Labor's carbon tax

And for what benefit to the climate? Zero.

The federal government’s carbon tax will cost every Australian $40,000 in the period to 2050 and a cost-benefit analysis should be conducted before it passes into law, an opposition-dominated Senate committee says.

The select committee on the scrutiny of new taxes on Friday tabled a 361-page report in parliament looking at whether a carbon tax should be brought in at a time of uncertainty about the global economy and whether there will be a concerted international effort to cut carbon emissions.

Labor’s laws to establish in a fixed $23-per-tonne carbon price from July 1, 2012, before moving to an emissions trading scheme in 2015, are set to pass the lower house next Wednesday before going to the Senate for debate.

The committee found that under the government’s own modelling the carbon tax would impose a $1 trillion cost on the Australian economy, or $40,000 per person.

“This is likely to be an underestimate given that Treasury’s modelling relies on the assumption that other countries will act in concert with Australia to reduce emissions,” its report said.

“The government has provided no evidence that its policy provides benefits commensurate with these costs.

“Indeed, without global action, a carbon tax in Australia cannot do anything to mitigate the effects of climate change.

“A carbon tax will be all economic pain for no environmental gain.” (source)

Once again, Labor’s climate policy is pure, undiluted madness.

Dodgy modelling

We have always suspected the Treasury modelling of the impact of the carbon price was a crock, and now we have been proved substantially right, with the Treasuring admitting as much. Not only that, but a “finding” that carbon pricing would not increase unemployment was actually an “assumption” in its modelling. Astonishing!

THE Treasury has admitted that in modelling the cost of the government’s price on carbon it assumed countries would trade emissions after 2016 despite the fact there is no indication major emitters such the US and China will do so.

A senior Treasury official previously told a Senate select committee she did not assume countries would engage in emissions trading.

But critics such as economist Henry Ergas pointed out that Treasury had claimed in its modelling there would be a global price for carbon by 2016 and said the only way this could happen was if major countries were trading emissions.

At a Senate committee meeting on August 10, Treasury macroeconomic modelling manager Meghan Quinn said: “What we are assuming is there are mechanisms in countries to achieve emissions that result in an implicit or explicit carbon price based on those economies. It does not mean it specifically has to be an emissions trading scheme.”

The Treasury has now written to Professor Ergas conceding that the modelling undertaken in the Strong Growth Low Pollution report assumes “countries allow individual firms or governments to trade abatement with firms/governments in other countries through some mechanism”.

It says “some such mechanisms are currently in place under the UNFCCC framework”. All schemes under the UN Framework Convention on Climate Change involve emissions trading or claiming a credit for emissions reductions.

Professor Ergas said: “They swore they were not assuming the US had an ETS. It turns out they were assuming the US had no emissions trading but some way of trading emissions. But they don’t tell us what that mechanism is or how it will come into place any time soon.”

The Treasury also admitted its finding that pricing carbon emissions would not increase unemployment was an assumption in its modelling. (source)

Henry Ergas responds in detail in an opinion piece entitled Lies, Deception and the Carbon tax. Read it all.

Spin cycle…

Parliamentary Secretary for Climate Change Mark Dreyfus huffs and puffs in The Australian today, having been found out by Henry Ergas last week of planting poison pills in the carbon tax legislation. Dreyfus attempts to explain it all away by citing “certainty” – i.e. it’s certain that we’ll be screwed under this legislation.

But the most shockingly misrepresentative statements in his article must be the following:

Ergas refers to carbon pricing in Australia as “unilateral action” and claims it will undermine our international competitiveness. This ignores the fact 89 countries, accounting for more than 80 per cent of global emissions and more than 90 per cent of the global economy, have pledged to reduce or limit emissions by 2020 under the UN Framework Convention on Climate Change.

Could you be any more economical with the truth? Dreyfus’ statement is utter nonsense. The Copenhagen accord is non-binding and is barely worth the paper it is printed on, so to say they have “pledged” is simply weasel words for talking big to get a shaky agreement. The US, China and India (which make up nearly 50% of emissions globally) are doing NOTHING. Yeah, maybe China is making the right noises about cutting carbon intensity, but absolute emissions will continue to rise for decades. Ditto India. And the US is more worried about GFC Mk II than tackling climate change. The claims made by Dreyfus just don’t hold up.

Secondly, Dreyfus inflates the importance of existing trading schemes:

Key economies are already constraining emissions or emissions growth. Emissions trading schemes have operated for years in 31 European countries, New Zealand and in 10 US states.

