Planet McCrann

My comments in this column are not deliberately trying to be political. In fact, I am trying to be apolitical: I see carbon pricing as an economic issue. However, I realise that this issue is so divisive that it has become impossible to comment on carbon without being seen as making political comment. That is not my objective. My advocacy of a carbon price, for better or worse, has been consistent regardless of whether it was the ETS proposed by then Prime Minister John Howard in 2007 or the CPRS under the Rudd Government supported by then Opposition Leader Malcolm Turnbull in 2009-2010 or the proposals under the current Greens-Labor-Independent government.

So after reading Terry McCrann’s commentary on the carbon tax in the Herald Sun yesterday I felt compelled to point out some of the inaccuracies.

You don’t need to worry about the $10 billion or $20 billion or more flowing to Canberra, because as Gillard and Combet keep claiming, you won’t be paying it. No, only the big so-called polluters will be paying the tax. Believe that and I have an opera house to throw in with the bridge I’ve got to sell you.

Let’s be clear on this. The carbon tax is applied at an industry level, ie the top 1,000 emitters in the country.  They pay for each tonne of emissions they emit. Yes they will attempt to pass it through, with some having more success than others. This will invariably flow through to some carbon intensive goods that households purchase. Some of the pass-through will be to businesses rather than households, some of these businesses will and some of them won’t be able to pass them on to their customers, some may even be forced to close.

But in summary, emitters are the ones that directly pay the “tax”; households pay indirectly through the increase in costs of some emission intensive goods. Some of these price impacts we will notice, such as an increase in our already high electricity costs, or an extra 6c/litre in petrol. Some of these we won’t, such as a 2c change in the price of a litre of milk (meaningless in the context of the current price war between the supermarket majors), or a fraction of a cent or lower price rise in the case of most other grocery items due to their almost negligible carbon content. We have a choice as householders. We can continue to consume emission intensive goods in exactly the same way as we had before. Or we can choose to modify our buying patterns to avoid these goods.

There is a very clear bottom line. This is a huge tax. It will grow to be at least half the size of the GST, perhaps even more. You all got fully compensated for the GST with the personal tax cuts. The Gillard-Brown government isn’t even promising that with this tax.

Let’s be clear on where this idea of household assistance came from. Historically, where cap-and-trade was implemented (eg US SOx & NOx trading since the 1990s or the EU ETS), emitters were “grandfathered” with permits, so there was no money raised at all. Basic economics says that regardless of whether free permits are received or not, a profit maximising firm will always price in the market price of the permits, so your end commodity includes the value of the permit.

This was one of Europe’s big mistakes; building in grandfathering with the misplaced idea that giving permits to emitters would ameliorate the extent to which they passed on prices. European electricity customers have felt the burden of this since 2005, European power generators have seen substantial “windfall profits” and European policy makers have realised their mistake and are now moving to full auctioning for the power sector from the start of Phase III of their scheme (from 1 January 2013). Permit allocation or the distribution of cash from auctioning or the tax is basically a large equity allocation issue. Why not provide a basis for a redistribution of the tax base from one of consumption insensitive to carbon content to one of consumption inclusive of carbon content, combined with assistance measures?

This is no different to the change in taxation base of purely income to a mix of income and consumption. If all we are arguing about is whether the household assistance package should be via lump sum payments, welfare package amendments, income tax reductions or reductions in consumption tax, then at last we are having a sensible debate about structural reform of the welfare and taxation system.

Allowing a political comment: you could continue the analogy by observing that Labor ran a big fear campaign with the introduction of the GST and also committed to a “rollback”, and that the then government implemented the reform in conjunction with a minor party with the then balance of power in the Senate (the Democrats).

Just to really make you feel enthusiastic, Gillard and Combet promise to hand the other half that is raised to climate change spivs and mainchancers – by splashing the money on useless wind farms and solar power(less) plants.

No, under the Howard’s ETS or Rudd/Turnbull’s CPRS or the currently proposed scheme, money does not go to wind farms or solar plants or climate change spivs. The amount of money raised that does not go to household assistance goes to supporting the Emission Intensive Trade Exposed (EITE) industries and some to other sectors to offset the impact (this is under debate at the moment). The formulation under Howard’s ETS and the CPRS is that EITEs would be given free permits and that all of the money raised by the residual auctioning of permits would go to household assistance. The basic idea of EITE assistance is to avoid carbon leakage; to reduce the risk that jobs will be lost offshore without any benefit to the global emissions profile. To be fair, I would be as critical as McCann is if the revenue raised was to be used to fund abatement; that is the job of the carbon price itself, not the public purse.

