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


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.


RSS 2.0

Exempting farmers from the CPRS: can we go the whole hog?

By Geoff Carmody - posted Monday, 7 December 2009

The Government proposes to exempt farmers from its Carbon Pollution Reduction Scheme (CPRS). This indefinite exemption covers direct cost increases otherwise arising if farmers had to purchase CPRS emissions permits.

Indirect cost increases affecting “upstream” and “downstream” supply chain inputs (for example, farmers’ purchases of electricity) will still increase farm prices, as measured from farm gate to final purchaser.

In GST jargon, farmers will be “input taxed” under the CPRS. This will increase export- and import-competing product prices. Eliminating these input cost effects on farm products would require exemption of the entire farm input supply chain. In practice, this covers most of the economy.


Farmers might be encouraged to reduce emissions by earning “carbon credits” for activities reducing greenhouse gas emissions (details aren’t available yet). If this shift from a “stick” to a “carrot” approach has merit, why stop at farmers?

Why not go the whole hog? Ditch the entire CPRS emissions permit regime, and adopt “carbon credits” incentives for the whole economy. After all, emissions reductions can be promoted two ways.

Taxes can be imposed on “bad” activities - emitting greenhouse gases. Alternatively, subsidies can be offered for reducing “bad” activities - reducing greenhouse gases.

In practice, bits of both approaches are envisaged under current policy in a number of countries.

Crucially, non-harmonised national action on climate policy is enshrined in agreements like the Kyoto Protocol, and national emissions production is the policy target for each country. In this context, rewarding reduced emissions, rather than punishing their production, has advantages.

Exports and import-competing products would no longer suffer losses of competitiveness if countries acting first were to subsidise emissions-reducing technologies for their own production, rather than taxing their emissions.


The “carbon leakage” problem for “first mover” countries would be eliminated. This would help remove impediments to developed countries acting ahead of developing countries, for example. “First movers” could act early, confident that late (or no) action by others would not adversely affect their international competitiveness.

If subsidies are less painful than taxes in producing the desired emissions reduction outcome, what are we waiting for? The CPRS taxation approach has failed since 1997 (the Kyoto Protocol) and earlier.

Sadly, there’s no “free lunch”. There are at least three practical problems with this approach.

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

Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

5 posts so far.

Share this:
reddit this reddit thisbookmark with 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 5 comments
Print Printable version
Subscribe Subscribe
Email Email a friend

About Us Search Discuss Feedback Legals Privacy