Michael Pascoe nails carbon pricing state of play

I reckon this is the most succinct, accurate and balanced summary I’ve read of the current state of the carbon pricing debate:

Pricing carbon in Australia is about pricing carbon, not saving the planet. As an insurance policy, we need to have a soft mechanism in place that can be ramped up in the future if it needs to be, if the rest of the world joins Europe in getting serious about it.

It won’t do much and it won’t hurt much either. Capitalism as we know it is not about to come to an end, despite the rantings of the Alan Jones/Chris Monckton side show. The coalition’s crazy promise to spend billions burying charcoal, that too will pass.

And the Greens will have a new bureaucracy to play with as they try to forget their big mistake. A national propeller hat roll out can’t be far away.

Abbott’s Direct Action policies, not to mention the Greens’ equally silly plans that Gillard has been forced to embrace despite being debunked by the Productivity Commission, are peas in a pod.  At least judging by the leaks to date,  Gillard’s  carbon pricing scheme is modest, sound and sensible policy.  It’s a miracle of political negotiation and constructive compromise that she managed to get the Greens to accept it.  Julia’s skills at public communication aren’t as great as I’d hoped but she must be an awesome behind-the-scenes deal-maker, possibly the best Australia has seen.   Moreover, given the disparate interests and personalities among the Greens and cross-bench Independents, the only way she would have achieved such an outcome is to have impressed all of them as a leader of great strength, integrity and fundamental decency.  You don’t  hold together people like Windsor, Oakeshott, Wilkie or the Greens by being mean and tricky. But that assessment doesn’t fit the current MSM hive mind narrative so it’s probably not what you’ll hear and read.

PS And, for schadenfreude afficionadoes, that treacherous prick Rudd will know in his guts that a bloke with his personality and skillset could never have pulled it off in a million years. And so will the rest of the Labor Caucus who’ve had to deal with his prima donna antics on a daily basis.

Update – The actual program is if anything a bit more ambitious and substantive than I’d expected.  A modestly progressive redistributive taxation alement is a positive feature.  And the independent Climate Change Authority is a definite plus, a transparency/accountability check and balance along similar lines to Nicholas Gruen’s long-advocated fiscal probity authority and the enhanced Infrastructure Australia that I’ve been writing about for a while.  In other areas, Gillard was right to steal the Coalition’s proposal to call for tenders for closing down or scaling back the dirtiest coal-fired power stations.  It was the only sensible part of Abbott’s Direct Action policies.  OTOH the renewable energy and soil carbon funds are no worse than Abbott’s policies and the unavoidable cost of getting the Greens, Windsor and Oakeshott onside.  All in all, better than I expected.  Whether Julia can sell it successfully in the face of Abbott’s willingness to mislead and deceive in every possible way is another question.  But having a solid product to sell is a damn good start.

About Ken Parish

Ken Parish is a legal academic at Charles Darwin University, with research areas in public law (constitutional and administrative law) and teaching & learning theory and practice. He has been a legal academic for almost 12 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in he early 1990s.
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52 Responses to Michael Pascoe nails carbon pricing state of play

  1. observa says:

    “It’s a miracle of political negotiation and constructive compromise that she managed to get the Greens to accept it…..”

    That’s as far from the truth as anyone could imagine. I’ll give Rudd his due, he staked everything on Copenhagen and when the writing was on the wall he came home and ate crow over the great moral imperative. I don’t think he was alone in that decision. I think he regretted it later as he could have taken the easy path with Turnbull in Opposition and carried on regardless by saying he was going to set an example anyway but the timimg of the GFC might have weighed against it. As far as the ETS was concerned the Greens couldn’t wear free credits to the La Trobe power stations and voted with the Libs against it. Rudd had to face the fact that to force these power stations to buy CCs would have sent them insolvent, thereby handing them back to the banks and tearing up existing supply price contracts. This was a result of gross overpayment for the PSs in the boom and although their backers were stuck with that they’d never throw good money after bad. In any case the banks would have upped power prices swiftly and immediately and that would have associated ETS with massive price hikes. Political suicide but the Greens couldn’t or wouldn’t see it and hence they bailed and squandered the opportunity. it didn’t matter to them because Rudd could wear the fallout with the faithful while Brown could stay ‘pure’ to Gaia.

    No such luck this time round for the Greens and they and all the co-conspirators backing Gillard’s election lie all had to sink or swim together, given those polls. There was never any chance some sort of carbon tax would be foisted on the voters this time round and it was only a matter of trying to reduce the immediate impact to try and convince voters the castor oil wasn’t as bad as big bad Tone and Co were saying. That merely produced a witches brew of administrative problems and exemptions as well as feeding the Greens with more failed pet programs.

    Gillard’s problems as leader of Labor were twofold. Firstly Labor stank due to L-plater incompetence after the contrasting Hawke/Keating and Howard/Costello years and she’d made a promise they were ‘all fiscal conservatives now’. With labor’s profligacy and fiscal and policy incompetence she needs taxes fast and feeling Rudd sank by letting the faithful down, she was going to play Iron Lady with his one big letdown. In that she had all the players by the ghoulies with her and could implement any witches brew she concocted. Remains to be seen if the electorate will swallow it but count me a skeptic because of their talent and record to date.

  2. observa says:

    oops….never any chance some sort of carbon tax would NOT be foisted on…

  3. observa says:

    Notice how this time round, Brown despite abhoring the BIG BAD POLLUTERS, is now left having to buy them out and only tax 500 of biggest of them instead of the 1000 promised and as well with Gillard has to defend exempting fuel but he gets thrown the ARENA bone as a sop, while that bone negates Gillard’s critique of Tone’s same alternative, even though he believes it’s all a load of crap. There is a God Bob.

  4. john walker says:

    Its a world threatening problem….. “It won’t do much and it won’t hurt much either” I.e it will not change behavior much either.

    But … it will create some more management action for the greens to play with.

    Ah modern times…. as the song goes:
    “There’s all ways something cooking , but there is nothing in the pot”

  5. murph the surf. says:

    I was half asleep this morning but I think I heard on News Radio that one measure to be announced was a billion dollars for soil C sequestration research and payments.
    The influence of the 2 rural independents and particularly Windsor as the academic pushing the charcoal strategy is based in Armidale NSW may be detected here.
    Please correct me if I have misheard – maybe other mitigation strategies have to share this allowance?

  6. Patrick says:

    Nope, murph, you haven’t missed much. It’s just an even bigger and stupider boondoggle than ‘direct action’ and the only meaningful results will be the massive cost of compliance for Australian businesses, some more offshoring more rapidly than might otherwise have happened and, of course, a massive upscaling of the Green patronage machine, to the detriment of our democracy.

  7. murph the surf. says:

    Well I have to express amazement at this – I have been to many lectures and courses about soil C and the techniques for measuring soil C and the subsequent recording methods are very much in their infancy.
    Greg Reid ( based at Wollongbar DPI NSW ) has toured the state giving demonstrations and lectures to interested landholders but I remember that one limitation is the chemistry of the soil testing needs validation under the various protocols we have signed up to and further that there is no standard against which alternate methods can be measured.
    I expect we will see a proliferation of substandard tesing outfits rush to the market all achieving a consistent increase in soil C and the $$$ flowing to the farmers regardless of the longterm storage durability of the soil C.
    Porkbarrelling at its most venal.

  8. Chris Grealy says:

    What an unbalanced post. I can just hear you out there shrieking, “Ditch the witch.” Get real, the rest of the world is addressing climate change and it’s about time Abbott started thinking about the good of the planet, over his insane ambition.

