China manufactures a lot of carbon heavy products in huge bulk. Materials such as steel, for instance, the West no longer has large capacity to produce. China may very well in future take a more strategic approach to high CO2 emitting products in order to trim its CO2 emissions to meet commitments. China has already demonstrated its ability to perform in this way with material such as phosphoric acid and aluminium. The rub here is that if China decides to drop supply of bulk low profit materials preserving their production for higher value added exports, this will throw the carbon load back at the West. China has been a convenient whipping boy for beligerant Western politicians wanting to avoid their own responsibilities such as Bush, Howard and Rudd. This may yet backfire horribly.

By contrast, the ABC reported:

Ms Wong says the ETS was the only thing the Government considered.

“Central to climate policy is putting a price on carbon. If you don’t make people pay for pollution you don’t have a policy on climate change and putting in place this sort of scheme is the cheapest way to achieve the reductions in carbon pollution we need to make,” she said.

This doesn’t sound like someone who understood the issues and considered alternatives before committing to something as complex as CPRS.
What I would really like to know is if someone can see practical issues that I have missed in my analysis of cleaning up power and reducing the average fuel consumption of new cars. I would also appreciate it ETS supporters would explain to me how ETS will handle these issues and what has to happen to the average price of electricity during the decades this cleanup will take?

http://www.iea.org/Textbase/pm/?mode=pm&action=detail&id=1573

tells that story. It is a story with some history to it. Denmark acted a decade ago, and not in an apologetic manner. I totally endorse direct targeted taxation as an instrument for change. However, we do not have the luxury from where we are now, thanks to John Howard, to feed the proceeds through the economy to support action through incomes. We now must invest the proceeds directly and completely into the infrastucture required.

(Australia’s CO2 pollution is 2.5 times higher per capita than Denmark.)

However the ideological battle to get to John Davidson’s position would be harder than getting the CPRS up. I’d start with the ETS now – and head for the national generating grid in the longer term.

John’s plan allows for the venerated genius of private enterprise very well through the tender process. Object-oriented approach – I like it.

It’s the same way the US military builds its force infrastructure. Anyone can tender to build the next best warplane if they’re up to it.

In the same way the Australian Department for CPRS Electricity can tender to Westinghouse for 500MW of solar in Wagga; and tender 1000MW of geothermal out to BHP-Origin.

We all understand that there is a price cap in the CPRS John – it has been debated on these forums at length. However, it is a transitional, not permanent feature of the scheme. The EU ETS price “cap” in contrast is too high to ever be binding (it operates as a genuine penalty), so binding price caps are not inevitable features of cap and trade schemes.

“We can still do an audit and come up with direct fixes for the highest density sources of pollution and work our way through the list down to the lowest density sources of pollution.”

You are massively underestimating this task. For a start, rigorous data on actual emissions is not available in real time. Second, once you have identified a gap between actual and desirable emissions it is not straightforward to come up with direct fixes that aren’t also incredibly expensive.

“The big problem with a market mechanism is the uncertainty over the price.”

Actually, no. That is the point of the secondary market for permits – to allow firms to manage their carbon risk. This statement is like saying we should have a fixed exchange rate to avoid uncertainty about the traded goods prices. Firms hedge to manage this risk.

John, your statement at 29 reveals even more strongly than the original OP that you have a strong taste for central planning. While planning is important at the firm level, to think that a central government agency can manage supply and demand well, not only in the energy sector but across the economy, within the context of uncertainty about future demand and supply, without the assistance of the price signals that market based mechanisms provide is fanciful.