Comments on David Hodgkinson, and Rebecca Johnston "Politics aside, a simple carbon tax makes more sense than a convoluted emissions trading scheme", 2/08/2015
While the two do have significant differences, they also share some commonality, or equivalence. For example, the ETS implies a equivalent price or tax to the carbon tax when the target of emissions is set as the exactly same that a carbon tax would achieve. Of course, there are other conditions that would need to meet. For example, the ETS must be a national and include all emissions sources where the carbon tax would apply to and the ETS market needs to be efficient and there is only one national price.
While the Abbott politics has hit hard on carbon taxes imposed by ALP government, there is no point to deny the equivalence of an well functioned ETS and a carbon tax.
To do it is just too cowardly in the wake of the very effective attack on the ALP government's carbon tax. Those who attempt to battle the Abbott anti carbon tax mantra should do better than that.
Showing posts with label emission trading. Show all posts
Showing posts with label emission trading. Show all posts
2015-07-17
A strategy of the ALP climate change policy
Comments on Tony Wood "The latest turn in the twisty history of Labor’s climate policies", 18/07/2015
Yes, it seems a revenue neutral framework with an efficient ETS as wide as possible, but with reference to what other major countries will be doing, would be a winning strategy for the ALP to take.
But tactically, there is no need for the ALP to disclose its climate change policy yet, given that the Coalition government will have to announce its policies for post 2020 soon, be fore the Paris international meeting of the year at the latest.
ALP can afford to have a better policy stance when a number of things become clearer, including the government's policy and other countries' targets, policies and strategies.
The leak of whatever it was of the ALP's discussion paper or options was unfortunate for itself. It risks being misrepresented, misused and an unnecessary target for the Coalition government with a very effective attacking leader, that is, the Prime Minister Abbott. It was self indulgent and sabotage.
Abbott's attack, both past and current ones, on the ALP's climate change policies, may scare the ALP (under stress) from developing a good policy. It is important that ALP develop an effective strategy in counter attack, as well as a strategy for its own policy on climate change. A two pronged approach may prove to be effective.
Yes, it seems a revenue neutral framework with an efficient ETS as wide as possible, but with reference to what other major countries will be doing, would be a winning strategy for the ALP to take.
But tactically, there is no need for the ALP to disclose its climate change policy yet, given that the Coalition government will have to announce its policies for post 2020 soon, be fore the Paris international meeting of the year at the latest.
ALP can afford to have a better policy stance when a number of things become clearer, including the government's policy and other countries' targets, policies and strategies.
The leak of whatever it was of the ALP's discussion paper or options was unfortunate for itself. It risks being misrepresented, misused and an unnecessary target for the Coalition government with a very effective attacking leader, that is, the Prime Minister Abbott. It was self indulgent and sabotage.
Abbott's attack, both past and current ones, on the ALP's climate change policies, may scare the ALP (under stress) from developing a good policy. It is important that ALP develop an effective strategy in counter attack, as well as a strategy for its own policy on climate change. A two pronged approach may prove to be effective.
2015-07-16
Energy productivity not very meaningful
Comments on Frank Jotzo "China could outperform its carbon pledge", 16/07/2015
Firstly, it seems there is a typo in the fourth paragraph, that is, “Yet China could do better still. China is set to outperform its existing 2020 target of a 40–45 per cent improvement in emissions intensity compared to 2025.”
The last number should probably be 2005 instead of 2025.
Secondly, while the following sentence is understandable, I am not sure that it does not mask the shortcomings of a single factor productivity, particularly the huge differences in economic structures between different economies, such as the energy productivity:
"China’s energy productivity lags that of advanced economies."
China, as it is often called by many, is the world's manufacturing factory, as a result, it is not particularly meaningful to compare the so called energy productivity with the so called energy productivities of the advanced countries which are mostly services heavy, as opposed to industry heavy of the Chinese economy.
Thirdly, some of the arguments, while understandable in terms of impact on emissions, may not be particularly strong for China to adopt, if China has an overarching economic, urbanisation and climate change strategy/framework, or as the author put it "with overarching national policy priorities". For example, "If China’s government were to once again use large fiscal stimulus measures, it would need to avoid over-investment in infrastructure and thereby heavy industries."
