First, from the actual speech, on issues in measuring the costs and benefits of climate change mitigation:
. . .the case for action is not made simply by comparing the cost of unmitigated climate change with the cost of mitigation. The relevant comparator is the reduction in the cost of climate change that is achieved as a result of the mitigation action. If we are evaluating Australian mitigation action, the reduction in costs of climate change that is relevant is that associated with the total global mitigation action that it enables – either by Australia, or by the set of countries which are undertaking joint action.
. . .Is there tension between our normative (what should be done) and positive (what seems to happen in markets) view of discounting for the future? Should we treat the interest rates generated in financial markets as market failures?
Global economic slowdown
Somebody asked the question whether a global slowdown would increase the costs of climate change mitigation. Ross points out that the current slowdown is mostly in the United States and that the drivers of growth are elsewhere in Asia. Australia, PNG , China and India continue their robust growth. World average growth will be somewhat slower, mainly because of the US, but that won’t materially affect climate change outcomes.
Food prices
Another question was asked about the link with food prices and the current crisis. In climate change mitigation, the finite nature of resources is mainly a problem for food prices, and not for fossil fuels as fossil fuel prices move in the same direction as we would want for climate change mitigation. Ross, in response to another question, observed that high food prices unambiguously reduce the welfare of the poor in developing countries. A discussion of this can be found in previous post on this blog. The reason is that a huge number of poor in developing countries are now living in urban areas and land is no longer owned by just the poor in these countries. There was a time when the effect would be ambiguous (what the previous post pointed to). Ross is also chair of the International Food Policy Research Institute based in Washington.
Separately he said that a well functioning emissions trading scheme(ETS) would have prevented the problem of food price rises from ethanol based food price inflation.
Ross noted that Senator Obama’s website states that Obama’s policy is to cut emissions by 80per cent in 2050 with 100per cent of permits auctioned. This would be good for America he said, refusing to be drawn on these targets for Australia.