Climate change is taking over the news - in case you hadn't noticed

I keep reading psychologists warning that talking about how terrible climate change will be is counterproductive. Rather than causing the deniers to see the error of their ways, it just makes them close their minds to further argument.

So this column isn’t for them. Rather, it’s to speak to the rest of us – those who don’t try to tell the scientists they’ve got it all wrong – to review the latest evidence that climate change is already upon us (what sane person could not have realised it?) and getting worse as each year flashes by our eyes.

I fear for my five grandkids’ future (as I may have mentioned before) but, to tell the truth, I’m glad I’ll be dead and gone before it reaches its worst. What we must do, like all those who voted teal at the last election, is to press both major parties to speed up our efforts and make Australia a leader rather than a laggard in the global push to limit how bad it gets.

Professor Albert Van Dijk of the Australian National University, an expert on precipitation, is part of an international team of researchers who’ve issued a report, the Global Water Monitor, using data from thousands of ground stations and satellites to document the effect of last year’s record heat on the world’s water cycle.

“We found global warming is profoundly changing the water cycle,” he says. “As a result, we are seeing more rapid and severe droughts, as well as more severe storms and flood events.”

Van Dijk says the most obvious sign of the climate crisis is the unprecedented heatwaves that swept the globe in 2023. Some 77 countries experienced their highest average annual temperature in at least 45 years. This “gave us a glimpse of what a typical year with 1.5 degrees Celsius of warming may look like,” he says. Warming consistently more than 1.5 degrees above pre-industrial levels is expected to have extreme and irreversible impacts on the Earth’s system.

“The high temperatures were often accompanied by very low air humidity. The relative air humidity of the global land surface was the second-driest on record in 2023. Rapid drying of farms and forests caused crops to fail and forests to burn.

“Lack of rain and soaring temperatures intensified multi-year droughts in vulnerable regions such as South America, the Horn of Africa and the Mediterranean ... This continuing trend towards drier conditions is threatening agriculture, biodiversity and overall water security.”

Get this: “The world’s forests have been soaking up a lot of our fossil fuel emissions. That’s because plant photosynthesis absorbs carbon dioxide from the atmosphere. Large disturbances like fire and drought reduce or even reverse that function.”

Rising sea surface and air temperatures have been intensifying the strength and rainfall intensity of monsoons, cyclones and other storm systems, Van Dijk adds.

We saw this when Cyclone Jasper battered northern Queensland and severe storms formed in south-east Queensland, leaving a trail of destruction. The cyclone moved much slower than expected, causing torrential rains and widespread flooding.

Enough of that. Australia’s Climate Council, a community funded organisation created by former members of the Climate Commission after it was abolished by the Abbott government in 2013, has created a “heat map” using thousands of data points from the CSIRO and help from the Bureau of Meteorology.

If we assume, perhaps optimistically, that all countries meet their present UN commitments to reduce emissions, the heat map predicts that western Sydney will swelter through twice as many days above 35 degrees and three weeks above 35 degrees every summer.

Temperatures will be worsened by the “urban heat-island effect”, as materials such as asphalt and concrete amplify heat by as much as 10 degrees during extreme heat.

Melbourne, too, faces double the number of days above 35 degrees by 2050. Will it take that long for the Australian Open to be moved?

Which brings us to last month, when six transmission line towers in Victoria were destroyed by extreme wind gusts from thunderstorms, leading to about 500,000 people losing power. The intense winds knocked trees onto local power lines or toppled the poles. Some people went without electricity for more than a week.

A month earlier, severe thunderstorms and wind took out five transmission towers in Western Australia and caused widespread outages. In January 2020, storms caused the collapse of six transmission towers in Victoria.

And, of course, in 2016 all of South Australia lost power for several hours after extreme winds damaged many transmission towers.

Recent research by Dr Andrew Dowdy and Andrew Brown, of the University of Melbourne, suggests that climate change is likely to cause more favourable conditions for thunderstorms with damaging winds, particularly in inland regions. But more research is needed to confirm this.

Van Dijk gets the last word: “Overall, 2023 provided a stark reminder of the consequences of our continued reliance on fossil fuels and the urgent need but apparent inability of humanity to act decisively to cut greenhouse gas emissions.”

Read more >>

'Planetary boundaries' set the limits of economic freedom

One of the most important developments in economics is something in which economists had no hand: the identification of the environmental limits which humans, busily producing and consuming, cross at their peril.

Earth has existed for about 4 billion years and humans have lived on Earth for about 200,000 years. For almost all of that time we were hunters and gatherers, but 10,000 to 12,000 years ago we settled down, to farm and create civilisation.

It’s probably no coincidence that, for about that time, Earth has enjoyed a stable climate, with no more ice ages nor period of great heat, in which palms grew in Antarctica. This is the geological epoch called the Holocene, in which we live – although it may be ruled that we’ve moved to the Anthropocene, a new epoch in which the human species has made major alterations to the planet.

In its modern form, economics can be dated to 1776, when Adam Smith published The Wealth of Nations. Beliefs about how the economy works were well-defined by the time Alfred Marshall published Principles of Economics in 1890.

The point is that all economic activity – all the efforts of humans to earn a living – both depends on the natural environment and adversely affects it. By 1900, there were only about 1.6 billion humans on the planet, not enough to do much damage.

If we wrecked some area, we could just move to somewhere that hadn’t been wrecked, while the first bit gradually recovered.

So, at the time conventional economics was established, it was perfectly sensible to assume that the environment’s role in economic activity could be taken for granted. It was just there and it always would be. It was, as economists say, a “free good”.

When, from the 1700s, we started burning fossil fuel – coal, oil and gas – for heat, light and energy, we had no reason to worry that one day it might run out. It certainly never occurred to us that this might end up having an effect on the climate.

It took many decades before scientists began telling us that all the things we were doing to improve our lives – cutting down forests, damming rivers, drilling for water, ploughing, fertilising crops, fishing with nets – were damaging the soil, causing erosion, killing species, lowering the water table, and damaging the environment in other ways.

However, in just the past century or so, the world’s population has gone from 1.6 billion to 8 billion. Every extra human does a bit more damage to the environment. But that’s not the main thing. The main thing that’s changed is our use of advances in technology to hugely increase our standard of living and, in the process, massively increase the damage we’re doing to the environment.