A tax that’s exactly opposite to the reform of the GST and the price-cutting impact of tariff reductions, will very seriously damage the economy.

Modelling by Treasury in 2008, and to be updated this year, shows the actual impact on the economy. The key thing to note here is that the carbon price is not the cost to the economy. The carbon price is a mechanism that structurally adjusts the economy, away from carbon intensive activities and towards less carbon intensive activities. The modelling shows that injecting the revenue raised back into the economy preserves economic growth and avoids a dead weight loss. Real incomes continue to rise; GNP per capita continues to rise.  The main impact is a slight shaving off of growth, about 0.1% per annum in the case of modest abatement through to 0.2% per annum in the case of more aggressive emission reductions.

Terry McCrann is arguing about another tax on some other planet.

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Comments

  1. I vote green, support the green but I am frankly annoyed by how this carbon tax is implemented.

    This tax will only cost jobs and add more friction, Carbon will not be reduced in a meaning full way as Fossil fuels are a tiny tiny part of the human carbon emission (less than 2%).

    This tax would have been a wonderful opportunity to solve our Dutch disease problem but pushing for a stable financing of the green energy transformation that would have created high value jobs (research, high tech industry, + tradies) & non-offshorable & more modern/sustainable society.Instead we are just going to be compensated.

    What a loss of opportunity.

    will endup by only have digged holes and no tech, no industry, no brain.

    What a shame

  2. Great article Coyote – this is the level and standard of debate we should be having about this problem.

    I particularly like this:

    “If all we are arguing about is whether the household assistance package should be via lump sum payments, welfare package amendments, incomes tax reductions or reductions in consumption tax, then at last we are having a sensible debate about structural reform of the welfare and taxation system.”

    Exactomo – the welfare/tax system is the BIGGEST problem we face in this country. We missed the bullet on the MRRT to setup a SWF (i.e should have been done 10-15 years ago), including changing state based royalties.

    Negative gearing has been raised here (Leith work on this is top class) as an obvious black hole and disincentive to cheap, responsive supply of housing.

    The level and wastage of transfers to the lower income 25% households is outrageous, whilst the burden shifts further and further to upper middle class, as middle class welfare becomes entangled in political bribes and rhetoric.

    Add in the state of superannuation taxation, the too low level of GST (and too many exemptions), and the countless loopholes for corporate Australia, and the system is an abject mess.

    I hope the upcoming Tax Summit does something in this regard, but I’m not holding my breath. Again ideologies – not pragmatic solutions – will get in the way of real reform.

    The state of the debate raised in the MSM about tax/welfare reform (i.e focus on the “dole bludgers” but not real reform) is pathetic.

    Again, I hope – I hope we can raise the debate to a better standard and level of discussion.

    • The MRRT wasn’r raised 10-15 years ago because mining wasn’t as proifttable then. It’s a short-sighted fix to government profligacy.

      • A SWF still should have been put in place. We need to capture some of the revenue from selling these non-renewable resources for the long term.

        As witnessed recently a budget surplus isn’t saving for a rainy day as it can disappear pretty quickly (no matter which set of talking heads is in charge). But neither party has the foresight or set of brass ones to propose it.

  3. Don’t you see? This issue has become so politicised that it is IMPOSSIBLE to leave politics out of it. How can you make comments like this:

    “regardless of whether it was the ETS proposed by then Prime Minister John Howard in 2007 or the CPRS under the Rudd Government supported by then Opposition Leader Malcolm Turnbull in 2009-2010 or the proposals under the current Greens-Labor-Independent government.”

    And then try to be apolitical? You have deliberately left out the current leader of the Coalition (who is way ahead in the polls) to make a point about your own ‘impartiality’. You totally ignore the fact that Howard opposed the climate change con vigourously for all but the last few months of his term and only when it was clear that he was going to lose the election. He introduced an ETS policy and it didn’t help him in the polls one bit.

    In fact, not once in the article do you mention the CURRENT opposition leader. The one who outright opposes this tax (yeah, he has his own lip service policy that I disagree with but this isn’t the issue at hand).

