Toyota Prius – not as green as it seems, but the forthcoming “plug-in” one might be
If there’s a certain bet flowing from last weekend’s Gippsland by-election result, it’s the proposition that any inclusion of petrol in Labor’s emissions trading scheme will be carefully structured to avoid any adverse price impacts at all in the short-medium term (or that they’ll be fully compensated for everyone). Voters have signalled that anything else would consign Labor to a single term in office, a fate Kevin Rudd will do almost anything to avoid. However that means the scheme will also have little or no tangible effect on people’s carbon-emitting behaviour in the short term. No pain no gain as they say.
Quite frankly though, until people actually have viable alternatives to their current behaviour no pain is justified. If there are no viable alternatives to using private cars with internal combustion engines as our predominant method of urban transport, an emissions permit system or additional tax on petrol is nothing more than a revenue-raising device, or at least an expensive and fairly pointless revenue-churning exercise if everyone is fully compensated. On the other hand, putting in place a revenue-neutral and fully compensated system would at least make some limited long-term sense, because rates could be cranked up at short notice to behaviour-changing levels once viable alternatives really exist.11. KP: Moreover, there really isn’t a need for a new behaviour-changing tax on petrol as long as market prices remain at their current levels for other reasons. What’s needed is something that convinces people that the higher prices are permanent, because that’s what will induce lasting behaviour change. Thus an emissions scheme for petrol expressly designed to kick in if/when market prices fall would send exactly the right message (though not electorally). [↩]
At the moment, public transport systems in our major capital cities are already running at or near capacity in the absence of substantial new capital spending, so most Australians don’t genuinely have the option of switching from car to public transport. Moreover, lower carbon-emitting private transportation options also aren’t readily available. Hybrid vehicles like the Toyota Prius arguably emit a little less carbon in operation, but many argue that this advantage is negated by significantly higher carbon emissions in the production process than conventional internal combustion vehicles. And even the operational advantage is disputed:
Jay Nagley, publisher of Clean Green Cars, said: “People may be surprised to learn that hybrids are no better in the real world than diesels, but our tests confirmed what we had long suspected.
“Hybrid technology offers the prospect of real benefits, but only with the next generation of plug-in hybrids using more advanced lithium-ion batteries, which are expected from 2010. Current models only confer dinner-party bragging rights.”
Moreover, as I discussed in a recent post, the way larger Australian cities treat cyclists means that leaving the car at home and using the treadly instead is an option only for the young and courageous.
Is there anything constructive that individual governments could do in the meantime (in the absence of a globally agreed carbon emissions trading scheme that would avoid drastic local competitive disadvantage)? I think the answer is yes. I don’t see any obvious reason why the Australian government should not immediately announce a 50% reduction in company tax on profits generated from the first seven years of sales of any locally developed fuel, power generation or transport propulsion technology that delivers substantial savings in carbon emissions over current technologies, as well as extended profit retention as long as profits are invested in further research and development of carbon-reducing energy-related technologies. There are lots of potentially promising ideas out there, not least in battery technologies. But a tax break of the sort I’m suggesting wouldn’t involve government in picking winners (individual winners anyway), nor can I immediately see any other major objection. Australia could quickly become a world leader in energy technology innovation. It’s a more targetted version of the way Ireland has achieved such remarkable economic success over the last 15 years or so.22. KP: Moreover, if it proved as successful in stimulating new investment as I suspect it would, we could adopt the full Irish model and move to a general 15% corporate tax rate. [↩]
Then again, I’m not fit to tie an economist’s shoelaces so I might be missing some glaringly obvious problems that would make this a really stupid idea. And what better way to find out than by posting the idea here at Troppo where it’s sure to be dissected by some of Australia’s leading economics brains and ripped to shreds if defective?