One highlight is that 55% of the revenue from an initial carbon price, which Garnaut would see in the $20-30 range, would be used for compensating households, principally by raising the tax-free threshold to $25,000. For higher earners, however, this would be partially offset by changes to taxation thresholds.
Garnaut also throws in another political hand grenade by suggesting a significant reduction in transfer payment compensation to groups such as pensioners over what was proposed in the CPRS, to reflect the pension increase since then, and the fact that welfare recipients were over-compensated under the CPRS.
Emissions-intensive trade-exposed industries would receive assistance, but this would be scaled back over time on the recommendation of the independent agency he would establish. We do have to be cognisant of what other countries are doing, but Garnaut has no patience with lazy rent seekers.
The institutional framework for managing the whole scheme is considerable and worth repeating:
- a UK-style independent committee to assess “national targets and scheme caps; progress towards meeting targets; the switch to a floating price; and expanding coverage of the scheme”, with the intention that the committee makes recommendations to government — for example on strengthening the national emissions target — and government being required to explain why it will not carry out the recommendations. Its first review would be to consider what target Australia should adopt after the initial phase of the scheme is completed; until then, Garnaut says the current target of 5% by 2020 or higher, depending on international agreement, should remain in place;
- an independent economic consulting agency to assess the level of compensation for trade-exposed, emissions-intensive industry, intended to be like the Productivity Commission or form part of the PC;
- a specialised Carbon Bank to independently operate the scheme;
- an Energy Security Council (which Garnaut recommends regardless of the move to a carbon pricing scheme) to oversee the introduction of a carbon price in the electricity generation sector;
- a Low Emissions Innovation Council to oversee research, development and commercialisation of low emissions technology.
A $26 price would yield $11.5 billion initially. About 10% would be set aside for innovation and 10-15% for carbon farming. There would be a one-off cut in petrol excise to offset the impact of a carbon price on the price of petrol, but petrol would be included in the mix.
Garnaut has spoken, it’s now over to the politicians.
The Australian’s coverage is worth a read.
Paul Kelly sees the contrasting views of Labor and the LNP as “a clash of culture, economics and ideology with huge consequences for Australia” and “an ideological and political conflict of rare intensity”. He sees Garnaut’s report as “an intellectual repudiation of Tony Abbott’s position.”
Garnaut mocks the idea that Australia is moving ahead of others and brands this aspect of the current debate as “extraordinary”. He says: “When you next hear someone say that he is worried that Australia might get ahead of the rest of the world in reducing greenhouse gases, take him by the hand and reassure him that he has no reason for fear.”
Other nations are “already too far ahead” and Australia’s risk, contrary to the popular debate, is being “a drag on the global mitigation effort”. The carbon price, however, gives Australia the chance to catch up with other developed nations and reduce emissions at lower cost. He backs an initial price of $26 a tonne as consistent with Australia’s bipartisan 5 per cent reduction target at 2020 and judges that by 2015 the shift can be effected to a floating price.
The Age picks out Garnaut’s emphasis that “the political battle over a carbon tax as a fight between an old political culture of special interests and the national interest.”
We are not a pissant country without influence in the world. What we do matters.
THE climate adviser, Ross Garnaut, has lashed Australian business for playing a ”spoiler” role in the carbon price debate, saying it is putting short-sighted ”self-interest” ahead of the national interest.
He singled out the Business Council of Australia and its president, Graham Bradley, the BlueScope Steel chairman Graeme Kraehe, the BHP Billiton chairman Jacques Nasser and the LNG and coal industries, and accused the business lobby of sliding back to a pre-1980s anti-reform culture that had left Australia with ”the worst productivity in the Western world”.
In the third we have Abbott pathetically cherry-picking a line from page 17 of the report to support his policies. The second says that the report seeks to reclaim the economic reform mantle which began with the Hawke-Keating reforms, seeing the business lobby fighting the carbon price as a return to the anti-productive political culture that prevailed for much of the last century.
Update: Tim Colebatch at The Age.
Peter Martin posts Garnaut’s speech at the Press Club.