    The very existence of this blog is a political statement because it assumes that catastrophic global warming is real and that we must ‘do something’ about it. Regardless of the evidence (which does not support the hypothesis). Being such a politicised issue, with both sides of the debate being drawn on clearly political lines, claiming impartiality, then supporting a carbon tax is strange to say the least.

    “We have a choice as householders. We can continue to consume emission intensive goods in exactly the same way as we had before. Or we can choose to modify our buying patterns to avoid these goods.”

    And why does the government get to decide which items we should or shouldn’t purchase? Don’t you see? This is my point, how can you claim, with a straight face, to be impartial, yet be commenting so clearly down partisan lines? You can’t claim impartiality and support such a massive intrusion in to the daily lives of ordinary citizens. It’s simply isn’t possible.

    You even use treasury modelling, the same treasury that is basically in bed with the ALP, as evidence. I mean, come on man.

    When you have one major party opposing the tax and the other major party implementing it (after very clearly saying they wouldn’t), then you come out in support of the tax, you can’t then reasonably claim to be impartial and apolitical.

    • How about looking at if from another perspective?

      You’re thinking that politics leads thought.

      Have you ever considered that thought leads politics?

      Coyote is saying that regardless of what politicians are doing he’s still on the side of a carbon price. If there were no parties, if we had a single dictator, if we had no politicians and voted on every issues individually he’d still have the same position. How is that not apolitical?

      Frankly for me the idea that for many people politics does lead thought is very scary. It means you have to put peer pressure, the ‘group mentality’ and the desire to belong, all reinforced by contradictory talking points, above active thought about your goals, their priority and the best way to achieve them.

      • “Coyote is saying that regardless of what politicians are doing he’s still on the side of a carbon price. If there were no parties, if we had a single dictator, if we had no politicians and voted on every issues individually he’d still have the same position. How is that not apolitical?”

        Because how can he come to this assumption without being partisan?

        I would argue 100% the opposite. If we had a reasoned dictator who only ever considered the facts and the evidence as well as all implications of his policies on balance, there is absolutely no way he would come to the decision the ALP and AGW alarmists have come to.

        I’m not saying that politics should lead thought. I’m saying that, in this issue, politics is the dominant factor. The science is not settled, there is no evidence to support the claims that CO2 emissions are even a little bit bad for us, let alone the harbinger of doom. Therefore the only way to come to the conclusion that he has come to is to be partisan.

        • Carbon E Coyote

          There is bipartisan agreement that what the scientists are saying is correct.

          That’s why it’s both ALP AND Liberal Party policy to reduce emissions by 5% on 2000 levels by 2020. The political disagreement is about how to achieve this.

          • CeC, if you were truly blogging apolitically as you claim to be, then you should also be presenting the economic pros and cons of addressing MMGW by means *other* than pricing carbon dioxide.

            After all, you say here that “it’s both ALP AND Liberal policy to reduce emissions by 5% .. the political disagreement is about how to achieve this”.

            If you wish to be seen as apolitical and impartial, then one would expect to see fair, balanced, and equal treatment given to the economics of other (ie, *non* CO2-pricing/trading) initiatives too.

            I look forward to a fair and balanced, non-partisan, impartial treatment of the Coalition’s mitigation policy.

            Disclaimer: I am *not* a Coalition supporter. In seeing all politicians and govt as the source of problems rather than the solution, my political views would be better labelled as Anarcho-pacifist.

          • talking about to reduce emissions by 5% on 2000 level is a fallacy with at growing population, at 2% growth rate it would be like 25% less emission than now.

            Why even talk about it as it was a serious proposal ?
            Big Australia and this 5% reduction are incompatible.Bloody politicians.

          • Actually, there isn’t. The Liberals have stated very clearly that they believe the science isn’t settled.

        • I think we are going to be 100% disagreeing on everything here.

          The dictator argument is useless. If it was you we’d have no price. If it was me of Coyote we would. It’s a waste of time even going down this path.

          You’re arguing back to the science, which is fine, but it can be argued 100% away from politics. You’re confusing science and politics. They are separate issues. You pick your policy first, then you pick the politicians who best represent them if you want to get into the politics of making it happen/not happen.

          I don’t even get how politics and the science entwine in Australia? All the major parties accept the science and have abatement policy’s. There’s disagreement about the way to do it, but that’s not disagreement on the science. You’re trying to say the opposition’s policy is just paying ‘lip service’, which means they support you even when they say they don’t.