  9. derrida derider says:

    A minority government pushing something like this was always going to have to put a lot of pork in it, murph; there’s actually less than I expected. Anyway given the Coalition commitment to much larger scale carbon sequestration if the money gets wasted (as it probably will be) they won’t be in a good position to object.

    La Gillard may not be much good at Obama-style public inspiration but she has always had a reputation as a formidable negotiator and conciliator – tough when she can be, charming and persuasive when she can’t, and always knowing the right time and place for each.

  10. Alphonse says:

    Abbott’s Direct Action policies, not to mention the Greens’ equally silly plans that Gillard has been forced to embrace despite being debunked by the Productivity Commission, are peas in a pod.

    Political pretence at addressing AGW by a re-closeted denialist in the same pod as a genuine but flawed attempt to address the problem? That is one hell of a variegated legume, Ken.

  11. observa says:

    Whilst the sting in the tail is the continual rise in carbon taxing which won’t change global temp a jot, I’d generally support a move toward complete reliance on resource taxing including CO2E taxing, so upping the tax free threshold is a positive move for mine. There should be more of it. As far as AGW goes any objective analysis of the science now would leave a rational person agnostic. As far as all the policies so far, supposedly to ameliorate the ‘problem’, they are farcical or counterproductive in their outcomes and for Aust to ultimately move toward global carbon credit trading is sheer lunacy, given its track record.

    As far as reshiftable energy goes and in particular solar, if you believe we can seriously rely on that, you’re either ignorant, delusional or lying. I’ll assume any solar advocates here are ignorant of the product and here’s a great place to get up to pace-
    http://htpc.avenard.org/power/home
    Follow the menu and check out those results which concur with my anecdotal glancing at the inverter readout on my 2.1kW system. When you see it producing 40-50W at midday on a wet overcast day you’ll scoff at any thought of ditching Hazelwood and Playford power stations without any reliable replacement. Inevitable brownouts will politically decimate any Govt that goes down that path. When you analyse those solar output figures you need to recognise these systems are about 15% efficient in turning what sun hits them into electricity. Sanyo claim world’s best 18% out of the inverter at present with their panels but we can easily model the ultimate in Green Utopia and still see the insurmountable hurdle. Dividing 100 by 15 gives a factor of 6.67 to multiply those extreme peaks and troughs by to see clearly that technological advances increasing efficiency just compounds the extreme variability/volatility problem for any backup. End of story and wind is the same which quickly leaves you with experimental hot rocks and cow farts, etc.

    Now we just have to get Tone’s mob to see the fait accompli of CO2E and resource taxing and how they could turn this half-baked watermelon witches brew into a market Green constitutional marketplace that can be the envy of the world and set us all on the right path. It’s the constitution of the marketplace stoopids and we need to give the environment true, level palying field, countervailing market power to its destruction for our wants. This lot is just more of the science of muddling through by the usual suspects.

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  13. murph the surf. says:

    DD , agree this is not the worst extravagence indulged in and I also concur that this reflects the mechanics of minority government.
    It is just that having bought into the whole evidence based government mantra praised and promoted by the Rudd Govt I feel played for a fool when such schemes are rolled out.
    Soil C can be a great tool , among many to ameliorate the increases in atmospheric C but it needs research and years of study not a quick flash in the pan scam which will impact on it’s credibility.
    Perhaps it is one of those situations where the amount of $$$ involved is not enough to worry about ( see Dave and others previously) and money “promised” isn’t always dispensed?
    Generally I’m more curious about the acceptability of this plan over the longer term – the reliance on purchasing permits from international markets to provide all of our reductions.
    As I understand things we will slow our own emissions growth but reduce them in the ledger so to speak by the addition of the internationally sourced permits.
    Where does this leave us when we are asked to consider the intergenerational and
    intercountry equity of such an arrangement?

  14. Ken Parish says:

    But Abbott’s “Direct Action”policies are much more heavily based on soil carbon stuff and he even boatsed yesterday that his policy was better because there was no dollar limit on the amount of soil carbon efforts by farmers et al that would be funded. I can’t help wondering in those circumstances why you’re focusing on Gillard’s scheme, which s much more modest in that respect and adopted only because it was the price of keeping Windsor and Oakeshott onside. The bulk of the havy lifting under Gillard’s scheme is done by carbon pricing, which all knowledgeable observers agree is the best and most cost-effective approach.

  15. murph the surf. says:

    I am not in a position to comment on the Opposition’s policy, I’m not sure at all on their position re soil C.
    From the tenor of their statements I don’t they have a genuine plan to do anything.
    I agree with you Ken that the introduction of the carbon price is the mechanism to drive change.On balance the money given in exchange for political support may be small but I just can’t let such obvious payoffs pass without comment.
    The ladder is still on the ledge I assume.

  16. Patrick says:

    If I’ve understood correctly, we now have, instead of a stupid direct action plan, a stupid direct action plan with a carbon tax to pay for it. Can someone explain to me why if we must spend billions in ‘direct action’ we don’t just subsidise a substantial (4GW-odd) nuclear complex in each of the Latrobe and Hunter Valleys?

    What am I missing?

    And we are just kinda hoping that the carbon tax won’t hurt the economy more than it raises money, as well as that someone else somewhere does the same thing soon?

    Meanwhile some people even have their fingers crossed that we will actually produce less carbon (although everyone else realises we will just export it).

    In short, we’ve done a lot, of something, but probably nothing material about emissions growth (let alone absolute levels!) for at least ten or maybe 50 years (depending on when you think developing countries might start trying to phase out the manufacturing emissions we’ve just exported to them). Awesome.

  17. Pedro says:

    “Moreover, given the disparate interests and personalities among the Greens and cross-bench Independents, the only way she would have achieved such an outcome is to have impressed all of them as a leader of great strength, integrity and fundamental decency.”

    I think the better assumption even before the package was that Gillard must have found something for everyone at the table and that it has nothing to do with quantities of strength, integrity and decency, which are not much in evidence. The package confirms it.

    “A modestly progressive redistributive taxation alement is a positive feature.”
    Unless you work in an industry that is being redistributed to the unemployment lines.

    It beats me why people get excited about a reduction in national productivity for no sensible purpose. Absent, a genuine global deal, the limited reductions in emission growth here will be largely off-set by increased emission growth overseas.

    The govt’s “clean energy future” is better described as the “expensive energy future”.

  18. Ken Parish says:

    I disagree (with both Patrick and pedro). In essence what the Gillard package does is to transfer Australia’s tax mix to a very modest extent from taxing income (by a modest but progressively redistributive tax cut) in favour of taxing a pollutant namely carbon which polluters have until now been able to externalise and impose on the rest of the community without cost to themselves. While the income tax cut is initially cancelled out by price increases, that won’t be the case over time to the extent that people change their behaviour as a result of these price signals (as many will). It makes sense to tax pollutants rather than the fruits of productive labour (i.e. income) on a conventional economic analysis basis, which is why most economists support the carbon pricing approach.

    Moreover, it won’t cause any significant economic damage given that exporting and import-exposed industries are being significantly compensated. It’s significant in that regard that Bluescope and OneSteel have accepted that the package is a reasonable one. Treasury modelling apparently concludes that the package will result in a reduction in GDP compared with business as usual of just 0.1% of GDP, while the inflationary effect is estimated at 0.7%. Moreover, and despite the compensation to both individuals and businesses, it still delivers an effective if modest price signal encouraging reduction of carbon emissions It’s an entirely sensible purpose for the reason Pascoe succinctly explains:

    As an insurance policy, we need to have a soft mechanism in place that can be ramped up in the future if it needs to be, if the rest of the world joins Europe in getting serious about it.