Which brings us to “planetary boundaries”. In 2009, the Swedish scientist Johan Rockstrom and a scientist from the Australian National University, the late Will Steffen, with many helpers, established a framework listing the key categories of environmental damage, and estimating the amount of damage that could be done to each before the risk increased that “the Earth system” could no longer recover.

A second update of these estimates, led by an American oceanographer based in Copenhagen, Katherine Richardson, was released last month. With the ANU’s Professor Xuemei Bai, Richardson has written an article explaining the planetary boundaries.

There are nine boundaries. Three of them cover what we take from the ecological system: loss of biodiversity (extinction of species), loss of fresh water (pumping too much water from rivers and aquifers) and land use (deforestation).

Something economists didn’t know – or didn’t realise affected them – is that the laws of physics say we can never truly get rid of anything that exists on Earth.

All we – or the ecosystem – can do is change the form of the thing. Water can evaporate, but it’s still up in the clouds, for instance. We can cut down a tree, but as it slowly sinks into the dirt, it releases the carbon dioxide it had previously taken up.

This means that all our economic activity leaves in its wake a lot of waste. Not just landfill, but in many other forms.

So, the remaining six boundaries concern the waste our activity greatly adds to what would have occurred naturally. They are: greenhouse gases which cause climate change, ocean acidification (carbon absorbed by the sea), emission of chemicals that deplete the Earth’s ozone layer, “novel entities” (synthetic chemicals such as plastics, DDT and concrete), aerosols, and nutrient overload (nitrogen and phosphorus from fertilisers that wash into rivers and the sea, causing algae blooms, killing fish and coral).

Crossing any of these boundaries doesn’t trigger immediate disaster. But it does mean we’ve moved from the safe zone into dangerous territory. And the nine boundaries are interrelated and interacting, in ways we don’t yet fully understand.

In 2009, the scientists found we’d already crossed three boundaries: biodiversity, climate change and nutrient overload. By the 2015 update, a fourth boundary had been crossed: land use.

And by this year’s update, only three boundaries hadn’t been crossed: ocean acidification (but only just), aerosol pollution, and stratospheric ozone depletion – where an international agreement banning CFCs is slowly reducing the ozone hole we created.

Richardson and Bai say we’re now well into the danger zone, “where we – as well as every other species – are now at risk”. “We are eating away at our own life support systems,” they say.

One thing to be said for economists is that, unlike some, they don’t try to tell scientists how to do their job. Very few economists dispute the scientists’ evidence that climate change has been caused by human activities.

It was economists who developed the best means to reduce carbon emissions – emission trading schemes – which other countries have adopted, but Australia rejected.

When our governments decide to act on the other planetary boundaries, it will be economists who work out the best way to do it.

Read more >>

Murray-Darling basin: farmers’ friends are helping them self-harm

Not only in America. If you think the United States has become dysfunctional and incapable of solving its pressing problems, I have three words to say to you: Murray-Darling Basin. Last week, federal Environment and Water Minister Tanya Plibersek announced a brave new plan to rescue the Murray-Darling rescue plan, which the feds, NSW and Victoria had agreed to give up as all too hard.

Since the issue’s unlikely to be front of mind, let me tell this sorry story from the beginning. I’ll do so with much help from Professor Jamie Pittock of the Australian National University, an environmental scientist who’s been studying it for most of his career. (His many articles are on the universities’ The Conversation website.)

The Murray-Darling Basin covers about a seventh of Australia’s land mass: most of NSW, all the Australian Capital Territory, much of Victoria, and parts of Queensland and South Australia. It covers the Murray and Darling rivers, plus all their many tributaries, including the Murrumbidgee.

You could call it the nation’s biggest food bowl, underpinning the livelihoods of 2.6 million people and producing food and fibres worth more than $24 billion a year. Vast amounts of water are extracted from the rivers to supply about 3 million people, including those in Adelaide, but particularly for irrigating farms.

It’s also a living ecosystem that depends on interconnected natural resources. About 5 per cent of the basin consists of floodplain forests, lakes, rivers and other wetland habitats. Like all our rivers, the Murray-Darling is subject to recurring droughts and flooding.

Over the past century, however, the extraction of water, especially for irrigation, has reduced water flows to the point where the system can no longer recover from these extreme events.

Over the past decade, millions of fish have perished in mass die-offs, toxic algae have bloomed, wildlife and waterbird numbers have declined and wetlands have dried up.

Efforts to reverse the river system’s decline began with big-spending announcements by John Howard and his environment minister Malcolm Turnbull before the election they lost in 2007. It took five years before Julia Gillard and Tony Burke reached agreement with the basin states on a plan to restore the river system.

Under the then $13 billion plan, 3200 billion litres a year would be returned to the rivers, largely by buying back water entitlements from willing farmers. But the plan’s been modified several times and in 2015 the feds decided to cease buying back entitlements. Both the NSW and Victorian governments had been persuaded by their farmers to oppose buybacks.

NSW and Victoria have not delivered on their promise to reach agreements with riverside landowners to allow bought-back water to spill out of river channels onto floodplain wetlands. Another problem has been farmers drawing more water than their entitlement.

The buybacks have stalled at 2100 billion litres a year, even though the planned 3200 billion litres is probably too little to counter the evaporation caused by global warming. The plan had been due to be completed by June next year, with a new agreement in 2026.

But, in the 2022 election campaign, Anthony Albanese promised to revive the scheme and buy back the remaining water needed to meet the 3200 billion-litre target, and last week Plibersek announced a new deal with all the states, bar Victoria.

She agreed to another two or three years to deliver the remaining water, more options to deliver it, more funding to pay for it and more accountability by the feds and other governments to deliver on their obligations.

But she will need the support of the Greens and independents to get the new deal through the Senate. The opposition won’t support the resumption of buybacks, whereas the Greens don’t like the extra time to be taken.

Of course, even if the legislation goes through, there’s no guarantee the various governments will do what they’ve committed to. The feds are doing what the feds always have to do to get the states’ co-operation – offer them more money – but Victoria and NSW will always be tempted to keep their own farmers and river towns on side, which remain strongly opposed to buybacks.

How can it be so hard to ensure the continued survival of such an important river system? To say that, without remedial action, the rivers could shrink to a chain of billabongs is no great exaggeration. That might not happen for 50 years but, the way climate change seems to be accelerating, it could be a lot sooner.

You’d think the people who’d see this most clearly were those who stand to lose most as the rivers continue to shrivel. But, no, myopia prevails.

