We’d be crazy to enter into an ETS Greg Sheridan Foreign Editor AUSTRALIAN JULY 03, 2014 IF the Abbott government is successful in reducing Australia’s greenhouse gas emissions by 5 per cent based on 2000 levels then Australia will have done more to reduce greenhouse gas emissions than almost any other advanced nation. You will never hear this in the Australian debate because there are so many institutional vested interests in favour of a carbon tax or an emissions trading scheme and most of the media are sympathetic to them. The Paris climate conference next year will have the same result as Copenhagen: there will be no legally binding targets. But it will be spun differently and the climate industry will use Copenhagen-style exaggerations beforehand to intimidate us into taking excessive and foolish actions. Assuming the carbon tax is repealed, there is a good chance Greg Hunt will become the Scott Morrison of climate change and deliver almost all he promised. Our debate is blighted by endless commentators — none of them ever properly challenged on the facts — pretending that foreign countries are doing far more than they really are. The Department of Foreign Affairs and Trade, in conjunction with the Environment Department, has produced an analysis of Australia’s efforts compared with the US, Canada, the EU, South Korea and New Zealand. Countries express their carbon emission reduction targets in all kinds of different ways. They typically use different base years in order to get the best presentational benefit from any technological change — say switching from coal to gas — which would have occurred anyway. Developing countries such as China have no target for overall emissions reduction — yes, that’s right, no target for reduction — but target, at most, per-capita emissions, or sometimes carbon intensity — how much carbon it takes to produce a unit of output. The Canberra departmental analysis compares Australia’s performance against the others using 2005 as the base year. Our overall emission reduction is more than respectable. On two key measures, it is far more than the others’. Our per-capita emissions by 2020 will reduce by 32 per cent, a bigger decrease than any of the others considered, which shows Canada with a 29 per cent reduction, the EU less than 26 per cent, the US 27 per cent. Our emissions intensity decreases by 45 per cent, more than any other nation analysed except South Korea. And compared with business as usual — that is, if we didn’t have a target — calculated from last year, our decrease is 19 per cent, significantly bettered only by South Korea. All this will be achieved by Australia reaching its 5 per cent reduction target on 2000 levels by 2020, which we will do if the Coalition is allowed to introduce its full suite of measures. Australia would be crazy to enter any emissions trading scheme. A straight carbon tax is a better measure, but at the same level that most nations have — that is, a few dollars a tonne. The EU shows that ETS arrangements can never work. The EU is the most densely regulated, intensely scrutinised, bureaucrat-heavy, regionally integrated economy in the world. Yet its ETS was a byword for corruption, ineffectiveness and volatility. As Tony Abbott once said, an ETS involves a fictional trade in a weightless product. The trade is not even in carbon, it is in the entirely notional product of carbon emissions forgone. No large-scale ETS can ever hope not to be compromised by fraud and the massive weight of its unintended consequences. A big international ETS will see countries buying the same rainforest over and over again. It will see Chinese industry start up carbon-intensive activities simply so they can be shut down in order to sell these allegedly forgone emissions into an ETS. Imagine if you designed a scheme so that every 4WD vehicle had to buy permits from a small four-cylinder vehicle to allow it to use more petrol. Worse, you then had to buy permits from people who were otherwise going to buy 4WD vehicles but promised not to do so in order that they could sell their change of mind as a petrol credit. And then you set up a vast, intermediating bureaucracy to trade the permits. Bureaucratic madness. It’s much more sensible just to regulate petrol-efficiency standards. Calling an ETS a market mechanisms is nonsense. Imagine you could receive a financial credit for every neighbour you promised not to punch and then sell those credits to people who did want to punch their neighbours. You would have a huge incentive to pretend to want to punch all your neighbours. We are constantly told that an ETS will create jobs and make us better equipped to deal with the future. If that were true, any state in Australia could have introduced an ETS over the past decade and become so much more competitive than the other states. None did so, of course, because in reality an ETS is a disguised tax with no compensating benefit. Some parts of Australian industry have supported an international ETS because they recognise that such schemes will be shonky but cheap. These businesses would not have to actually reduce their carbon emissions but could buy credits from overseas, probably quite cheaply and without any worry about the credits’ authenticity. In the end, the difference between an ETS and the government’s “direct action” scheme is that an ETS involves sending billions of dollars overseas for fictional abatements, while direct action involves spending a few billion dollars at home for actual abatements. Once the carbon tax is repealed, all the political pressure will go on to the Greens, the ALP and the Palmer senators to pass some form of direct action to allow all the pro-abatement activities the government wants to sponsor to go ahead. Corporate chiefs are lining up to reduce emissions under such a scheme. The Clean Energy Finance Corporation will have its mandate changed to reflect Coalition policy. The Climate Change Authority’s board members will come up for renewal. And the government’s review of the renewable energy target will focus on its unreasonable cost. The argument for its reform will be persuasive. Almost all of the world’s emissions trading schemes are Clive Palmer-style fake schemes, with either very narrow coverage or very low prices. The government is right to avoid such fakery.
Posted on: Thu, 03 Jul 2014 00:22:40 +0000