I miss the Democrats. They often enunciated sensible public policy options.
Andrew Murray in the AFR on Monday reckoned the Libs are all over the shop on political and policy options in relation to climate change. If they are going to have the swing vote they really ought to sort out what policy they actually favour. He says they should think about a carbon tax.
He’s not saying there should be a carbon tax. He’s saying that no-one in the political arena has given any serious thought to the matter. And they should.
This is what he says about a carbon tax:
It is more easily understood by voters and businesses, while an ETS remains incomprehensible to most – the effects of a carbon tax are immediate and much more easily measured than an ETS.
A carbon tax can be more easily calibrated than an ETS – it can be set low and rise as needed.
An ETS is indirect, while a carbon tax is direct.
An ETS is a complex uncertain market-based system (its European trial has hardly been encouraging). But a carbon tax is a simple certain price signal.
An ETS hides the true cost to consumers, like the wholesale sales tax, whereas a carbon tax shows true cost, like the GST.
An ETS will compensate polluters; a carbon tax can compensate low-income consumers.
An ETS taxes production; a carbon tax taxes consumption.
An ETS advantages imports and cannot exempt exports (but can compensate them in a complicated and costly manner); a carbon tax can exempt exports.
An ETS discourages individual action because the cumulative carbon savings of concerned consumers just gives polluters more room to pollute.
Murray says some economists support one for good reasons, some support the other. His is a call to think about the options.
I can only agree and compliment the AFR for maintaining a lively opinion page
I would like to see more debate on the use of a Carbon Tax. An ETS is conceptually elegant but perhaps a less elegant but simpler situation may be preferable in a practical sense.
That said, some of the arguments made by Murray are a tad silly.
A carbon tax is direct only if you see the aim as the price of carbon. If you see reducing emissions as the point, an ETS process is more direct. With an ETS you’re setting a limit on emissions first, the trading scheme is merely a way of allocating the carbon that you are allowing. A tax can be adjusted easily, but will still take a constant process of trial and error to find a level sufficient to reduce emissions to a given level without being so high to incur unneccessary costs.
For instance, the statement that a tax targets consumption whereas a paid for permit targets production. A very very simply microeconomic analysis can demonstrate that increased costs anywhere along the supply chain are shared between the producer and purchaser. The relative share is determined by their relative elasticities, not the nominal point where the extra cost is imposed.
This also relates to the statement that the tax is transparent in the costs it shows.
I think Murray may be running with an idea that the carbon emmitted in a good is somehow added up and then charged ONLY at the point of final sale, as opposed to the carbon emissions at each value added point being taxed. If he is runnign with that idea, it belies the entire strengths of using price signals. Their success in coordinating complex systems relies on their ability to incorporate information from the entire supply chain, a chain not visible or knowable in whole to any single participant or observer.
Yet to calculate the tax at the final stage assumes the taxing body can know the entire production history of a good or service. It also provides a great deal of opportunity for businesses to lie about their processes to the taxing authority, who has limited ability to see if they are.
Better to have a tax charged at the point of emission (or directly on the fossil fuel) so it gets incorporated into prices the same way as every other cost in the economic system. It may be less transparent to consumers, but no price of any good in our economy is!
Still, its something worth discussing and perhaps pursuing, maybe even as an interim measure, and it certainly would be more sensible politics from the libs.
I don’t think it’s quite accurate to say that “no-one in the political arena has given any serious thought to the matter”. The CIS put out a rather detailed policy monograph on this back in 2007 , and earlier this year the Oz published op eds both from the right and also from the left arguing in favour of a carbon tax. The Age also covered the issue last week, and some right wing bloggers like Sinclair Davidson have also argued that a carbon tax is preferable to the ETS.
So while it certainly hasn’t received the attention it deserves, it has been given at least some degree of thought by some people in the political arena.
I disagree on two fronts.
For one thing, Murray appears to be comparing the CPRS we have with the ideal carbon tax. Once any carbon tax made it through the political process it’d be weighed down with just as many compromises and handouts to polluters as the CPRS.
For another, the debate over taxes vs. cap and trade was had years ago, and cap and trade won the argument, partly because it makes international trading in carbon directly by polluters straightforward. A carbon tax would make the Australian government’s plan to outsource much of our emissions reductions to Asia much more problematic, so it’s a political non-starter.
