What climate policy should Australia adopt now?

Comments on Geoff Carmody “The only consensus on climate change is to chose the wrong policy”, 25/10/2010, http://www.theaustralian.com.au/news/opinion/the-only-consensus-on-climate-change-is-to-chose-the-wrong-policy/story-e6frg6zo-1225942965363


The most cost effective approach is a broad based carbon tax.

It is much better than cap and trade with so many exclusions and administrative costs. Also the initial allocation of free permits and quotas cannot achieve fairness and equity.

In addition, revenue and trade neutrality will ensure fairness to every Australian and internationally, and not distort trade when uneven international climate change polices.

Revenue neutrality will avoid the government's using as a revenue raising measure.

Coupled with equal distribution of revenue among all Australians, revenue neutrality will create the basis for the most efficient emissions controlling policy.

Of course, it may also be necessary to provide other measures to encourage other emission reduction processes, such as reducing land clearing, planting more trees and etc. For this purpose, a small part of the carbon tax revenue can be retained to do it.

PS: a carbon tax can also be very flexible and start with a low tax rate but send an important price signal for both businesses and consumers. This is particularly useful given the current international uncertainty and the domestic uncertainty for businesses.