Tag: government

revenue and costs to the community – reckless with the future

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Playing the tricks on a NSW Electricity bill: Typical increase is $316 for climate change actions [red ink] and $392 [black ink – price revenue change $200 + price service availability change $162 + GST change $36] for other revenues. * These prices assume 7kWh per day consumption as written on the ‘red ink’ part of the bill.

CO2Land org is an advocate of necessary actions for the future of a sustainable world and disagrees strongly with the way politics plays the emotional card. If we strip away the emotion and look at the hard numbers of the viability of state finances we can understand the panic and scramble for revenue raising and shifting the blame and shame wherever for short-term gains – creating a radio shock jocks paradise despite distorting the facts.

The cold hard facts on state finances can be taken from this table:

NSW VIC QLD WA SA TAS
2011/12 -$940 -$811 na -$178 -$120 -$80
2012/13 -$1000 -$635 na -$284 -$400 -$120

Table: Estimated impact of GST reduction on State budgets, 2011/12 and 2012/13 ($m). Source: State budget papers

From what’s on the table, we can see that state budgets are in a mess that seems to be getting worse rather than better.

To quote The Conversation, 25 June 2012, on the parlous health of our state finances: “These financial woes are not because of reckless spending. The trouble stems from revenues, which are flat-lining and seem set to stay that way for the foreseeable future…We are only seeing the problem clearly now because the Rudd government’s recession-busting stimulus spending that was channeled through the states is coming to a premature end”.

CO2Land org asks is the problem, and the solution to be, to address excess bureaucracy and regulation that serves as cost drivers on the community. The idea is not new and the Council of Australian Government (COAG) meeting of 12 April 2012 announced it was “meeting the red tape challenge”.

How should we tackle the ‘real’ problem? Paul Keating favoured a reform of the tiers of government and was ahead of his time. Malcolm Turnbull pushed for a republic model and it to be truly representative – and recently concede vested interests would resist vigorously.  These two persons are selected at this point to illustrate that between them [one a former and the other a likely Prime Minister] they hold the answer to our problems.  We need to address the effectiveness of our beliefs and the efficiencies of how we use our energies.

CO2Land org proposes we examine the imposts on the community and review:

  1. Tiers of government – the terms of reference being: the money waste of the structures for producing relatively ineffective practices; the effectiveness and efficiencies of parochial behaviours of state bodies; and the powers of federal government as an executive power.
  2. The rights for every resident of this country to unfettered education and training in the most effective way possible (please note: this is not a guarantee for established practices, it calls for a complete rethink of how we teach and learn).
  3. That the issues of Education, Environment and Immigration be judged by a jurist prudence principle and not in the hands of short term ambitions of any political party. If we consider this idea, we also consider the four primary schools of thought in general jurisprudence:

▪    Natural law is the idea that there are rational objective limits to the power of legislative rulers.

▪    Legal positivism, by contrast to natural law, holds that there is no necessary connection between law and morality and that the force of law comes from some basic social facts although positivists differ on what those facts are.

▪    Legal realism is a third theory of jurisprudence which argues that the real world practice of law is what determines what law is; the law has the force that it does because of what legislators, judges, and executives do with it. Similar approaches have been developed in many different ways in sociology of law.

▪    Critical legal studies is a younger theory of jurisprudence that has developed since the 1970s which is primarily a negative thesis that the law is largely contradictory and can be best analyzed as an expression of the policy goals of the dominant social group.

CO2Land org has in each is its previous postings set the theme of better practice and were it can illustrate how innovation is a trait of our human side. We have the power to control our future and all too often our willingness to get a result we align in an pluralist way to align with people we do not agree with for our own short term ends. If we look at community consultation businesses that influence, they are making their money by setting up community representative groups. These groups give comfort to the Minister of state that all is well on a certain issue. So the question then becomes why does our three tiers of government fail to give the Minister comfort? Answer, the truism is: Those that seek election are opinionated and not necessarily informed!

