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Seeking a fair GHG reduction target:part 6- Equitable Reduction Targets

This is the 6th sixth post in the series: " Seeking a consensus on GHG reduction targets ". In earlier posts we suggested 4 prop...

Tuesday, 29 November 2016

A rational perspective

In Towards Heaven or Hell I presented my perspective on the direction our civilization is heading. Despite the current chaos and despite all the threats to humanity, my conclusion was that whatever we have today is better than we had in the past and yet tomorrow will be better still. Given the very obvious challenges confronting us this optimistic view is counter-intuitive and many do not share my view. Yet I have found one, a most articulate one in Matt Ridley. In his 2013 Kemp memorial lecture, he covers all the reasons why civilisation feels threatened, yet offers strong, compelling reasons why we should be optimistic. So much so that you should not read the rest of this post but simply watch this video.

The 30 minutes is well worthwhile. If you don't have the time here are some snippets from his presentation.

We are much better off today than at any other time in history

  • In 1800 the living standard of the average Brit was about that of someone in Mozambique today. People died of starvation and disease by the 10's of thousands every winter.
  • In 1800 you had to work 6 hours on the average wage to buy a candle that would burn for an hour, today you have to work for less than 1/2 second to earn the money to switch on a lamp for an hour.
  • Over the last 40 years life expectancy has increased by 1/3 and child mortality has fallen by 2/3 globally, income per head has trebled in real terms.
  • Both the rate of poverty and the number of people in poverty is falling at a higher rate than at any other time in history.
  • We are not only healthier and wealthier than ever before, but we are happier, safer, cleverer, cleaner, better fed, kinder, freer, more peaceful & more equal. Life satisfaction increases with wealth both within and between countries.
  • Death rates from storm, floods and droughts have fallen by 98% since the 1920s.
  • IQ is increasing in most countries and so is participation in education.
  • Air and water pollution are dramatically reduced in wealthier countries. A modern car emits less pollution at 70 mph than a parked car, with the engine off, in 1970, because of leaks from the fuel tank.
  • People are giving more to charity as a proportion of income than ever before.
  • More people live in democracies than under autocracies than ever before.
  • Fewer people died in warfare in the first decade of this century than any other decade since the early 1940's. 
  • People in poor countries are getting rich much faster than the rate at which people in rich countries are getting rich. This is closing the gap between global gaps between the rich and poor.

The future always looks bleak

Riddley recounts the range of threats to civilization he lived through in the 1970s, including ; - 
  • population explosion was unstoppable
  • mass famine was imminent
  • a cancer epidemic from chemicals in the environment was going to shorten lifespan
  • the Sahara was advancing at a mile per year
  • the ice age was returning
  • oil was running out
  • air pollution was choking us
  • and a nuclear winter would destroy life on earth

It always looks bleak but doesn't turn out that way

"As Lord Macaulay put it, “in every age everybody knows that up to his own time, progressive improvement has been taking place; nobody seems to reckon on any improvement in the next generation. We cannot absolutely prove that those are in error who say society has reached a turning point – that we have seen our best days. But so said all who came before us and with just as much apparent reason.
“On what principle is it that with nothing but improvement behind us, we are to expect nothing but deterioration before us?” 
People always think they living in a world about to change and things will get worse. But history teaches us that it doesn't turn out that way. There is no rational basis for believing otherwise this time either.

The only reasonable conclusion is that the current positive trends in our collective quality of life will continue. We have good reason to remain optimistic about the future.

Monday, 28 November 2016

Super needs real reform

Although the new superannuation legislation is still 'hot off the plate', this new incarnation is far from ideal. Despite ever larger contributions, the average worker even after 40 years will end up relying on an aged pension. This is a far cry from the picture painted by Keating/Hawke when superannuation was first introduced.

Keep an eye on the prize

In order for a worker to be fully self-funded in retirement their Super fund balance at retirement must yield an annual income greater than the Aged Part-Pension cut-off.
Lets call this target balance the Self Funded Retirement Threshold. Today with the Aged Part Pension cut-off at just below $50,000 pa, at a yield of, say, 5% the Self Funded Retirement Threshold (SFRT) is $1,000,000. 

All superannuation policies should be focused on every retiree reaching this super balance.

5 Changes to Improve our Super

This objective leads us to consider a wide range of changes that can both lower the burden on our welfare budget and yet increase the number of workers achieving self funded retirement.

Here are 5 suggestions; -
  • Taxation discounts on super contributions should be capped. There should be NO tax discounts on super contributions if the projected balance is greater than the SFRT.
  • Super fund annual contribution limits should increase as the employee approaches retirement . There is no cost to the government in doing this as the tax discounts automatically cut off if the projected balance is greater thant SFRT
  • Retirees should not be allowed to withdraw a 'lump sum' from their Super if by doing so its remaining balance would fall below the SFRT
  • Government could issue a government guaranteed Superannuation Bond (SAB) with a fixed rate of return above inflation, say 5%.  There are two benefits to this approach. The government receives a ready source of funds in return for the tax 'discount' on super contributions. Funds that can be used for long-term infrastructure projects. At the same time the individual receives a guaranteed inflation adjusted return on at least part of their super contributions. There should be strict rules pertaining to this special purpose SAB. Here are some suggestions; - 
    • Any SAB investment cannot be withdrawn till retirement and its value at retirement is the inflation adjusted value of the sum invested, ie no capital gain. 
    • The maximum value of investment for any individual would be limited to the SFRT. 
    • The government could manage the SAB to reduce debt and to fund infrastructure projects. 
  • It could be mandatory for Super funds to purchase SAB as part of their annual contributions. This 'compulsory' contribution could be equivalent to the value of the tax discount provided on Super contributions. eg if a worker contributes $10,000 in any year to his super and has saved $1500 in tax in making this contribution he would have a mandatory contribution of $1500 to the SAB. 

