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Renewables are cheap, reliable, clean. Hubris, hype or hope?

By Geoff Carmody - posted Wednesday, 29 June 2022


How best to reduce GHGs? We need to price emissions, encouraging their reduction, and say so, clearly. Politicians deny this, asserting 'there will be no carbon tax under my government', etc, while claiming to cut their countries' GHGs.

Untrue. Any policy that reduces any GHGs puts a price on them. This includes subsidies for renewables, ultimately paid by taxpayers.

Politicians prefer measures (including subsidies) making emissions prices non-transparent. Result? Selective, distorting, higher prices for GHGs actually reduced than otherwise needed.

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A broad-based, transparent price on emissions high enough to deliver any target reduction in GHGs is the least-cost option.

Pretending preferred initiatives don't price emissions allows them to be rorted, and outcomes to be fiddled, not measured properly.

It encourages 'pass the parcel' emissions reduction responses between countries, as we've seen over the last three decades or more.

Sure, getting a global deal to cut GHGs is very difficult. Can we improve its chances?

Some in Europe and the USA recently proposed 'border tax adjustments' on imports from countries not cutting their GHGs. All VAT or GST consumption taxes do exactly this, across all imports, based on the taxing country's GST or VAT rate. Pricing GHGs based on national consumption of them is entirely consistent with this well-established value-added tax approach.

Consider pricing emissions consumption, not production. Globally, GHG production equals GHG consumption, anyway.

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This would reduce threats to national trade competitiveness from unilateral action, minimising 'pass the parcel' incentives. It can be adopted at different times and at different rates, just like VATs and GSTs are today.

That would help confidence-building towards a truly global approach, if that's what we're after.

Some say doing the same thing again and again, and expecting a different result, is a sign of insanity. After over three decades of failing to reduce global emissions production, you don't need to be Einstein to figure that out.

There's a wider policy reality we should well understand.

Simply promising a policy doesn't deliver it.

 

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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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