All posts by John Gregg

Community Based Solutions — Why the Opposition?

Much current thinking about climate change and renewable energy has been based on rational economic theory and standard modelling. A core assumption of this approach is that individuals always seek to maximise their utility; however, in many fields where human behaviour plays a substantial intervening role—such as finance, health, or taxation—this assumption has been shown to be flawed. It must therefore be of concern that the same flawed assumption is prominent in the response to climate change.

So far, the debate about changing individuals’ behaviour in relation to climate change has focused on market mechanisms. Better pricing of energy and costing of scarce resources can indeed steer individuals away from carbon-intensive consumption.

But the drivers of consumption behaviour by individuals and groups go far beyond prices. Many energy efficient technologies have been available for years, yet little action to really utilise these technologies on a mass scale has taken place. The trick is to grasp why—and this is where conventional economic theory fails to provide answers.

Awareness of climate change has increased without translating into individuals’ actions. We are more aware of climate change than ever, yet drive more large 4WDs, live in ever larger houses and we consume copious amounts of energy. What explains this disconnect between perceptions and actions?

This “green gap” in public attitudes partly stems from how climate science is communicated (with particular prevalence of deliberate disinformation by vested interests) and how our minds (mis-)understand climate dynamics. Standard “information-deficit” models of communication assume that if we “know” something, we also change our behaviour. Thus, on this model, knowing more about climate change should bring about behavioural change. But improved knowledge or even prior experience may not lead to corrective action; just look at the centuries of financial folly that have led to speculative bubbles and their inevitable meltdowns from the Dutch Tulip Mania to the sub-prime crisis or, arguably, the current Australian housing market.

Information can also lead to feelings of disempowerment (“you can’t change the course of nature”); which then may turns into ambivalent powerlessness. Similarly, playing up the multi-stakeholder nature of climate adaptation is a reminder that the solution rests with no single actor, resulting in a generalised feeling of limited agency, helplessness, and disempowerment.

An added challenge has to do with how we perceive the problem. The dynamics of climate change stretch our mental capacities in several ways. The fact that even the most drastic and sudden emissions reductions will not immediately stop further warming is something we struggle with. The delayed, intangible nature of climate change risks simply does not “move us.”

Understanding barriers to behaviour change also requires that we go beyond explanations based on the individual as a unit of analysis and embrace the way social factors influence perceptions, decisions, and actions. We tend to resist and deny information that contradicts our cultural values or ideological beliefs, such as information challenging notions of belonging and identity, but also of rights to freedom and consumption.

We also construct and reconstruct information to make it less uncomfortable, leading to socially organised denial that shape the way we interpret and respond to the challenges of climate change. The evolution of standard narratives about climate change provides an example.

In Australia the media focus on our relatively low gross national carbon emissions (1.7% of world total). Focusing on country emissions rather than per capita emissions, or even the fact that this 1.7% total places us at number 14 of national emitters among 190+ countries, can lead us to frame our perceptions against “perceived” big country emitters. Frequent calls for the need for an international response play down the fact that domestic action is required in any case.

As Bill Gates aptly pointed out on the 7.30 report this week, Australia’s effort to price carbon is admirable but also simply a responsible domestic action. He compared Australia with the US which despite not having a national carbon price, sports regional systems that encompass close to 45% of the country’s economy. Moreover, per head of population, the US is spending far more on clean energy research than any other country. Far from defending the US, Bill Gates was simply pointing out that each nation has to make domestic decisions to contribute to the greater whole, and different nations may choose different actions.

Policy makers need to be aware of these individual and social barriers to action, and treat policy options accordingly.

Two policy areas are especially relevant: communications and institutional measures.

 From information to communication

Information, education, and awareness-raising are insufficient at best and may be counterproductive at worst. There are at least two potential avenues for a better approach in coverage of climate change.

First, creating the right communication opportunities and avenues to communicate requires more interaction between journalists and scientists. Second, communicating climate change needs to shift away from an information-driven approach to a group-centric one. Both scientists and the media need to work together on enhancing the group salience of the messages they relay. Well-designed climate communication campaigns that address individuals as members of a local community and not powerless members of an unmanageably large group can empower them to act. Third, “greenwash” from business and government needs to be both limited and “named and shamed” to avoid public confusion and public backlash.

A valid question is whether detailed public understanding of complex issues such as climate change is feasible, and even necessary, for effective policymaking. The answer may be no, or at least not always. Much policy making is based on technicalities fully ignored by the public. Few people understand the intricacies of trade policies affecting the price of the food they buy and eat.

Yet discounting the importance of information altogether would probably be a mistake.  Some excellent recent and ongoing research that can be found on the US Behaviour Energy and Climate Change conference portal vindicates the assertion that information is key for the public to back costly measures. The benefits of providing more accurate information about people’s consumption decisions—say, through carbon labelling and smart power meters have been observed. Similarly, opposition to environmental taxes seems to decrease once the public fully understands that they are a way not simply to raise money, but to change behaviour and reduce a negative externality.

Institutional measures

Beyond communication, a key question for climate policy is to design interventions that take into account psychological and social constraints to positive action.

The design of effective adaptation interventions should include measures that reduce the transaction costs for individuals in making decisions while enhancing the ownership of the information available. One way to achieve this might be for adaption strategies to be informed by communities’ own perceptions of risk, and be framed as an opportunity to act, highlighting the perceived benefits of action.

There are already many such success stories in Australia at the local government level. For example, Newcastle’s highly-regarded “Climate Cam” programme has reportedly achieved a 28% reduction of GHG emissions since 2008.

In South Australia, Victor Harbour, a town of 15,000, has developed a comprehensive climate change programme with extensive community consultation that has installed 2100 rooftop solar panels, has generated 24 installation jobs for electricians, established a micro wind turbine manufacturing facility, saved local ratepayers over $350,000 in utility charges and replaced all existing street lighting with solar powered lighting.

Climate policy should heed people’s tendency to favour local and visible outcomes.

To most, the benefits of mitigation and adaptation are distant, abstract, and uncertain, while its actual and associated costs are immediate, concrete, and certain. Interventions can be devised to better highlight upfront the “ancillary” benefits. For instance, cost benefit analysis (CBA) of energy-efficiency projects often do not include non-energy co-benefits. These include public health benefits from cleaner air and water, improved comfort of building occupants, increased labour productivity, and increased jobs through the multiplier effects of switching energy expenditure.