Finally, while I believe Andrew Murray is quite sincere in wishing to have a debate, I think lot of the other people calling for carbon taxes are doing so to filibuster passage of the CPRS. They don’t want a carbon tax, they oppose any and all action to reduce greenhouse gas emissions.
I’m surprised Murray missed this one:
An ETS bamboozles punters into thinking you’re acting on climate while you gladhand pollution rights and scads of cash to the worst offenders; a Carbon Tax does not.
‘An ETS bamboozles punters into thinking you’re acting on climate while you gladhand pollution rights and scads of cash to the worst offenders; a Carbon Tax does not’
An ETS doesnt, the government does. The same would happen with a carbon tax. Its inconceivable that a carbon tax would get through the parliament without sufficient kickbacks for the rent seekers.
“Once any carbon tax made it through the political process it’d be weighed down with just as many compromises and handouts to polluters as the CPRS.”
Possibly. However while the CPRS is too complex for the average punter, and therefore its compromises are somewhat arcane, the simplicity of a carbon tax means that attempts to rig it in favour of political interests are harder to hide and harder to implement. Additionally, if it’s revenue-neutral, any exemptions will reduce the tax take, and thus any cuts elsewhere, hitting people’s pockets directly. Imagine the political capital to be made in that scenario! My ideal consequence of that would be a bidding war by the major parties to deliver more to ‘working families’ through payroll/income/fuel/etc tax reductions financed by a carbon tax.
Of course, the overall effects would be supposed to cancel out, but I know that people are more likely to approve of a positive change in figures on their paycheck than they are to object the imposition of a hidden tax incorporated into goods across the whole economy.
That was a horrible sentence, but I’m in a rush.
“I think lot of the other people calling for carbon taxes are doing so to filibuster passage of the CPRS.”
Again, possibly. But people I’ve come across that grudgingly support a carbon tax while normally opposing ANY action on climate change do so because they feel it’s the least-worst option. Ceteris paribus, that means it’s more likely to pass into law.
I am very much inclined to agree with Brian and Andrew Murray.
I do not understand the CPRS/ETS one little bit (and I’ve tried to work it out lately) but I can see it being abused by the big polluters (because it is cap and trade). Whereas a Carbon Tax just makes sense on the most basic level as described by Brian, Andrew, Tim and Jarrah.
John Quiggin wrote a piece many months ago in which he compared the two and observed that you can either set the carbon price and let the market determine quantity (which is what a tax does) or set the quantity and let the market determine price (which is what a cap & trade regime does) but it is difficult to simultaneously control both quantity and price. (The proposed ETS makes a gesture towards that only as a transition measure.)
However, given that Europe is already committed to c&t and the US is expected to follow, it would be economically and politically awkward to go for a tax and be the odd one out.
Senexx, my first preference is for more direct action as promoted by John D on various threads. It should come as no surprise that we’ve talked about it on several occasions.
At the same time I’d think the taxing of some undesirable behaviour might accompany direct action to raise some funds in order to support desirable activities and send a message to the undesirables.
Later when we have agreement across the board in the world about where we should be heading and have binding targetted programs across the board to get there, I’d see an international ETS as probably desirable. Prior to that countries are going to game the situation, the possibility of scams is high and there is no framework to discipline miscreants.
That’s overall, in principle and very briefly.
MikeM, I recall that post of Quiggin’s, but didn’t have time to look it up. I think his reasoning for going ETS is what you said. So it’s not a strong economic case for an ETS, more strategic.
Against that Robert Gottliebsen who is always yarning to someone with supposed inside knowledge told Geraldine Doogue a couple of weeks ago that we were heading towards an ETS at precisely the time everyone else that matters was having second thoughts.
I have no idea whether he was onto something.
I was going to post, but Robert’s post @3 is absolutely spot on. People should understand, in particular, that the ability to trade carbon quotas is a massive advantage in getting global carbon reduction with minimal economic pain, and is therefore a massive political plus.
That the actually exising Australian ETS is a dog’s breakfast is neither here nor there in discussing the advantages of an ETS vs a carbon tax. In the current political climate any actually existing carbon tax would also be a dog’s breakfast.
As you say Robert @3 and DD @11, both systems are likely to be dog’s breakfasts.
