Election 2013: Day 11 (or, my thought bubble is more concrete than yours)

And so today Kevin Rudd hoped on a plane and went north with a plan. He was the man with a plan. And being a man with a plan in a plane heading north is a good thing.

Unfortunately it seems the plan was something he only bothered to come up with on the actual plane flight.

He, like Tony Abbott before him, saw a vision of a new North – a north that is going to tap into the growing middle class of China.

All good. So what is he going to do about it?

Three things. First he is going to

• Expand the Ord Irrigation Scheme Stage 3 by providing $10 million to the Northern Territory Government to help facilitate expansion of the Scheme from its current 29,000 hectares to 43,000 hectares. This will increase economic output in northern Australia by an estimated $150 million every year, mainly through expanded sugar production and agricultural crops.

OK. Now I have written a number of times before about boondoggle plans to make northern Australia into Asia’s food bowl.

Northern Australia will never become a food bowl in the sense that it will, as Andrew Robb wrote, “double Australia’s agricultural output”.

The most recent report on the issue of Northern Australia was handed down in 2009 by the Northern Australia Land and Water Taskforce (set up by John Howard as a sop to the Nationals and Bill Heffernan), It stated:

The north is not a vacant land. It needs to be actively managed for resilience and sustainability, based on a contemporary and informed understanding of the complexities of the landscape and its people. Contrary to popular belief, water resources in the north are neither unlimited, nor wasted. Equally, the potential for northern Australia to become a ‘food bowl’ is not supported by evidence.

And when it came to speculation home much land could be “opened up for farming”

The potential for growth in groundwater irrigable land in northern Australia is
estimated at between 100 and 200 per cent, or around 20 000 – 40 000 hectares.

And it attached to that a number of risks.

To put that size into context, the Murrumbidgee Irrigation Area is around 660,000 hectares, of which 120,000 hectares is irrigated. And if you look at the map above, you see that is only a small fraction of the Murray-Darling basin (which of course is not all farm land, but it gives some good perspective).

So at least Kevin Rudd is not off with the fairies and talking about doubling our food production.

He also talked about

• Develop twenty-year growth plans for the regional hubs of Darwin, Cairns, Townsville and Mackay. Infrastructure Australia will oversee these plans, based on the successful Mount Isa to Townsville Economic Development Zone supply chain model, developed in collaboration with the private and public sectors. These plans will target key industry sectors and include strategies for increasing trade, investment and employment in these regional centres.

Sounds good. Anything developed through Infrastructure Australia gets my tick of approval. But it is all a bit, “we don’t know really what we’re going to do”. He probably should have had Anthony Albanese along, because Albo would be reeling off a number of projects that he probably has on a list that he keeps under his pillow.

There’s also not a lot of meat here. Nice sentiments, but, you would hope a bit more from a party currently in Government.

This is one of the problems with changing a leader so close to an election –especially if you want to come up with different policies. It means you can’t use the incumbency in your favour.

Remember those trades centre announced yesterday? That was not an election promise – that was actual money that is going out. It was a Government announcement that Rudd was able to badge as a campaign issue.

Same deal with the after-school care announced in the first week. It was budgeted and is now going out. The Liberal Party will have to actually stop it if it doesn’t want to spend the money.

That is what good political operators do. They spend the last 6-9 months before an election using the public service to cost and develop policies and programs, put a few in the budget as “decision taken but not yet announced” and announce them in the campaign.

You also announce all these whiz-bang policies that are well formed and developed, because for the past 6-9 months some bright sparks in the public service have been working on them!Howard was great at using the public service. He knew better than probably any politician before him how to use the power of incumbency.

No Prime Minister should turn up during an election and announce something that sounds like a thought bubble. Julie Gillard did it last time when she came out with the cash for clunkers and people’s assembly.

And Kevin Rudd did it today. Because the third thing he announced today was this:

• Create a Northern Special Economic Zone focussing on the Northern Territory to attract new Australian and foreign investment through simplifying investment rules, streamlining regulation and application processes for major projects, and introducing new tax incentives with the objective of reducing the company tax rate for Northern Territory based companies in five years.

A lower company tax rate for NT based companies.

The best response to this was a tweet by economist Richard Green (who blogs for Club Troppo)

Who wants to invest with me in a large building of letter boxes just on the NT side of the WA border so firms can incorporate there?

— Richard T. Green (@RHTGreen) August 15, 2013

Anyone think every major organisation who can employ a decent tax lawyer won’t set up a HQ in Darwin that does just enough to ensure its business operations qualify for the lower tax rate?

That is not producing an economic boom, that is just shifting capital, and reducing the revenue collected by the government at the same time.

It was a dumb idea when it was floated by free-market ideologues from the IPA, and it is still dopey. The IPA wants it because it’ll end up with less tax collected and hopefully set off a spark whereby the company tax rate gets lowered everywhere else and then perhaps lowered in NT again and then…. Gina Rinehart wants it because she’ll get to pay less tax just by shifting here HQ.

But what the hell is an ALP government doing proposing it?

Geez. Next Rudd will come out in favour of income splitting tax returns.

Worst of all is he didn’t seem to have a clue about the details. He had no idea how much this would cost, and even how low the rate would be and whether it would apply to Darwin based or Northern Territory based companies. The media release talked of “reducing the company tax rate”, but then Rudd off the top of his heads talks about “by a third” – so to 20% – but this was just his hope.

Geez.

