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Thursday 27/8/2009 Page: 3
TRADING of emission permits around the world will become a financial rort that fails to reduce carbon emissions - and will ultimately be scrapped in favour of a simple carbon tax, a former senior official in the Clinton administration has forecast. Robert Shapiro, former US undersecretary of commerce and author of Futurecast, predicted that the US Senate would reject the emissions trading scheme proposed by President Obama, which is now before it.
Speaking by video to the Trade 2020 conference convened by Austrade and the Committee for Economic Development of Australia, Dr Shapiro said "cap-and-trade" systems as proposed by the US and the Australian governments to limit carbon dioxide emissions and allow trade in permits do not work as intended.
"Cap and trade has proved very vulnerable to vested interests, and therefore too weak to deliver the necessary emission reductions", he said. "Cap and trade creates trillions of dollars of new financial instruments to be traded, and subjected to the next financial fads. China and India will never accept a cap-and-trade regime."
A better solution is to impose a carbon tax on emissions and return the revenue from it to households so people are not made worse off, Dr Shapiro said. A similar approach in Sweden has cut emissions there by 8% since 1990 while GDP rose about 40%. CEDA research director Michael Porter strongly supported Dr Shapiro. CEDA today will release a report urging the Rudd Government to scrap its emissions trading scheme in favour of a carbon tax.
Dr Porter warned that a carbon market would not be trading carbon, "it'll be trading derivatives". International trade in permits will mean the integrity of a permit is only as good as the weakest supervisory regime. Economists are divided over which is the better way to fight climate change. Emissions trading has won widespread support because it is a market-based solution that, in theory, will deliver certain emission reductions at the lowest cost, as companies that can't reduce emissions cheaply instead buy permits from companies that can.
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