    That is precisely what Gillard’s package has given us, however much some here here may wish to recycle Tony Abbott’s idiotic talking points.

    observa can’t plausibly/rationally argue that the package “won’t change global temp a jot” while complaining about the fact that the carbon tax/emissions trading scheme price will rise over time. As a matter of basic logic (never obs/ strong point), there must be a point where the price of carbon emissions reaches a level where it becomes cheaper to replace old coal/oil-emitting energy production with either lower-polluting alternatives (e.g. LNG) or non-polluting renewables. Most of the expert advice seems to suggest that that point for LNG conversion is reached at a price a little over $30 per tonne of carbon emissions. That is a price projected to be reached some time between 2015 and 2020. Thus you would expect that any energy producer looking at replacing existing plant between now and then would opt at least for the LNG alternative. LNG produces just 30% of the carbon emissions of brown coal and about 50% of black coal. That’s in essence how a modest scheme like this one will nevertheless produce significant reductions in Australia’s carbon emissions, while ploughing the tax revenue back into compensating export and import-competing industries ensures tha Australia’s competitive position is affected hardly at all. of course, all that takes a bit of explaining and understanding, which is why Abbott still stands a very good chance of frightening and confusing the electorate despite the fact that this is overall a sensible and moderate policy.

  19. Pedro says:

    Ken, the tax is levied on low cost energy production to encourage a swap to higher cost energy production, though with obvious debate about whether the tax is high enough to achieve that explicit goal. Contra Pascoe, we are supposedly moving to a clean energy future, not a tax on carbon future as he claims in your quote.

    The govt acknowledges that future GDP growth will be lower than otherwise as a consequence of the tax, which is a simple fact of the resulting reduction in productivity. The projections are for a relatively low reduction in future growth. Clearly the compensation arrangements do not prevent the reduction in future growth and while the govt is promising to protect trade exposed industries they cannot be certain of doing so and the future structure of our economy will be different in some degree at least. The PC has explicitly said that we will be reducing our main comparative advantage.

    I don’t recall seeing a single thing in any of the official publications to demonstrate that the tax will reduce global emissions, so it is pointless.

    “That’s in essence how a modest scheme like this one will nevertheless produce significant reductions in Australia’s carbon emissions, while ploughing the tax revenue back into compensating export and import-competing industries ensures tha Australia’s competitive position is affected hardly at all.”

    If this succeeds as you claim then the effect will be to reduce general welfare through an increase in protection for selected industries. Again for no global benefit.

    Penance is pointless when it turns out there is no hell.

  20. Pedro says:

    PS, this is crap as well:

    “As an insurance policy, we need to have a soft mechanism in place that can be ramped up in the future if it needs to be, if the rest of the world joins Europe in getting serious about it.”

    It’s perfectly clear from the past that if the fable global agreement comes about then we will have plenty of time, and must better context, for our own arrangements.

    Remember the scene at the end of Gallipoli where the Colonel goes over the top with his men in the pointless charge? Didn’t you think at the time that here was a smarter outcome than the pointless waste of all those lives?

  21. wizofaus says:

    Patrick you can’t seriously be wondering what you’re missing as to why the government doesn’t subsidize large-scale nuclear power plant roll-outs (something I would personally support). Even leaving aside this little incident at Fukushima, and the fact that an unfortunate plank of Greens policy includes nuclear power never being so much as considered, even if somehow Gillard could somehow gather sufficient votes to push through a bill to support such a thing, ultimately there’s no reason to believe such a roll-out would make any more of a dent in Australia’s emissions in the next couple of decades as any number of far more politically viable options.

  22. Ken Parish says:

    “Ken, the tax is levied on low cost energy production to encourage a swap to higher cost energy production”

    pedro, there is an unjustified assumption inherent in your statement, namely that the extent to which current regulatory regimes permit energy producers to externalise their environmental and other costs and impose them on the community with impunity is self-evidently correct and even immutable (to the extent that any change to the current regime is by definition illegitimate). But why is that logically true? Surely you need to justify your assumptions?

    No doubt nuclear energy would be vastly cheaper, probably even competitive with coal, if producers weren’t subjected to strict reactor containment regulations, requirements to safely transport, store and dispose of nuclear waste and safely decommission old nuclear plants. Should we assess it on that basis?

    And coal-fired power stations would no doubt be even cheaper if they weren’t subjected to quite tight requirements for filtering and removing particulate matter from their atmospheric waste. It wasn’t so long ago that all major cities were shrouded in smog and begrimed with soot. In fact, the generally accepted science as to why global mean temperature did not rise between the 1940s and 1970s as a result of atmospheric discharge of CO2 was because of the countervailing masking cooling effects of atmospheric discharge of fine particulate matter especially sulfate aerosols. Why should fossil fuels receive a permanent “get out of gaol free” card merely because science did not understand until the last 40 years or so that invisible atmospheric CO2 pollution from the same fossil fuels was at least as environmentally harmful? Why should the fact that until now the community hasn’t charged polluters for their polluting activity be conclusively deemed (contrary to all credible evidence) to make those fuels “low cost”? Both costs and markets are socially determined concepts not immutable natural phenomena.

    If we can begin to enact regulations which will progressively force the polluters to bear the costs/accept the consequences of their own activities without imposing a significant penalty on the general community (and Treasury modelling indicates we can) then why should we not do so? In that context a modest shifting of the tax burden from income to carbon pollution makes sense.

  23. observa says:

    Cap and trade for dummies-
    http://blogs.wsj.com/environmentalcapital/2009/08/13/scrap-cap-and-trade-emissions-trading-inventors-now-leery/
    which leads me to an explanation of why Federal Labor has been such a dismal failure to date and will inevitably fail with its latest emotional brainfart with carbon taxing melding into emissions trading. Unlike the Hawke/Keating Ministry that were prepared to ditch emotional ideology for what works for the greatest number this Labor Govt believes in emoting first and letting the details take care of themselves. In doing so it is all too often blind to setting itself up to fail.

    Take a trip back in time to Fuelwatch and Grocerywatch, both the result of siding emotionally with the gallery on rising prices and interest rates for that matter with their bank bashing. Both Fuelwatch and Grocerywatch were doomed to failure unless any promulgator was prepared to go down the lunar path of price controls and in the absence of that, fail they did. When they fail, the emotional resourcing that goes with it is wasted with less in the kitty to address other problems, or simply depleting the tax take. In Labor’s case all this emotional claptrap just adds to their deficit problems.

    Pink batts was another classic as was the BER scheme for another flaw in their makeup- the lack of trust in individuals at the coal-face to allocate resources best, as well as picking winners and creating inevitable envy or disenchantment that what you had worked hard and paid for was now being doled out free to others. With BER the idea of fiscal stimulus behind it was OK, and building education, but instead of spreading the stimulus about and leaving it up to principals, teachers and parents to decide their best needs, the resources came with conditions attached. Bad luck if your school had just saved and worked hard for its school hall, the school community watched as the school down the raod that hadn’t, got the same for nix. Exactly the same as you’d feel having insulated your own home at your expense and along comes freebie insualtion for all. Then the inevitable fallout to really rub it in, as particular selected industries are ramped up to cope with such sudden increases in demand. We saw the same thing with set-top boxes and the lack of a level playing field. Fair enough (perhaps) to think of pensioners in the change to digital TV but expending up to $400 for some when everyone knows you can buy an STB with the groceries for $50 or less. How pissed off would you be at that as a pensioner if you’d scrimped and saved for a flatscreen or even bought your own STB a couple of years ago. The obvious answer(if you thought this really was a pressing welfare issue??) was to add a $100 as a one off to every pension cheque.