There is no way in hell this policy was worked over by boffins in Treasury. And we know this because just a couple months ago the Gillard Government was quite rightly calling it a boondoggle.

But Rudd had a thought bubble I guess.

All this to try and win Lingiari?

***

And it was a dumb day to have such an uncosted thought bubble, because Tony Abbott was in Tasmania announcing the next step of his plan for Tasmania.

Among the plans was extra money to lengthen the Hobart Airport to allow it to service 747s and the like, and also a “one stop shop” located in Launceston for approvals for major projects. This Tasmanian Major Projects Approvals Agency sounds all well and good. Though it does seem an odd move for someone who wants to cut the public service to create a new agency, so it will be interesting to see if it will be done by trying to transfer people from Canberra.

It says it will try and makes this a one stop shop for both Commonwealth and State approvals. Which sounds a bit like it needs state government support. And given his stated aim of giving the state the right to tick off on any environmental concerns, I’m not sure how it all fits in with that.

But overall the policies at least had the whiff of intelligence about them. They sounded like things being done. The was an overall shape to them all.

And then at the press conference Joe Hockey put in one last sound-bite:

JOE HOCKEY:

Well, we have always said we will release the full costings before the election, well before the timetable that Labor has had in the past.

I just say to you, if the whole election is going to be about costings rather than about policies like we are announcing today then I think everyone is going to bore the Australian people to death and we don’t want to do that, we won’t them to be excited about the policy initiatives, but believe me all of our policies and all of the costings and the ways we are going to pay for it. All of it is going to be out there verified and in net terms provided to the Australian people before polling day.

You have to love the wannabe Treasurer of Australia saying policy costings are boring.

He’s right though – policy initiatives are the exciting thing. Everyone wants to do that. Heck I could go out on the hustings right now and promise everything from high speed rail to double carriage highways across Australia and a second airport in Sydney.

Look at me! I’m doing policy!!

That’s the easy part. The hard part – as Kevin Rudd showed today – is the costings, and that is why they are important. If your costings are dodgy then the policy is dodgy.

The only reason this is an issue at all this time round is because in 2010 the Liberal Party absolutly ballsed up the costings. They treated everyone like mugs. The best they showed us was a spread sheet with numbers on them that correctly added up to a total number

That is not costings.

Heck I can do that. Watch:

JERICHO PARTY MAJOR POLICIES:

1. High Speed Rail from Sydney CBD to the Bradman museum in Bowral (because Richie Benaud says, ‘gosh it’s interesting’, so we need to get there fast): $5 billion.

2. A giant wall around the north coast to keep undesirable people out and put me onside with voters who say they aren’t racist and they really only care about people drowning at sea: $6 billion

3. Free beer at Christmas for those who can’t afford to buy those Tap King things: $7 billion

TOTAL COST: $18 billion

Wow. And here I thought it would be harder to run for government.

Costings are not about adding up the final numbers, it is about working out what the number should be and why. And it needs to be done by someone who you are NOT paying to come up with a nice figure for you. 

Take the Greens. They are thus far the only party to have had any polices fully costed and released by the Parliamentary Budget Office.

Here for example is the costings for their “Improved Mining Tax”

And there we have it – the policy, the assumption made and then the cost (or save) to the budget). We can challenge the assumptions – indeed that is where most of the argy bargy lies, because the costing are made on the basis of the assumption.

If we don’t like the figures, we have to find issue with the assumptions – ie the diesel rebate ain’t going to get removed, so fughgeddaboudit.

But we can trust that the figures are not dodgy, because they were not worked out by anyone who has any reason to give the Greens better number than there really is.

(As an aside, as someone who wrote about the legislation of the PBO in my third ever Drum article in which I chided the media for ignoring the legislation, I am quite happy to see it being used so extensively).

The costings don’t suddenly mean the policy is good. But at least the argument has some degree of reality involved.

Now the Liberal Party has apparently around 200 policies with the PBO. That is great, but it is time to start releasing them. Sure some things are dependent on the PEFO numbers, and may take a couple more days. But today Abbott announced $38m for the extensions to the Hobart airport. Fine show us the costings. Show us the document that displays that a third party has looked at your policy and said, yep $38m will cover it.

There is no more reason to wait.

Tony Abbott tonight on ABC’s 7:30 again talked about “in good time” before the election. That good time is now, not later.

Because the longer he leaves this, the better the ALP new advert looks:

***

And the first policy he can shows us is his Direct Action Plan.

Today the Climate Institute released a report on the Direct Action Plan which suggested the Libs were about $4b short.

And having read the report, I think that’s a conservative estimate. They made some very conservative assumptions which will unlikely occur and which if they didn’t would lead to higher costs. As was noted Tristan Edis of Climate Spectator, the assumptions that the companies bidding for contracts will do so based only on their costs rather than on what they think has become the going rate; that it will be able to start by July 2014; and that all bidders will deliver on time and on budget are pretty generous.

The thing about the Direct Action plan is it is a plan whose purpose is not to reduce emissions but to look as if the Liberal Party wants to try and reduce emissions. The only person who might think the Liberals can get to their target of 5% reduction in CO2 from 2000 levels with the money they’re spending is Greg Hunt.

Tony Abbott certainly isn’t so dumb as to care; he knows the policy is just a show – one that he can slice and dice once in government to suddenly find savings. It is designed to appeal to people who don’t like the carbon tax, but kind of think we should at least be trying something, and it;s also a policy that doesn’t offend those who think Climate Change is … crap..

