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Climate Change Scepticism: It’s the Economy, Stupid

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I’m sceptical that climate change scepticism is simply a matter of scientific ignorance. While it may be true for some climate change sceptic individuals, I don’t think it is representative. The scientific community doesn’t agree with me. Scientists think the answer to this knowledge ‘deficit’ is to provide even more scientific information. This ‘deficit model’ of scientific communication assumes that climate change sceptics are ignorant and will change their views if they are simply plied with more information. However, it does not take into account that all people interpret scientific information in subjective ways, usually in ways that reinforce their prevailing views on the matter. Essentially, scientific information does not deal with people’s concerns on how climate change policy measures would impact their economic well-being.

This is being played out in Australia at the moment as the current Federal Government works to dismantle the previous climate change policy framework that sought to encourage renewables and impose a carbon tax. For example, the Renewable Energy Target (RET) review advises that support for large- and small-scale renewable projects be reduced. Despite this advice, the Prime Minister has requested “…more work on the option of terminating the target altogether”. This is despite the ambiguous effect this will have on electricity prices and the threat to $11 billion of renewable energy investment. However, it is clear from economic modelling commissioned by the Climate Institute, owners of coal-fired generators would benefit $25 billion between 2015 and 2030. Clearly, there are high economic stakes in dismantling the Australian climate change policy framework.

The problem with the previous climate change policy framework is that it created winners and losers, or a zero sum game. Business knew this and some businessmen enthusiastically supported the current Prime Minister’s campaign to ‘axe the tax’. This is despite generous compensation arrangements built into the climate change policy to compensate ’emissions-intensive and trade exposed’ industries. The losers from the carbon tax could only see downside. Naturally, this encouraged them to lobby to seek the removal of the carbon tax. Likewise, with the attempt to terminate the RET, owners of coal-fired generators will be the big winner while renewables and the environment will be the losers.

Given this bleak Australian experience with the wicked political-economy of implementing meaningful carbon pricing, is there any hope that governments can do anything to control carbon? Actually, there is and it is from the Canadian province of British Columbia. In 2008, British Columbia introduced a ‘revenue-neutral’ carbon tax that replaced corporate and income taxes as the carbon tax rose CAD5 a year from CAD10 to CAD30 in 2012. The carbon tax was levied on fuel and was successful in reducing per capita consumption by 16% during this period. In contrast, per capita fuel consumption rose by 3% in the rest of Canada. Furthermore, the carbon tax didn’t ‘clobber the economy’ – in fact per capita income rose slightly more in British Columbia at 1.75% during 2008-12 compared to 1.28% in the rest of Canada. What about the wicked political-economy? While there was initially a campaign to ‘axe the tax’ by the opposition New Democratic Party, and specific industries did suffer (e.g. cement), political support actually rose for the carbon tax. The British Columbia carbon tax is so popular that the New Democratic Party actually criticised the governing Liberal Party for freezing the tax. So, the British Columbia carbon tax provides a positive example for policy-makers who are seeking to craft their own carbon tax that can build support among business and voters.

While climate change scepticism, if it is based on economic anxiety,  is a key barrier to introducing carbon pricing and other climate change policy measures, the British Columbia and Australian examples demonstrate that avoiding creating a zero sum game between winners and losers is key to overcoming the wicked political-economy of climate change. This is unlikely to convince all sceptics. But it would help remove anxiety of the economic impact of a carbon tax as a barrier to implementing one. The British Columbia does this by not shrinking the pie, but actually letting the pie grow. Surely, that is a better outcome for business, tax-payers and the environment.