Take some pain now to avoid catastrophe later? No way! You can keep all the city-slickers’ tax money you want to pay us to help us adjust. We’re betting it will never happen. In any case, I’ll be dead by then.

And politicians who will take the votes of people who’d prefer to self-destruct aren’t hard to find. Reminds me of the way things are in the Land of the Free.

Read more >>

A damaged environment leads to an unlivable economy

Economists are paid to worry about the economy, which they usually define fairly narrowly. And, like all specialists, they tend to overemphasise what they know so much about and underrate everything else.

Karl Marx usually gets the credit for saying that, in the economy, “everything’s connected to everything else”. The most conservative economist would agree. The economy is circular because what’s an expense to you, is income to me.

But what applies inside the economy applies equally outside it. Everything inside what we call the economy is connected to everything outside it. What is outside it? The rest of the world – the natural world.

The “economy” sits inside what we call “the environment”. Without the environment, there wouldn’t be an economy. Humans wouldn’t be here, and we wouldn’t need one.

When you step back from our daily preoccupations – at the minute, inflation and interest rates – the bigger picture reveals that economic activity – producing and consuming goods and services – mainly involves doing things to the natural environment: we clear the forest to grow food, scar the countryside to mine minerals, which we manufacture into a thousand kinds of machines.

As we get more prosperous, the population grows, our towns and cities get bigger and we clear more forest to build more houses, roads, highways and bridges. We pull more fish from the sea. We move around a lot. And we power it all by digging up fossil fuels and burning them.

As the population’s grown, but more particularly as consumption per person has multiplied, we’ve done more and more damage to the environment.

But here’s the trick: we’ve hit the environment so hard, it’s started punching back.

That’s why the most important economic event of recent times is not the latest rise in interest rates, it’s last month’s State of the Environment report – whose release was delayed until we found a government with the courage to break the bad news.

The report’s significance is not only its rollcall of how much damage we’ve done so far, but its account of the way that damage is damaging the humans who’ve done it.

We’ve been damaging the environment in many ways – loss of habitat and species, introduction of invasive animals and plants, pollution and waste disposal, salinity and other damage to soil and waterways, overfishing – but the greatest single source of damage, of course, is climate change.

The five-yearly report brings the bad news that climate change is compounding all the other problems. And whereas previous reports warned of future damage from climate change, this one shows it’s already happening – and getting worse.

It documents the extreme floods, droughts, heatwaves, storms and bushfires that have occurred across Australia in the past five years. The immediate effects have been millions of animals killed and habitats burnt, enormous areas of reef bleached, and people’s livelihoods and homes lost.

But there are many longer-term effects still to play out. Extreme conditions put immense stress on species already threatened by habitat loss and invasive species. An extreme heatwave in 2018, for example, killed 23,000 spectacled flying foxes, making them an endangered species.

Many of our ecosystems have evolved to rebound from bushfires. But now that the fires are coming more often and are more intense, the bush doesn’t have enough time to recover, which scientists expect will make it weedy – only those species that live fast and reproduce quickly will thrive.

But enough about plants and animals, what about us? While cyclones, floods and bushfires directly destroy our homes and landscapes, Professor Emma Johnston, of Sydney University, an author of the report, writes that heatwaves kill more people in Australia than any other extreme event.

Heatwave intensity has increased by a third over the past two decades. And climate change worsens air quality through dust, smoke and emissions. The Black Summer of 2019-20 exposed more than 80 per cent of our population to smoke, killing about 420 people.

As Liz Hanna and Mark Howden, of the Australian National University, remind us, clean air is just one of the “ecosystem services” the environment provides to you and me in the economy. Another is clean food. A lot of our recent complaints about the cost of living – the high cost of meat and vegetables, the mythical $10 iceberg lettuce – come from the delayed effect of the drought and the recent effect of the floods.

Yet another service is clean water. But many country towns had to truck in water during the last drought. Land clearing affects water quality. Run-off from agriculture damages water ecosystems and encourages algal bloom and species loss. More than 4 million people depend on the Murray-Darling rivers for their water, but the catchments are rated as poor or very poor.

Finally, the report reminds us that contact with (healthy) nature is associated with mental health benefits, promotes physical activity and contributes to overall wellbeing. Biodiversity and green and blue spaces in cities are linked to stress reduction and mood improvement, increased respiratory health, and lower rates of depression and blood pressure. Enjoy ’em while they last.

Read more >>

Water reform report’s big smile hides its big teeth: much more to do

A quick look at the Productivity Commission’s draft report on national water reform reminds me of the repeated judgment from old Mr Grace, the doddering owner of the department store in Are You Being Served? as he headed for the door: “You’ve all done very well!”

Its review of the progress of the National Water Initiative signed by the federal and state governments in 2004 – encompassing agreements on the Murray-Darling Basin – is terribly polite, understated and relentlessly upbeat.

Apparently, governments have made “good progress” in having “largely achieved” their reform commitments. All that remains is just the need for a teensy-weensy bit of “policy renewal”.

This mild-mannered stuff and congratulatory tone bear no resemblance to my memories of meetings of angry farmers railing against stupid greenies and other city slickers; of their insistence that the immediate needs of irrigators and irrigation towns along the river take priority over the river system’s ultimate survival; of each state government’s insistence on favouring their own irrigators over those in states further down the river; of federal and state National Party ministers happy to slip farmers a quiet favour, avoid enforcing the rules and turn a blind eye to blatant infringements; of federal Labor ministers who, even with no seats to lose in the region, were unwilling to make themselves unpopular by standing up for the rivers’ future.

I remember that the Howard government spent billions of city slickers’ money helping individual farmers make their irrigation systems more resistant to evaporation and seepage when all the benefits went to the farmer and none to the river system.

I remember all the infighting between government water agencies, and the mass fish kills during the recent drought in NSW and Queensland, for which the managers of the system accepted no responsibility.

Fortunately, reporters are adept at ignoring all the happy flannel up the front of government reports and finding the carefully hidden bad bits. And fortunately, we have the assistance of long-standing water experts, including the economist Professor Quentin Grafton, of the Australian National University, whose summary of the report on The Conversation website is headed: “Our national water policy is outdated, unfair and not fit for climate challenges.”

“The report’s findings matter to all Australians, whether you live in a city or a drought-ravaged town. If governments don’t manage water better, on our behalf, then entire communities may disappear. Agriculture will suffer and nature will continue to degrade,” he says.