Perhaps we should be demanding a dog’s breakfast that does not involve too much:
- burying of smelly bones in all parts of the economic garden,
- churning of the same old bones with no meat on them,
- hidden treasures for government “free bones” bribes before elections, and
- passing bones from the left to the right hand to create imaginary new bones?
Maybe it doesn’t matter what system they chose, as long as delivers easily measurable RESULTS, for an easily measurable COST, and it is relatively transparent so that we can all see the gaming going on?
It would also be better if the money went from taxed entity to recipient entity without losing bits along the way through the government sector.
It would also be less burdensome on our economy, if the minnows weren’t subjected to the same carbon account-keeping rigours as sharks. Imagine the local hairdresser having to minutely detail all their carbon emissions (or else e.g. pay some KPMG leech for doing it), to regularly report on the nine-tenths of bugger-all contributions from their operation?
The current system, as I understand it, has the potential to become a haven for rent seekers from the likes of KPMG, with a cost to the rest of society and no discernable improvement in emissions.
Taking the hairdresser example, the cost of the e.g. KPMG monitoring and reports will have to be factored into the cost of your haircut. Imagine this being rolled out over every microbusiness in the entire economy?
Someone please tell me this isn’t so, and they have devised a system which properly addresses the biggest emitters, without paralysing the rest of the economy and leaving it vulnerable to swarms of leeches?
John Quiggin also observed in a separate post, that for many domestic eventualities, there is no functional difference that an economist could observe between a carbon tax and an ETS. This was however pre-white paper when we didn’t realise just what a shemozzle the CPRS would be.
I still favour carbon taxes simply because I can’t stand rent-seeking derivative traders that get paid a lot of money to very cleverly exploit loopholes and complex structures for no soceitally meaningful purpose. There will be a huge class of carbon futures traders and other desk-jockeys who will have a lifetime of jobs jsut through raising the administrative costs of a CPRS. While a tax isn’t totally immune to that, it’s far more resistant.
But I accept that international trade and a tax don’t combine terribly well.
Robert and DD have it. I also think there has been an increasing tendency on the Right to use discussion of a carbon tax as a way to attack the government and justify further delay in taking action under the guise of “considering a better option”.
Elise, there is no way a hairdressing salon would generate enough emissions to be captured by the CPRS. At the outset, the cutoff for inclusion in the scheme will be 125,000 tonnes of CO2 equivalent per annum, which will then be ratcheted down to 25,000 tonnes pa over a few years.
Wilful @13: “But I accept that international trade and a tax don’t combine terribly well.”
Who would bet that this “international trade” caper turns into a real scam?
Would it be reasonable to suppose that international trade in carbon credits will become a major rort, where developed countries pay third world “carbon traders” to avoid taking any carbon-reduction action themselves?
Especially “carbon traders” from corrupt developing nations?
Then we all cover our eyes, and say we assume that they are doing the right thing and creating carbon sinks? And they have a vested interest in lying through their teeth about what they are doing with the money – Swiss bank accounts, anyone?
If challenged, we could pay local “inspectors”, who can also be bought off (shock, horror!), with more lying through teeth, rather than international umpires who might upset any fraud applecart?
Which polluting company wouldn’t have a vested interest in paying cheap bribes to avoid taking serious action?
And the chances of the atmospheric CO2 level declining under this scenario would be exactly what?
Point taken elise.
Which is not to say that international trade in permits in principle is a bad idea. In fact, in order to get action by the BRIC, it’s got to happen.
But yeah, we’re screwed.
I take it those are rhetorical questions Elise. There will need to be a lot of activity, not only by regulators, but by NGOs, market participants and customers to ensure that violations are minimised. Yes, there are risks in a proposed international carbon market, as there are in all complex enterprises. But relentless cynicism is a little tiring. And not very productive. Without cooperative international action, the problem can’t be solved, so if you think international action is hopeless, then putting PV panels on your own roof is pointless. So why bother?
Tim @18: “But relentless cynicism is a little tiring. And not very productive.”
So, you think the current proposals will be “very productive” then?
My objection is to the provision of copious smokescreens and rorts, which indeed will not be very productive either.
Elise, I think the “current proposals”, by which I assume you mean the CPRS, are flawed, but are nonetheless a real improvement on the status quo (under which emissions continue to rise). Your post @16 implied that the entire concept of international emissions trading is one giant “rort or smokescreen”, and that it couldn’t possibly work and perhaps wasn’t intended to. That was pointless cynical snark, IMHO. You could have made your point without the cynical posturing.