But today Greg Hunt came out and said the Climate Institutes report is silly and that it was done by a partisan organisation.

Now that is fair – they certainly do favour action on climate change and would prefer a price on carbon. But where is your policy? Show us your assumptions, let’s put them side by side with this report and let’s see who is making the more realistic case.

The aim of the Direct Action plan seems not to be to reduce emissions but to spend $3.2 billion on reducing emissions. Any suggestion that it might cost more is met with the response that it is capped and no more will be spent.

It’s a bit like saying you plan to spend $50 million to build a bridge and upon being told that will only get you three quarters of the way, saying, ‘Well that’s all we’re going to spend, we will not have a blow out of costs’.

Tony Abbott doesn’t care if we don’t get to 5% by 2002. 2020 is three elections away.

The latest Direct Action policy is the 2010 version. Is it still the same? If so bring it out and show us that the costings within have been made by an independent party. Until then you got nothing but dreams and idle desires.

But it could be worse. You could have just announced a company tax cut and you’re not even sure how much the cut will be.

***

And look it could all be worse than that. You could be the journalist who asked Tony Abbott this question:

QUESTION:

[You chose] the song ‘Hot and Cold’ to be your anthem. Are you fully aware of the lyrics? “You change your mind like a changes clothes” “You say yes but you mean no”, “got a case of love bipolar” Do you think that is the best anthem for you as Opposition Leader?

Andrew Bolt trends towards dodgy graphs

I don’t normally blog about Andrew Bolt, because really, what’s the point? The bloke struggles with basic levels of research (a fact I have encountered personally) and hell, his stuff is pretty much pure opinion (or the opinions given to him by his readers), so there’s not much point saying I disagree with him because, well everyone is entitled to their opinions.
But today he decided to try his hand with some graphs.
The settings for this foray in to the graphic world of data was a comment by Craig Emerson on Twitter with Dr Karl Kruszelnicki:

In response Andrew Bolt today wrote a blog post titled:

In the faint hope Emerson can be educated

And he opens with this line:

One man presents science on the ABC. The other is a senior minister in the government that’s imposed the carbon tax.

You would expect both not to be so ignorant about the very basic data on global warming:

Now it’s a brave man who starts calling others ignorant especially one who is not exactly known for his superb research skills.
In order to prove to Emerson and Dr Karl that they were ignorant Bolt tried his hands at graphing some data.
Now look. I don’t want to get all “demarcation dispute” with Andrew on graphs. Sure they’ve become a bit of my thing. And sure I probably have a passion for graphs that rather goes beyond the healthy stage. But here’s the thing. When I use a graph I know that I have to be just as careful in how I present that graph as I do when I write words, because you can lie just as easily with a graph as you can with words, and I don’t want anyone accusing me of attempting to defraud the public by presenting data that is actually false or misleading.
Bolt presents 5 graphs and I will show them all screenshot just to prove I’m not making this up (because by the time you get to the end of this you’ll be sure I am).
First he presents a “graph” from the Met Office in the UK:

It’s not really a graph worth considering because where the temperature was in January 1997 and December 2012 doesn’t actually say much about the trend, but it does nicely convey to his readers that there has been no increase in temperatures. This graph he’s clearly lifted from somewhere – probably the Watts Up With That website, as that’s usually where he gets his climate change “scoops”.
But then Bolt really goes wrong, because instead of grabbing a graph from somewhere else, he astonishingly decides to do some work himself and produce his own graphs.
He went to the great website Wood for Trees which has pretty much all the data on global temperature recordings you could want. It is a neutral site. No one disputes the data it provides. And best of all it allows you to use that data to make graphs. You can do graphs according to any time period and using a raft of different measures.
Here for example is a graph I made using the GISTEMP data (the NASA guys) from 1972-2012:

I have screen capped it all to show you how these graphs are made. Series 1 – (the red line) is “GISTEMP LOTI global mean from 1972”. LOTI stands for “Land-Ocean-Temperature Index. Series 2 (the Green line) is the Linear Trend from 1972 of “GISTEMP LOTI global mean”.
As you can see it’s a nice upward trend.
Have a look also at the top left of the graph. It clearly labels the red and green lines.
OK. Now here’s the graphs Bolt used and his captions for them (and remember he prefaced these graphs by saying “In the foolish hope that these two men may reconsider their opinions after consulting the evidence”:
First up is UAH. This is the data from the USA’s National Oceanic and Atmospheric Administration (NOAA) and it measures “Tropospheric and lower stratospheric temperature data collected by NOAA's TIROS-N polar-orbiting satellites and adjusted for time-dependent biases by the Global Hydrology and Climate Center at the University of Alabama in Huntsville (UAH)”. OK that’s a mouthful but I want to be exact about what it is.

OK. Let’s have a look at this graph. Go up to the top left. What do you see? You see the red line is “uah/ from 1997”, which is what it should be, but the green line – the linear trend line – is from “rss/ from: 1997/ trend”.
That is, the trend line is not the trend of the red line. It is not the trend line of UAH data, it is the trend line of “rss data from 1997”.
What is rss? Well that is also done by NOAA but it is their “remote sensing system’s microwave sounding units”. It rather nicely has shown a flat trend since 1997.
But that is not what Bolt is saying this graph is suggesting.
What he is saying is that the green line shows the trend of UAH measurements has been flat since 1997 – it “confirms” it to use his exact word. .But what he actually has shown is two different measurements. And the measurement he has used as the trend line is from data that reveals a flat trend line. But what about the actual UAH temperatures? Have they been flat?
Let’s use the same data Bolt has used but instead of the “rss linear trend” let’s actually use the UAH data to make a trend – because that is what he is saying his graph displays:

Notice anything different? Like the fact the linear trend is now clearly heading up? 
How astonishment.
OK onto his next graph and here we at least see some honesty, because (what a surprise) it is the RSS graph! The trend certainly is flat – if anything it might even be going downwards.
I have no problems saying that, because I trust the data and I am not afraid of admitting what it shows – even if it contradicts the argument I might wish to make about climate change.