No doubt more changes will come

Given the legislation has just passed the senate, it may seem that these suggestions have missed the boat. I guess in the short term that is true. But have no doubt the pollies have not finished fiddling with Super for long. Most likely it will be revisited in the not too distant future for another tax grab. Then again who knows, perhaps the inspiration fairy will strike some future PM with the fortitude to guide the parliament to sensible, long lasting Super reform.

Wednesday, 9 November 2016

Don't Panic!

I happened to catch the last few minutes of the ABC's QandA last night. The topic at the time was Climate change. It was the usual one-sided ABC panel with the usual one-sided audience clamoring for immediate action against carbon pollution. It is the greatest "moral challenge of our time", "without real action today we are facing climate disaster!" the various calls coming across as rather shrill.

Of course there was the sacrificial token representative of the 'dark' side. In this case it was James Paterson a rather youthful Victorian Liberal Senator. During the few minutes I watched he acquitted himself well, responding with commendable equanimity in the clearly hostile atmosphere.

I was struck by the passion of the climate change advocates, the foam-in-the-mouth, frothy passion, the no-argument-or-discussion-is-allowed passion, the disgust-for-anyone-wanting-to-question passion.

These are without doubt intelligent people, who on any other subject would listen to the information, seek alternate views, apply some filters as to the veracity of the information and then come to a balanced judgement. But it seems that with Climate change it is different. Yes it is a cliche to call it a religion, but I do recall from decades past I did note the same visceral passions in the occasional discussions on religion.

As I have noted in my earlier posts, my own beliefs have evolved over the past year. (See the Climate Change page for a list of my posts.) I have been swayed from the most foreboding predictions of "runaway" climate change by just a few observations.

  • The Earth's average temperature has been more than 5C degrees higher than today and yet it supported a rich biodiversity.  For example, during the Jurassic period the average temperature of the Earth was ~25C. This is a full 10C degrees higher than today. Yet during the Jurassic life was abundant. So what is so special about a 2 degree rise from the current average of ~15C. 
  • CO2 concentration has been much higher than today and yet the Earth supported abundant animal life. Again during the Jurassic CO2 concentration rose to >2500 ppm yet supported life. 
  • The historical record shows no evidence of a "tipping point". The geological record shows a wide variation of temperatures and CO2 concentrations (see Graphic above). Yet there is no evidence that there is a "Tipping point" whereby if the CO2 concentration exceeds some threshold there is a runaway temperature increase. On the contrary the geological record shows cyclical changes in temperature and CO2 concentration with most temperature higher than today. 
So lets all calm down. Yes, there is global warming. The earth has been in a steady warming period after the mini-ice age of the early 17th century. Yes, it is probable, but not certain, that man made emissions of CO2 are contributing to this warming. It is possible, but again not certain, that if our civilization can reduce its emissions, we could mitigate some of the temperature increase. Indeed it may even be worth doing this in a sensible, equitable and gradual process. After all I am all for sustainability.

But there is no need to overreact. The world will not end in a ball of fire if we fail to control our emissions. Planet earth will not turn into Venus if we fail to close brown coal power stations in Victoria next year. Nor indeed can any of our virtue-signaling state governments on their own make any measurable impact on the Earth's temperature. Neither can all of Australia. It requires a coordinated world effort to make even an iota of difference. Will such a coordinated effort occur? We are yet to see.

My expectation is that our significant investment in energy research will generate breakthrough technologies. Technologies that provide abundant base-load energy at lower cost than fossil fuels. When that happens the world will quickly shut down fossil fuel power stations without any coaxing.

We do have time. Even if the world carries on business-as-usual our civilization will survive a 3 degree increase in temperature and a doubling of CO2 concentration. Indeed it would be a warmer wetter and greener world, perhaps more pleasant that today's. 

QandA's shrill calls for no-holds-barred-urgent-action remind me of the advice printed on the "Hitchhiker's Guide to the Galaxy" , "Don't Panic!"

Monday, 7 November 2016

Lifetime ban-ter

What's so wrong about a lifetime Visa ban for asylum seekers who had tried to enter Australia by boat? The proposed ban would prevent anyone who has come to Australia by boat from re-entering anytime in the future, even if they have citizenship from another country.

Sounds pretty harsh! After all it could be 40 years from now, when that person may have won a Nobel prize, and wishes to enter for a holiday. I guess these are some of the arguments.

But let's considers some facts; -
  • The government has a right to do this. The Australian government has a right to determine who enters the country, and certainly can and does prevent persons of 'doubtful' character from entering. So this declaration is not really novel.
  • The person has had fair warning. The Australian Government has already stated that no person who enters Australia by boat will be settled in Australia (courtesy of the Rudd ALP gov in 2013). So again this is not really novel.
  • It encourages re-settlement. While NZ has offered to accept some asylum seekers, the Australian government has not allowed this option as the open border between Aus and NZ would enable asylum seekers to circumvent Australia's stated policies. This would inevitably feedback to re-start the boats.
  • It hastens closure of the offshore processing centres at Manus/Nauru. While the proposed change will not suddenly empty the detention centres it will encourage asylum seekers to leave voluntarily. By firmly locking the door to settlement in Australia some will inevitably opt to return to their home countries, while others may receive the chance to be-settled in countries such as NZ.
While it may not serve the political purposes of the ALP /Greens and refugee advocates, the legislation can help asylum seekers and there is little downside.

Asylum seekers would far prefer to have an option for re-settlement in a country like NZ, Canada or US than hold-out on Naure/Manus for an indefinite period.  So by arguing against this measure asylum seeker advocates are arguing against the interests of those they claim to support!