Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

Will Australia's emissions policy encourage global action?

By Geoff Carmody - posted Wednesday, 16 November 2011


Last Tuesday Australia’s carbon tax/emissions trading scheme (ETS) became law. A carbon tax of $A23/tonne in 2012 – already high by international standards – will increase 2.5 per cent annum in real terms for three years. This will undermine competitiveness and emissions reductions.

After 2015, Australia plans to trade in an international ETS market, but with regulations (price ceilings, a minimum Australian price starting at $A15, and limits on permit purchases overseas). Emissions ‘caps’ remain uncertain. 

Will the world follow, as optimists assert? History suggests almost zero chance. Recognising this, some now spruik an alternative: ‘creeping’ adoption of national emissions targets, sometimes including an ETS, sometimes not.

Advertisement

Suppose emissions reduction targets are adopted by most countries, and, for many, include an ETS allowing international permit trading.

Australia’s policy envisages businesses purchasing many permits from overseas (subject to a limit) where they are cheaper, supporting lower-cost global emissions cuts. Will practice match theory?

Suppose we divide this ETS world into developed and developing countries. Realistically, any deal requires developed countries to accept much tougher emissions targets than developing countries.

As a result, average emissions prices initially will be much higher in developed countries than in developing countries. 

International permit trading then reduces these price differences, (subject to regulatory constraints) as permit demand shifts to low-price markets, and permit supply to high-price markets.

This is how Australian, N.Z. and E.U. ETS models are intended to work.

Advertisement

This convergence of emissions prices will require net purchases of permits by developed economies, matched by net sales from developing economies.

As a result, effective emissions targets are relaxed in rich countries (net buyers of permits internationally), and become correspondingly tougher in poorer countries selling some of their permits.

International permit trading alters their effective national allocation. This is exactly how the Government expects Australia will do much of its emissions reduction – by shifting it to other countries.

  1. Pages:
  2. Page 1
  3. 2
  4. 3
  5. All

Article edited by Jo Coghlan.
If you'd like to be a volunteer editor too, click here.



Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

8 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

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?

Other articles by this Author

All articles by Geoff Carmody

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

Article Tools
Comment 8 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy