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Carbon tax and international ETS

Comments on Michael Stutchbury “Carbon price may take the heat off “, 7/06/2011, http://www.theaustralian.com.au/business/opinion/carbon-price-may-take-the-heat-off/story-e6frg9p6-1226070476597

While it is true that "the Labor-Greens carbon tax model does not allow business to buy international permits for up to the next five years", it is because no hard thinking has been done on how to linking a carbon tax with an international ETS, partly as a result of no international ETS available yet.

It is possible to have a carbon tax model in Australia and use the tax revenue to buy international carbon emission reductions. In this scenario, the nation as a whole is a buyer of emission permits, as opposed to individual companies to do it to allow them to emit above their domestic quotas that would be the case under a domestic ETS.

As long as the combined reduction in emissions under a domestic carbon tax and the purchased emissions reduction meets whatever targets set as the country's requirement, the country would have fulfilled its reduction obligation.

So, carbon tax models and international ETS can coexist with no difficulty.

It is interesting that for so long few people have focused on this most efficient system to achieve emissions reduction. A carbon tax is arguably more efficient means than ETS in administration.

It is time for domestic ETS proponents to discontinue their myth on ETS and recognise the more efficient carbon tax approach.

PS: of course, no matter it is the traditional ETS and my proposed system of carbon tax and ETS, they will all involve international transfer of payments for emissions entitlements. It would mean high emissions countries will need to pay for low emissions countries for above their average emissions. This can be politically difficult for any individual country at present without a well functioning international market.

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