    The moment I heard this mob had stopped a multi-million dollar cattle trade dead in its tracks as a result of a TV expose, I immediately thought guns and bulldozers within weeks stoopids. Just the threat of shooting the nice moo-cows in front of the kiddies sent them wobbly at the knees and they rolled over. The bottom line is you can’t run countries like Mother Theresa and the nuns or the Salvos but that’s how these children think and act. Hysteria over Howard and kiddies overboard only to go deathly silent at their awful tradeoff of kiddies on the rocks.

    Now the biggie in AGW. Copenhagen with pro Maoists telling a bunch of emotional Western wets ‘in your bloody dreams telling us what to do’ should have ended all that emotion and failed policies right there, but Gillard wants to play Iron Lady with it all over again. Well if you’re going to do that you need to be on solid high ground or else. To do that she had to implement a level playing field tax with no exemptions but what a witches brew they’ve come up with, the exemptions and freebies immediately begging the question, how serious is all this luv? But more than that she had to know that renewables were a serious option once she wanted to close Hazelwood and Playford, but as I’ve shown before that’s a pipedream by over-emotional Greens. If this plays out there will be inevitable brownouts and Labor will be crucified for that for lying to the electorate. And the classic how she’ll be travelling the country taking all questions from all-comers. The problem is she needs to answer them and that obvious one they’ll repeatedly ask- How much will this carbon tax of yours reduce the temp by luv?

    At the next election the Opposition have this emotional tale of woe to flash across the lounge room screens to remind everyone what this mob stand for and there’s a stark difference between personal, individual emotion and hard-headed national policy-making on behalf of the whole. This mob are hard-wired to fail because of that serious shortcoming in their makeup.

  24. Pedro says:

    “But why is that logically true? Surely you need to justify your assumptions?”

    Ken, the PM said (again and again and again) that the tax is to move us to a clean energy future. So I don’t see any assumption needs to be made.

    As for the externalities argument you make. First, the filtering to stop dangerous particles and acid rain cannot be compared because those emissions have local effects and so the reduction has local benefits. Second, just because an externality exists does not justify taxing it, especially when the tax does not in any way compensate for the costs imposed by the externality or usefully lead to a reduction in the problem sought to be addressed. Moving money from me to someone else and reducing productivity (even in a small way) under this scheme is not achieving any environmental benefits, so what is the point?

    I would support the tax if people could make good arguments for it. But in truth the whole thing is an embarrassment. Despite the PC report even more money is going into renewables and we persist with the fantasy that our good exemple will get the US, China and India, plus Brazil and whoever all doing the same.

  25. john walker says:

    Ken

    I was reading today how they are raising the tax free threshold, but also raising the tax rates and removing the low pay rate offset- will there really be much change.
    And this new ‘Green energy investment authority’ sounds a bit of a rort waiting to happen, no?

  26. Ken Parish says:

    Pedro

    The assumption of yours that I’m challenging is that LNG and even wind etc necessarily amount to “higher cost energy production”. That is true only if and to the extent that we fail to force coal-fired energy producers either to prevent harmful CO2 emissions or pay the community for the costs so externalised. For example, there’s nothing technologically impossible or even especially difficult about carbon capture and underground sequestration from coal-fired power stations. It’s just that it’s horrendously expensive given current technology, and therefore renders coal uneconomic compared with even wind (perhaps line-ball with solar).

    Imagine if coal-burning produced dense clouds of cyanide gas which killed everyone within a 100 kilometer radius of the power plant. You would hardly be arguing that the community should not insist that the producer pay for fool-proof emission capture and sequestration solutions as a condition of being permitted to operate. The fact that the CO2 gas that coal-burning in fact produces is less instantly toxic and builds up to drastically harmful levels only over a long period of time does not negate the proposition that CO2 emissions are a real and serious cost to the community that we are entitled to insist the producers internalise or pay for the cost of the community dealing with the problem.

    “especially when the tax does not in any way compensate for the costs imposed by the externality or usefully lead to a reduction in the problem sought to be addressed.”

    These are spurious arguments. If anything a carbon tax of $23 per tonne of emissions is seriously inadequate to compensate the community for the long run effects of increased atmospheric CO2. What price does one put on destruction of the Great Barrier Reef, massive disruptions to agriculture in may regions etc etc? All those things are the foreseeable and certain result of global temperature increase around 3-4 degrees C over the next century or less (the current scientific mid-range prediction). In any event, the currently proposed Gillard scheme does not aim at generating compensation for the horrendous costs of allowing “business as usual” to occur, but to do our modest part in creating a structure that will create incentives/price signals to ensure that this does not occur and that future temperature increases remain within more manageable bounds.

    Moreover, the consensus of scientists and economists is that the Gillard scheme as currently configured WILL achieve the intended modest reduction in Australian greenhouse emissions of 5% by 2020. Are you suggesting that all the scientists and economists are wrong? On what basis?

    Or are you simply arguing that this is a piddling reduction that will mean next to nothing in global terms? On a very narrow view I suppose that’s right. But there are a couple of critical points here:

    (1) The scheme is deliberately modest so that Australia’s economic and competitive position won’t be damaged, but we’ll still achieve the intended modest emissions reductions by 2020. As Pascoe points out, it also sets in place a durable mechanism which can easily be cranked up if and when enough other countries adopt a comparable carbon price to make it sensible for Australia to go any further. I assume here that Bernie Fraser’s independent Climate Change Authority would not recommend significant cuts in the number of emissions permits issued after 2015 unless enough other countries have “come to the party” and implemented their own carbon pricing scheme. Am I correct in assuming that you also would not like to see Australia take that sort of pointless unilateral action? Of course Gillard can’t afford to be quite that blunt right now, because that’s exactly what the Greens would like to see happen, and she can’t afford to alienate them too much because she currently needs their votes. If there hasn’t been clear and significant movement towards a broadly-based international carbon pricing regime well before 2020, Australia’s efforts should shift decisively away from funding CO2 reduction strategies towards adaptation strategies.

    (2) While the actions of a middle-ranking economic power like Australia are hardly likely to be determinative of the actions big emerging powers like China and India end up taking on carbon policy, it’s unlikely that Australia will have any influence at all unless we ourselves adopt a plausible carbon reduction policy. Our net contribution to global emissions in absolute terms may be tiny, but we are one of the world’s wealthiest countries with the highest per capita carbon emissions of any nation. That doesn’t mean we should ride gallantly into the valley of death while others don’t, but it DOES mean we ought to take modest, sensible (not significantly economically damaging) measures to rein in our carbon emissions i.e. pull our weight. Gillard’s package meets that description.

    (3) Ultimately the most internationally persuasive position Australia can take is to implement the sort of modest, responsible measures Gillard is proposing, but also to make it expressly clear that we’re not going further in the absence of appropriate action by China, India etc. The reality is that wealthy countries like Australia are in a position to fund adaptation measures which will ensure that we suffer not much economic damage from global warming even in the absence of adequate third world action (although we won’t save the Barrier Reef etc). China and India, by contrast, are unlikely to be in such a position. They are much more exposed to the adverse effects of global warming than we are, and one would imagine their more far-sighted experts know it. Thus I don’t accept that the prospects of effective international emissions reduction actions before it’s too late (assuming it isn’t already too late) are as pessimistic as some suggest.