Although China has made enormous progress in its infrastructure, the fact still remains that China's urbanisation is only about 50% and there is a long way to go simply for China to urbanise. There is no question that urbanisation means more infrastructure, and as a result, more investment in infrastructure will be needed.
When discussing climate change policy, it would be more helpful to put it into the appropriate framework.
I would bet that China is unlikely to sacrifice its urbanisation and hence investment in the related infrastructure purely for emission purpose.
Firstly, it seems there is a typo in the fourth paragraph, that is, “Yet China could do better still. China is set to outperform its existing 2020 target of a 40–45 per cent improvement in emissions intensity compared to 2025.”
The last number should probably be 2005 instead of 2025.
Secondly, while the following sentence is understandable, I am not sure that it does not mask the shortcomings of a single factor productivity, particularly the huge differences in economic structures between different economies, such as the energy productivity:
"China’s energy productivity lags that of advanced economies."
China, as it is often called by many, is the world's manufacturing factory, as a result, it is not particularly meaningful to compare the so called energy productivity with the so called energy productivities of the advanced countries which are mostly services heavy, as opposed to industry heavy of the Chinese economy.
Thirdly, some of the arguments, while understandable in terms of impact on emissions, may not be particularly strong for China to adopt, if China has an overarching economic, urbanisation and climate change strategy/framework, or as the author put it "with overarching national policy priorities". For example, "If China’s government were to once again use large fiscal stimulus measures, it would need to avoid over-investment in infrastructure and thereby heavy industries."
Although China has made enormous progress in its infrastructure, the fact still remains that China's urbanisation is only about 50% and there is a long way to go simply for China to urbanise. There is no question that urbanisation means more infrastructure, and as a result, more investment in infrastructure will be needed.
When discussing climate change policy, it would be more helpful to put it into the appropriate framework.
I would bet that China is unlikely to sacrifice its urbanisation and hence investment in the related infrastructure purely for emission purpose.
2013-01-16
Pollutions in China and its ETS - a wrong priority
Comments on Alex Lo “Carbon trading in the Asian Century: China’s ETS on track”, 16/01/2013, https://theconversation.edu.au/carbon-trading-in-the-asian-century-chinas-ets-on-track-11438
What you mentioned is too complicated than necessary.
One of the problems in international negotiations on climate change is that it has included too many details. Instead, it should be focused on important ones, such as CO2 and leave most relatively unimportant emissions out.
Further, the many problems you mentioned in the Nordhaus study/paper have the same relatively easy solutions. For example, the key for a global solution is the fairness of an agreement. Once that is achieved, participation other problems will be easy to dealt with.
What solution is there for international fairness? In economics, it is fairly simple, that is, a system of user or emitter pay would do.
Is that system difficult to achieve? No, once one realise to set an international carbon price and every country is taxed for carbon emissions and the revenue is then distributed by population shares to each country.
Such a system may not achieve all the objectives from the start, but over time it will be effective and achieve the target. This is because there will be enough incentives for innovations to reduce emissions and for the use of alternative and more economic energy sources.
The difficulties Nordhaus got is the unrealistically perfection that created unnecessary problems. If everyone falls into that kind of trap of thinking, then it would be a problem of unsolvable.
But once a different thinking is adopted, it is a whole different story.
Why is it so difficult to reach an international agreement, given in economics the principles and methods are so clear for a solution? The reason is that applying the economically sound principle and method would mean the rich and powerful countries would have to pay more, much more because they emit more on the per capita basis and powerful countries would not like to do it. That is why the US has refused to do Kyoto, that has caused a serious other problems, including developing countries refusal to commit to a legally binding regime for them.
Now large developing countries are strong enough to resist the pressures from powerful countries to an unfair agreement.
Effectively, it is a loss-loss situation, unless powerful countries realise there must be a fair agreement.
Now back to the focus of the article, that is, ETS in China. Looking at the air pollution in China including in Beijing recently it is clear that China has a huge task in dealing with environment.
It also points to priorities in its task in terms of benefits and costs of analysis to determine what is most urgent and what can be left for a different time.
From that point of view, while ETS may achieve that, it does appear to be the best approach to adopt, unfortunately.
What you mentioned is too complicated than necessary.
One of the problems in international negotiations on climate change is that it has included too many details. Instead, it should be focused on important ones, such as CO2 and leave most relatively unimportant emissions out.
