A ‘model’ plan
Economic modelling at UQ has influenced climate change public policy and debate, thanks chiefly to the work of Australian Laureate Fellow in Economics Professor John Quiggin.
Research academics rarely drive policy change, but Professor John Quiggin and UQ’s Risk and Sustainable Management Group have certainly influenced the thinking behind several big shifts in public sentiment, if not policy, during the past decade or so.
The Risk and Sustainable Management Group has worked in three significant policy areas, namely the role of water trading in the Murray-Darling Basin Plan, the Garnaut Climate Change Review, and the Climate Change Authority’s light vehicle fuel efficiency policy.
Modern policymakers increasingly rely on economic modelling
The best economists, while not exactly soothsayers, are highly sought after for their ability to help policymakers predict what might happen when different monetary or fiscal levers are pulled, allowing policy decisions to interact with market forces – sometimes with unforeseen results.
Consider how the Reserve Bank of Australia’s cash rate decisions resonate within the community each month, or the implications for millions of Australians when the Federal Government makes a relatively small change to taxation or superannuation rules.
Despite the media barnstorm that often accompanies the release of economic modelling, it’s usually difficult to isolate individual contributions of the economists behind them as being singularly influential in the development of policy.
Sovereign risk research impact
In terms of research impact, few economists have made such a respected contribution to sovereign risk issues in Australia as Professor Quiggin, who took a lead role in the Climate Change Authority’s decision to analyse a light vehicle fuel efficiency proposal, and was actively involved in the research process.
The resulting policy document Light vehicle emissions standards for Australia concluded that Australia could reduce greenhouse gas emissions and lower fuel bills for Australian motorists by making light vehicles more efficient.
“Improving the efficiency of light vehicles was shown to be one of the least costly emissions reduction options available to Australia,” Professor Quiggin said.
Professor Quiggin and his group also assessed the agricultural impacts of climate change in the Australian Government’s Garnaut Climate Change Review.
The 2008 review and its 2011 update have so far remained as the key authoritative references for Australian climate change policy. However, Professor Quiggin said there were still many issues that needed to be resolved in the quest to identify the best energy mix for Australia.
“For brand new electricity generation, there’s overwhelming evidence that renewables are more cost-efficient than coal, and in the Australian context more cost-efficient than gas,” he said.
“And that’s reflected worldwide; in the developed countries in particular, nobody is building new coal-fired power stations.
“Some less developed countries have a pipeline of stuff that’s still rolling on, but essentially all the countries that have stable or steadily growing demand…no one is building new coal-fired power stations.”
Renewable power still requires dispatchable power
He argued that even if we had 100 per cent renewable power, we are still going to need some forms of dispatchable power – and the lead candidate for that is battery storage.
Dispatchable power refers to a power system that can be controlled and switched on or off to meet electricity supply and demand.
“There’s lots of research showing essentially that a system primarily dominated by solar PV and wind, with storage and possibly a bit of gas as a ‘peaker,’ is entirely feasible," Professor Quiggin said.
“Then the only real question is how fast do you close down the existing coal-fired power stations?
“As long as you put any significant weight on carbon dioxide emissions and on public health, the case for a rapid closure of coal-fired power stations is very strong.
“That’s just for generation. To get things working you need a big investment in transmission – which is not happening in the way it should.”
Sooner or later, he said, we will all have to move into electric vehicles.
“In the medium-term you need to electrify motor vehicles, and again how that integrates with the grid can be either helpful or harmful.
“If we have charging taking place primarily during the middle of the day when the sun’s shining, we actually increase the stability of the system. But if we just default to letting people charge their cars up at night, that’s not going to work so well.”
National energy policy process in disarray
According to Professor Quiggin, the great many unresolved energy issues and a lack of willpower to make internal combustion engines more efficient have left the national energy policy process in disarray.
“The big problems are to do with government climate policy, which is a mess," he said.
"But there's also the fact that the national electricity market, although its existence has more or less coincided with recognition of the climate change problem, has been designed with no attention to this whatsoever.
“Once you have a carbon price – which we clearly should have – as that price rises, coal-fired power stations become uneconomic to operate.”
He said that anyone who invests in a coal-fired power station will find that it’s the classic definition of a stranded asset, to the extent that those assets have to be written off.
“That’s particularly relevant in the context of new investment,” Professor Quiggin said.
“If you’re developing a new coal mine or a railway line or a new power station, you’re making a bet that coal-fired power is still going to be around in forty years’ time.
“It is more a matter of getting the reasoning right than complex modelling techniques.
“The kind of issues that matter a lot are, for example, how much you discount the future.
“In the quest to identify the best energy mix for Australia – as we move towards a low-carbon future – it’s clear that the impacts of policy research evolve over long periods of time.”
With almost 9000 Twitter followers, Professor Quiggin is not your typical academic.
In the rough-and-tumble of economic theory, the Vice-Chancellor's Senior Research Fellow in the UQ School of Economics has remained undaunted at the coalface of public discourse on climate change, power generation and river flows for more than twenty years.
“I still get excited by economics,” said the man who also wears the mantle of Australian Laureate Fellow in Economics.
An active commentator on social media, writer, and contributor to his own long-running personal blog, the former member of the Climate Change Authority has also learnt not to tolerate trolls in public debate.
“If someone makes a snarky remark on Twitter, I just block them,” Professor Quiggin said.
Professor John Quiggin: a life of achievement
1978: Completes Bachelor of Arts with First Class Honours in Mathematics at Australian National University.
1980: Completes Bachelor of Economics (First Class Honours), winning the University Medal and Economics Society Prize.
1984: Completes Master of Economics at Australian National University.
1988: Completes Doctor of Philosophy in Economics at University of New England, receiving the Drummond Prize for best doctoral thesis.
1988–2000: Becomes one of the most prolific economists in Australia, illustrated by his output over diverse, high-quality journals and by citation frequencies in the period; is placed in the top five per cent of economists in the world according to IDEAS/RePEc since compilation of its monthly aggregate rankings in 2004.
2003: Commences at UQ’s School of Economics as a Senior Research Fellow.
2004: Embarks on ARC Federation Fellowship project Sustainable reform of the Murray-Darling system: property rights, uncertainty and institutions, which leads to development of a state-contingent model of inflows of water to the Murray-Darling Basin and the impact of alternative policy options on the economic and social value of irrigated agriculture.
2008: Is awarded his second ARC Federation Fellowship (2008-12) for his project Climate Change: adaptation and resilience in the face of uncertainty.
2010: His book, Zombie Economics: How Dead Ideas Still Walk Among Us sells 20,000 copies and is translated into eight languages.
2010: Is made a Fellow of the Econometric Society, an international society for the advancement of economic theory in its relation to statistics and mathematics.
2012: Is awarded an ARC Australian Laureate Fellowship in Economics.
2012: Is appointed as a Member of the Climate Change Authority.
2015: Outlines his opposition to Bitcoin, calling it a "delusion" that would lead to "environmental disaster”.
2017: Receives a UQ Vice-Chancellor's Senior Research Fellowship.
2019: Publishes his latest book Economics in Two Lessons, an introduction to the key ideas behind the successes—and failures—of free markets.
Professor John Quiggin, School of Economics
Phone: +61 7 334 69646
This article was last updated on 2 August 2019.