Environment in Crisis

Global Warming Debate
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In both the US and Australia, think tank economists have been influential in debate over the costs of greenhouse gas abatement. In Australia the Commonwealth government has relied heavily on figures provided by the Australian Bureau of Agricultural and Resource Economics (ABARE). ABARE raised $1.1 million from oil companies and industry lobby groups by offered them the opportunity to pay $50,000 to sit on the steering committe and "have an influence on the direction of the model development" (as stated in ABARE's literature).

Those who took advantage of the offer included Mobil, Exxon, Texaco, BHP, Rio Tinto, the Australian Aluminium Council, the Business Council of Australia, and Norwegian oil company Statoil. The Australian Conservation Foundation, which could not afford the $50,000, requested a waiver of the fee to be on the steering committee but was refused. According to Clive Hamilton, from the Australia Institute (an environmental think tank), 80 per cent of the funds for ABARE's climate change modelling come from the fossil fuel industry.(Hogarth 1997)

Not surprisingly ABARE's model (MEGABARE) predicts huge costs in jobs and income if emission reduction targets are to be met. This is disputed by environmentalists and alternative energy experts, as well as 131 Australian economists who signed a joint statement that said "the economic modelling studies on which the Government is relying to assess the impacts of reducing Australia's greenhouse gas emissions overestimate the costs and underestimate the benefits of reducing emissions." Professor Mark Diesendorf, Director of the Institute for Sustainable Futures, claims that ABARE's model has serious flaws because it neglects the role of technological change as well as the benefits of different energy paths such as the new industries created. And several Australian studies over the last few years have shown that emissions could be cut in Australia by atleast 20 percent without cost. In fact an earlier 1991 ABARE study "concluded that emissions could cost-effectively be cut by 30 percent." (Gilchrist 1997)

In the US a frequently cited computer model of economic costs of climate change, the International Impact Assessment Model (IIAM) was originally commissioned by the American Petroleum Institute, although this is seldom mentioned when referring to the findings of the model. This model also predicts large costs if emissions targets have to be met and that it would be cheaper to reduce emissions later rather than earlier. The model ignores the environmental costs of not acting sooner and the possibility of new markets created by alternatives to fossil fuels.(Ozone Action 1997)

The World Resources Institute (WRI) examined "sixteen widely-used economic models, including the three used by the Clinton administration to analyse climate policy options" and found that they differed in terms of the assumptions they made such as the availability of alternative energy sources, whether nations would cooperate, how energy taxes would be spent, whether fossil fuel consumption reductions would have other benefits such as cleaner air. The WRI found that even with the most unfavourable assumptions the costs would amount to only 2.4 per cent of GDP over the next 22 years: "This means that the economy in 2020 would be 75 percent larger than today's, instead of 77.4 percent larger." Even so, a more likely scenario, they claim, is that sensible policies and international cooperation would ensure "carbon dioxide emissions can be reduced with minimal impacts on the economy". (WRI 1997)

The emphasis on and exaggeration of costs has long been a tactic of corporations opposing environmental regulation. Invariably the economic disaster forecast by industry never eventuates and the cost turns out to be far less than predicted. For example, when it was proposed that CFCs be banned as propellants in the US, chemical companies predicted terrible consequences to an industry which employed 200,000 people and contributed $8 billion to the US economy. In fact the US economy benefited from the ban. (Ozone Action 1997)

Public Relations firms such as Bonner and Associates are generating 'grassroots' opposition to measures to prevent global warming by emphasing costs.

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Additional Material:

ABARE Publications

Hogarth, Murray 1998, 'Greens Priced Out of Kyoto Input', Sydney Morning Herald, 4 February, p. 3.

Hogarth, Murray 1997, 'Climate research alleged to be biased', Sydney Morning Herald, 5 August.

Gilchrist, Gavin 1997, 'Too Much Hot Air', Sydney Morning Herald, 30 August, p. 5S.

WRI, 1997, 'New WRI Report Pinpoints Source of Conflicting Predictions About Costs of Climate Change', News Release, 11 June.

Ozone Action, 1996, Ties that Blind III: How the Public Interest was Lost, Ozone Action, Washington D.C.

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© 2003 Sharon Beder