Further, the many problems you mentioned in the Nordhaus study/paper have the same relatively easy solutions. For example, the key for a global solution is the fairness of an agreement. Once that is achieved, participation other problems will be easy to dealt with.
What solution is there for international fairness? In economics, it is fairly simple, that is, a system of user or emitter pay would do.
Is that system difficult to achieve? No, once one realise to set an international carbon price and every country is taxed for carbon emissions and the revenue is then distributed by population shares to each country.
Such a system may not achieve all the objectives from the start, but over time it will be effective and achieve the target. This is because there will be enough incentives for innovations to reduce emissions and for the use of alternative and more economic energy sources.
The difficulties Nordhaus got is the unrealistically perfection that created unnecessary problems. If everyone falls into that kind of trap of thinking, then it would be a problem of unsolvable.
But once a different thinking is adopted, it is a whole different story.
Why is it so difficult to reach an international agreement, given in economics the principles and methods are so clear for a solution? The reason is that applying the economically sound principle and method would mean the rich and powerful countries would have to pay more, much more because they emit more on the per capita basis and powerful countries would not like to do it. That is why the US has refused to do Kyoto, that has caused a serious other problems, including developing countries refusal to commit to a legally binding regime for them.
Now large developing countries are strong enough to resist the pressures from powerful countries to an unfair agreement.
Effectively, it is a loss-loss situation, unless powerful countries realise there must be a fair agreement.
Now back to the focus of the article, that is, ETS in China. Looking at the air pollution in China including in Beijing recently it is clear that China has a huge task in dealing with environment.
It also points to priorities in its task in terms of benefits and costs of analysis to determine what is most urgent and what can be left for a different time.
From that point of view, while ETS may achieve that, it does appear to be the best approach to adopt, unfortunately.
Focusing on the more visible and localised pollutions should be the priority and for that the international experience from industrialised countries is very valuable.
2011-06-07
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.
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.
2011-05-17
Greg Combet is disappointing too
Comments on Joe Kelly “The Greens say the carbon tax will need to be far above $40 a tonne, while the Government says it will be 'well south'”, 17/05/2011, http://www.theaustralian.com.au/national-affairs/the-greens-say-the-carbon-tax-will-need-to-be-far-above-40-a-tonne-while-the-government-says-it-will-be-well-south/story-fn59niix-1226057359647
Greg Combet is becoming less and less competent in his role as the climate change minister which has the key role in setting the policy for the proposed carbon tax, although his job is inherently and undoubtedly very difficult.
All the time he has been saying that the carbon price has not been set, yet now he is also saying that the tax will be well south of $40 per ton.
Does he know or not know the likely tax?
If what he is now saying is correct, then he has been misled the public all the time.
If he has been right all the time in terms of the tax, then he is kidding himself now.
Such a display of politics by a minister is unhelpful to the debate on climate change and the carbon tax and very disappointing.
The public had high hopes for Combet to advance or at least to resolve the issue of ETS or a carbon tax. He appeared to be more flexible than his predecessor, Senator Wong, in terms of dealing with other parties in the failed negotiations for the Rudd/Wong ETS.
But it seems those have been misplaced.
Greg Combet is becoming less and less competent in his role as the climate change minister which has the key role in setting the policy for the proposed carbon tax, although his job is inherently and undoubtedly very difficult.
All the time he has been saying that the carbon price has not been set, yet now he is also saying that the tax will be well south of $40 per ton.
Does he know or not know the likely tax?
If what he is now saying is correct, then he has been misled the public all the time.
If he has been right all the time in terms of the tax, then he is kidding himself now.
Such a display of politics by a minister is unhelpful to the debate on climate change and the carbon tax and very disappointing.
The public had high hopes for Combet to advance or at least to resolve the issue of ETS or a carbon tax. He appeared to be more flexible than his predecessor, Senator Wong, in terms of dealing with other parties in the failed negotiations for the Rudd/Wong ETS.
But it seems those have been misplaced.
2011-04-29
Carbon tax and compensation issues
Comments on Robert Gottliebsen “Alinta's fiery carbon resolve”, 29/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/carbon-tax-Dimery-Alinta-energy-prices-pd20110429-GCS8F?OpenDocument&src=sph&src=rot
That just points to why all compensations on a revenue neutral basis should go to residents and not businesses, because most residents have no where or no means to pass on the higher energy costs (they don't sell things) to while many businesses can because they sell more than they buy.