  27. Patrick says:

    Ken, I want to agree with you just out of respect for the effort you put in! And the cogency of what comes out. In particular, I am sympath

    I would broadly agree with what you say apart some objections:
    1) You say:

    Moreover, the consensus of scientists and economists is that the Gillard scheme as currently configured WILL achieve the intended modest reduction in Australian greenhouse emissions of 5% by 2020.

    I expect it will achieve far greater reduction in on-shore Australian greenhouse emissions (and the jobs that cause them).

    But I don’t believe for a second it will cause any such reduction in Australian emissions as such – I expect that we will just export the majority of them.

    2) Any real reduction achieved is basically going to result from shifting our baseload power away from brown coal, which is a sensible case for ‘direct action’ as proposed by Abbott, mocked by many (including you) and copied by Gillard.

    3) So, from the above it follows that whilst I broadly support ‘positioning’ ourselves vis-à-vis an eventual international scheme, I don’t see how this could have been done worse by, say, a three-year consultation period, spanning an election. Oh wait, stupid people would have voted against the tax, or worse, politicians may have had to actually explain it..!!

    3a) How much do you want to bet on 2015?

  28. Ken Parish says:

    “2) Any real reduction achieved is basically going to result from shifting our baseload power away from brown coal, which is a sensible case for ‘direct action’ as proposed by Abbott, mocked by many (including you) and copied by Gillard.”

    I haven’t mocked the form of direct action constituted by paying brown coal power generators to close down and convert to gas. That’s eminently sensible as an adjunct to creating a carbon price, which just about all expert advice says must be the primary mechanism (and which Howard, Turnbull, most of the Coalition front bench ad even Abbott subscribed to until they decided that it made cynical political sense to profess to oppose it on any spurious argument they could dream up).

    The direct action plans that are clearly silly (and vastly expensive or uncertain) and which should be mocked are those involving subsidising fringe and unproven technologies including soil carbon, the renewable energy fund etc. Read the Productivity Commission’s report. Gillard was forced to embrace them to keep the Independents and Greens respectively in the tent. Abbott has embraced them seemingly only to give him some policy window dressing that voters who couldn’t be bothered actually thinking about the issues might believe. “Picking winners” direct action is economically and practically idiotic. A carbon pricing regime will ensure that the market ultimately picks which low carbon and renewable technologies will prevail. Of course that will only occur when/if the carbon price gets significantly higher than the low thirties per tonne (which creates an immediate price incentive to shift to gas but not any of the renewable technologies). But in the meantime, closing down brown coal stations and shifting to gas, along with household responses to a modest carbon price, will achieve the 5% reduction aimed at by 2020. And if there isn’t a much wider international carbon pricing regime well before then, we’ll be shifting to adaptation strategies anyway.

  29. john walker says:

    Paying farmers to ‘plant’ trees could make the pink bats look well managed. Successful tree planting on a large scale is a skilled biz (it takes a bit more than diging a hole), the supply of labor in many farming areas is not that great , and farms are notoriously dangerous workplaces. And some Cockies know a fair bit about a rort or two.

  30. JC says:

    The direct action plans that are clearly silly (and vastly expensive or uncertain) and which should be mocked are those involving subsidising fringe and unproven technologies including soil carbon, the renewable energy fund etc

    Considering both plans are essentially Direct Action, the one big difference is the Libs plan allows this.

    A more recent technology being co-developed by Babcock-ThermoEnergy is the Zero Emission Boiler System (ZEBS). This system features near 100% carbon-capture and according to company information virtually no air-emmissons

    It does seem to work and Babcock is a serious player.

    http://www.thermoenergy.com/energy-technologies.aspx

  31. Ken Parish says:

    John W

    Yes I agree. All the direct action subsidyschemes are wasteful boondoggles waiting to happen, except subsidising closing down of dirty brown coal power stations and conversion to gas, which is eminently sensible on any reasonable view.

    JC

    See my comment immediately above. If Babcock and Brown’s system is as good as you say, then industry will adopt it under even a moderate carbon pricing regime. Governments and bureaucrats aren’t good at picking winners; it’s a recipe for gross waste, rent seeking behaviour and distorting government interference with the private sector. In ordinary circumstances, people like you, Patrick and Pedro would be shouting these arguments from the rooftops yourselves. There isn’t a sensible argument against carbon pricing as the principal element in any workable CO2 reduction strategy. It ensures that the markets make these choices and take the relevant investment risks. If you accept the overwhelming scientific evidence that man-made global warming is real and occurring at problematic levels, then you could only embrace a moderate market-based strategy like Gillard’s (while scrutinising the detail of any proposed regime and opposing elements where necessary – that’s what I’m doing). OTOH if the truth is that you simply don’t accept the science, you should be honest enough to say so and oppose Abbott’s and Gillard’s policies equally (and indeed Abbott’s more so because it’s more wasteful and makes little sense on most of its elements).

    BTW The carbon capture part of the solution for coal-fired power (which seems to be what B & B’s tehnology deals with) is only half of the picture and arguably the easy half. The other half is where to store the bloody stuff once it’s captured. The volumes of CO2 we’re talking about are gargantuan. It’s possible that places like the Hunter Valley and other regions where coal mining and/or oil extraction have occurred over a long period may contain sufficient huge deep undergound spaces to act as storage reservoirs, although even then ensuring that the CO2 doesn’t leak out over time may be problematic. But whether there are enough such underground spaces around the world to make carbon capture a viable general option is questionable to say the least.

  32. JC says:

    Ken:

    If it was the tax alone I wouldn’t have much of an issue. But it’s not the tax on its own. It’s a tax stretched out all over subsidies, feed-ins, subsidy banks and mandates. That’s the problem I have with it.

    There’s also the contradictory nature of the tax too. If there is carbon price alone then why close down a coal plant if indeed the tax is supposed to be pricing carbon emissions. In fact by it’s very nature the tax is implying that there ought to be no limitations on how many new plants are built as long as the tax is paid.

    You have a valid point about market based systems. However we’re not really dealing here with a situation that is half way market based. We’re dealing with a situation where the state is intervening to dissuade one type of economic activity and desiring to hasten another. There’s no evidence in economic history where a tax was introduced to speed up technological innovation being successful. It may do so this time, but it’s not a sure bet.

    Also why continue the ban on nuclear and hydro? It may be that nuclear doesn’t make the grade just yet, but why stop it?

    I don’t much like the Libs plan but at least there no tax that goes over their slop.

    OTOH if the truth is that you simply don’t accept the science, you should be honest enough to say so and oppose Abbott’s and Gillard’s policies equally (and indeed Abbott’s more so because it’s more wasteful and makes little sense on most of its elements).

    I do accept the science. I think anyone that thinks the amount of emissions that are going to be spewed out over the next 40 years with China alone adding around 5 times the US 2006 base level by 2050 (this doesn’t count India or the rest of the emerging world which would double China’s) kid themselves. AGW is a big freaking long term problem. However, I see it more as a technological/engineering issue and certainly not a moral one. In fact it’s a problem born out of something good that’s happening in the world, which is millions and millions of people lifted out of grinding poverty. Fiture emissions are a totally an emerging economy problem.