The matters that arise over education is the levels are tiered and try to be a fit of society as if society has a stable static requirement to conform to an ideal of more of the same. Education as funds become more scarce are tending to be generalised and specialising is seen as an elitist achievement. However, it is increasingly evident that high achievers are bored with convention and ceremony, good narcism could be the term best suited in saying a specialist position for the niches of interest will follow with them a need for a fit into the world rather than teaching to conform with alliances.

Combine all these issues and it becomes obvious that whenever a decision is made at a group level it is a political achievement. However, if the rule of law was to apply the rights of a better education, to protect the environment and law of god, we do remove the one real problem in the  ‘reasonable man’ principle being applied to protect the future from those that peddle misinformation. Our cliché being ‘better to have been educated and lost, than ignorant and foreboding’.

Power of Choice – review by AEMC of DR

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All community is affected by the rising cost of energy. Something can be done, and the “Power of Choice” review being run by the Australian Energy Market Commission (AEMC) and a Senate Select Committee on Electricity Prices Inquiry is underway. Both these essential bodies need to be influenced and informed about how essential the implementation of and effective Demand Response (DR) is in the National Electricity Market (NEM) in saving $billions, and continuous saving thereafter.

Over the last 11 years there have been a number of Reviews that have made clear recommendations[1] that Demand Response (DR) should be implemented in our electricity markets.  Unfortunately, all these recommendations for implementation of DR have been ignored, with the exception of DR for Reserve Capacity in Western Australia’s Wholesale Electricity Market (WEM) which works very well.  In hindsight, the lack of an effective DR mechanism in the NEM in particular has cost electricity users an estimated Present Value (PV) of $15.8 Billion[2] (this is in the order of a 9% impost on their annual electricity bills).  Worse still this loss to the community is continuing to grow.

The “Power of Choice” Review is an unfinished work, and CO2Land org has experience in the material of Demand Response (DR). DR is most effective as a formal aggregation of small amounts of demand reduction from a larger electricity users who are contracted to reduce this pre-agreed amount of their demand at times when their are extreme wholesale prices, extreme peaks in demand or in emergencies.  It is much cheaper way to address these short term events than our current outdated approach of spending billions of dollars on more generators and networks which are only needed for a total of about 40 hours per year.

In the push for acceptance of DR becoming a part of the National Electricity Market (NEM) an article was written in the Daily Telegraph, 5 Sept 2012,  (link: http://www.dailytelegraph.com.au/news/power-shift-to-cut-household-bills/story-e6freuy9-1226465075377) after it was relayed some of the source contributions were gleaned from an EnerNOC sponsored report recently completed by CME.

CO2Land org and those mentioned in this post accept we look forward and hope the AEMC is now convinced that DR is essential to minimize further price rises.

If you are confused with the terminology, hopefully the following will help you better understand: The energy market has three components that affect the price we pay: Price response (PR), Demand Response (DR) and the Emergency response (ER).  Price is largely inelastic, and as we are experiencing alternative energy sources we notice the costs have similar or more Price effects to introduce them. Demand Response (DR) is the most volatile price driver in the market where smaller splices of time require a greater build and increase capital required for infrastructure projects (pole and wires builds and maintenance needs to cater for the demand growth). Emergency Response (ER) is an energy security problem and is reactionary to large events with little warning.

References to support this view are:

[1]

  • Alan Fels, Chair of ACCC, speaking at the Inaugural EUAA Conference on 19 November 2001
  • The Parer Review 2002 “Towards A Truly National And Efficient Energy Market”
  • The EUAA April 2004 “Trial of a Demand Side Response Facility for the National Electricity Market”
  • The ERIG Review November 2006 “Review of Energy Related Financial Markets”
  • Stages 1 & 2 of the Demand Side Participation Review (Stage 3 still in progress)

[2]

Pure Gold Standard

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On 28 June 2012, it was reported by the Australian Government, it “introduced the National Carbon Offset Standard (NCOS) on 1 July 2010 to provide national consistency and consumer confidence in the voluntary carbon market. The Government called for submissions into the standard, and received 34 submissions for the draft review of the standard.”