Businesses can pass on, at least some of the carbon tax to consumers, because the average industry costs, as opposed to just some firms in an industry, will be higher under a carbon tax, so all business members will pass on that higher average costs. A caveat is the shape of the demand curve - if vertical, then all the tax will be passed on to consumers; but if horizontal, none of the tax can be passed on. But in the short term, it is likely to be more vertical than horizontal, especially as energy products are concerned.
The second point is that brown coal power will be less profitable than gas fired power if the electricity has the same market price irrespective how it is generated.
That is the main point of a carbon tax to reduce emissions - a market mechanism as liked by many economists or the likes.
That just points to why all compensations on a revenue neutral basis should go to residents and not businesses, because most residents have no where or no means to pass on the higher energy costs (they don't sell things) to while many businesses can because they sell more than they buy.
Businesses can pass on, at least some of the carbon tax to consumers, because the average industry costs, as opposed to just some firms in an industry, will be higher under a carbon tax, so all business members will pass on that higher average costs. A caveat is the shape of the demand curve - if vertical, then all the tax will be passed on to consumers; but if horizontal, none of the tax can be passed on. But in the short term, it is likely to be more vertical than horizontal, especially as energy products are concerned.
The second point is that brown coal power will be less profitable than gas fired power if the electricity has the same market price irrespective how it is generated.
That is the main point of a carbon tax to reduce emissions - a market mechanism as liked by many economists or the likes.
Protect union jobs and enhance national wealth too
Comments on Tony Maher “Where are jobs in carbon plan?” 29/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/where-are-jobs-in-carbon-plan/story-e6frgd0x-1226046535916
It is understandable that a union leader is and will be aimed at protecting jobs of its members.
It should be better done in the context that also enhances the nation's wealth.
If those two are combined, then few will object what Tony Maher argued, such as: "Unions should campaign long and hard to ensure any restructuring of the energy sector maximises the jobs dividend."
The key is productivity and international competitiveness.
We should use all internationally acceptable policy means and technologies and management practices to achieve the duel objectives.
It is understandable that a union leader is and will be aimed at protecting jobs of its members.
It should be better done in the context that also enhances the nation's wealth.
If those two are combined, then few will object what Tony Maher argued, such as: "Unions should campaign long and hard to ensure any restructuring of the energy sector maximises the jobs dividend."
The key is productivity and international competitiveness.
We should use all internationally acceptable policy means and technologies and management practices to achieve the duel objectives.
Government and its carbon committee to blame
Comments on Siobhain Ryan “Tony Windsor's carbon call for BHP”, 29/04/2011, http://www.theaustralian.com.au/national-affairs/tony-windsors-carbon-call-for-bhp/story-fn59niix-1226046579423
While Tony Windsor has an obvious point, the government and the carbon committee have not helped in their own duties either, by not having stated of a broad trade neutral approach or framework.
That largely is the problem with the government and the committee.
Why haven’t they announced such a broad framework in the first place and leave any details to be worked out? Is an announcement of intention that difficult?
So Windsor may suffer a problem himself too, as a member of the committee.
While Tony Windsor has an obvious point, the government and the carbon committee have not helped in their own duties either, by not having stated of a broad trade neutral approach or framework.
That largely is the problem with the government and the committee.
Why haven’t they announced such a broad framework in the first place and leave any details to be worked out? Is an announcement of intention that difficult?
So Windsor may suffer a problem himself too, as a member of the committee.
2011-04-08
Truth about ETS and carbon tax
Comments on Henry Ergas “Treasury should know better about an ETS”, 8/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/treasury-should-know-better-about-an-ets/story-e6frgd0x-1226035611467
Good point, Ergas.
Maybe another way to put it more clearly would be that either the government, not Treasury can't honestly and truthfully tell how much the costs of energy would be for consumers under an ETS to achieve the 5% reduction in emissions.
Further and arguably, ETS won't be able to tell exactly whether a target of reduction in percentage terms is achievable or not, given the fact that surely certain sectors or activities will be excluded or not included in the ETS as the original one indicated. That ETS can only tell the parts that are included and that is only a partial as opposed to a full account emissions in the target reduction.