          This means either;

          *They accept the science of climate change
          *They are liars, their supporters know they are liars and don’t care/support the lie

          Now this is getting off-topic, so I’ll get back to the main point. If you have an issue with the science that’s cool. You can’t claim that someone you disagree with is just following a political line when politics can, and in this case is, outside the argument. The partisan criticism is invalid and a underhanded way to give your disagreement extra credibility.

          If you have a problem with the treasury? Awesome, make your case. Think carbon pricing won’t be effective? I’d like to know how.

          • “I think we are going to be 100% disagreeing on everything here.”

            Exactly, which is my point. Good to see we agree.

            “The dictator argument is useless. If it was you we’d have no price. If it was me of Coyote we would. It’s a waste of time even going down this path.”

            Agreed again, it was a waste of time. So why did you go down that path?

            “You’re confusing science and politics. They are separate issues.”

            Totally agree again. They SHOULD be separate, in this case they aren’t. Which is the whole point of the discussion.

            “You’re trying to say the opposition’s policy is just paying ‘lip service’, which means they support you even when they say they don’t.”

            Yep, I sure am. As I say above, Tony Abbott has stated very clearly that he doesn’t believe the science is settled. Actually, I feel they should abandon their abatement policy, but hey, they live in a political world and are grown ups, they can make their own policy decisions.

            “*They are liars, their supporters know they are liars and don’t care/support the lie”

            Perhaps your should actually read their policies before commenting on them? Just a thought. Don’t forget the Liberals still have a few alarmists in their ranks.

            “The partisan criticism is invalid and a underhanded way to give your disagreement extra credibility.”

            Yes, because saying it’s so makes it so.

            “If you have a problem with the treasury? Awesome, make your case. Think carbon pricing won’t be effective? I’d like to know how.”

            This is getting ridiculously small here so I will refrain from making a detailed argument. I’ll summarise it for you:

            1. Hasn’t worked anywhere else.
            2. Plenty of people have done this already, look it up. If they can’t change your mind, nobody can.

          • Sigh. An imaginary dictator which agrees with you was your idea, not mine.

            You still haven’t given any proof here that the science, policy options and politics aren’t separate, except your projections.

            “The Coalition believes Australia should prepare for the great challenges of climate change and
            preserving our environment and heritage through Real and Direct Action rather than talk”

            http://www.liberal.org.au/~/media/Files/Policies%20and%20Media/Environment/Environment%20Policy.ashx

            What makes you think I haven’t read their policies? Sure there’s talking points from sections of the party that disagree, but the policy is the middle ground and is what gets written down.

    • MattR, whilst I agree with your perspective, an argument over whether or not CeC’s claim to apoliticality is valid, is to be drawn into another red herring diversion.

      The issue at the heart of his claim is an appeal that he is unbiased. In this case, in the “political” sense of unbiased.

      Why not simply distill the argument of “political” bias (or lack of), down to the essential point. Is he *biased* (whether politically speaking, or in any other context)?

      The answer is obvious –

      http://macrobusiness.com.au/about/

      “You can’t claim impartiality” when your entire career and future financial prospects have been built on the premise that “catastrophic” Man-made Global Warming is both real, and, must be addressed via “clean” energy initiatives, in concert with destruction of “dirty” energy, all to (allegedly) be achieved via a new global derivatives market trading on a mental construct (ie, “permits” to emit CO2).

  4. Firstly can we please stop talking about “Carbon” emissions unless that is the particular topic we wish to discuss. We are talking about the levels of the colourless naturally occurring gas Carbon Dioxide. Every day we see this misinformation on TV with, as an opening preamble to any story on ‘Carbon’, film of trucks and various smoke stacks emitting huge amounts of Carbon particles . Don’t even mention the ABC who, despite major objections, continues to depict huge steam clouds as ‘Carbon’ The aim is to persuade a fair section of the population that the AGW debate is about some dirty Carbon and Sulphur emissions.
    Don’t even mention the ABC who, despite major objections, continues to depict huge steam clouds as ‘Carbon’ If this was an honest debate none of these distortions would be needed or occurring.

    Quoting Treasury models without a detailed list of the assumptions is meaningless.
    The shift away from Carbon Dioxide intensive industries to less Carbon Dioxide intensive industries is a shift away from what to what? What are the ‘Carbon’ intensive industries we are going to kill off? What are the less Carbon Dioxide intensive industries that are suddenly magically to appear?
    Less farms?
    Less manufacturing?
    Less mining?

