A simple and effective global emission reduction scheme

Comments on Christopher Findlay “Green growth and how to get there”, 10/06/2009, http://www.eastasiaforum.org/2009/06/10/green-growth-is-hot/

I like your second paragraph, Christopher. The best the government can do is to create an environment for the private sector to innovate to bring the best technologies for green growth. Government mandates are not necessarily good. It is no different from some politicians or bureaucrats trying to pick winners, and they seldom can get it right.

The important thing is the price signal. If government can get a creditable pricing of carbon emissions, and have a future path for it, then the private sector will react. The government can provide some incentives to innovation and it can use the revenue from a carbon tax or emission permits.

PC sometimes makes very dry and irrelevant recommendations. But I am with PC On this point – let the market and the private sector work through competition according to price signal and incentives.

I prefer a universal carbon tax and have a schedule for the price to go up over a period. Emissions permits and trading are likely to be less effective and less efficient. They, like the current Australian government proposal, will probably leave transport emissions out.

A universal or uniform carbon tax is the most efficient and effective way to do it, even though it is difficult to get the tax rate right at the beginning to achieve certain reductions. But that can be sorted out fairly soon.

This difficulty of a carbon tax is no different to the use of interest rate to manage the economy. It takes time.

So my approach is a universal carbon tax and certain government incentives for innovation and development of new technologies.

It is better to have a global carbon tax and an international transfer system for high cost countries to pay for low cost countries. Alternatively, an international agreement on reduction targets for countries and then supplementing that agreement with an international emissions trading system.