So, it is good politics to hide the costs and not to tell the public about hit pocket costs (leave that to the market, that is their argument of course).
But that is not transparent and honest politics with the public, nor will that provide any certainty to business in terms of investment decision, because the future price of carbon is unknown even though on any day the ETS market may give you a current price.
Any argument of business certainty was, is and will be fanciful thinking and self delusion.
It is good politics too clever by half.
Good point, Ergas.
Maybe another way to put it more clearly would be that either the government, not Treasury can't honestly and truthfully tell how much the costs of energy would be for consumers under an ETS to achieve the 5% reduction in emissions.
Further and arguably, ETS won't be able to tell exactly whether a target of reduction in percentage terms is achievable or not, given the fact that surely certain sectors or activities will be excluded or not included in the ETS as the original one indicated. That ETS can only tell the parts that are included and that is only a partial as opposed to a full account emissions in the target reduction.
So, it is good politics to hide the costs and not to tell the public about hit pocket costs (leave that to the market, that is their argument of course).
But that is not transparent and honest politics with the public, nor will that provide any certainty to business in terms of investment decision, because the future price of carbon is unknown even though on any day the ETS market may give you a current price.
Any argument of business certainty was, is and will be fanciful thinking and self delusion.
It is good politics too clever by half.
2011-04-07
Such a market is not good!
Comments on John Daley and Tristan Edis “Markets still best climate option”, 7/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/markets-still-best-climate-option/story-e6frgd0x-1226034919878
Parts of the article are nonsensical, as the following paragraph from it shows:
"Government should also set a floor to prevent the carbon price falling too low, potentially destroying the value of the market, if emissions reduction turns out to be easier than anticipated."
Isn't it crazy to have a carbon price that is higher than necessary to achieve the target of reduction in emissions?
Why is there a need to artificially inflate extra costs than necessary, for the purpose of that market?
Isn't it suggesting that kind of market would have unnecessarily higher costs?
Is it just to make that market for some people to profit, from that market at the expense of taxpayers and consumers, the same as those genius Wall Street financial engineers to create various complex financial products that led to the near death experience not long ago?
What a silly idea it is!
PS: it may imply that a carbon tax instead of the kind of concept of a carbon market is better and should be preferred.
Parts of the article are nonsensical, as the following paragraph from it shows:
"Government should also set a floor to prevent the carbon price falling too low, potentially destroying the value of the market, if emissions reduction turns out to be easier than anticipated."
Isn't it crazy to have a carbon price that is higher than necessary to achieve the target of reduction in emissions?
Why is there a need to artificially inflate extra costs than necessary, for the purpose of that market?
Isn't it suggesting that kind of market would have unnecessarily higher costs?
Is it just to make that market for some people to profit, from that market at the expense of taxpayers and consumers, the same as those genius Wall Street financial engineers to create various complex financial products that led to the near death experience not long ago?
What a silly idea it is!
PS: it may imply that a carbon tax instead of the kind of concept of a carbon market is better and should be preferred.
2011-04-01
Tony Shepherd's myths
Comments on Tony Shepherd “Eight myths of a carbon tax”, 1/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/eight-myths-of-a-carbon-tax/story-e6frgd0x-1226031613147
Instead of expose the myths as the title suggests, the author creates his own myths, by misleading information, incorrect facts and distorted logic.
In another word it is purely self-interest serving, implying lobbying for potentially more compensation.
Let’s expose this by one example in the article. It says: “1. The greatest myth is that if we lead the world in carbon pricing the rest of the world will follow. We produce 1.5 per cent of the world's CO2; China and America account for 40 per cent. A 5 per cent reduction in Australia's emissions would be cancelled out by as little as a 0.3 per cent increase in China's emissions.”
There is no such a myth in here in Australia at all. We are not leading the world. To the contrary, we have been lagging or dragging it behind. As Tony Shepherd mentioned in the article, there is the CO2 trading in Europe as the obvious precedent scheme.
What does that mean to his distorting argument as if we are leading the world? It means he is contradicting himself.
Note that that is his number one and greatest myth!
Credible or incredible?
Instead of expose the myths as the title suggests, the author creates his own myths, by misleading information, incorrect facts and distorted logic.
In another word it is purely self-interest serving, implying lobbying for potentially more compensation.