    More retail?
    More Government?
    More leisure parks?
    More Coffee shops?
    More laudries as we “eke out a living taking in each others washing”?

    Treasury, like most so-called ‘Economists’ including University Professors, does not even include in the models the effect on the external account.
    Essentially in a nation that suffers from chronic Foreign Debt and is forced to sell our assets continuously, day after day, year after year, in order to cover an intractable Current Account Deficit, we are now proposing to restructure the economy to make that problem even worse.

    Sure, if you regard the external account as an infinite source of free capital you can come up with any model to advocate anything in the domestic economy.

    Yes, we need sensible debate. So let’s have some with the full implications of what we are doing taken into account. Quoting some obscure Treasury model as proof of a point is hardly sensible. In any case Treasury models have already been proven to be highly unreliable in predicting the future. Nothing has changed at Treasury.

    Further, even assuming we want to reduce Carbon Dioxide emissions there is considerable evidence to suggest that a Carbon tax is one of the least efficient ways of achieving that purpose. Certainly the models that demonstrate that are at least as reliable as those of Treasury. I don’t have time to go there right now and perhaps there is not much point here but I will try to get back to it.

    • “…if you regard the external account as an infinite source of free capital you can come up with any model to advocate anything in the domestic economy”

      Or, you can view it from an elitist standpoint – as a means to enslave a nation via TOTAL debt dependency.

      Both private, and public, debt dependency.

      That’s where other much bigger nations are already. And where we are rapidly following.

    • Flawse
      Totally agree. I would argue that the least carbon intenive industry is of course Government – the fast growing industry in the developed world.

      Next we will see packaging that displays the amount of carbon emitted in producing the product. Woolies and Coles can have Super Tuesday specials for “no carbon products”. And the shepeople will follow as long as they are supported by the government.

      This tax will do nothing other than provide consolidated revenue for government and to keep the majority of the shepeople on a short leash.

      I think I will need to re-read George Orwell’s book “1984” to prepare myself for the future.

  5. Firstly, this is the debate we were not supposed to have had. Labor assured us of that prior to the last election.

    I don’t support a carbon tax, nor by extension an ETS. My reasons are pretty simple and someone more sophisticated than I will probably destroy them.

    – Negligible impact-effect on global carbon emissions.
    – Political determination (and exemption) of affected industries eg coal, agriculture
    – Method and accuracy of emissions measurement
    – Creation of another level of government bureaucracy at significant cost
    – Further complication of the taxation system – both the imposition of the tax itself on businesses and the proposed compensation for increased costs to households via the transfer system
    – When converts to ETS, becomes another plaything of the bankers

    From that most reliable of sources, Wikipedia:

    “In contrast, an emission tax is a price instrument because it fixes the price while the emission level is allowed to vary according to economic activity. A major drawback of an emission tax is that the environmental outcome (e.g. a limit on the amount of emissions) is not guaranteed. On one hand, a tax will remove capital from the industry, suppressing possibly useful economic activity, but conversely, the polluter will not need to hedge as much against future uncertainty since the amount of tax will track with profits. The burden of a volatile market will be borne by the controlling (taxing) agency rather than the industry itself, which is generally less efficient. An advantage is that, given a uniform tax rate and a volatile market, the taxing entity will not be in a position to pick “winners and losers” and the opportunity for corruption will be less.”

    Read the Wikipedia Emissions Trading article and try not to feel that carbon pricing is:

    a) is a bureaucrat’s wetdream
    b) ineffectual in reducing emissions
    c) best left in Kyoto.

    http://en.wikipedia.org/wiki/Emissions_trading

  6. ‘I see carbon pricing as an economic issue.’

    No, carbon ‘pollution’ and all other form of pollution (such as radioactive pollution from nuclear energy) should not be an economic pricing issue – it should be an engineering/medical/environmental science issue.

    Most of the real pollution problems can be solved, there is technology, but we have not heard the voice of engineers and scientist – only the voice of politicians, market economists, and the officially appointed speakers…

    As i have said before – it requires a religious zeal to believe in the dogma of ‘minimizing carbon’ will ‘mitigate climate change’. Why not all the other known pollutants? Why?

    I promise to stop breathing one day, that will be my contribution to this debate.

  7. Bring on the ETS, they should double it and scrap any rebates to the household. The future only holds energy shortage and most of our energy comes from carbon. i see global warming, regardless of if the science is settled, as a political framework for discussing the other huge issue in the room. Peak oil! Its very clear that peak oil or peak liquid fuels is not something politicians can talk about as there is no fix, so we talk about GW instead.