But after the one honest graph of the RSS he quickly moves on to the next bit of “evidence”. We now come to our old friend GISTEMP:

Notice anything about that top left corner? Yep the wonderful “rss from 1997” trend line.
Gee how did that get there?
Now anyone with mathematical knowledge slightly above that exhibited by the ape creatures of the Indus (thank you Black Adder) would look at that graph and think hang on, that green line isn’t anywhere near the middle of the red lines – which is usually the case for trends (scratch that, not usually – always). But not our Andy. He saw it, and slapped it on his page with a Huzzah you ignorant Craig Emerson, can’t you see even NASA knows temperatures have stopped warming!
Well OK, let’s put in the GISTEMP data to get a linear trend and see what pops up:

Hmmm. Now I may be seeing things all crooked after spending two weeks watching Channel 7’s coverage of the tennis, but that green trend line looks to be going up.
OK now he goes back to the UK Met Office and their “HADCRUT” data:

Don’t you love the nonchalant “ditto” like he has this whole climate change thing sewn up. And don’t you also like how when you look at the top left corner once again he is using the RSS data to represent the trend for different data. Once again even a basic knowledge of maths would have you realising that that green line could in no way be the trend of the red line.
But not Andrew Bolt. He saw that, saw nothing wrong with it. He put it on his blog and thinks QED.
Note as well that Bolt has used “HADCRUT3”, which has now been superseded by HADCRUT4.
OK what is the real HADCRUT3 trend

Again we see a trend line that is going up. Now sure it is only just going up and I wrote about this on The Drum a couple weeks back. Although it was only just going up I still noted it, even though I was trying to show that climate change is causing temperatures to rise. I did that because I am honest with data and am not trying to pretend the facts are one thing when they are something quite different.
Now Bolt used HADCRUT3. Why didn’t he use the more recent version, HADCRUT4? Maybe because then the trend would look like this:

You can’t even pretend that trend is flat. Also it clearly shows that even by the UK data, 1998 was not the hottest year.
I guess Bolt just wasn’t aware of that data.
Bolt then quotes NASA head climate honcho James Hansen:

An admission from the godfather of global warming, NASA’s James Hansen:

The five-year mean global temperature has been flat for the last decade, which we interpret as a combination of natural variability and a slow down in the growth rate of net climate forcing.

Well OK, but Emerson and Dr Karl was talking since 1998 which is rather a tad more than 5 years (I’m not 100% sure on this, but I sure as hell hope Bolt realises that 2012 minus 1998 is not 5). So Hanson’s quote would be worth citing if Dr Karl had said “the world has warmed in the past 5 years”.
Incidentally here’s the GISTEMP for the past 5 years

Yep it is flat.
But here’s the thing. Who gives a damn? No one tries to measure changes in the climate in just 5 year blocks because it is completely meaningless. Here’s what running (reader kalusfloozy rightly points out these means aren’t running [and I didn’t intend them to be either, so sloppy adjective use there]) 5 year trends look like on the graph I had earlier of GISTEMP from 1972

As you can see some went down, some went flat, some went up. But the trend since 1972 is obvious.
Now look, Bolt normally does such cherry picking. It’s intellectually dishonest, but maybe he actually does believe 5 year trends are important.
But when it comes to representing trends on a graph and suggesting that they show something which they do not, well that is not just intellectually dishonest; it is completely so.
But here’s the kicker he ends his graphs with a quote from Phil Jones regarding temperatures from 1995 to 2009. I’m not sure why Bolt is not concerned about the past 3 years, but oh well, let’s stick with what he thinks is irrefutable evidence.
The line Bolt quotes is this:

I also calculated the trend for the period 1995 to 2009. This trend (0.12C per decade) is positive, but not significant at the 95% significance level.

Rather hilariously he got this line from the great blog Skeptical Science (he even links to it!), which has the quote in full:

BBC: Do you agree that from 1995 to the present there has been no statistically-significant global warming
Phil Jones: Yes, but only just. I also calculated the trend for the period 1995 to 2009. This trend (0.12C per decade) is positive, but not significant at the 95% significance level. The positive trend is quite close to the significance level. Achieving statistical significance in scientific terms is much more likely for longer periods, and much less likely for shorter periods.
BBC: How confident are you that warming has taken place and that humans are mainly responsible?
Phil Jones: I'm 100% confident that the climate has warmed. As to the second question, I would go along with IPCC Chapter 9 - there's evidence that most of the warming since the 1950s is due to human activity.

Bolt for some reason didn’t graph 1995-2009, so I’ll do it for him, using HADCRU4 as that is Phil Jones’ data:

Bolt ends his diatribe of misleading information and context-slaughtered quotes by writing:

Do Dr Karl and Emerson truly dispute this evidence? Are they so in denial?

PS: an apology would be nice.

