Carbon tax is not Green…

When I think of environmental policy I don’t think of a carbon tax or an emissions trading scheme, they leave me wondering what good they actually do for the environment around us.

How does this policy result in greener water ways, less destruction of our forests, a cleaner atmosphere, or a reduction in fossil fuel usage?

Surely to combat climate change we need environmental policy not more fiscal policy? This move to create a low carbon economy to me at least appears nothing more then conservative politics to give the money men a new financial playground at the expense of the consumer and local communities in developing nations.

Julia Gillard’s carbon tax is really just placing a fixed price on carbon permits till an emissions trading framework can be introduced. The legislation that goes before the house will be for an ETS not a carbon tax.

It seems Australia is set to embark on a domestic cap-and-trade emissions scheme, where by polluters can buy their way out of their obligations to the environment and pass on those costs to us the consumers while adding in a bit extra to cover the cost of doing business under the ETS.

Sure you the end user can do you bit and reduce your “carbon” foot print by changing your light bulbs and buying that prius etc but at the end of the day it’s not the consumer that creates these emissions it’s big business and resource infrastructure.

A cap-and-trade scheme has two sides, the first being to cap pollution and the second works by creating a commodities market where companies can trade emission permits. A company must hold enough permits to cover their pollution, so if a company goes over the cap they must acquire additional emission permits off the market from a company with spare emission permits to sell.

The problem I have with this is does this really encourage companies to go out of their way to restructure their business to reduce emission’s or are we just creating another false financial industry?

lets look at the European Union for a moment where an ETS and been operating since 2005 and is the largest multinational ETS in the world. How has this effected emission out put there? Well to be blunt it hasn’t, it’s been modest at best. In fact the big polluters ended up with a credit windfall as they were issued credit to begin with to cover their historical pollution levels.

More emission permits were granted in the EU then there were emissions, this resulted in the value of permits falling dramatically and the EU introducing a tighter command and control method that economists say should be avoided at all costs to reduce the cap.

Business always takes the path of least cost, when deciding on a course of action. Carbon trading actually encourages business to continue on as usual as emission permits are frequently more available from less developed nations and are a cheaper solution then long term structural changes to the business. This is magnified when those costs can be directly past onto the consumer.

All a global ETS does is allow countries like Australia to buy in emission permits from countries with less infrastructure at the expense of the population of those countries. Lets look as Zimbabwe as a hypothetical ruled by a dictator with little regard for his people and an out of control economy. We as a developed nation provide a new free export market to Zimbabwe in the form of emission permits what incentive is there for the leaders of that nation to better the lot of his people when he can sell their poverty and lack of infrastructure to us in the civilised world?

Still a if there must be an ETS surely a global agreement is the only way to go, how does this effect the level playing field of international markets? Industry leaders will tell you that if goods are imported from a nation without a carbon price then surely we must place a tariff on those goods, which just leads to “green protectionism” placing a burden on nations that may not be equipped to cope with these extra costs.

Domestically if we look at LNG which is a massive emerging resources industry here in Queensland it competes on a world stage with countries like Indonesia, Malaysia, Omen, Qatar, and Eastern Russia all of whom have no carbon price, and are not likely to introduce one. This could have a crippling effect on this industry as it tries to complete while having an extra tax placed upon it.

Of course our government likes the ETS, it’s something that’s on the world stage in the EU and wants to be seen as proactive, and of course lets not forget it creates a new revenue stream.

But lets me honest what is this market based approach to control pollution actually achieving, shouldn’t a greener, healthier environment be the basic tenant of any environmental policy?

This new economic theory may well create the worlds largest commodities market, and employ all those failed hedge fund mangers looking for jobs after the GFC but it could also create a state of emission leakage where domestic action to reduce emissions leads to the increase in global emissions by companies simply moving production to new less environmentally friendly places and ramping up that production.

Surely an ETS is environmentally ineffective, from the EU and every other ETS market alive today we can see they have resulted in scant all emission reductions, nor green jobs, nor technology. No what we need dear friends is a new radical approach to this problem, one that shifts societies thinking and beliefs with a focus on new technology that leaves whats left of the worlds fossil fuels safely underground.

When Julia tells you that she won’t put her ETS or carbon tax on petrol you know the policy is a dud. We need real policy and real incentives to change our ways not on the consumer level but at the supply end of the spectrum. Lets make it cheaper for business to restructure then to continue on in the old ways… to make it work it has to work on the balance sheets for industry and while emission permits exist as a cheaper option that’s the path business will travel.

Put in place the command and control regulations, and support emerging green technology on a large scale, don’t tax them give them R&D breaks, reduce their payroll tax etc etc etc. Use the tools to enable a new green industry don’t introduce economic theory that maintains the status quo and makes my investment banker more money, he doesn’t need it and the platypus doesn’t care.

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