    The ETS or whatever it ends up as, provides an incentive for people to make changes to their lifestyle which they would not make otherwise. I understand that no one likes making changes and would not do so without a financial incentive.

    Any rebates from the ETS should go to encourage people to exchange high energy using items in their lives for more efficient ones. Australia could be well ahead of the curve when reality catches up with the rest of the world.

    Yes i know i am dreaming, people don’t like the truth and anyone who tried this would be kicked out of government in 20seconds.

    btw peak oil is about the RATE OF PRODUCTION. nothing to do with how much oil is in the ground.

  8. H&H, I see you’ve chosen to delete my commment @ 10:42am.

    Would you please explain how it did not “even pretend to add argument”?

    How is the mainstream media *reported* fact of a major international banks’ central role in pushing carbon trading not highly relevant to this blog?

    How is the mainstream media reported fact of Malcolm Turnbull’s legal battle over the HIH collapse when head of Goldman Sachs Australia, and his salvation from appearing in court as a defendant thanks to a “confidential” out-of-court settlement made by GS whilst he was Opposition Leader pushing an ETS, somehow *not* an extremely relevant point of argument?

    • Such is posting..David..however,
      You could score points, now you
      mentioned it ,by,listing
      “Other Peoples Money ” by Andrew Main..under DE’s book review section….All’s not lost..cheers JR

  9. I think of ,
    Costs increasing on the,
    Alloy bike production ,as it’s spokes not as much…with and
    Following cooking shows ,will get expensive.
    Bakeries Deliver and Bake and do Hospitals use stacks…
    Lots of subsidizing could be needed with-out thinking…for-today.
    Cheers…keep us thinking CEC…JR

  10. There is an extremely interesting book (self) published a few years ago by one Professor Lance Endersbee called ‘A Voyage of Discovery’. You may be able to get a copy through Monash Print Services at Monash University.

    While not specifically about climate change, rather, geology; the ideas he expresses go to the heart of these claims of human induced warming, greenhouse gases etc.

    Mr Coyote and others talk about human induced climate change as ‘fact’ & their arguments flow from that. The fact is though, there are other explanations that are more logical than anything Mr Coyote could come up with.

    The book is well worth reading, written by a guy who was the Dean of Engineering & Pro-Vice Chancellor at Monash University.

  11. H&H,

    Please don’t delete the comments, they are honest expression of people’s opinions. There is always value in diversity of views: “When everyone is thinking the same, no one is thinking.”

    On the actual issue of carbon tax in Australia – i enjoy reading Greg Atkinson’s blog. He is an Aussie living in Japan, often commenting about economic/financial issues.

    Link to his view on this issue:

    “Carbon, a new tax and Gillard’s Lifeform Levy”

    http://www.shareswatch.com.au/blog/opinion/carbon-a-new-tax-and-gillards-lifeform-levy/

  12. Coyote,

    “The amount of money raised that does not go to household assistance goes to supporting the Emission Intensive Trade Exposed (EITE) industries and *SOME* to *OTHER SECTORS* to offset the impact”

    Ok.

    Let’s first put this in context, so you may appreciate my and others profound scepticism.

    First, the government claimed that “every cent” would go to assisting households.

    Then, in recent days, they claimed that “over 50%” would go to assisting households.

    Already we have great reason to doubt their honesty and integrity.

    Now to your comment.

    What *exactly* are these “other sectors” that you claim will also get a piece of the financial action (ie, in contradiction of the govt’s original assertion)?

    Do you have any comment to make about the MSM’s burying of the fact that we are obliged (viz. Copenhagen Accord) to give 10% to the UN (ie, mainchancers and rent-seeking spivs par excellence)?

    http://www.youtube.com/watch?v=XX5rlhbYTXY

    [H&H, before deleting this comment, please first consider how this could possibly be not relevant to the argument. We have a right to know where the money will go.]

    • Carbon E Coyote

      Good questions David.

      You obviously didn’t see Lateline on Wednesday night. The claimed “difference” in the government’s position depends on whether you cut off Combet’s quote after the first thing he lists of three things they will use 100% of the revenue for or let it play to the list of the three things:

      TONY JONES: The Opposition says you’ve already broken a promise there, that originally you promised 100 per cent of the compensation would go to households; now it’s down to just over 50 per cent. Is that true?