    BTW The carbon capture part of the solution for coal-fired power (which seems to be what B & B’s tehnology deals with) is only half of the picture and arguably the easy half. The other half is where to store the bloody stuff once it’s captured. The volumes of CO2 we’re talking about are gargantuan.

    I don’t think the Babcock solution is storage and capture, as I agree with you if it was that is a pretty risky thing to do as a result of leakage. I think the Babcock technology is actually pressurizing the crap, burning it and then changing it to a safer composition. It’s appears promising, although we have to wait and see.

  33. Ken Parish says:

    Joe

    Yes the B & B idea does sound fascinating. i hadn’t done any more than glance at the site you linked until now. I wonder whether they’ve constructed even a small pilot plant? Presumably not otherwise they would have mentioned it.

    Given its potential wide application and capacity (if it works and is cost-effective) to make coal a long-term proposition in a low CO2 emissions world, I would personally support Australian taxpayers’ dollars going into partially funding a pilot plant (perhaps along with other coal-producing nations). After all, as a major coal producer we have a lot to gain and lose. But you’d have to leave a similar offer potentially open to other competing coal capture technologies, otherwise its just classic winner picking and encouraging the worst form of rent-seeking.

    BTW I’m not aware that there’s a ban on hydro power in Australia, although it’s certainly true that Green groups habitually vehemently oppose any proosals to build new dams. However, despite the failure of Qld’s Traveston Dam proposal I don’t think you can assume that Labor (or Coalition) State governments will not pursue other future options for dams and hydro power.

    As for nuclear, I certainly don’t oppose it (as you’d know as a long time Troppo reader), but the prospects of either major party actively touting the nuclear option in the near future while the Fukushima fiasco remains so fresh in people’s minds is remote. I’ll wager it won’t feature in Tony Abbott’s talking points in the near future.

  34. JC says:

    BTW I’m not aware that there’s a ban on hydro power in Australia, although it’s certainly true that Green groups habitually vehemently oppose any proosals to build new dams. However, despite the failure of Qld’s Traveston Dam proposal I don’t think you can assume that Labor (or Coalition) State governments will not pursue other future options for dams and hydro power.

    Yes, that’s more accurately described.

  35. Seriously – of course you can get higher growth (at least for a time) by continuing not to charge polluters. What does that prove?

    If you want to reduce emissions, you price them – and pursue whatever ‘direct action’ shortcuts might not be too silly in the shorter term.

    Like Ken said . . .

  36. Ken Parish says:

    On Patrick’s growth/exporting jobs point (and Nicholas’s response):

    At the moment Australia’s economic management problem seems to be not so much concern about losing jobs but worrying about where we’re going to find the people to fill the ones we already have (although note the “two speed” economy issue). Of course all that could change if some of the PIIGS ecconomies hit the wall in a way that provokes another global recession.

    But as things presently stand, engineering tax settings that persuade some high cost marginal coal or iron ore mining prospects to be postponed would be a plus for economic management rather than a minus. Patrick’s implicit suggestion that highly profitable mines (i.e. the vast majority) will shut down because they pay a carbon tax and the cost of power inputs rises by 10% or so is clearly a serious exaggeration. Not even Twiggy Forrest goes quite that far.

    As for the steel industry, both Bluescope and Onesteel cautiously welcomed the package, which they certainly would not have done had it been adverse to their interests. Their problems relate to the high Australian dollar and low cost imports not the carbon tax, although that won’t stop Tony Abbott misrepresenting the situation if they continue to struggle (as they might well for those reasons).

    Finally, the carbon tax isn’t gong to hurt the power generation industry overall. It is neither an exporter nor import-exposed, and we can’t do without electricity. The power industry can and will price its product to maintain profitability, and indeed the success of a carbon price in reducing consumption depends on precisely those pricing responses.

    Thus there will no doubt be a very small negative effect on growth flowing from the carbon pricing regime (1% of GDP according to Treasury), but it’s modest indeed. As Pascoe observed: “It won’t do much and it won’t hurt much either. Capitalism as we know it is not about to come to an end …”

    Patrick’s suggestion that “I expect it will achieve far greater reduction in on-shore Australian greenhouse emissions (and the jobs that cause them)” is so hyperbolic that he should be embarrassed to have made it (despite his generosity about my comments). There are cogent criticisms that can be made about the Gillard package and probably some of the assumptions underpinning it. But exaggerated claims about driving jobs offshore are not among them.

  37. JC says:

    Hollowing out is real Ken. It does happen and happening now. Costs are important especially to manufacturing that is now dealing with a high dollar and now has to contend with a carbon tax that overseas producers don’t.

    Once you lose manufacturing you never really get it back as the US has found.

    Manufacturing assistance of the kind I have in mind is of course nothing to do with protection. But has to do with crap like payroll tax, elongated deprecation for tax purposes, regulated wage rates, and electricity prices that have gone up by about 35% for the past 2 years in some states.

    I actually don’t think the high dollar has really hurt the steel makers to take one example.

    Chinese producers are essentially on a US dollar parity as the Yuan is fixed to the US Dollar, so their raw material inputs costs have risen on parity with the US dollar rate…. (iron ore, coking coal etc). So their costs structure hasn’t exactly been great for them. Input costs for our steel producers haven’t gone up as much simply because that stuff is quoted to them off the US dollar price and our Dollar has risen, thereby cushioning a great deal of the impact. So they were never as badly off with the rising Aussie Dollar.

    But this stuff does hit their bottom line. Credit Suisse estimates around (from memory) $115 million for One Steel and around $165 million for the other producer. It makes them far less profitable. Now stick a multiple on that of around 9 times earnings and you’re lopping off around $1 billion for One Steel and around $1.5 Billion in market capitalization. These aren’t insignificant amounts. To top it off they’ve essentially now become wards of the state too. So from healthy firms paying taxes we’re now turning this around the other way and paying them.

    Add all these losses up whether it’s income or wealth destruction and it’s serious money we’re talking here. These were just two firms by the way.

    That’s all fine if we’re going into this thing with our eyes open, but I’m not entirely sure we are or have considered the knock on effects.

    I’ll try and dig up the exact figures from CS and post them here later.

  38. observa says:

    “If you accept the overwhelming scientific evidence that man-made global warming is real and occurring at problematic levels, then you could only embrace a moderate market-based strategy like Gillard’s….”
    Come off it Ken even if you accept that BIG IF at the beginning after Climategate and the various Greanpeace/IPCC Exaggerationgates, this is no market based strategy and even if it was, no fan of it dares to answer the question how much temp reduction for how much bucks. The cap and trade ‘market-based’ mantra is merely a veneer of respectability by a bunch of watermelons hell bent on growing the evil empire. 20 Depts and agencies so far and counting, including wait for it- Carbonwatch and Carbon Cops, as if these people haven’t learned their lesson with Fuelwatch and Grocerywatch.

    Then there’s the inventors themselves of C&T saying right market based approach, wrong market-place folks-http://online.wsj.com/article/SB125011380094927137.html
    CO2 derivatives trading has been an abysmal failure at controlling emissions precisely for the lack of institutional controls and yet our BIG POLLUTERS can buy 60% of them on the world market, from the Russian Mafia or whatever. When some young punk knocks on the door to change your light globes and shower heads (sorry not for gas HW mister), do a quick calc of the CO2 ‘saved’ and trot it off to the Morgan Sachs crowd forever more, you just know any edifice built on that is one giant load of Tone’s crap. That’s before you get into earning credits for putting the world’s food in your tank or knocking over Asian rainforest for Palm oil diesel, etc., or like Origin Energy trying to claim Snowy Hydro as carbon credits. A lot like the trash heap owners who have to tap the methane or boom!, claiming likewise. Then there’s all those solar RECs to be got rid of. You know, the ones like mine where they averaged out the output which had no connection whatsover to the actual marginal output and any real coal fired power saved.

