A bit too early for saying that now

Comments on Frank Jotzo “Climate change policy resurrected in Australia”, 4/02/2011, http://www.eastasiaforum.org/2011/02/04/climate-change-policy-resurrected-in-australia/comment-page-1/#comment-539990

It does not appear to be clear why the following is the case:

"For carbon pricing design, a fixed-price permit system that allows a later shift to market trading, as suggested by the 2008 Garnaut Review, is receiving increasing support."

One would have thought that a carbon tax has increased its likelihood in Australia following the political development of the hung parliament and the role of the Greens with its preference of a carbon tax and no subsidies to big polluters.

And arguably, a carbon tax is superior to a trading scheme where some emissions are hard to be included in a scheme and the very high costs involved in any trading schemes. The fixation with trading schemes is hardly rational.

Secondly, while Professor Garnaut has made a strong argument that Australia's action will be in its interests, yet many Australians may still need to be convinced.

Garnaut's argument relies heavily on two points: 1. Australia's approach to other international issues including sending troops to overseas missions; and 2. Australia is a high per capita emission country and it is also likely to be more heavily and adversely affected by climate change.

The first one may have difficulties in that many Australians may not regard sending troops to Iraq as the right action.

The second one has to depend on international players will follow if Australia is to take actions. But there is not necessarily guarantee for that, especially given the US domestic political situation.

In my view, a moderate carbon tax that is revenue neutral and trade neutral will be most efficient and is likely to gain greater support from voters. And it is in Australia’s interest too.

Revenue neutral should be accompanied by equal per capita distribution of the revenue from the carbon tax to Australia residents, but businesses should not be compensated given that they can pass part of their costs to residents, the consumers.

Trade neutral should ensure that Australia's tradable sector is not unduly affected, if other countries are not real taking actions.