Paradoxically there are instances where opponents to mitigation actions use CBA to “enhance” intangible costs to support their case. I experienced this first-hand in recent months while working on a container deposit programme for WA, whereby consumers could return their beverage containers to depots and receive a 10c refund. This program will cut visible litter while also cutting costs and increasing efficiency of kerbside recycling.

I was confronted with a plethora of industry-sponsored CBA studies that inputted “guestimates” of “inconvenience” to consumers that such a programme might entail, for example by calculating that an average consumer would need to make 30% more trips to the local supermarket to return their containers.

These unsubstantiated “inconvenience” inputs added as much as 45% to the cost estimates provided by industry, and naturally supported their claims that such programmes were not viable. Coca Cola Amatil, one of the chief purveyors of many of these CBAs and a principal opponent of such schemes, has today been taken to task by the grass-roots organization GetUp, whose video reveals more about Coke’s actions in response to a proposed program that has been working flawlessly for decades in most European countries and in neighbouring South Australia.

Community Based Solutions

These measures are obviously not sufficient to ensure the success of climate policy. But they might well prove to be necessary. Encouraging behaviour change for mitigation and adaptation goes well beyond providing additional information, finance, or technology. Traditional measures can be complemented by alternative types of interventions, often at low cost. Rather than simply treat these social and psychological drivers of behaviour as barriers to adaptation and mitigation, policymakers have the option to use them to build more effective and sustainable policies and interventions.

Psychologist, social psychologists and behavioural economists are making great progress in helping understand where rational economic approaches to addressing climate change continue to fail, while simultaneously indentifying new effective methods to tackle this complex challenge.

It’s 2061, how’s life?

Andrew Craig hit the start-button on a balmy Albany April day. His Landcruiser unhooked from the household power, then the twin electric motors cut in and moved it quietly down the drive. The silence disturbed some people when HydroElectrics first took over the V8 market, so they’d bought the audio option that simulated the sound of a historical V8 engine. Now the only time you’d hear anything like that was when the amplified “chugga, chugga, chugga” of a Harley Electro Hog drifted through the open window.

It was a long drive to Perth for Andrew and his daughter Jenny and, though the sun was shining and the cleaned solar panels on the roof of Andrews’  big Landcruiser Suburban would add charge to the high-test Beijing batteries, but they’d also have to burn some hydrogen before reaching the luxurious Abrolhos Marriott.

This could be the last International Wind Farmers Conference, and as one of the dwindling number of founding members who was still on the ball, Andrew was up for the opening keynote. He had plenty of time to consider his speech. Australian Clean Tech – now a major multinational corporation – had taken over the business and he no longer needed to worry about the 300 big turbines on the property. He’d installed and cared for those whirling power plants all his adult life and he’d done such a good job even the 60 year old antique Danish monsters were still pushing good amperage.

For a wind farmer descended form generation of dairy farmers, Andrew was an eloquent and compelling speaker. A devout Christian, he’d played a big part in influencing his congregation, to embrace the view that stewardship of this green world is of primary responsibility for people of faith. Even so the advocacy of those who shared his conviction would not have carried the day without the cumulating awareness that there was less water to drink, temperatures were inexorably rising and millions of hectares’ of Australia’s best agricultural areas were no longer agriculturally viable.

Andrew was reflecting on the massive events that had accrued overseas that impacted his life. Ironically in America it was the ‘new’ Republicans (now unrecognisable from the neo cons of the first decade of the century) and their chief strategist Arnie Schwarzenegger who in 2020 had pushed the final legislation that mandated a 90 percent reduction of carbon emissions by 2070. While at the same time China, had failed to reign in its semi-autonomous provinces, the result being the clean policy legislation instituted in Beijing carried little “stick” for those who did not comply.

Now in 2061, we see desertification across the entire Western Beijing Plains, dust storms from the Inner Mongolian land long denuded of fauna for open pit coal extraction now roll in giant waves from the desert, reducing within minutes visibility to a maximum of 5 metres. Upon retreat millions of tonnes of red sand clog the streets, stores and homes. Economic refugees — mainly famers — have flowed into Beijing and live on the margins of society, the drifting sands themselves having encroached many Beijing suburbs and a social municipal department has been established to try and clear the sand drift in the suburbs. The Chinese Public are not happy campers.

Back to global actions, even more remarkable than the global GHG reductions commitments was the 2023 signing of the international convention that stated: “The deliberate suppression of science relating to climate change and technology that will alleviate the severity of global warming is a crime against humanity.”

Andrew’s thoughts returned to the task ahead. He’d thought very carefully about his speech. He wanted to convey the immense pride in the contributions that the thousands of fellow wind farmers had made to cleaning and greening the country they loved so much. Of course, the efforts by the “windies” had been just a part of the extraordinary Australian and global energy and determination that stabilised CO2 in the air at just below 450ppm; a momentous achievement that many had thought could never be achieved. The announcement prompted waves of celebration, street parties and gatherings across the world. These united efforts by the many across all cultures resembled the UN’s original charter of over one hundred years ago. Here the combined will and determination of the people and politicians and their rapid concrete actions had come together to find solutions to the greatest threat our planet had ever faced.

With the EU leading the way with the institution of tariffs against goods manufactured in countries that would not comply with internationally agreed carbon targets, the rest of the world had quickly followed suit. As the decades passed, they’d watched new industries emerge, along with a healthier and in every way happier society as people had gathered into closer communities and rediscover the delights of a sustainable lifestyle.

With the EU leading and China reluctantly playing ball (no doubt reminded of the economic impact of degradation back home), remitting carbon taxes back to supply the necessary resources to the poor nations of the planet had also led to a new sense of an international accord, and to a view that humanity had somehow returned to a sense of sanity. Weapon sales had been displaced by green technology and products that were designed to be recycled as the biggest revenue earners for all members of the UN Security Council. A remarkable transition that would have been dismissed out of hand by Friedman, Hayek, Von Mises even Keynes. These possibilities were simply not on their radars screen of the future.