The report’s proposal to make “water infrastructure developments” a much larger part of the National Water Initiative is a critical way to keep governments honest. For years, state and federal governments have used taxpayers’ dollars to pay for farming water infrastructure that largely benefits big corporate irrigators, Grafton says.

Last year the Morrison government announced a further $2 billion for its Building 21st Century Water Infrastructure project. Such megaprojects, he says, perpetuate the simplistic myths of the early 20th century that Australia – the driest inhabited continent on Earth – can be “drought-proofed”.

When governments signed the original initiative in 2004, they agreed to ensure investments in infrastructure would be both economically viable and ecologically sustainable. But many projects appear to be neither.

The report notes, for example, that the construction of Dungowan Dam in NSW means “any infrastructure that improves reliability for one user will affect water availability for others”. The “prospect of ‘new’ water is illusory”.

The report warns that projects that aren’t economically viable or ecologically sustainable can “burden taxpayers with ongoing costs, discourage efficient water use and result in long-lived impacts on communities and the environment”.

Equally disturbing is that billions of dollars for water infrastructure are presently targeted primarily at the agriculture and mining industries, while communities in desperate need of drinking water that meets water quality guidelines miss out, Grafton says.

Fortunately, the report isn’t so house trained as to avoid mentioning the gorilla the Morrison government prefers not to notice. There’s a lot about the consequences of climate change. It says droughts will likely become more intense and frequent and, in many places, water will become scarce.

In Grafton’s summary, the report says planning provisions were inadequate to deal with both the millennium drought and the recent drought in Eastern Australia. The 2012 Murray-Darling Basin Plan, for instance, took no account of climate change when determining how much water to take from rivers and streams.

The present federal government actually dismantled the National Water Commission in 2015, meaning we no longer have a resourced, well-informed agency to “mark the homework” and make sure the reforms were being implemented as agreed, Grafton says.

In 2007, the worst year of the millennium drought – and the year John Howard feared he’d lose the election if he didn’t match Labor’s promise to introduce an emissions trading scheme – Howard remarked that “in a protracted drought, and with the prospect of long-term climate change, we need radical and permanent change”.

Grafton says we’re still waiting for that change. “If Australia is to be prosperous and liveable into the future, governments must urgently implement water reform.”

Read more >>

High immigration is changing the Aussie way of life

The nation’s economic elite – politicians of all colours, businesspeople and economists – long ago decided we need to grow our population as fast as we can. To them, their reasons for believing this are so blindingly obvious they don’t need to be discussed.

Unfortunately, however, it’s doubtful most ordinary Australians agree. A survey last year by researchers at the Australian National University found that more than 69 per cent of respondents felt we didn’t need more people, well up on a similar poll in 2010.

This may explain why Scott Morrison announced before this year’s election a big cut in our permanent migrant intake – while failing to mention that our booming temporary migrant intake wouldn’t be constrained.

He also foreshadowed measures to encourage more migrants to settle in regional cities. What he didn’t say is what he’d be doing differently this time, given the many times such efforts had failed in the past.

In between scandalising over the invading hordes of boat people, John Howard greatly increased the immigration intake after the turn of the century, and this has been continued by the later Labor and Coalition governments. “Net overseas migration” accounts for about 60 per cent of our population growth.

In 2000, the Australian Bureau of Statistics projected that our population wouldn’t reach 25.4 million until 2051. We got there this year. Our population is growing much faster than other developed countries’ are.

The growth in our economy has been so weak over the past year that they’ve had to stop saying it, but for years our politicians boasted about how much faster our economy was growing than the other economies.

What they invariably failed to mention was that most of our faster growth was explained by our faster-growing population, not our increasing prosperity. Over the year to June, for instance, real gross domestic product grew by (a pathetic) 1.4 per cent, whereas GDP per person actually fell by 0.2 per cent.

That’s telling us that, despite the growth in the economy, on average our material standard of living is stagnant. All that immigration isn’t making the rest of us any better off in monetary terms.

Of course, that’s just a crude average. You can be sure some people are better off as a result of all the migration. Our business people have always demanded high migration because of their confidence that a bigger market allows them to make bigger profits.

Economists, on the other hand, are supposed to believe in economic growth because it makes all of us better off. They’re not supposed to believe in growth for its own sake.

This week one of the few interest groups devoted to opposing high migration, Sustainable Population Australia, issued a discussion paper that’s worth discussing. It reminds us that many of the problems we complain about are symptoms of migration.

The biggest issue is infrastructure. We need additional public infrastructure – and private business equipment and structures, and housing – to accommodate the needs of every extra person (locally born as well as immigrant) if average living standards aren’t to fall.

Taking just public infrastructure – covering roads, public transport, hospitals, schools, electricity, water and sewage, policing, law and justice, parks and open space and much more – the discussion paper estimates that every extra person requires well over $100,000 of infrastructure spending.

When governments fail to keep up with this need – as they have been, despite a surge in spending lately – congestion on roads and public transport is just the most obvious disruption we suffer.

The International Monetary Fund’s latest report on our economy says we have “a notable infrastructure gap compared to other advanced economies”. Spending is “not keeping up with population and economic growth”. We have a forecast annual gap averaging about 0.35 per cent of GDP for basic infrastructure (roads, rail, water, ports) plus a smaller gap for social infrastructure (schools, hospitals, prisons).

One factor increasing the cost of infrastructure is that about two-thirds of migrants settle in the already crowded cities of Sydney and Melbourne – each of whose populations is projected to reach 10 million in the next 50 years, with Melbourne overtaking Sydney.

According to a Productivity Commission report, “growing populations will place pressure on already strained transport systems. Yet available choices for new investments are constrained by the increasingly limited availability of unutilised land”.

New developments such as Sydney’s WestConnex have required land reclamation, costly compensation arrangements, or otherwise more expensive alternatives such as tunnels. It’s reported to cost $515 million a kilometre, with Melbourne’s West Gate Tunnel costing $1.34 billion a kilometre.

Who pays for all this? We do – one way or another. “Funding will inevitably be borne by the Australian community either through user-pays fees or general taxation,” the commission says.

Combine our growing population with lower rainfall and increased evaporation from climate change and water will become a perennial problem and an ever-rising expense to householders and farmers alike.

The housing industry’s frequent failure to keep up with the demand for new homes adds to the price of housing. And the only way we’ll double the populations of Melbourne and Sydney is by moving to a lot more high-rise living.