It takes a hell of a lot of front to demand an apology after misleading the public and displaying an utter ignorance of statistics.
Andrew Bolt doesn’t deserves an apology, he deserves censure.
UPDATE
Bolt has now changed his post stating:

(APOLOGIES - I originally and inadvertently used two graphics with the wrong trend line. This HADCRUT graphic is now corrected. The other graphic was of GISTEMP, one of the data sets showing a mild warming.)

That’s not quite accurate either. As you can see from above he “inadvertently” used three graphs with the wrong trend line, not two.  
He puts up the correct HADCRUT graph – still using HADCRUT3 not HADCRUT4. Rather oddly however he doesn’t put the the GISTEMP graph on this new updated blog, he just links to it. And he completely ignores the UAH graph!
Pathetic, really.
****
I note that on some browsers the graphs aren’t coming up. I use Chrome and it seems fine on them, but not on explorer (although you can right click and “show graphs”) and on Firefox it’s just the link. I don’t know why – as I put them up the way I do all my other graphs in the past. Will try and sort it out.

Drum Piece: Productivity, Climate Change and Facts

My Drum piece today covers the rather comment-bait friendly topic of climate change.

I thought about writing it when I saw this graph on US temperatures that fairly well shocked me:

Now of course the United States is not the whole world, but for 2012 to be the hottest on record by around 1 degree F or about 0.55C is pretty jaw-dropping.

Then I looked at the world figures going back to 1880. It is all a bit confusing and tough to label all the year, so I have made 2012 the black line and all the red lines are the years from 2000 onwards:

Or linearly in annual mean terms it is:

Now I’m a big fan of looking at things long term to find some context, so I though since I’m 40, I wonder how many of the hottest 40 years have occurred since I have been alive:

Clearly my arrival on the planet has caused some imbalance in the climate. There can be no other explanation.

In my article today I also had a bit of a slap at The Oz’s coverage of the environment. I really should be sanctioned for doing so – it isn’t seemly to shoot fish in a barrel so publicly. In my defence, as I had already submitted my article yesterday morning I was denied the use of Graham Lloyd’s classic headline “Sea rise ‘not linked to warming’ says report”. This meant I could not make use of the great image created by Mark Whalan on Twitter comparing the original article with an AAP report that came out loter int eh day after the co-author of the study Lloyd cited refuted his article completely:

The good thing about most coverage of amazing new discoveries on the non-existence of climate change reported either in The Oz or various denialist blogs that get a run on news.ltd sites is how they invariably arrive about 5-7 days after they have been circulating on environment blogs.

Take the report on sea level rises in yesterday Oz. It was covered on the Real Climate blog a week ago (and with rather a bit more intelligence – though let’s be honest, that ain’t a high bar to get over).

The standard process for me when reading one of these types of stories is to think “Well that sounds interesting… but there’s probably more to it..”, then go online look at various blogs, find the “new research” is a week to a month old and finds almost the opposite of what was reported, or (quite often) was not even examining the areas on which the newspaper report says it has found startling evidence.

Ahh well, at least this time The Oz didn’t publish a response citing the “Australian Pocket Oxford Dictionary” on the meaning of the words used in its headline.

****

A commenter linked to this excellent video from NASA on the shift of temperature anomalies:

***

And this morning the thing doing the rounds is that GISS head James Hansen has put out a paper (pdf) that starts with:

Global temperature thus continues at a high level that is sufficient to cause a substantial increase in the frequency of extreme warm anomalies. The 5-year mean global temperature has been flat for a decade, which we interpret as a combination of natural variability and a slowdown in the growth rate of the net climate forcing.

This is apparently a big statement. An admission, if you will! Oh my gosh he has admitted what his data found!! The scandal!!!

Of course it’s probably if you want to think that to not read the whole paper because then you’d see things like this:

Indeed, the current stand-still of the 5-year running mean global temperature may be largely a consequence of the fact that the first half of the past 10 years had predominately El Nino conditions, while the second half had predominately La Nina conditions (Nino index in Fig. 1). Comparing the global temperature at the time of the most recent three La Ninas (1999-2000, 2008, and 2011-2012), it is apparent that global temperature has continued to rise between recent years of comparable tropical temperature, indeed, at a rate of warming similar to that of the previous three decades. We conclude that background global warming is continuing, consistent with the known planetary energy imbalance, even though it is likely that the slowdown in climate forcing growth rate contributed to the recent apparent standstill in global temperature.

And if that sounds too sciency, there’s an excellent video representation of this from Skeptical Science:

The Carbon Price: The Tim Tams are safe; not sure about hyperbole

So word leaked out this morning that the Carbon Price was going to not wreak the  expected havoc on the price of consumer goods. It was reported that the price of Tim Tams would increase by $0.012. This I guess means my masterful plan to stock up on chocolate biscuits and reap the windfall gains once the world comes to an end with the institution of a carbon price was rather misplaced.

Oh well, no less stupid than suggesting the mining industry is fighting for its survival, I guess. 

But let us not be side-tracked, when Julia Gillard came out at noon and announced the carbon price, it was a significant moment. One of the criticisms of the Rudd Government was that is didn’t make the tough decisions; didn’t do anything unpopular. Putting a price on carbon is definitely in the tough decision pile, and quite snuggly fits in the “unpopular” drawer as well. Deciding something which heretofore had been free will now have a price is not something that happens everyday.

The whole policy can be read here (56 pages – have fun). The Treasury modelling is here (even more fun).