Derrida Derider,
But people don’t understand, that’s the point.
Brian, I’m not sure understand your point about moving from direct action (I presume tax) to an ETS but I can accept that it is politically wiser to use an ETS when other countries are using an ETS as well.
Tim @20: “That was pointless cynical snark, IMHO.”
It was cynical, yes. However, I wasn’t being snarky so much as realistic. If you want to know what behaviour is likely to occur, then look at what occurs already.
Most of us know about the ocean of charity dollars to the poor of Africa, over many decades, which has largely gone into the pockets of a few corrupt officials. In many cases their GDP/head hasn’t even stayed constant, it has gone backwards, despite all the aid money. Corruption is absolutely endemic in many developing countries. Even the head of the World Bank has said as much.
World Vision is hopefully being cleverer with their aid money, by trying to offer “a hand up, rather than a hand-out”, as Tim Costello puts it. I believe they are offering goods and services, rather than dollars, to achieve tangible change. It seems to me that an ETS would do the opposite, by providing a river of green dollars to corrupt officials.
Did you see the recent SBS (I think) story on the rise of big tobacco in Indonesia, and the various documentaries over the years about their efforts to conceal the damage of tobacco smoking? What about the behaviour of James Hardy over concealing the damage of asbestos, and concealing the state of their compensation fund? What about the efforts of the oil and coal companies over many years to delay the acknowledgement of climate change? The underlying driver is the profit motive, and putting profits before any other concern. Why would that change?
Should we naively believe that leopards are going to change their spots?
We can all have a cosy green feeling by paying others to absolve ourselves of our responsibilities to cut pollution at source? Fine that we help others, but we should clean up our own backyards first, surely? Can you understand that is not snarky – it is questioning whether we are conning ourselves?
Robert at 3 gets it exactly and precisely right.
Robert @ 3:
Er, why is that a negative? That’s a positive!
Sam, I have to disagree, Robert at 3 gets it exactly wrong.
“international trading in carbon directly by polluters straightforward”
this is such a nonsense. Take in some of Elise at 22 for starters. The next part of the fallacy of thought is that business will do the right thing. My new electricity bill has just gone up by 23%. Is this the CPRS at work? despite there being no compliance cost for electricity for many years to come?
The whole ETS thing is so wishey washey and invisible that it can, and will, be used to explain away all manner of price increases, regardless of reality. This 23% price increase represents an $8 billion windfall for electricity retailers if applied nationally at that level. If you accept that most electricity users do not have the mobility to go shopping around for “todays spot special” on electricity then you will also be recognising that there is an effective cartel at the retail end of electricity, and therefore there is no real pressure for the retailers to provide anything different by way of service. And it is not the retaillers who will be investing in Solar power, that is the electricity generators problem. So what will this windfall be used for? Buying up the competition. Just as the US banks did with hand outs from their federal government.
Now I would be only too please to pay an extra 20% for electricity if it meant that Renewable Power stations were being built. But that is not happening, and there is absolutely nothing in the CPRS to force that to happen. So if there are ever to be alternative energy sources built then that is a whole other wave of price increases yet to come.
Robert says that there was a debate over cap and trade versus carbon tax years ago. I dispute that completely. There was a massive study on the viability of a cap and trade system that had every economist in the country doing handstands to have their name included in the process, and a carbon tax was mentioned in passing. There was no debate.
Richard – A carbon tax is direct only if you see the aim as the price of carbon. If you see reducing emissions as the point, an ETS process is more direct.
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This is fundamentally true and for that reason those who seek regulatory solutions tend to favour it. You deploy cap ‘n trade you have a target that must be met by the nation-state. The trouble is the nation-state doesn’t produce most of the carbon; individuals, families, associations and businesses do. And they will all find arguments for exemption. Also the ETS provides temptation for wealthy high polluters to try and fob off their responsibilities on developing or stranded economies. These latter will exploit it and get around it if they can. How do you police it?
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The carbon tax provides an incentive for everyone to cut down on their emissions. And this will precipitate thrift and innovation. And we need both for reasons besides AGW.
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I don’t think any of his arguments are ‘silly’. I can understand that people would object, but ‘silly’? No. I’m glad to see this getting thru, if slowly.
Elise – Who would bet that this “international trade” caper turns into a real scam?
