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Paying the bill for carbon cuts

By Mark S. Lawson - posted Tuesday, 26 October 2010


An additional handicap to a carbon tax, like the CPRS, is that even the least aware of consumers will eventually realise that it is largely a waste of money. Although it may have some effect in reducing emissions in Australia - making Australia the first country to deliberately reduce emissions through use of such policy measures - there is no chance of emissions falling anywhere else, short of economic collapse.

Activists attempt to obfuscate the issue by pointing to various overseas schemes, notably the European Union Emissions Trading Scheme, which is limited to the major emitters such as power stations. There are various problems with the EU ETS including the stark fact that it is not yet possible to credit the scheme with actually reducing emissions.

Then what about recent media stories that China is shutting down aluminium smelters and making efforts to meet conservation targets in certain, heavy industries? The Sydney Morning Herald reported this on July 7 and that seems to be the only time it's been mentioned. Apart from that sole report the Chinese have never shown any real interest in reducing emissions or discharges of any kind, let alone carbon dioxide.

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Then what about the recent report The implicit price of carbon in the electricity sector of six major economies prepared for the Climate Institute by a consultancy, Vivid Economics? This insists that China has put a price of US$14.22 a tonne on carbon dioxide emissions, compared to $US29.31 for the UK, $US5.05 for the US and $US1.68 for Australia.

A glance at the report's section on China shows that the price on carbon is partially inferred by policy efforts and subsidies encouraging whoever runs power stations in China to switch from a lot of smaller, less efficient coal-fired power plants, to fewer, larger plants. The result of this policy seems to be many more power stations of varying size and, at most, a reduction in the rate of growth of emissions.

Similar comments could be made about the US section of the reports. The price is implied from the likes of subsidies for wind power, where it is assumed that the subsidies are being used wisely and that they actually result in an overall reduction in emissions. In fact, with the possible exception of the UK, it is difficult to find any country making anything other than comparatively feeble efforts to reduce emissions. If they are making a real effort then they have yet to claim that those efforts have resulted in a reduction in emissions.   

Even from the point of view of those who believe that reduction on carbon dioxide is good for the planet this issue has become wholly ridiculous. The Gillard Government's best policy option is to let the carbon tax setting process drag on until the next election, and hope that, somehow, the electorate moves on.

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About the Author

Mark Lawson is a senior journalist at the Australian Financial Review. He has written The Zen of Being Grumpy (Connor Court).

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