To say that it is pretty complex is to take a big drink out of the understatement bottle. So let’s have a quick squiz at a few things:

First the Government has come up with a bit of a video on how the carbon price works. I quite like it:

It’s simple yes, but not demeaning, and not boring like the bloke with the power point trying to explain the RSPT. Do not underestimate how few people understand how a carbon price works. I would bet a majority think it is like a GST or is something we need to account for in our incomes tax returns. So explaining how it works is item number one for the Government.

Now to the announcement:

The introduction of a broad based carbon price in Australia, commencing from 1 July 2012 with a fixed price period and transitioning to a fully flexible cap-and-trade carbon pricing mechanism on 1 July 2015.

• The fixed price will commence at $23 per tonne of CO2-e;
• Coverage of the scheme will include stationary energy, most business transport emissions, industrial processes, non-legacy waste, and fugitive emissions, with direct liability under the mechanism limited to large emitters;

The price was not a shock – it had been leaked on Thursday. The general reaction seems to be – yeah that’s lower than we’d like, but higher than we’d hate. The Treasury modelling gives a nice graph on where it sits visa vis the European carbon price:

So it’s pretty comparable.

What does it mean for prices?

So not a big hit to prices; a lot less than the GST – but remember as well the GST was accompanied with much bigger compensations and tax cuts. But the difference of course is the GST was meant to do that, the carbon price is supposed to be felt – Abbott is exactly right when he says that.

When it goes to the flexible ETS in 2015, the rules are thus:

Pollution caps:

• Five years of pollution caps will be announced in advance and extended each year to maintain a minimum five year period of caps at any given time.
  Price cap:
  – A price cap will operate in the first three years of the flexible price period. The price cap will be set at $20 above the expected international price in 2015/16 (as set in regulations no later than 13 months before the end of the fixed price period) and will rise by five per cent in real terms each year.
  – A review of the role of the price cap will occur after the first three years of the flexible price period.

Price floor:

• A price floor of $15, rising by four per cent in real terms each year, will operate for the first three years of the flexible price mechanism.
• A review of the role of the price floor will occur after the first three years of the flexible price period.

So a minimum of $15, and a maximum of $20 above whatever is the international price.

What else was there?

• International linking will be allowed in the flexible price scheme;
• Kyoto compliant credits from the Carbon Farming Initiative will be able to be used for compliance.
• The establishment of a new more ambitious 2050 target for emissions reductions which will be set at 80 per cent below 2000 levels.
• The establishment of a new independent Authority – the Climate Change Authority – which will provide advice to the Government on progress towards meeting announced targets;
• make recommendations on pollution caps, voluntary action, trajectories, long term emissions budgets and mechanism design issues;
• conduct regular reviews on the carbon price mechanism, NGER reporting, the Renewable Energy Target and other matters upon request.

The Climate Change Authority is interesting – it will be headed by former Reserve Bank head Bernie Fraser, and will advise the Government on the carbon pricing mechanism – including future pollution caps, which will in effect help determine the carbon price under the flexible pricing system – because it will determine how many permits are in the market. The CCA will also work with the Productivity Commission on issues such as assistance to polluters. The Productivity Commission report will be looking at such matters as: “Industry sectors where there is strong evidence of windfall gains as a result of the assistance.” Of which you can bet there will be many, given emissions-intensive trade-exposed are getting free permits covering 94.5 per cent of their activities affected by the carbon price. (This point alone pretty well renders Abbott’s suggestions that the mining industry is fighting for its survival and that Whyalla will be wiped off the map are complete bulldust)

But enough of this; let’s get down to a couple things – what will it do to emissions:

As you can see a big swag of the reductions in carbon emission come from overseas. Abbott will be onto this, suggesting it is a waste of tax payers money (and also trying to suggest his own policy would not require such abatement if it was to get to 5 per cent reduction). What it also shows is that in terms of domestic levels only we are not going back to the stone age. Two per cent by 2050 sounds like nothing, but bear in mind the population will grow to an expected 35 million by then, so we’ll have an extra 13 million people generating 2 per cent less emissions.

What it also shows is just how damn hard it is to reduce carbon emissions. And given no one – not even those economists who do not like the carbon tax – thinks a direct action policy such as suggested by Tony Abbott will reduce emissions more efficiently, it gives an indicator of the job ahead of Abbott – especially if he wants to tell us it can be done without abatements sourced from overseas.

To believe Abbott is right is like suggesting price increases of cigarettes has been less effective at reducing smoking than warnings on packets. Sure warnings and nicotine patches (essentially direct action measures) are great, but if smokes still cost $4 a packet, a hell of a lot more of us would still be smoking.

What the ALP will focus on is the reduction compared to what would have happened had there been no carbon price. In her speech announcing the policy, Julia Gillard said:

By 2020 our carbon price will take 160 million tonnes of pollution out of the atmosphere every year.

That’s the equivalent of taking forty five million cars off the road.

That’s a good figure to spout. It makes sense to put things in a form people can grasp. 160 tonnes of carbon sounds a lot, but is it – you feel like you need to know a climate scientist to ask to find out? 45 million cars on the other is a lot and you don’t need to be a bloke in a scientific white coat to grasp it (you just need to ignore that the main driver of car use, petrol, is excluded from the carbon price!). 

But what will it do to the economy – especially electricity generation. This graph is pretty instructive:

Notice the green column next to “brown coal”? Err no? That’s because it ain’t there. By 2050 it is planned that no brown coal fired power stations will be operating. Black coal ones also take a big hit. They are replaced by a huge boost in renewable.