High immigration is changing the Aussie way of life. Before long, only the rich will be able to afford a detached house with a backyard.

Read more >>

How to lose water, waste money and wreck the environment

If you want a salutary example of the taxpayers’ money that can be wasted and the harm that can be done when governments yield to the temptation to prop up declining – and, in this case, environmentally damaging – industries, look no further than Melbourne’s water supply.

The industry in question is the tiny native-forest logging industry in Victoria’s Central Highlands. The value it adds to national production of goods and services is a mere $12 million a year (using figures for 2013-14).

The industry's employment in the region was 430 to 660 people in 2012 – though it would be less than that by now. Few of those jobs would be permanent, with the rest being people working for contractors, who could be deployed elsewhere.

Successive state governments have kept the native-timber industry alive by undercharging it for logs taken from state forests. The state-owned logging company, VicForests, operates at a loss, which is hidden by grants from other parts of the government.

Coalition governments are urged to keep propping up the industry by the National Party; Labor governments by the Construction Forestry Maritime Mining and Energy Union.

What’s this got to do with Melbourne’s water supply? Ah, that’s the beauty of a case study by David Lindenmayer, Heather Keith, Michael Vardon, John Stein and Chris Taylor and others from the Australian National University’s Fenner School of Environment and Society.

I’ve written before in praise of the United Nations’ system of economic and environmental accounts (SEEA), which extends our long-standing way of measuring the economy (to reach gross domestic product) to include our use of natural resources and “ecosystem services” – the many benefits humans get from nature, such as photosynthesis.

Lindenmayer and co’s case study is one of the first to use the SEEA framework to join the dots between the economy (in this case, native forestry) and the environment (Melbourne’s water supply).

Melbourne’s population of 5 million is growing so rapidly it won’t be long before it overtakes Sydney as the nation’s largest city.

So many people require a lot of clean water, a need that can only grow. Almost all of Melbourne’s water comes from water catchments to the city’s north-east.

Logging of native forests has been banned in all those catchments except the biggest, the Thomson catchment, which holds about 59 per cent of Melbourne’s water storage.

Trouble is, the water that runs off native forests is significantly reduced by bushfires – and logging.

This is the consequence of an ecosystem service scientists call “evapo-transpiration” – the product of leaf transpiration and interception and soil evaporation losses.

This means the oldest forests produce the most water run-off. When old trees are lost through fire or logging, the regrowth that takes their place absorbs much more water.

Logging done many years ago can still reduce a forest’s water run-off yield today. The Fenner people calculate that past logging of the Thomson catchment has reduced its present water yield by 26 per cent, or more than 15,000 megalitres a year. They calculate that, should logging continue to 2050, this loss would increase to about 35,000 megalitres a year.

Assuming the average person uses 161 litres of water a day, the loss of water yield resulting from logging would have met the needs of nearly 600,000 people by 2050.

The SEEA-based case study shows the economic value of the water in all of Melbourne’s catchments is more than 25 times the economic value of the timber, woodchips and pulp produced from all Victoria’s native forests.

This is partly because, thanks to past fires and overcutting, only one-eighth of the native timber logged in Victoria is good enough for valuable sawlogs, with the remainder turned into low-value pulp and woodchips for making paper. (This is true even though the trees being logged include lovely mountain ash, alpine ash and shining gums.)

Turning to the Central Highlands alone, in 2013-14 the annual economic value of water supply to Melbourne was $310 million, about the same as the value of its agriculture. Its tourism was worth $260 million – all compared to its native timber production worth $12 million.

But the main thing to note is the trade-off between the different uses to which land can be put. Use it to produce water supply, and it’s very valuable. Use it to produce water supply and native timber, however, and you reduce the value of the water by far more than the chips and pulp are worth.

And why? To save a relative handful of workers the pain of moving to a different industry in a different town. And save the mill owners the expense of adapting their mills to chipping plantation wood rather than native wood. When did they deserve the kid-glove treatment the rest of us don’t get?

As for all the water that won’t be available to meet Melbourne’s growing needs, how will we replace it? Not to worry. We’ll get it from the desalination plant. It will cost $1650 more per megalitre than catchment water, but the Nats and the CFMMEU know we won’t mind paying through the nose to continue wrecking our native forests.

Read more >>

Governments only pretending to fix Murray-Darling

Genelle Haldane, my desk calendar tells me, has said that "only until all of mankind lives in harmony with nature can we truly decree ourselves to be an intelligent species". I've no idea who Haldane is or was, but she's right.

And you don't need to be terribly intelligent to realise it. Even most economists get it. It's blindingly obvious that the economy – that is, human production and consumption of goods and services - exists within the natural environment.

The economy is sustained by the natural resources the environment supplies to it and by the natural processes that are part of the human production process. We rely on the ecosystem also to deal with the mountains of waste and emissions we generate.

It's equally clear that economic activity can damage the environment and its ability to function. We're exploiting the environment in ways that are literally unsustainable, and must stop doing so before the damage becomes irreparable.

But if it's all so obvious, why are we having trouble doing what we know we should? Why, for instance, has more fighting broken out over our use and abuse of the Murray-Darling river system, a problem we've been told our governments – state and federal – are busy fixing?

One reason is that some people – not many of us – earn their living in ways that damage the environment, and don't want their businesses and lives disrupted by being obliged to stop.

Often, they don't bear the cost of the damage they're doing. It's borne by farmers downstream, or by the wider community, or the next generation.

Those bearing the direct and immediate cost of stopping invariably fight harder to keep going than those affected only indirectly and to a small extent.

In the case of the Murray-Darling, it's only the costs being born by downstream irrigators – and downstream water drinkers in Adelaide – that keep the fight alive.

Since it's hard to be sure when damage to the environment has reached the point of no return, there's a great temptation to say doing a bit more won't hurt. I'll be right, and the future can look after itself. Business people think that; politicians even more so.

Democracy has degenerated into a battle between vested interests. Get in there to fight for your own interests, and don't worry about whether it all adds up or what happens to those who lose out.

The political parties have succumbed to this approach. They're too busy keeping themselves in power by oiling enough of the squeakiest wheels to worry about showing leadership, about the wider community interest or about any future beyond the next election.

I don't trust any of them, nor the Murray-Darling Basin Authority they appointed, which seems to see its job as assuring us everything's fine, when clearly it isn't.