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That’s like betting on Phar Lap 20 mins after the 1930 Melb Cup’s over. It’s already a scam.
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Lots of the comments here are along the lines of I don’t understand the Carbon Producer’s Rorting Scam. That’ the point. Because it’s had to understand it’s hard to evaluate and experts can then create a royal mud storm in a pond. We get a headache and give up. That what’s the corporatocracy wants. They all got together and said: how do we feed the chow to the morons out there so they’ll shut-up about global warming?
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And then Kevvie said: Hi Rupert is that property deal in the mountains still on? Y’know I’ve been thinking about it and it sounds like a good deal. And we’ve always wanted to retire to a beachfront property.
The only problem with a carbon tax is the frequent hikes in the rate that would be needed. Implementation shouldn’t be too much harder than the GST was, just imagine GST with a different rate for every item you sell and you’ve got it. Then every year when it becomes obvious that emissions haven’t been reduced by the amount forecast the future path of the carbon tax gets adjusted to compensate. So it’s a bit like a GST where the rate changes every year as well. Oh, and there would be inward tax credits on imports, and outward ones on exports. Otherwise there’d be a rich secondary market in carbon tax differentials.
As an IT worker I see that as an absolute gold mine. GST was pretty straight forward to write programs for, the data entry was more of a hassle with the exemption for some foods, but in this case the data entry would be considerably more complex, and the auditing would be a nightmare. How exactly does the cafe at your local organic market track its net carbon emissions?
The opposition is not going to make significant political gains by either supporting the climate skeptics or putting forward a variation of CPRS. The problem in both cases is that the arguments in both cases will be too complex for mere mortals to understand. The same problem will arise for a policy that depends on carbon taxes to drive change. If the carbon tax is set high enough to drive investment in clean electricity etc. the opposition will have to offer CPRS style tax breaks and compensation to limit the damage the carbon tax causes to the economy.
If the opposition is going to make gains it has to propose something that is far more simple that either CPRS or carbon taxes. It has to be simple enough for voters to be able to understand what effect it will have on job security and their household budgets.
Part of the problem with comprehensive schemes such as CPRS and carbon taxes is that they “exclude by exception”. This means that concessions will be made to a few industries that can afford effective lobbyists. Concessions won’t be made to a raft of small indusries that will either go out of business or pass on the extra cost without being reducing their emissions.
With this in mind perhaps the opposition should be looking at a converse approach that “includes by exception” This means a policy that concentrates on a very limited number of significant opportunities for reducing net emissions. Significant opportunities for which commercially viable technologies that could make a significant difference are already avialable.
Power generation and the fuel consumption of cars both have to be a part of any viable policy. Power because it is responsible for for about 50% of our emissions, cars because we need to protect the economy from oil shocks. The opposition might also do better if it starts thinking outside the we must put a price on carbon mindset. This would allow it to propose doing things like leaving the price of fuel unchanged while it uses regulations to drive down the average fuel consumption of new cars.
Include by exception does not stop the opposition proposing more challenging targets than the government.
Elise @22 – fair enough, I accept that you weren’t being snarky.
“How exactly does the cafe at your local organic market track its net carbon emissions?”
Most carbon tax proposals recommend taxing at the source, ie power stations.
It was interesting to see Warrick McKibbon on Lateline tonight virtually admitting that the “market based”, too clever by half, ETS was failing the business community for whom it was created by being impossible to predict. And now required a “price belt” ???? to enable business to see the limit of their exposure.
At the end of the day the economists are going to be as culpable as the politicians for the failure of the West West to react to the Climate Change Challenge. Countries such as China are far more proactive at implementing emissions limiting mechanisms.
Jarrah@31: so the farm gate is not the source? The cafe is the first point where the organic produce is monetised in many cases. Or will small producers be exempt? That’s the obvious hole that I see, where the tax only applies to businesses over a certain size and thus many or most farms are exempt. Along with 20% of our emissions…
BilB, it is hardly surprising that McKibbin “admits” that the ETS is too clever by half, since he has opposed it from the get-go, in favour of his own concept of a national emissions reduction scheme which is notable mostly for the fact that it deliberately refrains from setting any targets at all for reduction.