It is worth noting that NCOS serves two primary functions:

  • Provides guidance on what is a genuine voluntary offset, and
  • Sets minimum requirements for calculating, auditing and offsetting the carbon footprint of an organisation, product or event to achieve ‘carbon neutrality’.

Then on 25 July 2012, Choice www.choice.com.au said several of its members were put off because of a perceived lack of accountability and oversight in the industry, and needed more assurance before they considered offsetting their carbon emissions.

CO2Land org is now interested in what makes this such an issue especially when NCOS is set up to provide a means of ensuring the environmental integrity of the carbon offsets and carbon neutral products available in the Australian voluntary market. It is meant for consumers and businesses alike to make informed choices and be able to interpret carbon neutral claims. Business should find comfort in being able to determine their carbon footprint in line with consumer expectations etc.

Maybe a little Carbon standards 101 at this point:

The Verified Carbon Standard (VCS) is an international standard that ensures carbon reductions meet quality standards and are independently verified, numbered and listed in a central database.

The Gold Standard (GS), established by the World Wildlife Fund (WWF), certifies offset projects that demonstrate greenhouse gas reductions and positively impact the economy, health, welfare and/or environment of the community where the project is located.

The Carbon Farming Initiative (CFI) is a voluntary Australian Government carbon offsets scheme that enables farmers and land managers to generate carbon credits by reducing agricultural emissions, such as nitrous oxide and methane, and sequestering carbon in vegetation and soils. These credits can then be sold to individuals and businesses wishing to offset their own greenhouse gas emissions.

The Government’s National Carbon Offset Standard (NCOS) verifies claims of carbon neutrality in Australia. To verify carbon neutral claims, the NCOS specifies that organisations must buy their offsets from projects verified under eligible schemes. These include credits issued under the CFI, VCS and GS, among others.

Now for a little more on the comfort factor:

CO2Land org on 16 August  2012 was told it still all feels good and Gold Standard (GS) is a rigorous standard with considerable credibility, there is a problem – nothing to do with creditability, but how and who is going to run the GS market in Australia. The issue today is NCOS clearly give GS the big tick and that is why we have watch this space and note that concerns over efficacy are being addressed through such a rigorous process for the regulation of the programs will ensure the money goes where it should. However, 2 years and counting is getting a little uncomfortable when you want to participate in the standards with confidence.

Lift the veil of corporate secrecy on public projects and save the taxpayer

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Reference:”http://theconversation.edu.au/profiles/vivek-chaudhri-164″

The $1.4 billion cost blowout reported by the NBN Co last week has focused attention once again on the seemingly regular occurrence of large government infrastructure projects being delivered late and over budget.

Whether we look at the much touted Public Private Partnerships (PPP) frameworks championed by state and federal governments of all persuasions, or in the NBN Co. case, a government monopoly engaging with the private sector, the cost to the taxpayer invariably appears to be greater than first estimated.

Why might that be? Is it that we are systematically poor (in one direction) at estimating future costs? Or do political realities and parameters change? That there is a lot of risk and uncertainty in the world around us is certainly true, but why must it always be the case that the taxpayer is left with the “bill”?

Surely there must be something wrong with our government’s existing tendering and contracting processes that leads to this repeated occurrence. And there is. An alarmingly lack of both good governance and contract design, principles that we expect of the corporate sector, are only cursorily considered in the public sector.

Let’s deconstruct the problem a bit further. The most efficacious delivery of large infrastructure (and other government projects) will almost always involve some private sector engagement. The challenge is to garner that engagement on terms that create societal value.

The tendering guidelines that most public sector entities adopt recognise the value in harnessing competition. Recourse to elementary microeconomics suggests that competition amongst potential bidders “for the market” (that is, to win the right to have some monopoly power) will result in the same efficiency outcomes as competition “in the market”. The problem, in almost all real world contexts however, is what economists refer to as an “asymmetry of information”.  If one side of the market – in this case the bidders (or worse yet, only some bidders, so we don’t even get the real positive effects of competition) – have information about the likely outcomes (costs/benefits etc) and the other side (the government) doesn’t, then we would expect the informed party to appropriate more of the rents.