    What a steaming rorted pile of excrement global thin air trading is. If I dared hawk and flog such crap under the new Australian Consumer Law I’d be jailed. Fit for purpose and sound and merchantable quality in case you’ve forgotten Ken and if there’s any major defect that can’t be fixed and had I known about that at the time of purchase and wouldn’t have bought it, then I can demand my dough back. They’re a savvy bunch of consumers out there with access to the internet nowadays, judging by those polls about all the denialist would-be suppliers out there trying to flog them lemons.

  39. Pedro says:

    “The assumption of yours that I’m challenging is that LNG and even wind etc necessarily amount to “higher cost energy production”. That is true only if and to the extent that we fail to force coal-fired energy producers either to prevent harmful CO2 emissions or pay the community for the costs so externalised.”

    They are higher than current costs of coal. That’s not an assumption. Yes, you can make the coal cost higher with a tax, but the argument is about whether the tax makes sense.

    “These are spurious arguments. If anything a carbon tax of $23 per tonne of emissions is seriously inadequate to compensate the community for the long run effects of increased atmospheric CO2.”

    So we’ll tax ourselves to compensate ourselves for the damage we inflict on ourselves by turning on the lights with a switch connected to a coal power station. Okey dokey then.

    There is going to be a massive increase in CO2 emissions across the period in question and any reductions we make are meaningless in comparison. There is no sign of any meaningful agreement to reduce global emissions. So any additional cost imposed on Australians must be justified on grounds other than emissions reduction.

  40. murph the surf. says:

    “And if there isn’t a much wider international carbon pricing regime well before then, we’ll be shifting to adaptation strategies anyway.”
    Henry Ergas has an article in the Australian today arguing something similar…..

    http://www.theaustralian.com.au/national-affairs/commentary/fatal-flaw-in-case-for-a-carbon-tax/story-e6frgd0x-1226094872101 From Catallaxy Files.

    but his main worry is that Treasury appears to have assumed that global agreement is definitley going to happen.
    Has either major party or the Greens suggested a course of action when there is no global agreement on cutting C emissions?

  41. observa says:

    I must confess it gets harder by the day to remain agnostic on AGW-
    http://climateaudit.org/2011/07/14/covert-operations-by-east-anglias-cru/
    Over to you Bob Brown and Julia Gillard in investigating and rooting out all these covert and shady goings on eh? We must all be prepared to stamp out any journos writing crap about such things eh Julia?

  42. Patrick says:

    To revisit this beknighted topic, you’ll excuse me for being slow, but is there an actual consensus that:
    1. Australia’s carbon emissions, taken in isolation of what other countries may or may not do, aren’t going to make a whit of difference to anything;
    2. Thus any impact on climate change is wholly dependent on what other countries do;
    3. Our carbon tax thus serves the dual purposes of:
    (a) helping forge an international consensus in favour of global carbon pricing/trading/what have you (or ride an emerging consensus if you prefer); and
    (b) give us early(-ish) mover advantage in adaptation and industry development;
    4. The effect and indeed purpose of carbon pricing is effectively to accelerate the existing transition to a services (especially financial?) and high-end manufacturing/design; and
    5. This will be really disruptive for tens of thousands who are still employed in the lower-skilled manufacturing industries?

    That is what appears to me to be the case at any rate, but I would be interested to hear what I have misread in the above.

  43. Ken Parish says:

    Patrick

    I fully accept all but your last point. We have consensus! However I don’t think a moderate carbon tax of the sort currently proposed is going to be terribly disruptive for industries that aren’t exporters or import-exposed, and even for them a 1-2% increase in operating expenses is unlikely to be fatal for any but the most marginal business.

    That said, I would strongly support much greater action on measures to boost productivity and competitiveness of Australian industry, including lowering or abolition of payroll tax as suggested by JC. Australian manufacturing industry has a range of issues to deal with to remain competitive, of which a modest carbon tax is nowhere near the most important.

    In fact one constructive thing I hope might emerge from the whole unedifying carbon tax debate is a renewed focus on productivity and manufacturing, and whether we should be paying more attention to preserving and enhancing our comparative advantage in highly skilled niche industries (not so much the lower-skilled ones, most of which are probably doomed before too long anyway at the hands of Chinese and Indian competition, carbon tax or no carbon tax). I certainly don’t think we should just passively ride the minerals boom and cross our fingers that an expanded services and high-end manufacturing/design sector will somehow miraculously materialise to keep us prosperous when the minerals boom ends. At the moment I see precious little sign that either major party has either coherent policies or any real interest in these questions (except Kim Carr, but he’s a complete f***wit).

  44. Nicholas Gruen says:

    Tens of thousands is a bit rich Patrick. If you look at the numbers the only manufacturers who are hit badly are trade exposed and highly energy intensive. You’re average low tech manufacturer – making cardboard boxes or skips, or furniture, or whatever is either not particularly trade exposed or not particularly energy intensive. When I looked at the numbers you pretty much had to be smelting something to give a damn. To quote some work Lateral Economics was involved in for the Vic Govt in 2009 “even under the maximum case scenario, rising energy prices due to the CPRS will increase SME manufacturers’ overall costs by less than 2.1 per cent in 2020”

    2.1% cost adjustment – next to nothing compared with currency movements or a bad labour market – over ten years. Pahhleese – can we keep things in perspective here.

  45. James Farrell says:

    Patrick, perhaps you intended Ken to answer this, but I’ll comment. By ‘consensus’ I gather you mean Ken and Michael Pascoe (rather than, say, rafe and Mr Monckton), but I agree with the thrust.

    1-3 are about right, but frame the issue in a way that seems to miss the point. If you start dumping your rubbish in Sydney Harbour, it will hardly ‘make a whit of difference to anything’, but if everyone does it, Sydney Harbour becomes a toxic cesspit. The fate of the harbour depends doesn’t depend on what ‘other’ people do, but on what everyone, including you, do.

    The purpose of the tax is to reward a switch to: (a) cleaner technologies for producing a given quantity of energy, (b) less energy intensive technologies for producing a given basket of consumer goods nad services, and (c) a less energy intensive basket of consumer goods and services. Your point 4 ignores (a) and (b).

    When I think about (c), I imagine less go-cart racing and more scrabble. I don’t see where a shift from simple to complex manufactures fits into the schema — a shift from quantity to quality (and durability) in clothes and furniture perhaps? The structural change your describe sounds more like the kind that arises from international integration and changing trade patterns. But of course that isn’t the purpose: global carbon emissions are nor reduced if Australia produces fewer simple manufactures so that some other country can produce more. In any case, this is not an element in any ‘consensus’ that I known of.

    On both this and point 5, the best place to start would be the Treasury’s modelling. Thought it may not be too accurate in its sectoral detail on outputs and jobs, at least it’s a start.

    But as far as jobs are concerned, the desired result is to close down coal-fired power stations, and the sooner the better. Let’s spare no expense in compensating and/or retraining redundant workers, buth let’s also cease the sentimental nonsense about preserving the noble profession of coal mining and guaranteeing jobs for miners’ children and grandchildren.