Andrew felt good about his life, what he had stood for and what he had done, as Jenny slept the car glided silently along and the kilometres rolled gently by. He knew that the future was assured for his Grandchildren and their Grandchildren.


This post is the first one in a new category of “Free Thinking” pieces that will explore important issues by unconventional but creative means.

What are Other Countries Really Doing about Carbon Emissions?

Given the mass of conflicting information surrounding Australia’s climate change policy; one might want to try to find out what the rest of the world really is doing.  Unfortunately, currently missing from the online information about climate change policies around the world is one non partisan website that compares and contrasts the policy action being undertaken by governments around the world. However, there are various Wikipedia sites that do a reasonable job of aggregating ETS, RETs, carbon tax and other policy instruments commonly utilised around the world. These include;

Emissions trading

Carbon tax

Renewable energy targets.

But to really learn about climate change policy around the world you have to visit each country’s government site and then compare for yourself. So in this post we provide links to some of these websites and briefly outline the policies they describe.

Starting with New Zealand, you might be aware that NZ has had an operating ETS since 2008. If not you can read about the NZ ETS and other measures here.

In the EU, overlaying individual country policies is the EU ETS which you can read about here. The ETS in operation since 2005 covers emitters which are collectively responsible for close to half of the EU’s emissions of CO2. The EU ETS alone aims to deliver emissions cuts of 21% (based on 2005 levels) by 2020.

In addition to the EU ETS most European nations have individual emissions reductions policies that include renewable energy targets, CO2 or energy taxes, feed in tariff policies and renewable energy certificates. A selection of these follow.

For example in the UK you can read about the Climate Change Act which puts in place a framework to achieve a mandatory 80% cut in the UK’s carbon emissions by 2050 (compared to 1990 levels), with an intermediate target of between 34% by 2020. Other policies include renewable energy obligations, a nation-wide cap and trade scheme that goes beyond the existing EU ETS, and low carbon buildings programmes.

Sweden’s climate change policy website leads with the announcement that Sweden is spending SEK 5 Billion (AUS$ 1 billion) between 2009 and 2011 on climate change mitigation policy. Other existing climate change policy instruments which include a CO2 tax in operation since the 1970’s, a renewable energy certification scheme requiring consumers to buy 7% of their energy from renewable sources since 2003; and an oil phase out programme with the following 2020 goals; consumption of oil in road transport to be reduced by 40-50 per cent; consumption of oil in industry to be cut by 25-40 per cent and heating in buildings with oil, a practice already cut by 70% since the 1973 oil crisis, should be phased out completely.

Germany is committed to a 40 per cent cut in emissions from 1990 levels by 2020; and through a huge investment in renewable energy, together with participation in the European ETS; Germany is well on its way to meeting these targets, despite also promising to phase out nuclear power.

In the US, while there is no national policy as yet, many states have climate change policies; for example California. Under the AB 32 act of 2006, California aimed to cut emissions by 11 percent by 2010 (which it achieved), 25 percent by 2020 and 80 percent by 2050. To deliver these targets California will install a million solar roofs, develop a high speed rail network, launch tough new vehicle emissions standards (already among the toughest in the world) and the state has already launched a cap and trade programme that covers 85% of all emitters.

There is a Northeast US regional cap and trade programme called the Regional Greenhouse Gas Initiative (RGGI). This program launched in 2009 with the aim to reduce the carbon “budget” of each state’s electricity generation sector to 10 percent below their 2009 allowances by 2010. The iniative includes nine Northeast states.

Japan’s carbon change policies can be found here. Like the US, Japan’s current cap and trade schemes operate at a city or regional level.

In 2007 China’s published its’ first National Action Plan on Climate Change. Since then there have been more announcements; for example just this week China announced it will pilot an emissions trading scheme in eight Chinese cities starting in 2012, to be then rolled out nationally in 2015. And estimates suggest it is on track to meet its UN target of a 40-45 per cent cut in emissions intensity by 2020. (Note than intensity is different from absolute cuts).

So a quick tour of online climate change policy information from around the world, clearly indicates there are many policies being implemented to mitigate climate change. The facts clearly contradict claims in Australia that we will be acting ahead of the rest of the world. Even with our planned 5% reductions on current emissions levels at 2020 are delivered, it appears we will still be the highest emitter per capita in the developed world.

So to wrap up, here is Australia’s own climate change policy website. The site leads with a ‘click through’ to Australia’s ‘Clean Energy Plan”. From here you can download key policy documents outlining the overall climate change plan. What you realise from the site is that the emphasis is more on what the government is doing to assist consumers and industry; rather than the goals, objectives and vision guiding Australia’s climate change policy; in fact these performance metrics are hidden in the accompanying documents. I guess this very much reflects the political reality of the issue in Australia at the moment.

What is clear, however, is that Australia does not run any risk of taking leadership in carbon abatement—on the contrary, we are lagging behind many other nations despite the fact that our emissions are historically very notable and that we are one of the world’s “dirtiest” generators of energy.

Climate Change and Scientific Debate – The Messenger Matters

What a week it’s been for the climate debate in Australia. The furore surrounding Christopher Monckton’s visit, the letter signed by 50 academics calling for a cancellation of his speaking engagements, the ensuing backlash against those petitioners by readers of The West Australian and of course Tony Abbott’s very public swipe at the calibre of our leading economists.

After all that, you could be forgiven for thinking the very basis of scientific debate on climate change is in question.

But are the ‘anti-climate change’ arguments posited this past week a fair reflection of changing public opinion regarding climate change?

In March 2011, CSIRO reviewed 21 recent studies examining Australians’ views of climate change, their beliefs about human-induced climate change, their support for various policy responses to climate change and to what extent public views had changed since the previous Garnaut review in 2008. (CSIRO, 2011)

While it is difficult to reconcile the results from all 21 studies (as question framing often differs by study), on balance the review indicates climate change “believers” are still the majority, but are on the decline. For example between 2008 and 2010, the proportion of people who believe climate change is at least partly human induced seems to have dropped about 10 percentage points on average. Accordingly, those who believed climate change was a result of natural causes rose from 21% in 2008 to 31% in 2010. (CSIRO, 2011)

Perhaps, we can blame part of this decline to the politicisation of the issue originating with the announcement of the CPRS (the Rudd-government’s emission trading scheme). As soon as a publically funded mitigation policy was announced, the gloves came off and the issue ceased to be viewed primarily through the lens of scientific enquiry.  