This policy is hoping to change the economy. As the Treasury modelling states:

Over time, the electricity sector will move away from coal-fired generation to renewables, with renewable energy growing from 10 to 40 per cent of the generation mix by 2050, and conventional coal-fired generation falling from 70 to below 10 per cent of the generation mix by 2050.

The key is that “over time” bit. The statement also contains:

Once commercially viable, carbon capture and storage (CCS) technology will deliver significant emission reductions, comprising almost 30 per cent of generation by 2050.

Which is ummm… optimistic. It ends with:

Of course, the exact mix of generation will depend heavily on a range of uncertain factors, including the cost of new technology and the price of energy commodities like gas.

In other words, we hope it’ll get there, but geez, we’re talking 2050.

So that’s the result, but let’s get down to what it is all really about. This policy might be about reducing carbon emissions, but it is also just as much about the compensation, and the changes to the tax system.

The big sell item is that “9 in 10 households will get a combination of tax cuts and payment increases.” This is a bit tricky – it certainly doesn’t mean all 9 will get their costs fully met – but then again, given what the carbon price is meant to do, nor should it.

First let’s look at the changes to the rates and taxation and the increasing of the tax free threshold from $6,001 to $18,201

Tax Scales	2011-12		2012-13		2015-16
	Threshold ($)	Marginal Rate	Threshold ($)	Marginal Rate	Threshold ($)	Marginal Rate
1st Rate	6,001	15%	18,201	19%	19,401	19%
2nd Rate	37,001	30%	37,001	32.50%	37,001	33%
3rd Rate	80,001	37%	80,001	37%	80,001	37%
4th Rate	180,001	45%	180,001	45%	180,001	45%
LITO	Up to $1,500	4% withdrawal rate on income over $30,000	Up to $445	1.5% withdrawal rate on income over $37,000	Up to $300	1% withdrawal rate on income over $37,000
Effective tax free threshold*	16,000		20,542		20,979

Now the key aspect of all of this is that this legislation will be separate to the legislation introducing the carbon price. This means if the Liberal Party wants to oppose it all, they will have to vote against tax cuts.

I don’t think that would disappoint the Labor party.

The other aspect is the compensation.

Among the compensation assistance are increases to Family Tax Benefit A , the pension, and the ‘Essential Medical Equipment Payment’.

You can go over to the excellent website Clean Energy Future to find out how much the carbon price will affect your net income. (As an aside – it is great to see a Government website that doesn't look  like it was designed by a blind accountant).

Now back after the budget, Matt Cowgill did an excellent post of what is the average Australian income. He found:

a single person, living alone, would need around $36 000 in disposable income to sustain the typical Australian’s standard of living. Following a widely-accepted methodology, each additional adult adds $18 000 to this figure, so a childless couple would need a disposable income of $54 000 a year to enjoy a median standard of living. Each child adds $10 800 to this figure.

A couple family with two children would therefore have needed $75 600 disposable income in 2007-08 to have the same standard of living as the typical Australian.

So let’s bear those figures in mind when we look at the impacts of various scenarios:

First, single people:

Single Person No kids

Incomes	Price Impact	Assistance	Net Cost	Per Week
$30,000	$229	$323	-$94	-$1.81
$35,000	$251	$303	-$52	-$1.00
$40,000	$270	$303	-$33	-$0.63
$45,000	$287	$303	-$16	-$0.31
$50,000	$304	$303	$1	$0.02
$60,000	$346	$303	$43	$0.83
$70,000	$392	$266	$126	$2.42
$80,000	$441	$16	$425	$8.17
$90,000	$485	$3	$482	$9.27

So let’s add a few thousand onto Matt’s figure of $36,000 to update to today’s figures (his were 2007-08), and the $40,000 single person actually comes out $33 a year better off. Nothing astounding, but certainly nothing to lose sleep over. It’s only when you get up to $70,000 a year income that the single person starts feeling more than $1 a week pain. And remember as well that’s only if you don’t do anything to change the price impact (ie use less energy). The estimates also assume (correctly) that the more you earn the more you spend. But I doubt the single person on $40,000 is going to shed too many tears for the poor sod earning $80,000 who decides to spend more each week, because they can. Perhaps it might just be wise to turn off the plasma when you’re not watching it.

What about if we add a child into the equation?

Single Person 1 Child 5-7 Years
Incomes	Price Impact	Assistance	Net Cost	Per Week
$30,000	$371	$864	-$493	-$9.48
$35,000	$376	$1,119	-$743	-$14.29
$40,000	$381	$1,419	-$1,038	-$19.96
$45,000	$386	$1,545	-$1,159	-$22.29
$50,000	$392	$442	-$50	-$0.96
$60,000	$408	$442	-$34	-$0.65
$70,000	$434	$391	$43	$0.83
$80,000	$475	$391	$84	$1.62
$90,000	$511	$391	$120	$2.31

Yes, those on around $50,000 and with one child – ie around the median using Matt’s figures will be $50 better off a year. Not much again, but no harm either – and remember as well they would be better off if they change their behaviour. The price impacts assume no change in behaviour. But look at the $45,000 level. Under these assumptions you are $1,159 a year better off.

The reason for this is because targeting those under median incomes to bear the brunt of a carbon price is dopey. They don’t have much opportunity to adjust behaviour – they actually are spending money on needs and not just wants.