Let’s expose this by one example in the article. It says: “1. The greatest myth is that if we lead the world in carbon pricing the rest of the world will follow. We produce 1.5 per cent of the world's CO2; China and America account for 40 per cent. A 5 per cent reduction in Australia's emissions would be cancelled out by as little as a 0.3 per cent increase in China's emissions.”
There is no such a myth in here in Australia at all. We are not leading the world. To the contrary, we have been lagging or dragging it behind. As Tony Shepherd mentioned in the article, there is the CO2 trading in Europe as the obvious precedent scheme.
What does that mean to his distorting argument as if we are leading the world? It means he is contradicting himself.
Note that that is his number one and greatest myth!
Credible or incredible?
2011-03-25
Uncertainties and opportunities
Comments on Michael Stutchbury “Sting in tail of climate analysis”, 25/03/2011, http://www.theaustralian.com.au/business/opinion/sting-in-tail-of-climate-analysis/story-e6frg9p6-1226027690257
While Gary Banks made some points on the uncertainties and impreciseness of the Productivity Study, it may actually help the government to design a clever package and to sell it partially based on the results of that study.
Because it will be uncertainty, then one justifies one's own design taking advantage of that uncertainty.
Were it completely certain, then the government's hands would be tied tightly and would have little room to manoeuvre to satisfy different constituents.
The uncertainties identified by Banks represent both challenges and opportunities to the government on the issue of carbon tax.
To conclude, it is not all bad but some positive from Gray Banks' points for the government.
Gillard should be happy about that.
While Gary Banks made some points on the uncertainties and impreciseness of the Productivity Study, it may actually help the government to design a clever package and to sell it partially based on the results of that study.
Because it will be uncertainty, then one justifies one's own design taking advantage of that uncertainty.
Were it completely certain, then the government's hands would be tied tightly and would have little room to manoeuvre to satisfy different constituents.
The uncertainties identified by Banks represent both challenges and opportunities to the government on the issue of carbon tax.
To conclude, it is not all bad but some positive from Gray Banks' points for the government.
Gillard should be happy about that.
2011-02-13
A long way ahead for Gillard on her model of carbon
Comments on Dennis Shanahan “Aggressive Labor pressures Greens”, 12/02/2011, http://www.theaustralian.com.au/news/opinion/aggressive-labor-pressures-greens/story-e6frg6zo-1226004698801
It is only the beginning rather than the end of the difficult negotiations the minority Gillard government has to do with the cross benches, including the Greens on both houses of the parliament.
The government, of course, does not want to capitulate at the beginning to the Greens.
Its climate change advisors of course does not want to see that either.
But the current starting stance does not guarantee any end result will be anything like it.
I think it will be difficult in two major points:
1. The no target approach does not appear to be tenable, both domestically and internationally.
2. The huge amounts of subsidies to the mining and power industries don't appear to be reasonable, given that it is the consumers who will bear the rising costs of electricity and energy.
Both would not probably be passed by its own advisor.
The government will have to make big changes or concessions on both to satisfy the Greens and the pubic.
Further, the fixation with an ETS is irrational. So the hybrid model is ridiculous.
If a carbon tax works, why is there any need to move to a more costly and less coverage ETS model?
It is only the beginning rather than the end of the difficult negotiations the minority Gillard government has to do with the cross benches, including the Greens on both houses of the parliament.
The government, of course, does not want to capitulate at the beginning to the Greens.
Its climate change advisors of course does not want to see that either.
But the current starting stance does not guarantee any end result will be anything like it.
I think it will be difficult in two major points:
1. The no target approach does not appear to be tenable, both domestically and internationally.
2. The huge amounts of subsidies to the mining and power industries don't appear to be reasonable, given that it is the consumers who will bear the rising costs of electricity and energy.
Both would not probably be passed by its own advisor.
The government will have to make big changes or concessions on both to satisfy the Greens and the pubic.
Further, the fixation with an ETS is irrational. So the hybrid model is ridiculous.
If a carbon tax works, why is there any need to move to a more costly and less coverage ETS model?
2011-02-11
Garnaut and Ergas on the economics of climate actions
Comments on Henry Ergas “Climate adviser misses the point”, 11/02/2011, http://www.theaustralian.com.au/news/opinion/climate-adviser-misses-the-point/story-e6frg6zo-1226003951163
While the logic that Henry Ergas has used is apparently and seemingly appealing, especially the discount approach for costs and benefits of climate actions, there is deep hole somewhere in his article that may heavily discount the powerfulness and persuasiveness of his whole thesis.