Once politicised, climate change brings to the fore ideologies and rhetoric, enough to dismay any scientist. But all is not lost I believe, once we accept that climate change is, publically, a political issue as much as a scientific issue. We then begin to realise that this challenge to science-based policy is not unique to climate change and we can chart our way forward out of the quagmire of partisan politics.

Overly optimistic?

Let’s see.

In a study of US print media portrayal of the climate debate, Antilla (2005) observed that the attack on climate science replicates previous assaults on science, such as by the pesticide industry (with respect to DDT), coal-burning utilities (when acid rain was identified as a serious environmental problem), and the chemical industry (effect of CFCs on stratospheric ozone).

Nissani (2007, p. 37) notes “there have always been experts willing to back up a ‘profitably mistaken viewpoint’; there have always been efforts ‘to cover the issue in a thick fog of sophistry and uncertainty’ and to ‘unearth yet one more reason why the status quo is best for us’.”

Unfortunately, I haven’t seen Australian research citing similar precedents, but I assume they are there.

So if we accept that the politicisation of climate change is not unique, perhaps we can get over the frustrations that somehow we are missing the ‘magic pudding’ of finely crafted evidence-based scientific discourse.

But why should we doubt the ability for rational argument to win the day – after all, 97% of climate scientists agree that the climate is changing and these changes are largely driven by human activity?

We should perhaps doubt that rational argument alone is sufficient because this is not a game of knowledge or of facts; but a battle for perception.

In their 2010 study “The Persistence of Political Misconceptions”, Nyhan and Reifer posit the correction of incorrect information in polarised political issues does not necessarily lead to a rejection of misconceptions. In fact, through three experiments in the US, they found that the correction of factually incorrect information could backfire, leading to more polarisation. Quoting from their conclusions: “As a result, the corrections fail to reduce misperceptions among the most committed participants. Even worse, they actually strengthen misperceptions among ideological subgroups in several cases” (p. 315).

If last week’s reaction to climate change issues by some segments of the WA public are any indication, the hypotheses put forward by Nyhan and Reifer’s have unfortunately been validated.

So if the correction of factual misconceptions does not always make things better, this implies the energy expended on the correction of misconceptions may be wasted, and the messages that enter into the public dialogue may be largely defined by the political opposition. Hence the dilemma: Do we fight on, or step back from the argument and, perhaps, seek to do no harm? Or is there a ‘third way’?

Returning to the CSIRO research review; while on the decline, ‘climate change’ believers still represent the majority. This suggests the science-based study of climate change, and its consequences have been communicated and largely accepted. On top of this, there is quite likely a group of “undecided’s” (my term, not a group defined by the CSIRO review, but one that forms in relation to any policy issue).

Rather than reacting to the message of the most “rusted on” anti climate change brigade, a more profitable communications strategy might be to identify and target the “undecided’s” (The US the Yale Climate Change Project has named this group “the cautious” representing 21% of the adult population – Yale, 2011). Of course, to effectively communicate with distinct attitudinal groups we need to know their concerns, hopes, dreams and fears; which are unlikely to be restricted to scientific queries.

Therein lies another dilemma. On the one hand, as discussed, the correction of untrue information and errors may just fuel the flames of opposition; on the other hand, aren’t we required to make these corrections?

Yes, but this doesn’t mean we must disengage from the discourse. It is still important to assure that there is regularly refreshed knowledge-based information. It is important that there is education, both formal and informal. It is important that we constantly improve the ability to communicate the essence and the substance of complex problems. In a nutshell, the dilemma is the recognition that incorrect information must be corrected, accompanied by the realisation that such corrections do not necessarily lead to knowledge-based reconciliation of disagreements.

So how to chart a path forward?

I propose that “climate change mitigation” advocates do not hang on in quiet desperation: Instead, there should be a substantial amount of positive information arising from their actions and intellectual energy focused on developing and implementing solutions.

The knowledge from these activities serves not only to promote creativity solutions, but also to diversify the base of people who are advancing climate change as an important issue. Enabling these groups and individuals to air their views, they can take climate change out of the narrowly defined realm and culture of scientists, broadening the message, and revealing more opportunity that comes from addressing climate change as a societal value.

The messenger is critically important here: The most obvious way past the problem of the politicised messenger is to expand and diversify the messenger base. Perhaps the easiest diversification of the messenger base is to engage a far broader cross section of voices from the community of scientists. There are experts outside of the community of authors of classic papers (e.g., the Garnaut Review, CSIRO, etc.). These voices can bring new strength and perspectives to the body of knowledge. Often the most passionate of these voices are young, and if we have confidence in our efforts, then we should have confidence in those who have learned from us.

But in reality, the widest diversification of the messengers of climate change comes from the active inclusion of people who are positioning themselves to adapt to climate change. These responses can be found in energy utilities, local government, the insurance industry,  community actions groups, academics, and government researchers, and they not only bring forward voices who are responding to the body of climate-change knowledge, but they also untangle conflict-of-interest perceptions and provide concrete examples of the translation of climate science to action.

Now to a contentious point; one I’ve been leading up to in this post.  I believe there is an imbalance in the discourse. I believe there are too many people on the solution side, or on the scientific climate-research side and too few on the community side. I think we need to recognise the resources, perceptions, attitudes and behavioural responses inherent in the community and develop the capability for the community to both advance the argument and to contribute to development of the knowledge base.

I advocate, here, a re-framing of the climate and climate-change problem. Rather than this being, primarily, a scientific problem with scientists or an institutional service pushing information to under-informed audiences, we must develop community-based resources that allow for the participation of an informed community in the evolution of climate solutions.

I agree this is simple to say – more difficult to accomplish.


Antilla, L, (2005) Climate of scepticism: US newspaper coverage of the science of climate change, Global Environmental Change 15, 338–352.

Essential Media (2010). Position on climate change, available at:, accessed 20th February, 2011.

Pollack, H., 2008. Uncertain Science in an Uncertain World. Cambridge University Press, Cambridge.

Nissani, M., 2007. Media coverage of the greenhouse effect. Population and Environment: A Journal of Interdisciplinary Studies 21 , 27–43.