Just how bad things are – how little progress has been made, how little has been done and how much spent on subsidies to irrigators – is made clear in a declaration issued this month by a dozen academics - scientists and economists - led by professors Quentin Grafton and John Williams, of the Australian National University, who've devoted their careers to studying water systems and water policy.

The decades of degradation of the Murray-Darling Basin, exacerbated by the Millennium drought, finally led John Howard to announce a $10 billion national plan for water security (since increased to $13 billion) in the months leading up to the 2007 election. Its intention was to return levels of water extraction for irrigation to environmentally sustainable levels.

It took until late 2012 for federal and state governments to agree on a basin plan to reduce water diversion by 2,750 gigalitres a year by July 2019, even though this was known to be inadequate to meet South Australia's water needs.

So far $6 billion has been spent on "water recovery", with $4 billion going not on buying back water rights but on subsidies to irrigators to upgrade to more efficient systems which lose less water.

Trouble is, those loses were finding their way back into the system, but now they don't. This has left the irrigators better off, but it's not clear there's much benefit in greater flows down the river. And no one has checked.

Federal figures show that buying water from willing sellers is 60 per cent cheaper than building questionable engineering works.

But little money has been spent helping communities adjust to the effects of adverse changes.

There's little evidence of much environmental improvement as a result of all the money spent, and river flows have been declining since 2011.

Until the ABC's 4 Corners program in July last year, many Australians were unaware of alleged water theft, nor of grossly deficient compliance along the Darling River.

State governments don't seem to be trying hard to fulfil their commitments under the 2012 agreement. Nor did the feds seem to take much interest when Barnaby Joyce was the minister.

The blow-up over the Senate's refusal to go along with a new round of reductions in the amount by which water extraction from the river is to be reduced – supposedly to be offset by increased spending on dubious engineering projects – is just the latest in the various governments' pretence of fixing the environmental problem, while quietly looking after their irrigator mates.

Read more >>

We can grow GDP if we stop growing natural resource use

Some things are more important even than the fate of the goods and services tax. A question I regard as just a tiny bit more significant to our future is whether we can continue increasing our population and material standard of living without doing irreparable damage to the natural environment.

Few of us noticed in all the excitement over tax reform, but last week we made a big step forward in answering this question. The CSIRO unveiled the results of a ground-breaking, two-year project – the Australian National Outlook report – in which it integrated a model of the economy with no less than eight models of different aspects of the global and domestic natural environment in which the economy exists.

So, is ecologically sustainable growth possible? Is it possible to "decouple" continuing economic growth from continuing environmental vandalism?

It depends on what you mean by "growth". There's enormous confusion on this point because what economists take the word to mean is not what scientists take it to mean.

What scientists mean by growth is growth in the "throughput" of natural materials and energy – using those resources to generate economic activity and, in the process, turning them into various forms of pollution and other waste.

They point out that such growth simply cannot continue indefinitely because the natural world – the global ecosystem – is of fixed size. And they have to be right because they're merely stating the first law of thermodynamics.

But that's not what economists mean by growth. They mean an increase in gross domestic product, most of which is cause by increased productivity (efficiency). It may or may not involve an increase in the economy's throughput of natural resources.

So what does the CSIRO's modelling say about whether we can continue to grow without inflicting further damage on the environment?

It says GDP can continue growing strongly, but throughput of natural resources can't. So the people who want continued growth in GDP win, but so do those saying ever-increasing use of natural resources must stop.

Since no one knows the future, CSIRO's economists and scientists ran through their super model 18 different scenarios covering different rates of growth in the global population, different degrees of global action to restrain climate change and a range of differing development in Australia and its economy.

All 18 scenarios project continuing strong growth in Australia's population and GDP out to 2050. But get this: only three of those scenarios also saw improvement or no further deterioration on the model's three key indicators of environmental health: emissions of greenhouse gases, water stress, and loss of native habitat.

As well, two of the three scenarios see no increase in the economy's annual throughput of natural resources, while the third projects a fall in material throughput of 38 per cent.

All this says ecologically sustainable growth and decoupling do seem to be possible, provided the world gets its act together.

The good news is that the model's results don't rely on "technological optimism" (don't worry, market forces will call forth a technological solution to every problem before the proverbial hits the fan) but nor do they require that we renounce our materialist ways and become greenie vegan mud-brick makers.

We don't need to do anything we don't already know how to do and, in many cases, have already begun doing. We just need to do a mighty lot more of it.

The bad news is that we can't do it on our own. To achieve improvement in the key environmental indicators and a fall in material throughput we need effective international action to limit the world's population to 8 billion in 2050 and limit global warming to 2 degrees in 2100.

This would require "very strong" global and Australian effort to reduce greenhouse emissions.

The two other environmentally not-so-bad scenarios – involving world population growing well beyond 8 billion and global warming limited to 3 degrees – would require "strong" global and Australian effort to reduce emissions.

Strong translates as a worldwide price per tonne of carbon dioxide emissions of $US30 ($42) in today's dollars; very strong translates as $US50 a tonne.

These world prices would be applied in Australia. But we'd have a comparative advantage over many countries that would reduce the carbon price's adverse effects on our economy: we could achieve up to half our required reduction in net emissions by "carbon sequestration" – reforestation of cleared land, either with one species of eucalypt (to maximise sequestration) or a range of eucalypts (to also restore native habitat).

At these carbon prices, our farmers could earn up to five times what they make from using the land to produce beef.

Our greenhouse emissions per person would fall from five times the global average in 1990 to below average by 2050.

Our biggest problem would be avoiding water stress, particularly because reforestation would add to the problem. The price of water for agriculture would be a lot higher and, in the cities, we'd have to do a lot more desalination and water recycling for industrial use.

I don't regard this as the last word on the subject. All modelling is far from infallible and this exercise is no different. The good thing is that a last we've made a start at reconciling our materialist ambitions with the constraints imposed by the natural environment we hope to continue living in.

Read more >>

All we should be doing to protect land and water

You get the feeling Tony Abbott doesn't lie awake at night worrying about what our economic activity is doing to our natural environment.

In which case, those of us who do care about ecological sustainability – including many Coalition voters and, in all probability, Abbott's successor, whether Liberal or Labor – will have a lot of catching up to do.

This looks like being true of our excessive contribution to global greenhouse gas emissions. But it also applies to the more mundane problems of protecting and restoring our degraded land, water systems and native flora and fauna.

