Change Adaptation Needs Actors and Measured Benefits Jack Pezzey Fenner School of Environment and Society, ANU Caveats My first venture into economics of climate change adaptation (CCA), though experienced in economics of climate change mitigation (CCM) Only 15 hours of reading went into this Aimed at challenging assumptions and provoking discussion, rather than accuracy Agenda Two hypotheses, with quotes from literature Six examples of alternative government CCA policies Survey of international, federal and state CCA documents First hypothesis: "Paralysis of the passive", with danger of crowding out ● In Oz policy documents on CCA, far too little thought given so far to which actors are to do various CCA actions actions are to be done (by "we"), but who are "we"? ● Many answers should come from standard economic analysis: government should do CCA (planned adaptation) which gives public benefits, but should leave individuals and businesses to do CCA (autonomous adaptation) which gives private benefits ● Government spending on CCA with private benefits will crowd out (prevent, at much higher cost) autonomous CCA Second hypothesis: Too little thought given to measuring public benefits of CCA ● Too little thought given to what type of public benefits expected from planned CCA, and whether they're big enough to justify cost of CCA ● Generally true of CCA to maintain iconic Australian ways of life ● Particularly true of CCA to maintain current patterns of (human) population and population growth ─ because avoids difficult but needed debates on which communities will inevitably shrink, or must not grow, because of CC? Statements from literature ● Fankhauser et al. (1999) "...main role for government...to provide the right legal, regulatory and socio-economic environment to support autonomous adaptation..." "Providing the right incentives is therefore key..." "...provision of public goods is also a typical area [for] government...." ● McKibbin & Wilcoxen (2003) "role for government...is not to mandate...an amount of adaptation at some point in the future ... Government needs to concentrate on creating and preserving property rights and appropriately regulating markets. It should focus on where public goods exist and where markets may not produce the socially desirable outcomes. It should focus on where there are serious coordination failures such as in federal and state relations..." Examples of alternative CCA policies ● Alpine ski industry ● Coastal development in Australia ● Biodiversity in the Alpine regions ● Agriculture in the Murray-Darling Basin ● Canberra January 2003 bushfire ● Federal immigration policy Alpine ski industry (a) Governments do nothing but provide best available information from climatic research about the likely future effect of CC on reducing skiable snow. Ski resorts adapt by spending more on snowmaking, and passing on the costs to skiers as higher prices. Skiing, and local employment and population, gradually shrinks over: autonomous CCA. (b) Because of a impression given to voters that it will maintain rural population and employment despite CC, government feels obliged to subsidise snow-making, at ever-rising cost. Local employment and skier visitation remains constant: autonomous CCA has been crowded out. Coastal development in Australia (a) Government requires all new homes to have flood insurance, thus creating demand. Supply from insurers is enabled by risk information publicly available. Builders choose not to build in highest risk coastal areas, because buyers will not pay required insurance premiums. Future floods in coastal areas cause less damage because no new homes in the riskiest areas: autonomous adaptation. (b) Government assures all homeowners will receive compensation if flooded, thus crowding out insurance demand. Builders build new homes irrespective of flood risk; future floods inundate thousands more homes than under (a); compensation costs to taxpayers are enormous. BUT does CC uncertainty make some climate risks uninsurable? Biodiversity in the Alpine regions Rare plants and animals in Australia's alpine region clearly have public value, which justifies some taxpayer spending on research into what CCA actions might be possible However, some (fairly cheap, economic) research into the $$ scale of such values may inform $$ scale of expensive, scientific research. Seems likely that for some species nothing will be possible, and extinction is unavoidable; if so, should be explicit, since then need to end some hopeless lines of research. Agriculture in the Murray-Darling Basin (a) Government provides nothing more than the best available climatic information. Industry declines even faster than now (→ more than 1.5%/yr popn declines over last 5 yr in 13 local govt areas in W NSW): pure autonomous CCA. (b) Government gives disguised subsidies, e.g. assistance for (no longer) Exceptional Circumstances, or for investment in more water-efficient irrigation systems (Wong 2008b). Because subsidies disguised, less incentive to make them efficient in aim of slowing autonomous population decline. (c) As (b), but govt explicitly states iconic value of MurrayDarling farming populations → better value subsidies? Canberra January 2003 bushfire ● Would less homes have been burnt if more CCA planning, both within and between NSW and the ACT, had led to delegation by the ACT of its firefighting authority to NSW under certain climatic conditions? ● Were data on fire risks in streets next to pine plantations available to insurance companies? Would they have led to higher insurance premia, and thus pressure from Duffy residents to have the plantation removed? ● Or were conditions of January 2003 bushfire essentially unforeseeable, because of CC? Federal immigration policy ● Immigration is main source of popn. growth in fastest-growing areas like Sydney Basin and S.E. Qld, & could greatly worsen water shortages as CC reduces supplies. ● So surely a need to debate immigration policy in context of CCA. But nothing on DIAC website; no mention of CC at all ● Suggest reason for lack of debate is over-reporting of benefits of immigration, in two main ways: reporting effect on total not per person economic output; failing to distinguish (+ve) effects on people who currently own land and/or businesses from (-ve) effects on those who don't Quick, incomplete survey of CCA policies ● IPCC (2007, 4th Assessment Report, Working Grp II): Very little on autonomous CCA, nothing on crowding out ● DCC (current webpage on How to adapt): "businesses, governments and the community" are advised (without differentiation) to "Plan early / Be systematic and strategic / Use the best information / Be flexible" No mentions of: autonomous CCA, crowding out, population or immigration policy, or even link to: ● COAG (2007 Climate Change Adaptation Framework) No mention of autonomous CCA, crowding out, or population/ migration other than as a force of nature ● NSW (webpage on Adapting to climate change): No mentions of: roles and responsibilities, autonomous CCA, crowding out, but there is a link to COAG CCAF ● ACT (webpage on Climate Change Policy - Our Challenge) "We need...to adapt to the changes that will occur. This is a challenge the whole ACT community must embrace." (the entire policy) ● QLD (2007 ClimateSmart 2050 document) Focuses more on CCM; makes no mention of autonomous CCA, crowding out, or human migration / population other than as a force of nature. ● VIC (2008, A Climate of Opportunity document): Substantial discussion of responsibilities, autonomous CCA: "To effectively address climate change, all levels of government need to establish shared goals, with a clear division of responsibility. ... "Where there are private benefits, individuals and businesses are generally best placed to manage some risks and therefore should take reasonable steps to manage their exposure to climate change risks." ─ but many details of responsibilities and benefits TBA