Nyhan, B & Reifer, J (2010) “When Corrections Fail: The Persistence of Political Misperceptions”, Political Behavior, 32, 303–330.

Trends in Australian Political Opinion: Results from the Australian Election Study, (2007) 1987-2007.

No One Likes Taxes But Sometimes People Don’t Mind

“Read my lips, there’ll be no new taxes”

George Bush accepting the Republican nomination, 1988

George Bush was simply tapping into a rich public attitudinal vein with this statement. Public aversion to increased, new or even just existing taxes, is of course one of the most universally held gripes and we have witnessed collective anger first hand in recent weeks over the carbon tax proposal in Australia.  

Many economists support the concept of Pigouvian taxes (i.e. taxes on externalities, such as CO2 taxes, road usage/anti congestion charges, fossil fuel levies and so on). Conventional economic wisdom is that they are the most efficient tool to redress market failure.  But theoretical elegance aside, when it comes to the nitty gritty of imposing such taxes, opposition from both industry and public has resulted in a graveyard of failed Pigouvian environmental tax proposals: For example, the French carbon tax in 2010, road pricing in Edinburgh in 2005, a tax on fossil fuels in Switzerland in 2000, the fuel tax escalator in the UK in 2000, and the US energy tax in 1993, to name just a few.

 Fortunately, in recent years there has been a growing body of behavioural research examining the factors that influence public support for Pigouvian taxation, and what can be done to make such taxes more feasible. One of the most comprehensive of such studies was the eight country EU PETRAS project (2006) In this post we’ll outline some of the more pertinent learning from these studies to provide some insight as to how public support for environmental taxes can be bolstered.

So what does the research say?
Factors influencing support for environmental taxes

It seems one of the main reasons for public opposition to environmental taxes is poor understanding of the rationale behind them. Several studies from the 2006 PETRAS Pan European research project found that many people across the EU felt uninformed about environmental taxes —what they were and how they work, and this heightened already existing suspicion of government motives (Dresner et al., 2006a).

One of the promoted benefits of environmental taxes is the so-called ‘double dividend’. The rationale is that the tax burden should fall more on ‘bads’ than ‘goods’, a process that may lead to a ‘double dividend’ whereby higher taxes on energy will lower energy use and hence pollution, while lower taxes on labour will contribute to higher rates of employment. The ‘double dividend’ concept was explored in depth in the PETRAS research and though some people were sceptical that such a transfer would actually occur, conceptually the idea was appealing (Baranzini et al., 2000).

The same research highlighted a clear paradox though. There emerged a widely held belief that governments cannot be trusted to use the tax revenue to the benefit of key stakeholders (e.g. through recycling of revenues to lower employment taxes; Dresner et al. 2006a).

Interestingly across the countries surveyed for the PETRAS project, there was a strong feeling that if revenue recycling was carried out by a body independent of government, then this would increase trust and ‘willingness to pay’. The independent body would control the revenues and could certify that they really went where they were supposed to. While the feasibility of such a system might prove difficult, such suggestions highlight a salient desire of stakeholders for measures and processes that are transparent and trustworthy (Dresner et al., 2006). Here in Australia, Professor Ross Garnaut, the government’s chief climate change adviser, only yesterday recommended an independent body be set up, to mandate emissions targets; though not to manage revenue recycling.

While transparent revenue recycling has appeal for some of the public and business groups, there was another point of view that emerged.  For many, especially public respondents, there was a stated preference for revenue raised from environmental taxes to be spent for environmental purposes. For these people, if revenues from a tax imposed supposedly for the sake of the environment went to other purposes, then that was seen as a confidence trick. Perhaps the case is that if you do not believe environmental taxes will improve the environment by altering behaviour, then earmarking the revenues for environmental purposes might do the trick (Dresner et al. 2006; Hsu et al. 2008; Schade & Schlag, 2003; Steg et al, 2006; Thalmann, 2004).

It also seems the notion of pilot ‘trials’ for programmes may spur public and business support. In a separate study to the PETRAS project, Winslott-Hiselius et al. (2009)  studied the Stockholm congestion charge trials and suggested that such trials may be a more useful tool to aid the implementing of ‘difficult’ policy measures. One explanation for this result was that trials generate tangible results that can be clearly witnessed—thus working to reduce feelings of fear and uncertainty while leaving open the possibility that the measure may be abolished if it fails.

So how can these insights inform our own tax debate? Of course attitudes and belief systems in Australia may differ somewhat. Nonetheless several of the European observations represent core ‘human truths’ and a recognition of such ‘truths’ seems to be missing from the current discourse. For example, a real fear of the unknown and the need for policy makers to assuage that fear with comprehensive but easily digestible information; the distrust of command and control systems and the resulting need to ensure tax revenue collected from constituents is clearly and transparently re-directed as benefits to the same; whether that be through environmental or tax reform.

Finally these observations point to the need to develop clear message strategies for complex policy initiatives such as a carbon tax; strategies that unequivocally convey the problem such initiatives intend to address, the end benefits such actions will deliver, and concrete ‘reasons to believe’ in both the problem and the benefits of a solution. Some might argue such clear message strategies have so far been missing from the debate.

References and further reading

Dresner, S., Dunne, L., Clinch, P., P., Beuermann, C., 2006a. Social and political responses to ecological tax reform in Europe: an introduction to the special issue. Energy Policy 34 (8), 895–904.

Dresner, S., Jackson, T., Gilbert, N., 2006b. History and social responses to environ- mental tax reform in the United Kingdom. Energy Policy 34 (8), 930–939.

Hsu, S.L., Walters, J., Purgas, A., 2008. Pollution tax heuristics: an empirical study of willingness to pay higher gasoline taxes. Energy Policy 36, 3612–3619.

Kahan, D., D., Braman, H., Jenkins-Smith, 2010. Cultural Cognition of Scientific Consen- sus, Cultural Cognition Project Working Paper No. 77,

Kallbekken, S., Aasen, M., 2010. The demand for earmarking: results from a focus group study in Norway. Ecological Economics 69 (11), 2183–2190.

Kallbekken, S., Kroll, S., Cherry, T.L., in press. Do you not like Pigou or do you not understand him? Tax aversion and earmarking in the lab. Journal of Environmental Economics and Management. doi:10.1016/j.jeem.2010.10.006.