New Zealand emits precisely square root of sod all. The “10” states in the RGGI (actually only eight since New Hampshire and New Jersey announced they were pulling out) make up a tiny token gesture. The EU ETS is in the process of helping to reduce the European economy to rubble. What a great act to follow!

And the Parliamentary Secretary really must check his facts:

California, the world’s eighth largest economy in its own right, will launch its ETS next year.

Wrong. The moonbat state has delayed it until 2013, which isn’t “next year”. Duh.

Read it here.

Not sovereign?

There is a general principle in constitutional law that the “sovereignty” of Parliament ensures that a future parliament cannot be bound by its predecessor. In other words, if a parliament enacts a law, then a subsequent parliament should be entitled to repeal it. However, two articles in The Australian have demonstrated that the Gillard government is trying very hard to breach this principle, and entrench the carbon tax legislation in the statute book.

Firstly, Henry Ergas, writing yesterday commented:

IT was Mark Dreyfus QC, Parliamentary Secretary for Climate Change, who let the cat out of the bag.

Once the carbon change legislation is in place, he said, repeal would amount to an acquisition of property by the commonwealth, as holders of emissions permits would be deprived of a valuable asset. As a result, the commonwealth would be liable, under s.51(xxxi) of the Australian Constitution, to pay compensation, potentially in the billions of dollars. A future government would therefore find repeal prohibitively costly.

That consequence is anything but unintended. The clean energy legislation, released this week, specifically provides that “a carbon unit (its generic term for a right to emit) is personal property”.

This, the government says, is needed to give certainty to long-term trades. But that claim makes little sense, for even without such protections there are flourishing markets for fishing quotas and other tradeable entitlements.

And internationally, governments have generally ensured pollution permits are not treated as conventional property rights, precisely so as to be able to revise environmental controls as circumstances change. Rather, this provision serves one purpose only: to guarantee any attempt at repeal triggers constitutional requirements to pay compensation, shackling future governments.

Nor is it the only poison pill built into the legislation. Also crucial is what happens if a new government rejects the emissions reductions recommendations made by the carbon regulator, the Climate Change Authority.

In that event, unless the government can secure a majority for an alternative target, permitted emissions are automatically cut by up to 10 per cent in a single year, crippling economic activity.

A Coalition government, or even a Labor government less wedded to the Greens, would therefore find itself trapped. (source)

And Paul Kelly, writing today, also considers the problem of repeal:

As incoming PM, Abbott would find himself having to check and reverse one of the deepest policy convictions in the senior ranks of the public service: that carbon pricing is far superior to his own direct action agenda.

Beyond that, he would need to replace an economy-wide scheme that priced carbon, treated emission permits as a property right, granted tax cuts and transfer payments as compensation and created an elaborate new structure of governance with a Clean Energy Regulator, a Climate Change Authority and a Clean Energy Finance Corporation.

Comparisons with Work Choices are false. Acting on its 2007 mandate, the Rudd government with Gillard as relevant minister replaced Howard’s laws with the Fair Work Act. But dismantling Labor’s clean energy structure is a far more formidable task. It penetrates to issues that will alarm business, face possible rejection in the Senate and could finish in the High Court. Gillard’s purpose is to entrench the new system and create a new status quo.

Labor’s scheme is one of the most elaborate in the world. The initial price of $23 a tonne from July 2012 will be fixed rising at 2.5 per cent per annum in real terms. From July 2015 it will transition to a flexible price estimated at $29 a tonne en route to an 80 per cent emissions reduction target by 2050. The coverage will be wide, reaching two-thirds of Australia’s emissions.

Upwards of 500 of the biggest polluters must pay for each tonne of carbon pollution they release. The flexible price means our scheme will be linked with other carbon markets. The heart of the policy is that companies can take action at home or purchase an international unit, thereby reducing carbon pollution abroad. This recognises that climate change is a global phenomenon and ensures domestic action occurs at the lowest cost.

The opposition is fixated on winning the political battle and how to unscramble the scheme in office. It has legal advice suggesting the issue may end in the High Court. The question is whether an Abbott government would be liable to compensation for removing property rights that were created only by this legislation. It is, unsurprisingly, a grey area.

“This is an attempt to sabotage the democratic process,” shadow finance minister Andrew Robb told The Australian yesterday. “We won’t be intimidated and we won’t be bullied. We will repeal this. If we have to return to the people at another election then we will.” (source)

It should come as little surprise that a government that has no mandate for the policy and treats the electorate with contempt takes such a cavalier attitude to constitutional norms of our democracy. This is a government hell bent on getting its way, and making sure that the Coalition are hamstrung if (when) they are elected in 2013 or sooner.