      GREG COMBET: Oh, well, that’s complete rubbish. We’ve been making very clear from day one, since the Prime Minister announced this carbon price framework in February, that all of the revenue, every dollar that was raised by the payment of the carbon price from the large polluters would be used to assist households to support jobs in the trade-exposed part of the economy in particular, the most affected industries, and to support programs that’ll get us towards a low carbon future in our economy. We’ve been making that point constantly and regularly. So, that’s a – I don’t understand that proposition from the Opposition.

      end quote.

      On the other industries, it’s essentially the debate about the coal-fired generation sector. They are emission intensive, clearly, but not trade exposed. There’s an active debate on this, with valid arguments either side. I’ll cover this debate in a future blog.

      • Coyote, thanks for responding.

        Unfortunately though, you’ve resorted to more misdirection here, via the classic “straw man” fallacy. You’ve cited one (1) example by way of attempted rebuttal – Combet on Lateline – and implied that somehow this refutes the claim that the government has changed its tune from “every dollar” to “50%” being returned to households.

        I see your Lateline, and raise you ABC Radio (Crean), ABC (Combet), Daily Telegraph (Combet), and Gillard (Question Time) –

        http://www.theaustralian.com.au/national-affairs/climate/labor-minister-accused-of-deception-over-compensation-for-carbon-tax/story-e6frg6xf-1226018900265

        What do you say to Combet’s statement on March 7 – “Every dollar that is raised … will be used towards supporting households, with a particular emphasis on pensioners and low-income households.”

        I note that you’ve not answered my actual questions. On the first – a specific request to clarify *exactly* which “other sectors” – you have mentioned only the “coal-fired generation sector”, and by use of the preceding term “essentially”, you have clearly implied that this is the *only* other sector that will get a slice of the $tax action.

        Is that what you are saying? That aside from “households”, “trade-exposed” industries (Combet quote), and “essentially” the “coal-fired generation sector” (your words), *no one* else will get any slice of the CO2 tax pie?

        How about the ‘green’ / ‘clean’ energy sector? Are you saying that not one of them will get a cent? No subsidies, no rebates, no other forms of “investment” assistance via the billions raised in CO2 Tax? How does your own *Cleantech Ventures* feel about a “no green subsidy” future? I imagine Tim Flannery and his Geodynamics “hot rocks” crowd wouldn’t be pleased to hear that either –

        http://www.hotdryrocks.com/content/view/39/2/

        http://beyondzeroemissions.org/media/newswire/smh-wrestling-climate-conundrum-110221

        Finally, I note that you did not comment *at all* on my specific question and Question Time link, vis-a-vis 10% of the CO2 Tax being already committed (by KRudd at Copenhagen) to go into the UN’s Climate slush fund.

        So basically, you’ve commended me for my questions… then one loosely responded to one with a straw man fallacy, and totally ignored the other.

        This is hardly the level of intellectual integrity and/or rigour that one should reasonably expect from one who is promoting the case for what is arguably the greatest and most far-reaching paradigm shift since the Industrial Revolution.

  13. Although I am a skeptic about the following ‘facts’

    1. The climate is changing (do we even know what the long run natural variability is?)
    2. That human activity is causing a change
    3. That ceasing this activity will stop the change
    4. That the climate changing is bad
    5. That our proposed actions will actualy reduce emissions

    I don’t believe a carbon tax or a cap and trade system are necessarliy bad.

    The first point would be to note that revenue raised should be refunded through reductions in taxes elsewhere. I don’t see the need to increase the total tax burden.

    If this is the case, surely raising revenue from a proxy of the actual resource use of these heavy industries has the potential benefit of slowing the resource extraction industries while stimulating the rest of the economy.

    The cap part of the proposed carbon price will also stimulate investment in research and technology for both alternative energy sources and pollution reduction systems (some sort of greenhouse gas scrubber). I imagine these investments will have flow on benefits.

    Although I don’t believe this policy will have any impact of global emissions, someone does need to demonstrate willingness to act (if we actually do want to act that is). So I still see a justification here.

    • CM – a couple of points:

      “…has the potential benefit of slowing the resource extraction industries while stimulating the rest of the economy.”

      Mmmmm – don’t think that is what the government wants (nor intends). Combet has essentially guaranteed the coal industry of it’s rosy future under any carbon scheme and surely, for fairness’ sake, will do so for others in the resource extraction sector. Gillard is busy assuring the AWU that no worker will lose their job as a result of the impost of a carbon tax….I sense leakages and backflips already!