List, J.A., Sturm, D.M., 2006. How elections matter: theory and evidence from environmental policy. Quarterly Journal of Economics 121 (4), 1249–1281.

Rienstra, S.A., Rietveld, P., Verhoef, E.T., 1999. The social support for policy measures in passenter transport. A statistical analysis for the Netherlands. Transportation Research D, 181–200.

Rivlin, A.M., 1989. The continuing search for a popular tax. American Economic Review 79 (2), 113–117.

Steg, L., Dreijerink, L., Abrahamse, W., 2006. Why are energy policies acceptable and effective? Environment and Behavior 38, 92–111.

Stern, P.C., 2000. Toward a Coherent Theory of Environmentally Significant Behavior. Journal of Social Issues 56 (3), 407–424.

Stern, P.C., Dietz, T., Kalof, L., 1993. Value orientations, gender, and environmental concern. Environment and Behavior 25, 322–348.

Thalmann, P., 2004. The public acceptance of green taxes: 2 million voters express their opinion. Public Choice 119, 179–217.

Winslott-Hiselius, L.,Brundell-Freij, K.,Vagland, (2009).The development of public attitudes towards the Stockholm congestiontrial. Transportation Research Part A43(3),269–282.

Germany Over-Achieves Again

News updates on Germany’s renewables achievements and objectives to 2020 caught my attention because I had recently drafted a policy paper on solar PV feed in tariffs in WA, and naturally a quick literature review highlighted Germany as the pace setter in clean energy policy delivery and outcomes.

Well, last month Chancellor Angela Merkel reviewed the nation’s progress on its renewables goal (comprising 17% of German energy requirements now) and laid down the gauntlet to achieve 35% of all energy requirements by 2020, 50% by 2030 and 80% by 2050. (Reuters)

Now in case you’re thinking that it’s no surprise given the strength of the German Green Party, don’t forget that the Greens are firmly back in opposition whereas Angela Merkel’s Christian Democratic Union (CDU) is more the ideological sibling to our own mainstream conservative party.

Now taking the comparison with Australia a little further, imagine the debate that would ensue if our biggest CO2 emitters presented a forecast akin to that below, after scenario-planning the move from fossil fuel and nuclear generation to renewables.

“RWE—Germany’s biggest producer of electricity by output capacity and Europe’s largest emitter of CO2—is forecasting a fall of more than 50% in recurrent after-tax profit by 2013, compared with 2010’s €3.75 billion. The company has said it intends increasingly to focus on the higher-growth markets of Eastern and Southeastern Europe and Turkey.” (Hromadko)

This was no fairy tale; RWE, one of Germany’s largest industrial conglomerates is understandably not happy with its business outlook; but rather than play ostrich it has been quick to adapt to future realities by investing AUS$1.4 billion per year in renewable projects since 2008.

Now at this point I have to be truthful; RWE’s troubles are not solely due to the “warm fuzzy green feeling” washing over the German government and public. RWE has heavy exposure to the nuclear sector and since Fukashima, well, the sky has sort of closed in. Within days of the disaster, Chancellor Merkel’s government suspended a plan—agreed upon only last year—to extend the lives of Germany’s 17 reactors, and instead committed to an accelerated exit from nuclear power. (Hromadko).

Admittedly adding to the pressure on Merkel, the CDU recently lost power in the State of Baden-Württemberg following 60 years of CDU rule, to the Green Party.  The historic result was largely seen as a referendum on nuclear power.

Now the German government is combining its push for renewables with a rapid retreat from its existing nuclear assets.

Some analysts have argued that a nuclear scale-back in Germany would prevent the country from reaching its long-term climate and energy goals. In reality, Germany is already well on its way to transitioning from nuclear and fossil fuel power to renewable energy.

Finally there’s that old economic chestnut often touted by critics, many of whom had hypothesised that Germany’s unwavering support for renewable energy would place a drag on the economy. Yes, Germany did suffer a downturn in 2008 and 2009, but the rebound was rapid. Germany’s export-led recovery added 3.6% to GDP in 2010, giving Germany the strongest export growth in three decades. (Focus economics). What’s the point? Well in a country where the key export sectors are energy and carbon intensive—heavy machinery and components, diversified industrials, cars and chemicals;  think BMW, BASF, Siemens, Bosch, Thyssen Krupp, and MAN—any government would be very wary of killing the geese that lay the golden eggs through punitive energy policies.

Germany’s 20-year affair with renewables quite possibly gives the nation the confidence and expertise to transition such an energy-intensive economy. For example Germany is expected to become the first nation to reach broad scale grid parity on PVs by 2012-2013. (FME, 2007)

Finally the jobs: Renewable energy now employs 370,000, compared to 50,000 in the coal industry, and Germany forecasts that its exports of clean energy technologies and expertise will continue to expand in the future (IEA 2010).

While not without its difficulties, the German renewables story just keeps getting better. But perhaps most impressive is to think that within four decades, the world’s fourth largest economy will be powered almost entirely by wind, solar, biomass, hydro, and geothermal power.


Hromadko, J, (2011) Trying to Solve the German Energy Conundrum”, Wall Street Journal, viewed May 16th, 2011. 

Focus Economics (2011) Germany’s economic indicators 2011, viewedMay 17th, 2011

Federal Ministry for the Environment. (2007). EEG – The renewable energy sources act: The success story of sustainable policies for Germany.

International Energy Agency, Photovoltaic Power Systems (2010). A Review of International Photovoltaic Applications

And if you’re really keen – some further reading

Germany’s overall energy strategic plan (in English).

The impressive objectives Germany has set itself are laid out in the rather chunky National Renewable Energy Plan.