So what should we be doing, even if we aren't yet? The Wentworth Group of Concerned Scientists have produced a paper on Using Markets to Conserve Natural Capital. As the name implies, it has economists' fingerprints all over it.

In many cases the adverse environmental consequences of economic activity aren't reflected in the costs faced by producers and their customers, a classic instance of "market failure" – where the operation of market forces does not produce satisfactory outcomes for the community.

For instance, industries will continue to emit excessive greenhouse gases if there's no market value placed on retaining a stable climate system. And farming may cause land degradation if there's no market value placed on preserving the services the ecosystem provides to society by allowing us to grow food and fibre.

All this is a way of saying that the economy and the environment are inextricably linked but, left to its own devices, the market isn't capable of ensuring we don't stuff the environment and thereby stuff the economy.

Most economists accept this truth, but argue that the least economically costly way to fix the problem is to intervene in markets in ways that harness market forces to the service of the environment.

Often this can be done by getting the social (community-wide) costs of environmental damage incorporated into the private costs borne by producers and consumers. This was the rationale for the Gillard government's policy of using a hybrid carbon tax/emissions trading scheme to put a price on emissions of carbon dioxide and other greenhouse gases.

The concerned scientists accept this logic and propose four market-oriented interventions to reduce future damage to the nation's "environmental assets" and to fix past damage.

Their first proposal is to change the law to impose on all landowners, public or private, a "duty of care" to prevent further damage to their land and water resources. Developing codes of practice would give landowners greater certainty about their obligations.

This reflects the principle that the community's right to a clean and sustainable environment overrides the rights of individuals to unrestricted use of their private property.

Actions of great environmental value that go beyond the standard of care required – such as fixing damage done in the past – could be purchased by governments from private owners using programs that use market-based instruments, such as Victoria's BushTender​ program.

The scientists' second proposal is for the federal government to supplement our efforts to reduce carbon emissions by paying farmers, Indigenous communities and other landowners to engage in "carbon farming" – doing things that improve the rate at which carbon dioxide is removed from the atmosphere and converted to plant material or soil organic matter, where it stays.

If you do this right, it can also be used to restore degraded land. But it involves having a price on carbon so farmers can be rewarded with valuable "carbon offset" certificates.

However, there are risks if the market for carbon offsets isn't properly regulated. "Without complementary land-use controls and water accounting arrangements in place, carbon forests could take over large areas of high quality agricultural land and affect water availability," the paper warns.

"This could create adverse impacts on food and fibre production, and affect regional jobs that are dependent on these industries."

The scientists' third proposal is that we reform the tax system to make it one that doesn't encourage unsustainable practices, but rather encourages the conservation and repair of the natural environment.

"Subsidising or providing economic incentives for fossil fuels makes no sense because it results in increased costs to the environment, costs we will all have to bear sooner or later," the paper says.

It particularly makes no sense when at the same time we're using a tax on carbon to discourage the use of fossil fuels or, as now, spending taxpayers' money to pay for "direct action" to reduce emissions.

And yet our miners and farmers are exempt from paying petrol excise on fuel used off-road. It's the obvious tax break to get rid of – and save the government money.

The paper also recommends establishing a broad-based land tax to provide long-term, equitable funding for paying farmers, Indigenous communities and other land holders to restore and maintain environmental assets in a healthy condition.

Finally, the scientists propose government action to encourage sustainable farming practices. They say farmers need to receive a financial reward for managing their farms sustainably and suppliers, retailers and consumers need to have confidence that their products satisfy rigorous standards.

A farm is sustainable when environmental assets located on the farm are being maintained in a condition that contributes to the overall health and resilience of its surrounding region.

Environmental assets – not all of which will be on farms – include soil, native vegetation, native fauna, water resources (rivers, aquifers, wetlands, estuaries) and carbon.

The financial reward doesn't have to come from the government. Consumers will pay a premium for food that has been grown sustainably, provided they have some assurance this is so.

The government's role is to support the development of voluntary, industry-based sustainable certification of farms and to ensure such schemes are trustworthy. The government should also be active in the development of international sustainability standards so our exporting farmers can participate and benefit.

All very sensible stuff. Now we just need a sensible government.

Read more >>

Smarter pricing would improve productivity

The debate over our seemingly weak productivity performance has come full circle, reverting to the explanation the big end of town was happy to accept under John Howard: almost all the weakness is explained by the special circumstances of the mining and utilities industries, which are nothing to worry about.

According to estimates by Reserve Bank researchers, after you exclude mining and utilities, labour productivity in the market sector improved at annual rates of 1.8 per cent over the 20 years to 1994, 3.1 per cent over the 10 years to 2004, and 1.7 per cent over the seven years to 2011.

However, Labour productivity in mining fell by 6.3 per cent a year over the past seven years because much higher prices justified the exploitation of harder-to-get-at deposits and because of spending on new mines that have yet to start producing.

Productivity in utilities (electricity, gas and water) fell by 5.5 per cent a year over the period, mainly because additional investment to improve the reliability of supply in the electricity and water industries has done little to increase output.

Note that a deterioration in our productivity performance isn't always a bad thing. Improved productivity is a means to an end, not an end in itself. The end is a higher material standard of living, and improved productivity is just one way for us to get richer. Another is for higher world prices to make uneconomic mineral deposits profitable to exploit. How could that be a bad thing, even if it does wreck our productivity figures?

And avoiding power blackouts and extreme water shortages is surely part and parcel of enjoying a high material living standard. If that requires us to invest in more power stations and higher-capacity power lines to cope with peak electricity demand - or requires us to build desalination plants to ensure we don't run out of water during severe droughts - what of it? Would it be better to go without to keep our figures looking good?

That's pretty obvious. But Dr Richard Tooth, of Sapere Research Group, and Professor Quentin Grafton, a water economist at the Australian National University, have separately advanced a more sophisticated argument: we could have avoided the expense of all that extra utilities investment had we been smarter in the way we set the prices of those commodities.

Starting with electricity, it has long been the case that we've needed to invest in sufficient generating and distribution capacity to cope with occasional peaks in demand that far exceed the average level of demand. These days, the peak comes on hot summer days. As household aircon has become cheaper and more ubiquitous, the peaks have shot ever higher than average demand, which is actually declining a little.

It costs a fortune to install the extra capacity - particularly the power-cable capacity - needed to ensure a lot of people turning on their aircon just a few days a year doesn't lead to the thing every state government dreads: blackouts.

