World of "sham carbon policies" exposed

Henry Ergas

Earlier in the week we had the government plugging the same old line: “Australia is falling behind other countries and we need to catch up – and by the way, here’s a Productivity Commission report which agrees with us.” Henry Ergas in The Australian unpicks the spin:

CONTRARY to repeated assertions by the Prime Minister, the Productivity Commission did not endorse an economy-wide emissions trading scheme. Rather, its recently released report on carbon emissions policies models an ETS that applies only to the electricity sector and excludes all trade-exposed industries.

As the commission shows, current policies aimed at subsidising renewable energy incur high costs for pitifully little outcome. No surprise then that its modelling finds that scrapping those policies and imposing a carbon price of $9 a tonne on the electricity sector would cause less harm.

True, the eight countries the PC analysed have more than a thousand policies in place, many focused on electricity generation. But in aggregate those policies yield barely 210 million tonnes of electricity sector abatement.

Take China, the world’s largest and most rapidly growing emitter, which the Garnaut report says has “pledged large reduction targets, implemented reforms that deliver on its commitments, and set sail on a global mission to dominate new opportunities”. But the PC finds China’s abatement affects barely 1 per cent of its electricity emissions, while its abatement outlays, at one-third of 1 per cent of gross domestic product, are well below Australia’s.

Moreover, the PC’s measure of net abatement takes no account of subsidies to emissions. Recent estimates place subsidies to fossil fuel use in China at about 1.4 per cent of GDP. For each dollar spent curbing emissions, China therefore spends $4 promoting them.

Yes, some countries, notably Germany and Britain, devote substantial resources to emissions reduction. But even there, the PC finds high costs for modest impacts. Indeed, as the report notes, the Germans spend $150 to $300 a tonne of carbon securing emissions reductions that under the European Union’s ETS are simply offset by increased emissions in Italy and Spain.

That may seem irrational. But the reality is that this is an area whose politics are now entirely symbolic. Notwithstanding sweeping promises in international forums, and regardless of the homilies of climate change’s high priests, governments do not believe communities have any stomach to make real sacrifices for a goal that seems ever more illusory.

Trapped between the zealots and that brute fact, they resort to what are little more than bribes, buying, at absurdly high cost, a bit of abatement here, dispensing an exclusion from obligations there, and sprinkling the whole with scarcely credible claims to moral principle. Unsurprisingly, the policies born from this combination of shabbiness of motives and pretence to public spirit are as incoherent as they are socially wasteful. But that does not mean those policies are not privately profitable. Indeed, studies find even the EU ETS increased European generators’ profits by some 30 to 50 per cent, as free permit allocations ensured revenues increased by more than costs. Such transfers merely increase the inefficiencies, as profits are dissipated in attempts to secure and protect rents, while those who would bear the costs throw further resources at self-defence.

Only in bad light, and even then only by the weak-sighted, could such policies be confused for meaningful efforts at tackling climate change. That is the sham the commission’s spotlight exposes. But none are so blind as those that would not see. Forcing the government to face up to the PC’s findings is the task ahead.

Read it here.


  1. carbon tax is purely about creating a new source of revenue, a new tradeable commodity.
    the belief that governments, who cannot manage something as simple as an economy, can somehow find the genius to manage the atmosphere is unbelievable to say the least, they manage to miss manage everything they get their hands on, everything costs twice as much (minimum) than initial estimates, and only half a job is ever delivered.
    if one wants to save their environment then perhaps they should apply modern efficiency measures to government, cut it right back till what is left is doing what it should be doing at the minimum cost, that way lots of office space could be put to productive use instead of used as cattle sheds producing lots of hot air and no real substance

  2. Baldrick says:

    The Greens will never go for a carbon dioxide tax or ETS which is only imposed on the electricity sector. They’re the one’s calling the shots to the Labor Party on this issue, so whilst it sounds good, it’ll never happen. Remember, the Greens are the ones who ideally would like to see a $120 per tonne carbon dioxide tax, so a tax of only $9 falls way short of their mark.

    The whole debate is full of rubbery figures, from the Labor/Green alliance, in regards to economic impact costs, so it’s no surprise carbon dioxide policies world-wide are also full of rubbery figures made to look good to appease public scrutiny at the money they’ve wasted and to meet unrealistic emission reduction targets.

    Science or real economics have little to do with this debate … it’s solely based on politics and that’s where the problem exists.

  3. Confusious says:

    Greens will also like us to live in caves so thay can feel good. Of course, they, as the managers of the climate change effort, will continue with their high standard living. Their measures are only aimed at the plebs like us. If you don’t believe that just check Carbon Cate’s lifestyle. Or Bob Brown’s or Joooliah’s with her Hairdressing escort………

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