Feed In Tariffs – The Devil Lies In The Details

Climate Change “is the greatest market failure the world has seen”

       -Sir Nicholas Stern

This analysis and other similarly dire predictions have stimulated decision makers in many countries to consider new approaches to energy policy.  The daunting challenge they face, has been to make the cost of renewable energy competitive with heavily-subsidised conventional energy. In the past, householders or energy companies who wanted to install wind turbines or solar panels have been faced with lengthy pay-back times. They have been forced to make a choice based on ethics rather than economics.  Without increased consumer demand and political measures to facilitate access to the market, manufacturers of, for example, wind turbines and solar photovoltaic (PV) panels, cannot produce the unit volumes needed to bring prices down and drive technological innovation. (Access economics, 2008)

The Feed-In Tariff (FIT) has proven to be the most effective policy instrument in overcoming these barriers. Led by Germany and Spain this simple, relatively low-cost mechanism has turned several European countries into world leaders in the renewables sector. Under a feed-in tariff mechanism, eligible renewable electricity generators (which can include homeowners and businesses) are paid a premium price for any renewable electricity they produce. Typically utilities are obligated to take the electricity and pay them. (Bender et al, 2009).

Close to 75% of the world’s residential solar photovoltaic (PV) installations have occurred with the support of national, state or provincial FIT policies. (Solangi et al, 2011). In 2009, 45 countries and 28 states/provinces/territories had FIT programmes in place. (International Energy Association, 2010)

Gross or Net?

There are two metering options for solar PV FIT programmes: 1) net metering (also referred to as net export, or import/export metering), and 2) gross metering.

Under a net metering scheme, residential energy generators are paid for the net quantity of electricity exported to the grid after accounting for in-home consumption. In other words, Net Export = Gross Production – Household Load.  Western Australia currently offers its incentive on a net export basis.

By contrast, under a gross metering system (as in the ACT and NSW), PV owners receive the premium tariff for all electricity produced by their systems (whether consumed at home or exported). They then pay the retail price for the electricity they actually consume.

It is interesting to note that gross FITs schemes appear to have become the worldwide default standard. Of the 45+ international examples of feed-in tariff schemes, Australia appears to be among the very few, if not the only country to adopt this form of metering for feed-in tariffs (McKinsey & Co, 2009)

The Consumer’s Perspective

Gross FIT schemes are widely believed to be a more effective policy instrument than Net in achieving customer uptake of solar PV renewable energy technology; (International Energy Agency 2010, World Futures Council 2008) for reasons that are discussed below.

  • Ease of understanding – Most consumers are able to more accurately estimate the payments they are likely to receive under a gross scheme and correspondingly the expected payback period for an installation. This is because the payments under a gross scheme can be estimated without needing to know consumption patterns.
  • Higher return on investment – Because the producer receives the premium tariff for all electricity produced, a gross FIT produces higher returns to the installer of a renewable energy generator, making investment in renewable energy more attractive
  • Less discriminatory – Gross FITs avoid discriminating between high peak load onsite users (small businesses, retirees) and those who would benefit from a net metered regime (mainly households who work during the day and consume PV electricity away from their generation site).
    • Behavioural impacts – Under a gross FIT, the householder has to buy the electricity they use at the regular tariff, so they are still prompted to make savings through energy conservation.
    • Investment certainty – A gross FIT allows investment decisions to be made with more certainty. Take as an example the following situation where an installer is setting out the benefits to a household: When selling a system the installer can easily say; “If you install this you will generate around $1,000 or $1,500 a year”. Because net metering depends on the behaviour of the householders, such certainty is not possible.

Net Feed In Tariffs are not without their supporters, some of their arguments are outlined below;

  • Ease of installation – Net FITs allow installation without the need for new metering. However a new or replacement meter costs around $200 (Bradley Shone, Energy Policy Manager, Alternative Technology Association, Proof Committee Hansard, 9 September 2008, p. 12), while the total solar PV installation cost is likely to be upward of $8000. Thus is a  small component of total outlays.
  • Information advantages – It has been argued that one of the benefits of a net feed in tariff is that consumers become more conscious of their electricity consumption habits. This is arguable.

In sum, net FIT schemes appear to lack several key attributes of successful consumer policy instruments. I.E. concrete, salient examples with cost/benefit information (Tversky and Kahneman 1974) designed to be as specific, detailed, and practical as possible (Stern 1976; Dresner 1990; Dennis et al. 1990) so as to allow participants to know the advantages and disadvantages of each measure and feel in control of their choices (Dennis et al. 1990).

Furthermore, with net metering this difficulty in gauging energy usage may actually serve to undermine the core purpose of FIT schemes, that is to stimulate energy conservation; as households using net metering cannot actually determine their own energy consumption, and therefore cannot use the meter to guide energy saving measures. (Pichert and Katsikopoulos 2007)

What are the others doing? – policies and responses worldwide

Ontario’s recently commenced renewable strategy and residential Gross FIT scheme is among the most ambitious globally. The provincial government is on track to close all its coal-fired power plants by 2014. The 694 large scale FIT contracts announced to date are expected to create 30,000 direct jobs and attract an estimated CAN $14 billion in private sector investment. (Pietruszko,2006)

In Germany, a Gross FIT program has been offered to PV operators since 2001. The success of the FIT along with solar PV purchase subsidies have enabled Germany to reach its goal of a 12.5% renewable energy supply three years early, in 2007. (Pietruszko,2008)

The rapid growth in Germany post 2004 (Figure 1) can be seen in response to a raft of new more attractive policies introduced in that same year. In Spain the first FIT scheme was launched in 2005 and then upgraded in 2007. (International Energy Association, 2008) In Japan meanwhile, between 1996 and 2007 subsidies of around AUS$2400 were allocated by the Japanese government for systems up to 10kw. With the conclusion of the subsidy programme, Japan did experience a reduction in demand from 290 MW in 2006 to 210 MW in 2007. (International Energy Association, 2008). Perhaps as a reaction to this drop in household demand for solar PV, the Japanese government instated a gross feed in tariff of AUS $80c/kwt in 2009 for residential solar generators.

Within the United States, California is recognised as one of the pioneering states in the adoption of FIT policy instruments for solar PVs. In an interesting format, generators can choose between a 10, 15 or 20 year contract and can opt for a gross FIT or Net Fit themselves.

