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Are we helping others increase global emissions?

By Geoff Carmody - posted Tuesday, 30 August 2022


Is Australia helping increase global greenhouse gas emissions? Yes. Not by continuing our coal and gas exports. By stopping them.

Current European responses show if supply of energy from one source is blocked, buyers turn to others. EU policy was for more renewables. They'd shut down EU coal and nuclear base-load power plants, punting on Russian piped gas as a transition fuel.

Ukraine interrupted this strategy. Without enough renewables, European fossil fuel and nuclear plant closures are in reverse. These, and other gas sources (Canada?), are now sought for winter. Their prices have risen a lot as Russia turns off its gas pipeline.

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If Australian policies make our fossil fuel exports internationally uncompetitive, or effectively bans them, importers will go elsewhere, too. If they buy from countries with less 'clean' fossil fuel supplies, net global emissions will probably increase. Australian policy own-goal?

Human emissions have many causes. Some Australia controls. Others we don't.

We don't control overseas energy supply blockages (eg, Russia/Ukraine). These cut world supplies and increase world prices.

Australian responses to them can increase global emissions. An Australia-wide gas reservation policy would mean less Australian gas on world markets. World gas prices rise. Global emissions might increase, depending on substitute energy sources.

Blocking development of Australian gas and other fossil fuel reserves is an own-goal too. 'Bad-mouthing' fossil fuels and power plants, whether new developments or maintenance of existing ones, kills investment in both. Financing refusals by banks and others likewise.

Compensation to Australians for energy price increases is zero-sum local income redistribution. If done, better via income transfers than price caps freezing market responses. We pay for all compensation by tax increases or on the Australian credit card.

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Global emissions policy effectively induces many countries to increase theirs. Australia supports this policy.

Over 30 years ago we learned a uniform global policy of reducing national emissions production could not be agreed. COP negotiations had to rely on individual country promises. Still do. We've learned talk is cheap, too.

This model hasn't worked. It won't in future. A better way?

Reducing emissions must cost us versus 'business as usual'. Otherwise we'd have done it by now. But we can minimise costs.

Globally, emissions production = emissions consumption. We 'consume' all the emissions produced. They're included in all purchases of goods & services. Globally, targeting emissions consumption spending is the same thing as targeting emissions production.

The consumption model works like an EU VAT (GST in ANZAC lingo). Countries adopt it at a pace they choose. Unlike the production model, no adverse national trade competitiveness losses ensue. Exports are zero-rated. Imports are priced like local production. It can be done as a tax or an emission trading scheme.

It's fairer. Rich high emissions-consuming countries pay most in total and per capita. Poorer countries pay much less.

Does a national emissions consumption model guarantee global emissions reduction? No. But it eliminates impediments to countries cutting their own emissions because of concerns about loss of trade competitiveness. These concerns wreck the production model.

A mix of energy sources best meeting affordability, reliability and lower emissions criteria is needed. Let science, not ideological assertion, speak first, then choose that mix. As Europe reminds us, don't forget reliability.

Stable science-based policy criteria support long-term investment. Markets can deliver within that framework.

Should we try to reduce human-caused greenhouse gas emissions?

If you say evidence doesn't support human-caused global warming, you'll say 'no'.

If you say science suggests human global warming, or are agnostic but risk-averse, you'll look at the world's major emitters and global arithmetic. If big emitters are increasing theirs, Australian action is largely futile. At 1.2% of global emissions production, and falling, we don't make much difference. If our action causes activity to shift to higher-emissions countries, we make things worse.

If you think humans add to global warming, you must advocate an effective global response. The current focus on national emissions production must stop. A national emissions consumption policy is better and fairer. With the current production model, history says we'll continue failing, COP summit after COP summit.

Many voters feel Australia should do something by reducing its own emissions. Many believe equally reliable renewables are cheaper than fossil fuels, because politicians and others assert they are. If reliable, they're not. Some expect others to pay. NIMBY reigns.

Unless the world's major emitters cut their emissions, doing nothing is a rational policy across all views about human global warming.

Why cut our emissions if we just encourage others to do the opposite, increasing emissions globally?

Makes no sense to me.

 

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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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