Which is exactly what we observe when cost blowouts occur.

So, how can we resolve this inherent and systemic problem? Firstly, competition for the market (that is the terms on which government tenders are constructed) needs to be much more transparent.

Potential bidders need to be able to have equal access to information and the “commercial in confidence” veil needs to be tempered for the public good. Simply having many bidders involved in a tender, if they are not privy to the requisite commercial information, will not yield competitive outcomes.

Too often, government tenders satisfy a very rudimentary definition of competition, without significant thought in the design of the tender to ensure real competition takes place. Efficient, well designed government tenders are about good governance.

Secondly, and more importantly, we need to be much better at contract design where there is a large deal of uncertainty about future outcomes. The way much of the government contracting currently takes place, despite the political rhetoric to the contrary, is that the residual or contingent risk always sits with the state.

This need not necessarily be the case. Getting the right balance of incentives that mitigate any cost over-runs, and ensure a viable commercial return to the private sector requires much more detailed tender and contract design than currently takes place. Payments for outcomes that capture risk and uncertainty are a staple of financial markets and business to business interactions.

Yet, government to business interactions seem to be devoid of the same detailed considerations. Not surprising, then, that time and time again, our political masters tell us that they have negotiated a great deal with the private sector, only to find that the realised costs are often way more!

The risky uncertain world in which governments attempt to deliver infrastructure and other social projects with private sector involvement necessitates a complete revamp of our tendering and contracting methods.

We need to design systems that harness competition by mitigating the risks of asymmetries of information, and contracts that allow for risk and uncertainty to be shared.

Unfortunately, to date, political expediency has trumped sound economic analysis and design. There is unlikely to be too much consternation from the private sector as a result of the latest cost blowout in a government tendering process, but an informed citizenry ought to be demanding much better from its political masters.

Because if we don’t we will continue to be left with the bill. And it will always be more than we were initially told it would be.

Now it is Co2Land org to have its say, if we look overseas we see that government (say UK) encourages business development and innovation is rewarded. So is the problem a fetish over branding?

Vic Coalition at odds with Fed Coalition – CFI Direct Action compromised.

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More barbed wire fences: At odds with the Federal Coalitions Direct Action Policy, the Victorian Coalition has a position that farmers need to be very careful of, it is effective now, and does impose imposts on farmers under Carbon Farming Initiatives. In an exclusive, Kate Dowler ( August 8, 2012 through weeklytimes Now) said Carbon farming could cost farmers, instead of making them money, and is the result of the Victorian Government tripling rate bills. Quoted: “The Victorian Government does not recognise carbon farming as a legitimate farming activity under land tax and valuation acts and has ruled out changing the laws”.

The impacts:

  • Carbon farming, as the main activity on a land title, could attract commercial council rates, instead of lower farming rates.
  • The Victorian Coalition’s move results in the federal Coalition’s Direct Action policy being ineffective in encouraging carbon sinks.
  • Treasury has advised farmers state and local governments did not “recognise carbon farming as a primary production activity for the purposes of land tax or council rates”.

Also quoted is Environmental Farmers Network spokesman and Ararat farmer Peter Forster: ”The news was very concerning…This is outrageous and means farmers trying to do the right thing (enter carbon farming Initiative programs) are going to be disadvantaged… People are already reluctant to go into carbon farming – this will be the nail in the coffin.”

The piece also quoted: Agriculture Minister Peter Walsh “confirmed carbon farming was not classified as a farming activity and flatly ruled out reviewing it…He said recognising it could distort the market and produce ‘a managed investment scheme debate all over again…Prime agriculture land should be used for food and fibre production and people should be “very careful” about entering carbon schemes”.

The Victorian Minister then added when asked what he thought of the federal Coalition’s policies for carbon abatement; Mr Walsh repeated, “People need to be very, very careful about going into carbon farming”.

CO2Land org in a previous story on coalition positions and government outreach said you may be even more confused and equally reluctant to modify land use practices because of the politics – who can blame you – It may be time for the resilient to overcome the Neanderthals.