Figure 1 also shows how Australia’s share of the solar PV market has fallen from around 7 per cent in 1992 to 1 per cent in 2007. (International Energy Agency, 2008)


If only! – Designing an optimal gross national FIT

Based on experience from overseas FIT schemes, and modelling by Access Economics; the Clean Energy Council PV Directorate (2008) maintains that FITs schemes should include the following principles:

  • Long Term. Long term commitment to the programme such as rates guaranteed for a minimum of 15 – 20 years
  • Gross Metering. That is, the feed in tariff rate is applied to all of the energy generated from the solar PV system not just the energy that is surplus to the investors needs.
  • All sectors. Open to all sectors not just the residential sector but community halls, distribution centres, churches, shopping centres, factories etc.
  • FIT Rates and Payback Periods. Access Economics modelling indicates that to facilitate a 10 year pay back on investments, a FIT of 75c/KWh would be required in year one of the scheme, falling to 62c/KWh for units installed in year 20 of the scheme (2028).

It should be noted that within Australia, no state or territory deploys a FIT scheme with the aforementioned attributes.


References & Further Reading

Access Economics (2008) The Economics of Feed-in Tariffs for solar PV in Australia Report by Access Economics Pty Limited for Clean Energy Council.

Ariely, D. and J. Heyman (2004) ‘Effort for payment: a tale of two markets’, Psychological Science, 15 (11), pp.787-93

Ayoub, J., 2007. Co-operative Programme on Photovoltaic Power Systems, National Survey Report of PV Power Applications in Canada 2008. International Energy Agency (IEA), May 2008, 1-21.

Cesario, J., Grant, H., Higgins, E. T. (2004). Regulatory fit and persuasion: Transfer from “feeling right.” Journal of Personality and Social Psychology, 86, 388-404.

Dennis, M, Soderstrom, J, Koncinski, W.S  and Cavanaugh, B. (1990). Effective dissemination of energy-related information: applying social psychology and evaluation research. American Psychologist (October): 1109-1117.

Dresner, M. (1990). Changing energy end-use patterns as a means of reducing global warming trends. Journal of Environmental Education 21 (Winter 1989-90): 41-6.

Federal Ministry for the Environment. (2007). EEG – The renewable energy sources act: The success story of sustainable policies for Germany.

Fehr, E., U. Fischbacher, U. and S. Gächter (2002) ‘Strong reciprocity, human cooperation and the enforcement of social norms’, Human Nature,13, pp.1-25, 17 September 2009

Garnaut, R. (2008). The Garnaut Climate Change Review. Cambridge University Press.

Gorner, Stephen et al. An Australian Cost Curve for Greenhouse Gas Reduction. McKinsey & Company, 2008,  (acessed 14 March, 2011)

Gertner, J. (2009) ‘Why isn’t the brain green?’, New York Times, 19 April, retrieved from, 22 April 2009

Hardisty, D. J., Weber, E. U. (2009). Discounting Future Green: Money Versus the Environment. Journal of Experimental Psychology: General. 138, 329-340.

International Energy Agency, Photovoltaic Power Systems (2010) Trends in Photovoltaic Applications, pg 30 International Energy Agency (2009) PV Power Systems 2010 Annual Report

International Energy Agency (2010) Trends in Photovoltaic Applications – Survey report of the selected IEA countries between 1992 and 2009

International Energy Agency (2009) National Survey Report of PV Power Applications Australia 2007

Kahneman, D. and A. Tversky (1986) ‘Rational choice and the framing of decisions’, in D. Kahneman and A. Tversky (eds), Choices, Values, and Frames, Cambridge: Cambridge University Press

Kahneman, D. and A. Tversky (1992) ‘Advances in prospect theory: cumulative representation of uncertainty’, in D. Kahneman and A. Tversky (eds), Choices, Values, and Frames, Cambridge: Cambridge University Press

Kaplan, S. (2000) ‘Human nature and environmentally responsible behavior’, Journal of Social Issues, Fall 2000, pp 230 – 252.

Krantz, D., N. Peterson, P. Arora, K. Milch and B. Orlove (2008) ’Individual values and social goals in environmental decision making’, Decision Modelling and Behavior in Uncertain and Complex Environments, pp.165-98,

Marshall, G,. (2001) ‘Denial and the Psychology of Climate Apathy’, The Ecologist (UK), November, 2001. pp-46-68.

Pichert, D. and K. Katsikopoulos (2007) ‘Green defaults: information presentation and pro-environmental behaviour’, Journal of Environmental Psychology, 28, pp.63-73, doi:10.1016/j.jenvp.2007.09.004

Pietruszko, S. (2009). Feed-in tariff: The most successful support programme. In Conference record of the 2006 IEEE 4th World conference on photovoltaic energy conversion (Vol. 2, pp. 2524–2527).

Peters, R., & Weis, T. (2008). Feeding the grid renewably: Using feed-in tariffs to capitalize on renewable energy (primer). The Pembina Institute 1(23).

Renewable Energy Policy Network for the 21st Century (REN21) (2009). Renewables Global Status Report: 2009 Update. Renewable energy policy network for the 21st century. Paris: REN21 Secretariat.

Shone, B. Alternative Technology Association, Proof Committee Hansard, 9 September 2008, p. 12

Solangi et al, (2011) ‘A review on global solar energy policy’, Renewable and Sustainable Energy Reviews, 15, pp-2149-2163.

South Australian Department of Premier and Cabinet, (2008) Submission 68.

Stern,P.C. 1976. Effect of incentives and education on resource conservation decisions in a simulated commons dilemma. Journal of Personality and Social Psychology 34 (6): 1285- 1292.

Stern, P.C. (2005) ‘Understanding individuals’ environmentally significant behavior’, ELR News and Analysis, 35, pp.10785-90

Swim, J. et al. (2009) Psychology and Global Climate Change: addressing a multi-faceted phenomenon and set of challenges, Washington DC: American Psychological Association

Thaler, R. (1979) ‘Toward a positive theory of consumer choice’, Journal of Economic Behavior and Organization, 1 (1980), pp.39-60,

Tierney, J. (2009) ‘Are we ready to track carbon footprints?’, New York Times Online, 25 March, 2010

Van Vugt, M. (2001) ‘Community identification moderating the impact of financial incentives in a natural social dilemma: a water shortage’, Personality and Social Psychology Bulletin, 27, pp.1440-9

Weber, E. (2006) ‘Experience-based and description-based perceptions of long-term risk: why global warming does not scare us (yet)’, Climate Change, 77, pp.103-20,

World Futures Council (2008) Feed in tariffs – a guide to one of the world’s best environmental policies.