A Clearer Picture On Carbon Trade
Sydney Morning Herald
Friday October 31, 2008
BUSINESS is a gamble, and any attempt at economic planning is also a gamble. When trying to plan an economic path to counter adverse climate change from carbon emissions, it is a double or triple gamble: that the science about the linkage between human activity and climate are right, that new pricing mechanisms will operate in the desired way and not cause economic devastation, and finally that everyone else will join the new system.
Work by the economist Ross Garnaut and now by the Federal Treasury, published yesterday, is steadily defining the odds for us. The do-nothing option is not one any of us should contemplate. Fortunately, the Treasury sees in all the scenarios it studies Australian per capita income growing at a rate only slightly below what would occur if a price is not put on carbon emissions. There would be a moderate spike in inflation at the outset, and a $6 to $7 a week increase in household costs of electricity and gas, a burden on low-income families that could be ameliorated by tax adjustments. Some industries will gain competitiveness, and a few, like aluminium refining, will lose, depending what counterparts in other economies do.The big gamble is when to start, and in what company. In his two scenarios, Professor Garnaut assumed all economies would join a global emissions trading scheme covering all sources of emissions. The Treasury bases its models on a more "realistic" assumption of developed economies joining the emissions market in 2010 and developing countries signing up over time, with everyone included by 2025.Australian business is concerned that the early start in 2010 - if not unilaterally, then in limited company - that is planned by the Rudd Government, could result in a transfer of production to countries that do not yet care about pollution or global warming. Yet the Treasury points out that caution could have a price too: the cost of catching up later with global emissions standards could be much higher.The wild gyrations of share and currency markets are making it hard to look beyond the short term, and 2010 is looming close. Yet we should know within a few months how serious will be the economic recession, and a big wave of green investment could help the climb out of it. Professor Garnaut has already noted out that investment in carbon reduction will itself be an economic stimulus. Trade unions and conservationists, not always in the same camp, see it creating new green industries and jobs.
© 2008 Sydney Morning Herald