  46. Patrick says:

    First, my sincere thanks for those responses, which are really helpful.

    Ken, I think we agree on all but a margin.

    Nick, that is not my gut reaction but I (usually) try and overcome gut reactions in the face of contrary facts, so for the nonce let’s call this consensus too. The only difference would be on the same margin as with Ken.

    James, your response is the most interesting, mainly because you I think your position is quite distinct. It certainly appears different to the position Nick used to argue.

    I’ll start backwards. I agree with your sentiments on coal power, but I don’t see what that has to do with the carbon tax since I understand that we are actually just paying them to shut (I believe this is called ‘direct action’). Sure the carbon tax might pay for it but that is surely a quite separate decision.

    I don’t really quite get your scrabble and go-karts. But I do get that, on the whole, the current scheme is just going to export any carbon emissions that become unprofitable to keep emitting in Australia – i.e. global production of aluminium won’t change (as a result of this), but the amount produced here will.

    Leaving aside power since that isn’t transportable and, as I think we agree, is largely exclusively dealt with by ‘direct action’, any actual lowering of emissions (as opposed to exporting thereof) will surely only come from actual changes in Australian manufacturing practices.

    So I think there is a very real question as to what real impact the carbon tax is likely to have (0.001% of global emissions? Is that an overstatement?) and whether that outcome is worth the cost to Australia, including the opportunity cost.

    To get to the top, it wouldn’t be worth changing your behaviour if you knew for a fact that no-one else was going to, or not in any meaningful way. The example works better if you factor in a real cost, i.e. you walk to work each day but can’t carry the wrapping from your breakfast, which you can only throw into the harbour. So your only way of not littering is to change how you eat breakfast or how you get to work, but not anything as easy as just carrying the litter to the bin.

    Ultimately I don’t see a real disagreement with 1-3 other than expanding on point three in a way that I’m fairly happy to do (to the extent that I have understood it!!). You seem to accept, as I think you have to (hence why I think there is a consensus on this) that the only real change in ‘AGW’ will result from global action.

    It would appear that I am far more sceptical about such global action than any of you. Hence you collectively think this is a worthwhile gamble whilst I think it is an extremely speculative one –> just look at the mess made of Doha where the current US, Indian and EU (well French Italian and Spanish at least) executive governments don’t really believe the benefits touted, or even the negotiations over Greece.

    I think that is the limit of any consensus. Also I expect that over time the impact in terms of displacement of jobs and economic activity will be much greater than it appears, but maybe this is just naive/silly of me. I would certainly be reassured if there was an explicit plan to retrain/relocate affected workers – if there are to be so few it could hardly cost so much could it?

  47. Patrick says:

    I also should mention that I’m quite disappointed in Ken, who up to very recently was a role model of the skeptical curmudgeonly old prick I aspire to become …

    I guess nobody’s perfect ;)

  48. Ken Parish says:

    I sometimes do a Friday morning ABC radio panel show called Three Big Questions. They got me on today in a live broadcast from the Royal Darwin Show specifically to take the curmudgeonly old prick role of hating the Darwin Show and all the noise, ripoff rides and grotty little spoiled brats pestering parents to buy grossly overpriced show bags. I did my best to sound curmudgeonly but it was a lovely cool sunny morning and the crowds hadn’t yet built up so I quite enjoyed it and I said so. I think they were a bit disappointed.

  49. Ken Parish says:

    BTW I generally agree with James Farrell as well. However I would heavily qualify this statement:

    “The fate of the harbour depends doesn’t depend on what ‘other’ people do, but on what everyone, including you, do.”

    While that’s clearly true (and an important rider to Patrick’s position), it has its limits. If in 5-6 years time there still isn’t significant progress towards an effective and fairly global approach to carbon pricing and more generally major reductions in emissions, then Australia should switch its efforts from emissions reduction expenditure to adjustment measures. I’ve made this point in the primary post and DD made it (on Rafe’s thread I think). If we stick with James’ rubbish in Sydney Harbour analogy, we might well start with a communal strategy to change people’s rubbish dumping behaviour, but if it becomes clear that most people just aren’t going to bother to change their behaviour enough to make any difference and you’re sufficiently wealthy, you’d be well advised to buy the rest of the land in your bay and fence it with boom-gates so the rubbish-dumping neighbours can’t get in.

    Of course, the problem with atmospheric carbon emissions is that you can’t fence off your own country’s atmosphere (or oceans for that matter). But you can choose to devote expenditure to adjustment measures like better building and planning laws, moving infrastructure and housing away from low-lying areas etc etc. In fact you’d be mad to do anything else once it becomes clear that continued warming is unavoidable because the rest of the global community just isn’t going to get its act together and take effective action fast enough. As I read Paul Frijters’ position, he thinks that’s the position we’re already in. He may be right, but I hope not.

    And a comment from Patrick that requires a response:

    “It would appear that I am far more sceptical about such global action than any of you. Hence you collectively think this is a worthwhile gamble whilst I think it is an extremely speculative one”

    No I don’t think so. I have serious doubts that the world will reach a sufficiently advanced stage of concerted (or a least concertedly effective) action in the next decade or so, although there are some positive signs (e.g. China has just announced a pilot emissions trading/carbon pricing scheme in 5 provinces including Guangdong which contains a quite large proportion of China’s export industries). The difference between my position and yours/Patrick’s is that I think your characterisation of the likely supposed averse effects of the current carbon tax proposal is massively exaggerated. The competitive effect on business overheads is very small, and just about all Australian mining operations are currently hugely profitable as a result of the Chinese-driven boom. They’ll still be hugely profitable with a carbon tax. It’s highly unlikely that any will close, move overseas or even scale back their operations. It’s conceivable that an alumina smelter might choose to move offshore if its plant was coming to the end of its useful economic life, they needed to make a decision to build a new, more modern plant, and it made economic sense to build it somewhere else. But that’s unlikely in the next few years and it’s unlikely to result solely from the current carbon tax regime given compensation measures for exporters and import-exposed industries (an alumina smelter falls into both categories). Nevertheless, that’s why I say that we should shift our efforts from emissions reduction to adaptation if most of the rest of the world doesn’t come on board in the next decade (or even less). There would be no point in further ramping up our emissions reduction efforts if no-one else was doing so and all we were achieving was driving emitting industries offshore.

  50. wizofaus says:

    If Paul’s position is just that there’s not going to be sufficient global mitigation action to prevent sea-level rises that will have measurable infrastructure impacts, that doesn’t strike me as particularly controversial. Adaptation is going to cost us no matter what – but we can either do no mitigation now and accept the very high cost of future adaptation measures (which will necessarily involve significant public expenditure, and most likely fairly heavy-handed restrictions on where and what we’re allowed to build etc.) or show other nations that mitigation needn’t cost too much, to the point that there’s at least a chance of sufficient global action soon enough to keep those future adaptation measures to a minimum.
    And at least if we are ultimately forced into the former scenario, we can say we did everything we reasonably could to avoid it.

  51. Patrick says:

    I too think that the only really coherent position is Paul Frijters’. Hence I don’t think the Vic desal plant was as stupid an idea as it might seem to be.

    Ken; I’m happy to have that difference, you may well be right! I hope so.

  52. Nicholas Gruen says:

    I’m not particularly optimistic about global action. I set out my basic views on this a way back here. It’s important to me that we do the right thing and be a part of the solution for however long there seems any non-trivial chance of there being one. I’m pretty amazed that others don’t given the tiny cost of doing something.

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