Tuesday, November 17, 2009

Static Guessing is terribly dangerous…

The reasons we cannot pin down the cost of an ETS or other climate change intervention are fairly obvious. Even so two things we seem to keep on missing:

1. These are fiscal costs govts keep trying to estimate. Likely mere bagatelle compared with the opportunity costs. The opportunity cost of the debate alone has already cost us dearly. So the cost is not just about spending a lot of money. It’s about spending a lot of money on the wrong thing while not spending that sum on the right thing(s).

2. The implicit assumption in all this is that static analysis will do, that behaviour doesn’t change when costs alter and that it is possible to find the “right” straight line. Clearly nonsense. We have no idea what sort of behaviour will ensue once some “scheme” is in place… look at the alteration in behaviour a few pieces of selective deception from an outed science fraud coupled with an embittered election failure can do.

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