Your “countries such as China are far more proactive at implementing emissions limiting mechanisms” interests me though. Have you got any details on what they are doing? Anything I have seen is along the lines of 174 new 500MW class coal-fired power stations were opened in China in 2007 alone, 70% of China’s energy is generated by coal, and its energy demand is increasing by something like 20% a year. If this is anything like true, the translation of proactivity to actual meaningful emission reductions is likely to take rather a long time, if it happens at all.
Leaving aside the question of whether your conversion of a one-off increase in your individual electricity bill to an $8 billion “windfall” for electricity retailers nationally is a rigorous approach estimating electricity price impacts, one issue in whatever the price impacts are currently is the effect of even the meagre emission reduction efforts currently being deployed. The Productivity Commission (quoting COAG) suggested that MRET alone would add up to $500 million to electricity prices by 2010. I do occasionally get annoyed when those who are most vociferously urging action which will clearly and substantially increase energy prices then whinge (and blame evil big business) when precisely that happens.
moz @ 33,
Agriculture will not be included initially anyway, except for inputs like fertilizer and fuel.
It is a simple calculation Wozza. Twenty three percent times the total electricity produced nationally times the retail rate, gives a big figure. This increase is the NSW increase
“On 1 July 2009 the cost of electricity will increase for most households and businesses.
These pricing changes are in accordance with the NSW Independent Pricing and Regulatory Tribunal (IPART) decisions and recent legislative changes, and will directly help to ensure the continued efficiency, safety and reliability of the State’s electricity network.”
but I believe that increases are to be rolled out in other states. Understand this clearly, Wozza, I am not whinging at the price increase, I am pissed off at the fact that there is no intention to apply the proceeds of this increase to building a solution to our CO2 emissions. 8 billion dollars is sufficient to build 3 to 4 gigawatts of CSP generation capacity in our high energy yielding deserts. Let’s see if that is what happens.
There are many reports coming from China indicating that businesses are facing tight regulation on energy useage, and alternative energy hardware than any other country. Not necessarily the hardware that you would expect, hardware such as domestic methane digesters that produce gas for cooking and heating as well as electricity for lighting. By the million. See Broad air conditioning.
The China electricity generation capacity increase is a country raising the standard of living of its people from next to nothing to nearly something. It is totally hypocritical of the world to demand that China manufacture much of the consumer products, but do it without using electricity. If the West is seriously concerned about China’s increasing CO2 emissions then there should be an embargo on Chinese imports. Go fly that kite and see if it stays up.
Wozza @34: An extra $500m equals $25/head – hardly an economy wrecker. Cleaning up electricity is not going to lead to sudden jumps in prices as long as the average price ramps up in line with the average cost of producing it. (For eaxmple, if clean electricity were to cost double the cost of dirty electricity the average cost would have only increased by 20% if the 2020 target is met. – By contrast, schemes like CPRS and carbon taxes that depend on putting a price on dirty elecricity would need the price of electricity to at least double before investment in clean electricity makes sense.
John D @29, Great analysis! Totally agree!
Moz – Or will small producers be exempt? That’s the obvious hole that I see, where the tax only applies to businesses over a certain size and thus many or most farms are exempt. Along with 20% of our emissions…
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The cost of the tax will be passed on to everyone. For example, if a petrol station is taxed for selling petrol calculated on the amount of CO4 its stock will produce, the station will bump up the price and the driver will have to pay more. The driver then wants an alternative fuel source and/or more efficient use. So s/he buys an electric car.
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The station owner responds by supplying fresh cells and cell charging stations for electric cars. The energy from carbon rich sources will be more expensive than from renwables so the station owner will start buying as much electricity from solar power stations as possible.
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Etcetera, so forth.
Comment by Elise at 16- very topical point you raise.
http://www.smh.com.au/environment/australian-firm-linked-to-pngs-100m-carbon-trading-scandal-20090903-fa2y.html
Well that says it all, MTS. The only thing to add to that is a look at the number of countries of the 195 nations that fit the corruption risk profile against those that don’t. It will be plainly evident that the responsible international trading of carbon credits is a non starter.
moz, you’re being deliberately obtuse. Capture stationary energy and transport fuels at the source and you’re 80% of the way there.
The real issue is how to appropriately put a carbon tariff on imports, which have been transformed and may contain a huge variety of relative embedded energy costs..
wilful, perhaps I’m being obtuse but how can it be easy to measure for stuff produced inside Australia but difficult for stuff produced outside Australia? Are you assuming cooperation from the Australians and the opposite from external suppliers?
