Wednesday, July 16, 2008

Opportunity for real change goes begging

The green paper on carbon trading operates on a false premise.

IMAGINE if the Rudd Government had said that its concern about teenage binge drinking had led it to the conclusion that it would put a cap on the production of alcopops. After determining the appropriate cap, it would then sell the licences to make alcopops and — to avoid extreme hardship — it would issue rebates to teenage alcoholics when the scheme was eventually introduced in 2010. We would think they weren't serious. Yet this is the approach to cutting carbon emissions.

Economically there is no difference between a carbon tax and "cap in trade" except that the latter is immensely complex, hard to implement and easy to rort as evidenced by the European Union Emissions Trading Scheme — and for the majority of people going about their daily lives, it is impossible to understand.

Apart from the warm fuzzy feeling engendered by signing the Kyoto agreement last year and a commitment to reduce Australia's greenhouse gas emissions by 60% below 2000 levels by 2050, the Government has done nothing .

Former World Bank chief economist Nicholas Stern has said that Labor's 60%-by-2050 target for developed nations would still lead to a three-degree rise in global warming.

But even two degrees is not a real target. Adelaide University's head of climate science, Professor Barry Brock, told a recent conference in Canberra: "Two degrees has the potential to lead to three-to-four degrees because of carbon cycle feedbacks."

A three-degree rise would destroy the Great Barrier Reef, Australia's tropical rainforests and wetlands, cause widespread desertification and a sea-level rise of five to seven metres or more.

At three degrees, hundreds of millions of people will not survive. There is a complete disjuncture between the green paper and the recent scientific discussion.

The green paper says: "The International Panel on Climate Change concluded that Australia's water resources, coastal communities, natural ecosystems, energy security, health, agriculture and tourism would all be vulnerable to climate change impacts if global temperatures rise by three degrees or more."

There is no hint of climate scepticism in the green paper. It says: "Changes in Australia's climate and effects on human and natural systems are observable already, and the magnitude of the impacts will grow as the climate continues to change in decades ahead."

It argues that "the Government's overriding objective is to get the design right". But how long will this take?

Introducing a tax now on carbon emissions might be guesswork, but it would have an immediate impact on emissions because it would begin to change behaviour.

The paper makes the obvious point that the bulk of Australian emissions come from electricity generation, transport and agriculture.

Over half the summary paper is about how the Government's scheme will provide relief for these high-polluting sectors.

Petrol is already more lightly taxed than in all OECD and OPEC countries except North America and our public transport and rail freight infrastructure is appalling. So, it is not surprising we are far higher per capita consumers of petroleum than advanced European countries.

Given the fact that Australia will be importing most of its oil within a decade and the country already has an unsustainable trade deficit and foreign debt, it is hard to imagine a more irresponsible policy than the promise to cut fuel taxes on a cent-for-cent basis to offset the carbon tax impact on petrol.

This flies in the face of the logic expressed elsewhere in the paper, which states that cash support for households to offset higher consumer prices rather than subsidies "should not blunt the incentive to change behaviours in ways that result in lower emissions".

Exactly. Why not an emissions charge on petrol that can be recycled back to households so that they can choose to spend the money on driving or public transport.

The Government doesn't propose to include deforestation in the carbon trading scheme even though it still accounts for 10% of emissions because of "the risk of pre-emptive land clearing if coverage was in prospect".

The Government proposes to allocate 30% of carbon pollution permits to emissions-intensive, trade-exposed activities, which will punch a huge hole in the emissions trading scheme.

A recent Cambridge University study said this wasn't as big a problem in practice as in theory unless carbon price differentials are expected to exist in the long run and affect investment. If the world is to survive, carbon taxes will have to be be equalised across countries. Even US President George Bush dimly perceives this.

The paper promises direct assistance to existing coal-fired power stations on the grounds that to refuse would lead to "increased perception of risk … potentially delaying new investments in the (fossil fuel) generating sector".

Excuse me? Isn't that what the cap and trade is supposed to achieve?

What the Government has done is develop a policy designed to fail in order to keep its new-found polluting business mates on side.

Kenneth Davidson is a senior columnist.


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