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2010-06-30

It is bureacrats not economists who haven't done enough on climate change

Comments on Martin Parkinson “Why economists need to engage in the CPRS debate”, 29/06/2010, http://www.crikey.com.au/2010/06/29/why-economists-need-to-engage-in-the-cprs-debate/
While I agree that economists can and should play a significant role in the debate and design of emission reduction strategy and policies to contribute to their effectiveness and efficiency, it is equally important that economists do not just become or hoped by the government or bureaucrats to become their supporters without critically analyse, evaluate and assess government's policy proposals.

It is important to recognise and acknowledge that there will be costs involved in reducing emissions and give realist expectations to the public on what the likely costs of emission reduction options.

Dr Martin Parkinson's claim that "our experience of reform should give us confidence that we can deliver significant reductions in emissions while maintaining strong and sustained growth" runs the risk of spins without real substance. Emission reductions, though a significant reform, will be significantly different from many of the past reforms, in that the benefits are not necessarily seen or felt except when the science is correct and it is done correctly temperature may not rise as much as a baseline that few knows and in the process costs of the actions will be evidently felt.

Without acknowledge that and being upfront and forthright with the public, there is a risk of misleading.

Secondly, government and its advisors should separate the issue of emission reduction and the issue of redistribution of income due to consideration of the impact of climate change actions. On that front, government should adopt the most efficient and least distortionary approach by using carbon price on emissions and distribute the proceeds to all residents equally. By doing that, two important objectives can be achieved: having public support and be most efficient. If it feels it has to do something more, it should find other means to address the impact on low income people.

There is not much that requires economists to do more than it already did. It is a puzzle that the government and bureaucrats have drafted distortionary and less efficient CPRS as it stood. The government was portrayed as a tax grab and bribing polluters. And the proposed subsidies to some were seen as an unnecessary Labor distribution agenda.

PS: the title is wrong from the start. Why should it be confined to the CPRS debate, as opposed to have the best policy options or actions? The government has moved on, but Dr Martin Parkinson hasn’t and hasn’t caught up even with his political master.

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