To start with, he didn’t not assess the likely scenario that although an international agreement for all international players to act may not be reached as he suggests, many countries may still take actions to have a measurable effect on climate change.
The second point is that he didn’t examine or analyse the possibility that Australia could take ‘unilateral’ actions that is trade neutral and therefore will not change too much Australia’s international competitiveness, especially when trade is concerned.
Third, he didn’t examine and analyse the likely advances in alternative energy technologies in the future and the impact on the costs of emissions mitigations, and the continued long term benefits of climate change actions – they are not just one year but will continue forever. Both can change the result of cost and benefit analysis of climate change actions.
Fourth, he didn’t examine and analyse the real costs of the likely depletion of fossil fuels. It is highly likely that market mechanism alone may significantly underprice the current use of fossil fuels.
PS: However, the above does not necessarily mean automatic endorsement of the Garnaut recommendations.
There are issues with trade neutrality and revenue neutrality, as well as carbon tax versus ETS that the Garnaut report or updates may have been rather unsatisfactory and disappointing.
While the logic that Henry Ergas has used is apparently and seemingly appealing, especially the discount approach for costs and benefits of climate actions, there is deep hole somewhere in his article that may heavily discount the powerfulness and persuasiveness of his whole thesis.
To start with, he didn’t not assess the likely scenario that although an international agreement for all international players to act may not be reached as he suggests, many countries may still take actions to have a measurable effect on climate change.
The second point is that he didn’t examine or analyse the possibility that Australia could take ‘unilateral’ actions that is trade neutral and therefore will not change too much Australia’s international competitiveness, especially when trade is concerned.
Third, he didn’t examine and analyse the likely advances in alternative energy technologies in the future and the impact on the costs of emissions mitigations, and the continued long term benefits of climate change actions – they are not just one year but will continue forever. Both can change the result of cost and benefit analysis of climate change actions.
Fourth, he didn’t examine and analyse the real costs of the likely depletion of fossil fuels. It is highly likely that market mechanism alone may significantly underprice the current use of fossil fuels.
PS: However, the above does not necessarily mean automatic endorsement of the Garnaut recommendations.
There are issues with trade neutrality and revenue neutrality, as well as carbon tax versus ETS that the Garnaut report or updates may have been rather unsatisfactory and disappointing.
2011-02-04
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.
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.
2010-12-17
Uncertain sciences in climate change and government policy making
Comments on Michael Asten “Political interference will cripple climate debate”, 17/12/2010, http://www.theaustralian.com.au/news/opinion/political-interference-will-cripple-climate-debate/story-e6frg6zo-1225972366783
While Michael Asten has made very good points in terms of political interference on sciences and scientific work by scientists, it is a different matter for actions on climate change by governments.
There are indeed uncertainties regarding the science of climate change and the role of man induced global warming. That is especially so given that there were reportedly very large variations in temperature on the earth with some higher temperature periods, as well as the data used in many modelling of man induced warming cover extremely short time in comparison with the long history of the earth. It is possible that most modelling could be spurious in that context, even though many of those works in isolation could be regarded as 'sound'.
But governments have to respond to many different voices and make decisions under uncertainties. In this context, there is a question of what is the best policy that a government can make and what are the best actions to take.
While any governments should not disregard the uncertainties in climate change sciences, it would not be prudent for them to ignore the larger voices from scientists who consider that man induced warming is true.
Even for insurance purposes, governments should take active actions to reduce or limit emissions while at the same time to also take actions to adapt to higher temperature future.
The best policy, though, seems to be a flexible carbon tax which can be adjusted to best suit any new evidences or new scientific and empirical findings.
In comparison, an ETS does have the danger and runs the risk of being manipulated for financial gains by participants in the financial markets to hijack its true purposes and to increase the costs of emission reductions accordingly in the due course.
In that regard, it has been unfortunate that the Labor government from Rudd to Gillard seems to have been fixated with an ETS so stubbornly and mistaken it as a good policy.
While Michael Asten has made very good points in terms of political interference on sciences and scientific work by scientists, it is a different matter for actions on climate change by governments.
