Peever of Rio has a point in a complex issue

Comments on David Peever “Industry urges, get tax right”, 7/03/2011, http://www.theaustralian.com.au/national-affairs/industry-urges-get-tax-right/story-fn59niix-1226016756940


This is a very complex issue.

There is international competitiveness for trade exposed Australian firms.

However, there is also an international equity issue in emissions or emission allowance/permits. Australia emits much more CO2 per capita than most other countries especially developing countries. International adjustment must take that into account.

Besides, it is not only a bilateral trade issue and can be much more complicated than just between two countries. For example, in terms of iron ore exports to China, Australia is competing not only with Chinese local producers (though they may be increasingly less important), but also with Brazil producers.

Further, other countries may take direct actions without an implicit price or tax on carbon and how to take that into account is also extremely difficult. For example, China has ambitious programs for the reduction of its emission intensity, including ordering the closure of some plants and stopping electricity supply.

Nevertheless, there is an issue of border adjustment to reduce trade distortion, to make good on international equity and to account for actions of other countries.

The case is complex, and the policy should take account that complexity but makes the implementation simple.

PS: it is probably true that most firms can pass the increased costs on in full or in part, that also further complicates the issue of industry compensations. On the other hand, most consumers have little means or power to pass any of their higher energy bills including electricity and petrol.