But all this capital spending - and the political pain of 18 per cent increases in power bills - could have been avoided had state governments got on with installing smart meters in homes. This would have allowed prices that vary with the time of day. Significantly higher prices at the time of year when people are tempted to put on their airconditioner would prompt many to think twice. It would also be easy to encourage big industrial users to reduce their demand for relatively brief periods when household aircon was full blast.

The case of water is more complicated. Water bills are composed of a fixed charge plus a usage charge that varies with how much water you use. In (simple) theory, the usage charge should reflect the long-run marginal cost of an extra unit of water. The fixed charge is whatever additional amount is needed to cover the water company's full costs (including a reasonable return on capital).

However, the usage charge is usually too low to have much effect on consumption behaviour. And the simple theory doesn't apply well to commodities that have to be stored rather than produced to order, such as water.

As usual, in the last drought we relied on water restrictions, but they weren't sufficient to fix the problem (you can only police the water use that can be seen from the street, which means restrictions don't work well with business users) and we ended up building desal plants, only to mothball them when the drought broke.

The economists' study of the price elasticity of demand for water leads them to argue that, had user charges been raised high enough, supply could have been better conserved and desalination avoided.

User charges could have been increased to the point where they raised more revenue than was needed, thus allowing the fixed charge to be a subtraction from the total user charge. Dr Tooth argues such an arrangement would have been fairer in its treatment of low-income users.

If all those jumping on the productivity bandwagon were more genuine in their concern to raise efficiency, they would have a lot more to say about efficient pricing.

The most bizarre (and pathetic) political statement of last week was Wayne Swan's response to news the annual inflation rate had fallen to 1.2 per cent, the lowest in 13 years: "While the moderation in ... inflation is certainly welcome, many households continue to face cost of living pressures." And these guys wonder why they're not getting the appreciation they deserve.

Read more >>

Don't think you can keep on neglecting me, Darling

Sustainability is a dangerous word, but one to which politicians are irresistibly attracted. It has a wonderful ring to it and drips with virtue. Can you think of anyone who would admit to supporting anything that wasn't sustainable?

And Julia Gillard has brought sustainability back into its own. Kevin Rudd appointed Tony Burke our first Minister for Population, but one of Gillard's first acts was to change his title to Minister for Sustainable Population.

These days Burke is Minister for Sustainability, Environment, Water, Population and Communities. Phew. Anything else you'd like me to fix while I'm at it?

One of his tasks is to soothe the anguished and outraged response of irrigators to the Murray-Darling Basin Authority's "guide to a plan" to restore the river system's environmental flows by reducing water allocations by 27 to 37 per cent.

Apparently, the bureaucrats at the authority have no idea of the devastation they'd cause, wiping out whole river towns and causing horrendous unemployment, while prompting a huge leap in the price of food, ending the nation's food security and prompting a surge in food imports.

Clearly, there is a requirement for commonsense to prevail and for the needs of people, their livelihoods and their communities to be put ahead of worries about the environment.

Just one problem: that dangerous notion, sustainability. The authority's guide says many of the challenges and risks faced by the basin and its communities are the direct result of the actions of successive governments over the history of the basin. "In retrospect, many of these decisions failed to strike a long-term balance between meeting the needs of the environment and those of a growing economy and population," the guide says.

"The amount of surface water diverted for consumptive use such as [in] towns, industry and irrigation has increased from about 2000 gigalitres per year in 1920 to entitlements of approximately 11,000 gigalitres per year in the 1990s. However, the impact of drought over the past decade has seen actual diversions drop significantly.

"The combination of drought and historic diversions means there have been no significant flows through the Murray mouth since 2002."

It is clear the impacts of the necessary adjustments would fall on the current generation of farmers and irrigators, industries and communities. So effective transitional arrangements would be needed to help people.

But it is also clear the environment has not had sufficient water for decades. This has led to serious environmental decline. "Twenty out of 23 catchments in the basin are in 'poor' to 'very poor' ecosystem health," the guide says. "The past decade has seen increasing water quality problems and more frequent outbreaks of blue-green algae blooms.

"The real possibility of environmental failure now threatens the long-term economic and social viability of many industries and the economic, social and cultural strength of many communities."

Over the past few decades, the focus has swung primarily to looking at the economics of the basin and what it can produce, such that the role of the environment in underpinning that economic development has been "somewhat overlooked".

But that can't continue. "If the focus does not swing back towards considering water required for the environment, then the nation risks irretrievably damaging the attributes of the basin that enable it to be so productive," the guide says.

See what this is saying? The sustainability of the ecosystem is, in the end, non-negotiable. It's not a question of being reasonable, of politicians splitting it down the middle and everyone going away grumpily satisfied. It's not even a question of imagining we can put the interests of flesh and blood ahead of mere inanimate objects.

The natural environment is utterly unreasonable and unforgiving. For years we have been able to abuse it - knowingly and unknowingly - confident in the belief it would recover from that abuse or some new technology would pop up to solve any problems.

But now it is clear to our scientists we are reaching the tipping point. Keep flogging the horse and the horse will die and leave us in the lurch. You can't negotiate with the environment, asking it to remember how many people's livelihoods are depending on it. And no amount of abuse of ignorant, city-living greenies will make the problem go away.

If what we are doing to the Murray-Darling is ecologically unsustainable it won't be - can't be - sustained. Sooner or later, it will come to an end. The only choice we face is whether to take the pain now in the hope of saving something for the future or do what all our predecessors have done and close our eyes to the problem, take a few token steps to confound our consciences and hope to be dead before the final devastation.

But politics as usual - create such a fuss the pollies back off - remains dominant. And the standard tactic is to hugely exaggerate the amount of pain that would be suffered. The authority's guide says its plan could lead to long-term job losses of 800. Just one irrigation lobby has "modelling" showing that 17,000 jobs will be lost in NSW alone.

A tip: worry about the decline of country towns if you wish - that would really happen - but don't worry about job losses. Why not? Because our economy's problem is just the opposite: we are already close to full employment, where we don't have workers to fill all the (mainly city) vacancies. That's why our interest rates are already so much higher than other countries' and why they're set to go higher. That's why economists and business people are clamouring for higher immigration.

And to country people who fear the change the authority's suggested cuts would impose on them, I'd say just keep carrying on the way you are. This is a weak federal government without a majority, opposed by a Coalition wedded to populist obstruction.

Read more >>