Broadly, if we tax fuels here there’s going to be a reproduction of the excise problem we already have with them. Which we already deal with. For imports, it seems that we could say “either you disclose your inputs or we guess them and bias upwards” and that would solve the problem. Imports already have a pile of paperwork required (and mechanisms to deal with failure), so that’s also a solved problem.
I see the issue as more a WTO/trade treaty one: we have agreed not to do this, and unilaterally breaking those agreements will cost us. Once the US starts we can just follow, but until then IMO it’s not possible.
moz, if the energy, fuels and fertiliser have been taxed, then there’s not much else to worry about as a carbon input. The organic farmer has paid his relevant tax on his diesel (bio-diesel being tax free), doesn’t use fertilisers, so can deliver a cheaper product than the mass-produced vegies.
Offshore, a car can be made in a dozen countries with a huge variety of power sources, from hydro to brown coal. We couldn’t possibly get an acurate measure for ETMs
The first reality is that, apart from things like alumminium billets, there are very few imports/exports for which the proposed price of carbon will make much difference – So there is no real need to impose carbon taxes on everything that comes into the country.
THe second reality is that the main threat to our competitive position is the artificially high value of our currency. Recent fluccuations in the value of the $Aus would swamp the effect of changes in wage rates or the proposed levy on carbon. If we were serious about our competitive postion we would be challenging the unusually high interest burdon we let the obsessives in the RBA impose on our economy.
The third reality is that Australia has very dirty electricity by world standards and close to the top per capita emission rate. At this stage we should hope that our cometitors and customers don’t start insisting emission based trade barriers. If for no other reason we should be getting on with our clean-up to reduce our risk of suffering from future trade sanctions.
wilful: The import problem is just an audit one, and we can address it by making our own estimates. “worst case is X, that’s what we charge you unless you show otherwise”. The fact that Australia is often the worst case just makes it easier to get the numbers.
And the organic farmer is just hoping that his anaerobic compost system doesn’t come to the attention of the PTB. Farmers are just an easy case where the compliance cost can easily outstrip the tax cost, and remove any incentive to reduce emissions. Look at the dairy industry – there’s a lot of methane being produced but it’s very hard to measure it accurately. So we make estimates and apply them to everyone, regardless of the specific details. And there are incentives to cheat – cheap feeds increase production of both milk and methane, so concealing their use boosts profits. In NZ, farming is not 20% of total GHG output, more like 50% of the total, and dairying at more than half of that.
http://norightturn.blogspot.com/2009/07/climate-change-real-culprits.html
Moz – Aren’t those problems viz carbon accounting you mention just as much a pickle under a CPRS system?
Hi Brian,
http://www.theoildrum.com/node/5737
Here a new feature at “the Oil Drum” which would be very good to have for each of your research items, as they have become a very important resource.
BilB
Just found an interesting set of numbers on average carbon emissions from Aussie cars (on NRMA website):
National Average Carbon Emission by year
Year Grams CO2/km
2002 252(est)
2004 246.5
2005 244.7
2006 230.3
2007 226.1
Hey, we are making some progress after all…!
A grand total of 26 g/km reduction over 5 years to 2007. If we kept that up, then by 2012 we would have an average car emission of 200 g/km. For 10,000 km/year that would be 2 tonnes of emissions per car.
The EU has current average emissions 30% below Australia, and has set a target of 130 g/km for all newly registered cars by 2012.
The Rudd government could set a similar target for NEW cars, and we could have a notional aim of 200 g/km over the entire passenger fleet.
Surely that would be a neater, simpler, less controversial approach than a carbon tax or future ETS on fuel? Why doesn’t the Coalition suggest it?
Found another interesting set of numbers for comparing emissions of coal-fired and gas power stations:
Brown coal: up to 1,600 g/kWh
Black coal: circa 1,000 g/kWh
Gas open-cycle: circa 600 g/kWh
Gas combined-cycle: 400 g/kWh
It would appear that Hazelwood in Victoria is the WORLD’S WORST power station, in terms of emissions per unit of energy produced: 1,580 g/kWh
One might have expected the world’s worst to be in a developing country, or some really poverty-stricken nation without modern technology. This is a total disgrace to Australia. We should all be ashamed.
