Brian Toohey says it's really got that bad.
Extracts from his provocative AFR column:
"Kevin Rudd is not behaving like a prime minister about to deliver a series of tough budgets. If he were, he would not give motorists a previously unnoticed $17 billion handout revealed in a Treasury report released on Monday."
"The Treasury report on the Mid-Year Economic and Fiscal Outlook (MYEFO) estimates that the government will outlay more than $116 billion by 2019-20 to compensate big polluters and households for the impact of the CPRS. Almost all of this money will be wasted.
"Instead of helping tackle global warming, the great bulk of the $116 billion will undermine the CPRS's goal of creating a price incentive to switch from products that emit greenhouse gases.
One of the worst examples involves an initial outlay of $3 billion to fully exempt petrol and diesel from the minor impact of the CPRS (6¢ a litre) until the decision is reviewed in 2014. Most observers, including some ministers, didn't realise that the cost of this exemption extends into future years, even if the government refuses to offset any additional impact on motorists from higher prices for pollution permits after 2014.
The Treasury estimates that the cost of the spineless initial decision will be $20 billion by 2019-20; $17 billion more than was commonly assumed. The cost will be much higher if the government wimps it and fully offsets all rises in permit prices after 2014.
"Although some people still regard the CPRS as a market-based scheme, the reality is that old-fashioned government regulation will do most of the work via a cap on emissions. A levy would also rely on caps to meet any target for greenhouse gas cuts. However, a low price would remove the justification for counterproductive compensation (other than the normal indexation of pensions).
With revenue from a $10 levy starting at about $5 billion a year, this would be sufficient to fund the $3 billion a year that the Garnaut report recommended be spent on developing low-emission technologies. The rest could go to purchasing abatement credits, promoting energy efficiency, and adjustment assistance for displaced workers.
UPDATE: Quiggin reckons Rudd's preparing for a double dissolution
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11 comments:
Australians, let alone Americans will not stand for such a new tax on... everything.
Just like they didn't stand for the GST.
Haha, awesome reply Anonymous :)
The GPRS was a fudge anyway and worked for nobody. Better to wait to see what the rest of the world does after Copenhagen and then make our move. If the big industrial nations don't sign on for it, why the hell would we destroy our economy for their sake?
Where is your proof of this "destroy our economy". I doubt the CPRS will be able to beat the damage to our economy than what the mining boom has already caused - the ransition to illusion-based wealth creation and asset price bubble maintenance. Australians will be the last people on earth to benefit from newer efficient ways of using and generating energy. I am constantly amazed at how out of touch Australian's are concerning the pace of developments in other countries. It's just pathetic. Anyone who comes up with a good idea will have no choice but to head overseas where they will be able to find investors that can see past minerals extraction.
We are far from the only country who burns coal, Anon. Did you watch Foreign Correspondent last week? Denmark, that beacon of ideological purity in the carbon debate, generate 20% of their power via wind. Fantastic. But do you know where at 40% of the total generation capacity comes from? Coal. And they bag Sweden for using nuclear power. What utter hypocrites.
So before we flagelate ourselves before the world for burning fossil fuels and ramp our energy prices skyward, perhaps we should look at what others do. And in any case, it's not like we don't have people working on alternatives. I am personally invested in a company doing wave power. There are coal seam gas and underground coal gassification companies running in Queensland who are helping us transition to cleaner power.
We can't get to 100% renewables in one step. It's far too expensive right now. What we can do, however, is work on a strategy to get us there in stages and use new technology as it becomes available. I am not at all convinced that PV solar or even thermal solar or wind can get us all the way there, at least not right now.
Sad to say, but the world needs nukes.
Read Barry Brook's blog for a no bullsh*t view of the climate debate.
Adam S sounds terribly sensible and pragmatic, but his wait and see approach applied universally would result in inaction everywhere. Not a good outcome, but unfortunately the most likely one.
Adam S. - I didn't mention coal specifically. What I asked was - where is your proof that pricing carbon emissions will wreck the economy. The lack of costs associated with externalities doesn't really "benefit" our economy - it just means that dirty polluting industries are getting a free ride. Putting aside carbon, pollution from burning fossil fuels in all their various current forms imposes a cost on society in terms of health. Putting a price on carbon should accelerate the invention and innovation of new technologies. This will no doubt be beneficial for some people in the economy. Again - show me your proof that emission trading will wreck the economy!
If you want to have a carbon tax/levy, then it should increase according to some discount rate, e.g. 4 percent per year above the CPI.
There is no reason to not have a carbon tax as well as an ETS. Interestingly, the effect is equivalent to having an ETS with a price floor, as described in this working paper. If this is done properly, then the extra transaction costs will be minimal.
Anon, how timely that Sinclair Davidson of the IPA has published an article on why the CPRS is a bad idea.
http://ipa.org.au/news/1993/the-real-costs-of-rudd%27s-cprs-are-just-starting-to-surface
Now I will admit to exaggerating for effect in my earlier comments (mea culpa, but no worse than we hear from Carbonsink), but to me there is a huge downside risk to this policy from an economic perspective. An ETS is also complicated and harder for businesses to comply with.
If you adopt the policy that you get less of what you discourage through taxation, then a carbon tax would appear to be a lot less hassle. I am in no way advocating that we simply burn more coal or other fossil fuels in perpetuity. However, we have to accept that these fuels are going to be with us for some time yet. There should be a gradual exit strategy and natural/coal-seam gas and nuclear power IMHO should be part of that strategy.
I reiterate that we simply cannot afford to go it alone on this. For all the moral leadership (which is debateable at best), the only people we would penalise would be ourselves. Europe, India, China and the US have to be part of the solution or it counts for nought. I would be in favour of scrapping the CPRS legislation until after Copenhagen and then crafting some sort of strategy based on the outcome of the summit
Adam S - I can agree with you on some things. I would be happy for the ETS to be replaced with a carbon tax.
I would be happy to have the GST (an overly complicated tax also) replaced with a carbon tax also. Reducing carbon emissions is going to be complicated and difficult for the average person to gauge where the cheapest cuts can be made and what the most effective technological solutions might be. I think price signals are the best way to harness the genius of the market to through up solutions.
That said I'm not naive enough to think that their isn't potential for purely speculative market manipulation. The entire financial industry is of dubious social benefit.
Whether the best transition technology is nuclear depends on their being a transparent and dispassionate analysis of the costs and benefits with the externalities brought into the calculations. I wish this could be done without markets but Australian politicians and bureaucrats seem to be too easily captured by powerful vested interests. I'm not an optimist.
Given the popularity of things like HSV utes (un essentially ego driven luxury purchase that is also tax deductible) I think Australia can afford to take a bit of expense ahead of China and India. If one less over powered compensation device is purchased because of the ETS then it will be a success.
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