Canberra Times
Friday 20/2/2009 Page: 13
The Government's carbon scheme is riddled with exemptions, Andrew Macintosh writes last week, in the midst of the bushfire crisis, the Rudd Government announced it was initiating an inquiry by the House of Representatives standing committee on economics on whether an emissions trading scheme was the best way to reduce Australia's greenhouse gas emissions.
While the timing of the announcement left many perplexed, the inquiry presents the Government with a golden opportunity to rethink its inefficient and ineffective carbon pollution reduction scheme. Many economists and climate policy analysts prefer emissions trading schemes to other mitigation options because theoretically they should reduce emissions at least cost while ensuring the Government can identify and achieve a credible rate of emissions reductions. The Government's scheme will achieve neither of these objectives.
The Rudd Government has punched so many holes in its scheme through exemptions and the provision of free permits that there is no chance of least-cost abatement. The impact of the scheme on transport fuels will be offset by a cent-for-cent reduction in the fuel excise. Big polluters in the electricity generation and trade-exposed sectors will receive a bountiful supply of free permits. The agriculture and deforestation sectors, which account for 26% of Australia's emissions, will be excluded..
When industries are given favourable treatment in an emissions trading scheme, the efficiency of the scheme is compromised. This is not groundbreaking economics. Polluting rights will not be distributed to the most economically efficient polluters and the price signals in the market will be distorted, obstructing their capacity to encourage an efficient shift to a less carbon-intensive economy. This scheme scores just as low on environmental credibility as it does on cost effectiveness.
Before the 2007 federal election, Rudd stated that "unless we are able to stabilise greenhouse gas emissions at something in the order of 450-490 parts per million, then frankly we place the planet in grave danger of not being able to correct itself". He was correct. And, since he made this statement, the situation has got worse, with further deterioration of key climate indicators.
While Rudd seems to get the science, it has played little part in the formation of the scheme's white paper. The paper states that stabilising the atmospheric concentration of greenhouse gases at 450 ppm "would be in Australia's interests' and then goes on to propose a target of reducing Australia's emissions by 5% to 15% below 2000 levels by 2020, Given the conditions the Government has placed on the 15% target, about 5% looks more likely.
Any target for 2020 that is less than 30% is light-years away from a 450ppm outcome. If other countries respond as Australia has done, the Government's 5% target puts the globe on track for a 650ppm-plus result. The world will be a fundamentally different place if the atmospheric concentration of greenhouse gases is allowed to reach this level. The environmental flaws in the announced scheme are compounded because it locks in failure until at least 2020. Once the scheme is in the place, the compensation required to shift its targets and gateways will ensure there is no significant change during the next decade.
The announcement of the House of Representatives inquiry left many confused. Why would the Government now be asking whether emissions trading is the way to go? If the Government had doubts about emissions trading, they should have been investigated before it invested trillions in its Garnaut Review-green paper-white paper process.
The spin put out by the Minister for Water and Climate Change, Penny Wong, is that the Government wants a forum in which to "confirm that cap-and-trade is the best approach, and that alternative policies are simply not up to the task of reducing carbon pollution at the lowest economic cost".
If Wong thinks the committee will be inundated with submissions from supporters of the announced scheme, she is delusional. Members of the fossil fuel lobby are the only ones likely to embrace the scheme, but even they have gripes. In particular, like the Coalition, they don't want the scheme to start in 2010 as planned. Postponing commencement is the least the Government could do.
There is no use forcing businesses to incur substantial compliance costs in the current economic climate for no noticeable environmental benefit. Delaying the start of the scheme would also enable the Government to adjust it to account for the outcomes of the international climate conference in Copenhagen later this year.
At this point the best thing the Government could do is scrap its scheme and start again. The Rudd Government has proved it is the mirror image of the Howard government on climate policy. If it wants to shake this image, it's going to have to put forward a more cost effective and environmentally credible scheme than what is currently on offer.
Andrew Macintosh is the associate director of the Australian National University's Centre for Climate Law and Policy.
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