http://www.theaustralian.com.au/news/opinion/questions-for-ross-garnaut/story-e6...THE Productivity Commission's research report, Carbon Emission Policies in Key Economies, has valuable, evidence-based, messages for politicians of all stripes, and some of their advisers.
There are more efficient and less efficient ways of abating emissions. Within the eight countries ultimately reviewed by the commission both are evident. (Nine countries were covered in the commission's terms of reference, but India did not participate.)
Australia can further cut the cost of the emissions reduction being delivered. A broadly based price on emissions of about $9 a tonne would achieve equivalent emissions reductions at a greatly reduced cost compared with the present 230 policies, the worst of which cost more than $1000 a tonne.
As with tariff cuts, unilateral action to reduce the cost of our existing emissions reduction effort is to our national benefit. This is the classic productivity enhancing finding we should expect from a commission doing its job.
However, under the government's terms of reference and tight time constraints, the commission was unable to deal with two central questions, even though securing a global climate policy deal hinges on answers to them.First, what action is being taken to reduce emissions by our trade competitors? It is vital to understand that Australia's seven trading partners in the review do not cover this group well.
If the average answer for our trade competitors is zero or not a lot, the results imply Australia is ahead of countries from which it has most to fear from carbon leakage and related activity/job losses and is ahead of the global average.
The government's climate change adviser Ross Garnaut concedes concern about loss of trade competitiveness is the most important single impediment to securing a global deal. In light of the commission's report, it would be useful for Garnaut and others to provide public, evidence-based, answers, rather than mere assertions, to the following questions:
First, do they agree with the commission's findings that, of the countries examined, Australia's emissions reductions effort is in the middle of the range and, if not, what evidence supports their disagreement?
Second, can they reconcile the finding that Australia is in the middle of the pack on emissions abatement with Garnaut's assertions that Australia is "falling behind" on emissions abatement?
Third, in praising the Chinese effort on emissions abatement, does Garnaut exclude its Large Substitute for Small program? This is the policy under which the Chinese shut down small, inefficient and highly polluting generators and replace them with lower cost big ones. The commission excluded the program because the emissions abatement is a by-product of moving to more efficient energy production at a negative cost. That is, the LSS is a "no regrets" policy. Such technological advances have already been undertaken by developed countries such as Australia and certainly don't count as part of our emissions reductions efforts.
Fourth, accepting the finding that broad, price-based policies such as an ETS are more cost-effective than selective subsidies such as direct action, what's the most cost-effective broad price-based option? Should a broad-based emissions price apply to production or consumption? Garnaut concedes in his updated report that a price on consumption would be better for Australia because it would not erode our trade competitiveness. He rejects it because he claims it is too late to persuade the rest of the world to pursue a price based on consumption.
This seems absurd given that Copenhagen collapsed and the Kyoto protocol hasn't been implemented and is about to expire.Did its terms of reference allow the commission to answer this crucial question? To do so requires modelling of emissions pricing options under different assumptions about what our trade competitors are likely to do. The commission is well aware of this issue. It is well placed to model different price-based approaches to emissions abatement.
These policy options could be modelled (under different assumptions about what our competitors are doing) as production or consumption-based taxes.
Compared with the morass the commission had to deal with in preparing its research report, this modelling exercise would have been relatively easy. (I already have some preliminary results, but I'd rather the commission did the job.)
I'm prepared to bet the Treasurer's recent claims that a carbon tax of about $20 a tonne will have a minor effect on Australian per capita incomes assumes our trade competitors also take action as part of a global deal. That's the assumption that underpinned the modelling for the carbon pollution reduction scheme a couple of years ago. Alternative assumptions weren't explored.
Suppose that, under government instruction or otherwise, the Treasury modelling makes this assumption. This would ignore the adverse activity, income and jobs implications of unilateral action by Australia to increase its existing average price on emissions.
Forum
Pages: 1
Terms of Reference (Read 642 times)