What about the DINKS – double income, no kids:

Couple, Double Income (50-50 split), No Kids
Incomes	Price Impact	Assistance	Net Cost	Per Week
$60,000	$455	$646	-$191	-$3.67
$70,000	$480	$606	-$126	-$2.42
$80,000	$512	$606	-$94	-$1.81
$90,000	$547	$606	-$59	-$1.13
$100,000	$582	$606	-$24	-$0.46
$110,000	$618	$606	$12	$0.23
$120,000	$658	$606	$52	$1.00
$130,000	$700	$606	$94	$1.81
$140,000	$744	$531	$213	$4.10
$150,000	$788	$281	$507	$9.75
$160,000	$833	$31	$802	$15.42
$170,000	$873	$6	$867	$16.67
$180,000	$913	$6	$907	$17.44
$190,000	$954	$6	$948	$18.23
$200,000	$994	$6	$988	$19.00

Until you together earn over $100k, you’re sitting pretty. But then it starts to bite or nibble in the case of the $1.81 a week for households on $130k.

Once you get over $150,000 you will notice the hit – nearly $10 a week. But let’s not forget if you’re on $150k you’re not struggling – you’re about $70,000 a year above the median. 

Ok, families. First a couple with only one income and one kid who has just started school:

Family, Single Income, 1 child 5-7 years
Incomes	Price Impact	Assistance	Net Cost	Per Week
$30,000	$364	$767	-$403	-$7.75
$35,000	$372	$791	-$419	-$8.06
$40,000	$374	$791	-$417	-$8.02
$45,000	$388	$442	-$54	-$1.04
$50,000	$406	$442	-$36	-$0.69
$60,000	$433	$442	-$9	-$0.17
$70,000	$467	$391	$76	$1.46
$80,000	$507	$391	$116	$2.23
$90,000	$542	$391	$151	$2.90

Compare to having no kids – you do better. A single person on $70,000 with no kids is $126 a year worse off, here you are now $76 a year worse off. Once again – get up higher – say $90,000 a year and you are $151 worse off. Maybe it is time for the other partner to look for some work. For example if that $70,000 was from two incomes, one of $49,000 and one of $21,000, the family would actually be $585 a year better off.

Which leads us to two incomes, two kids – one pre-school, one at school:

Family, Dual Income (70-30 split), children 0-4 and 5-7 years
Incomes	Price Impact	Assistance	Net Cost	Per Week
$60,000	$501	$773	-$272	-$5.23
$70,000	$526	$1,274	-$748	-$14.38
$80,000	$553	$1,064	-$511	-$9.83
$90,000	$594	$819	-$225	-$4.33
$100,000	$638	$661	-$23	-$0.44
$110,000	$667	$466	$201	$3.87
$120,000	$696	$306	$390	$7.50
$130,000	$735	$306	$429	$8.25
$140,000	$774	$306	$468	$9.00
$150,000	$812	$306	$506	$9.73
$160,000	$850	$306	$544	$10.46
$170,000	$889	$306	$583	$11.21
$180,000	$934	$306	$628	$12.08
$190,000	$978	$306	$672	$12.92
$200,000	$1,022	$306	$716	$13.77

Again using Matt’s media of around $80,000, you see that such a household will actually be $511 better off a year.

This remains even if the incomes of the two are equal rather than one fulltime and one part time

Family, Dual Income (50-50 split) children 8-13 and 13-17 years)
Incomes	Price Impact	Assistance	Net Cost	Per Week
$60,000	$510	$843	-$333	-$6.40
$70,000	$546	$803	-$257	-$4.94
$80,000	$578	$803	-$225	-$4.33
$90,000	$610	$679	-$69	-$1.33
$100,000	$650	$679	-$29	-$0.56
$110,000	$674	$679	-$5	-$0.10
$120,000	$694	$606	$88	$1.69
$130,000	$734	$606	$128	$2.46
$140,000	$775	$531	$244	$4.69
$150,000	$817	$281	$536	$10.31
$160,000	$859	$31	$828	$15.92
$170,000	$899	$6	$893	$17.17
$180,000	$943	$6	$937	$18.02
$190,000	$986	$6	$980	$18.85
$200,000	$1,030	$6	$1,024	$19.69

Tony Abbott will no doubt focus on the red parts – the people who are worse off. He did this today – take this from the Liberal’s media release:

For example, a policeman and a nurse each earning $70,000 a year with one dependent child will be on average $230 a year worse off even after compensation. And that’s just for starters.

Notice the “each earning $70,000” rather than “together earning $140,000”. And certainly no mention that such a family brings in around $60,000 more than the median family…

Nonetheless the hits are there – some small, some large – and it will be up to the Labor Party to convince the public that the cost is worth it to reduce carbon emissions.

But now the framework is set. Abbott’s hyperbole about the end of times looks decidedly overblown – and his performance in his press conference suggested he is still trying to work out how he is going to counter the tax cuts, and the fact that the big hits are to households well above the median rate.

Gillard, once again looked comfortable – but she often does when introducing new policy and gearing up for the fight. She has been less impressive once the battle is joined and Abbott has found his spin.

And so now we prepare for the fight – armed with some facts and not just assumptions. Will that change the fortunes of the ALP and the LNP? Or has the battleground been set already and the voters will take the tax cuts and still stay firmly opposed to the ALP?

Today Tony Abbott’s attack lost a bit of puff, and it would be tempting for the ALP to focus on that aspect, but, for mine, the best thing the Labor Party could do now is to ignore him, and just get out there and sell this policy.

There is plenty of time to show up Abbott’s outlandish predictions for the dopiness they are, for now Julia Gillard need to focus on the electorate, not the opposition.