Hazelwood was due for decommissioning this year (2009), but the pommie owners want a stay of execution. What have they done to bring the thing into the modern world, in all the time that they have been owners? Bugger all – milked it as a cash cow. And now they say that they intend to clean up their act…?
Why, for goodness sake, don’t we shut the disgraceful, decrepit thing down ASAP?
Rudd can’t be serious talking about emissions “leadership” when we continue to run the world’s worst power station? Blatant hypocrisy. And what has our Greenhouse Office been doing all these years – pushing paper around in circles?
Surely we should have some sort of target for stationary energy emissions from power stations including renewables? For example, why not a combined emissions target of 500 g/kWh for electrical power (a bit less than using only gas open-cycle turbines, to encourage use of renewables)?
The coal-fired power stations can either use their much-discussed CCS “clean coal”, or they can build supplementary renewable power (wind or solar or geothermal or whatever), to bring their aggregate emissions down.
Surely a clear combined target would be simpler and easier to implement, and be more likely to significantly drive down emissions for a reasonable cost, compared with the proposed ETS charges across the entire economy?
Furthermore, a combined target for power companies would leave the method of emissions reduction open to private enterprise, to solve with the most efficient combination of technology, rather than the government trying to “pick winners”.
Why don’t the coalition parties propose a combination of targets, rather than wasting time throwing rocks at the poxy ETS?
There are a lot of good questions there. Any one from government prepared to stick their hand up?
No?
Elise asks:
For the fairly obvious reason that the rocks they are throwing at the ETS do not derive from a genuine desire to drive down emissions but a desire to reconcile engaging in trnch warfare to defend the interests of the big polluters with a policy of paying lip service to being interested in the protection of the environment.
They know that the best way to do that is to oppose/advocate delay in whatever policy is on the table, since any policy of supporting something else necessarily divides the opposition.
Fran @52, I guess you are right. Certainly looks that way.
Shame really, as it is not a winning strategy – for them or Australia.
As they can have no winning strategy, and are indifferent to good policy, this isn’t really a criticism of their approach. At least this way they can satisfy their core supporters and put a floor under their losses.
Fran @54: “…they can satisfy their core supporters and put a floor under their losses.”
There I was thinking that elections were not won on “core supporters”, these days, but on the swinging voters who are everywhere and expanding.
Ahem, floor under losses you say. The Liberals lost the swinging votes at the last election didn’t they? A floor under that loss won’t do them much good at all.
You’re assuming Elise that they imagine that some combination of policies and strategy can get the voters to do what they haven’t done in more than 60 years — turn out a government after one term or turn out a government that was 10 points up 2PP midterm.
They are praying that they are standing after a miracle happens.
Fran @56: “They are praying that they are standing after a miracle happens.”
MontyPythonesque!!!
Isn’t this a “nothing to lose” scenario? They may as well stand for something worthwhile, as they won’t be left with any dignity otherwise.
Mainstream politics has nothing to do with standing for something worthwhile. It’s about achieving office or avoiding catastrophe so you can achieve office later and avoid looking a complete tosser. There aren’t nearly enough people who care about principle, can recognise it and vote for it to make that a viable strategy.
If you look at Rees in NSW, it’s exactly the same story, colours reversed. He’d have nothing to lose by doing worthwhile things, but of course he will stay on the reservation and almost certainly get slaughtered in 2011.
Fran @58, I guess you are probably right.
Perhaps they are just a bunch of tossers?
There must be something wrong with the system, if it promotes such poor specimens to senior political roles?
There is absolutuely something wrong with the system because it strongly skews selection in favour of those whose politics can readily be trumped by the desire to acquire power over others, and who contemplate making a career out of the practice of horse trading over benefits. Essentially the whole thing is the political equivalent of a moulding factory. If you go in the wrong shape you either recoil in horror and leave or get pressed into the shape of the political cookie cutter. You learn that nothing matters except acquiring office and the right to disburse benefits and build an emp[ire and defences around you. You quickly marginalise anyone who doesn’t play the game, because such people are loose cannons.
If one wanted a system in which honest civic-minded people would be disadvantaged and the corrupt and disingenuous advantaged but which one could deny was calculated to produce this result one could scarcely have created a better system than what we have. The beauty of this system is that by creating the culture described above, large sections of the public become disnegaged and inclined to “what you gonna do?” which of course means that they can continue doing what they’ve always done while pretending the public is to blame.