There are indeed uncertainties regarding the science of climate change and the role of man induced global warming. That is especially so given that there were reportedly very large variations in temperature on the earth with some higher temperature periods, as well as the data used in many modelling of man induced warming cover extremely short time in comparison with the long history of the earth. It is possible that most modelling could be spurious in that context, even though many of those works in isolation could be regarded as 'sound'.
But governments have to respond to many different voices and make decisions under uncertainties. In this context, there is a question of what is the best policy that a government can make and what are the best actions to take.
While any governments should not disregard the uncertainties in climate change sciences, it would not be prudent for them to ignore the larger voices from scientists who consider that man induced warming is true.
Even for insurance purposes, governments should take active actions to reduce or limit emissions while at the same time to also take actions to adapt to higher temperature future.
The best policy, though, seems to be a flexible carbon tax which can be adjusted to best suit any new evidences or new scientific and empirical findings.
In comparison, an ETS does have the danger and runs the risk of being manipulated for financial gains by participants in the financial markets to hijack its true purposes and to increase the costs of emission reductions accordingly in the due course.
In that regard, it has been unfortunate that the Labor government from Rudd to Gillard seems to have been fixated with an ETS so stubbornly and mistaken it as a good policy.
2010-10-13
Lessons from government past failures on climate policy
Comments on Greg Combet “Put a price on a cleaner future”, 13/10/2010, http://www.theaustralian.com.au/news/opinion/put-a-price-on-a-cleaner-future/story-e6frg6zo-1225937875487
Greg, some points to consider for lessons:
Government can get the price wrong or unnecessarily higher than it should or could be at taxpayers’ expenses, so it is not just a matter of a price. We need the best and lowest price to be costly effectively and efficient!
Labor tradition of tough reforms – what about the abandon of the ETS in last term?
Climate change: is the science a complete certainty?
The CPRS: government needs to consider why both the coalition and the Greens opposed it. Further was the CPRS a good or a flawed approach? It can’t and shouldn’t simply think any scheme is good!
There are more points the government should consider.
Greg, some points to consider for lessons:
Government can get the price wrong or unnecessarily higher than it should or could be at taxpayers’ expenses, so it is not just a matter of a price. We need the best and lowest price to be costly effectively and efficient!
Labor tradition of tough reforms – what about the abandon of the ETS in last term?
Climate change: is the science a complete certainty?
The CPRS: government needs to consider why both the coalition and the Greens opposed it. Further was the CPRS a good or a flawed approach? It can’t and shouldn’t simply think any scheme is good!
There are more points the government should consider.
2010-07-12
Link between carbon price and ETS unnecessary
Comments on Frank Jotzo “Climate action an issue that will not fade”, 10/07/2010, http://www.eastasiaforum.org/2010/07/10/climate-action-an-issue-that-will-not-fade/
The proposal to allocate more of the revenue from carbon tax to consumers rather than to shareholders is a sensible one in the right direction.
The middle way proposal to have a low carbon price with an ETS structure does not appear to be so sensible – why should a carbon price be necessarily linked to an ETS? It will have the same problems with any ETS.
A clean carbon tax can stand on its own to achieve all important objectives of emission reductions and does not need an unnecessary ETS to mess up the system.
A carbon tax coupled with returning the revenue to all residents will be far better and superior option than a limited and often heavily distorted ETS. It is highly likely to have strong public support.
An equivalent carbon tax on border trade can avoid or reduce carbon leakage. Coupled with compensation for low emission countries on per capita basis, it will be internationally acceptable as well.
The proposal to allocate more of the revenue from carbon tax to consumers rather than to shareholders is a sensible one in the right direction.
The middle way proposal to have a low carbon price with an ETS structure does not appear to be so sensible – why should a carbon price be necessarily linked to an ETS? It will have the same problems with any ETS.
A clean carbon tax can stand on its own to achieve all important objectives of emission reductions and does not need an unnecessary ETS to mess up the system.
A carbon tax coupled with returning the revenue to all residents will be far better and superior option than a limited and often heavily distorted ETS. It is highly likely to have strong public support.
An equivalent carbon tax on border trade can avoid or reduce carbon leakage. Coupled with compensation for low emission countries on per capita basis, it will be internationally acceptable as well.
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.
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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