      “The cap part of the proposed carbon price will also stimulate investment in research and technology for both alternative energy sources and pollution reduction systems (some sort of greenhouse gas scrubber).”

      Great in theory – but I suspect, unlikely. Aap and trade is open to manipulation and emission ‘rights’ will become simply another tradeable commodity, global banks have already in place divisions to take advantage of the ETS market. I believe technological fixes will be found for much pollution control The following (CeC’s alter-ego?) may be of interest.
      http://www.coyoteblog.com/coyote_blog/2007/07/why-a-carbon-ta.html

      and finally,

      “I don’t believe this policy will have any impact of global emissions”

      Nor do I. I think the enormous cost of implementing and operating the scheme far outweigh any prospective benefits.

      Cheers.

    • Personally I could tollerate the carbon tax if it directly funded tax cuts in other areas, like income tax, stamp duty, etc. Much like the GST did (or was supposed to do).

      What makes me 100% against it is that it relies on compensation that the government gets to dole out. This makes it look very very close to nothing but a wealth redistribution scheme to me.

  14. The economics – that is, the Money – of the MMGW debate is inseparable from the politics:

    WikiLeaks cables reveal how US manipulated climate accord –

    http://www.guardian.co.uk/environment/2010/dec/03/wikileaks-us-manipulated-climate-accord

    “Hidden behind the save-the-world rhetoric of the global climate change negotiations lies the mucky realpolitik: money and threats buy political support; spying and cyberwarfare are used to seek out leverage.”

    H&H, please allow my earlier post with multiple links vis-a-vis Goldman Sachs / Turnbull / HIH.

    If the founders of this blog truly purport to uphold free speech, acceptance of the right to express and value in discussion of non-mainstream views, reasoned debate, and evidence, then denying readers the opportunity to consider the sources/evidence I’ve presented is fundamental. The clear possibility of vested (and quite possibly corrupt) and *protected* big bankster interest at the very heart of our own political system, pioneering and driving the move towards an ETS since the early 2000’s, is a vital issue that should not be censored.

    • I think Dan (above) has hit the nail on the head.

      Global warming probably isn’t a huge issue, but peak oil certainly is and governments around the world are sh*t scared to even mention it. Governments have realised that we can talk about climate change (because it’s nebulous and off into the never never). But the actions required to combat climate change are almost identical to those required to overcome peak oil. So we tie ourselves up in knots to address climate change as a proxy for the real issue – peak oil.

      To the extent that a carbon tax or ETS starts us on the path towards greater sustainability, that has to be a good thing, surely.

  15. I know I still haven’t moved on from yesterday but… well Coyote I was wondering if you could help me.

    I found a report for the US Congress – Power Characteristics and Costs, published in 2008

    http://www.fas.org/sgp/crs/misc/RL34746.pdf

    Like Australia, they advocate a switch to natural gas as the cost effective first step if you want to reduce CO2 emissions.

    I’d like your opinion on Table 4. Estimated Base Case Results. It includeds O&M costs, pollution costs and fuels cost to give ‘Total Annualised $/MWhr’.

    Coyote do you have information to indicate what the carbon emissions cost would be per MWhr for a carbon price of of say a $10, $20, $30, $50 per tonne CO2 for new coal, gas, and coal with carbon capture and storage?

    I think it would make solar thermal much more competitive than the EPRI report on capital costs would suggest. If you value baseload power using proven technology in while reducing energy CO2 emissions, then solar thermal needs to be a serious consideration.

    • Carbon E Coyote

      Sure. The way you calculate the CO2 allowance cost is to multiply the cost of permits ($/tCO2e) by the carbon intensity of generation (in tonnes per MWh), which gives you a carbon cost in $/MWh. What they don’t have in the table is the carbon intensity, but roughly, gas CCGT is 0.4t/MWh, pulverised black coal is around 0.9t/MWh. So for a $10/t carbon price, gas needs to add $4/MWh and coal needs to add $9/MWh. So in their table, Pulverized Coal would become $72.10 and Gas would become $65.77, making it cheaper.

      I’ve never seen capital return figures on solar thermal so low as what’s in that table. Problem with all solar technologies is that they only run about 20% of the time, which gives them very poor capital utilitisation. Solar thermal below $4m/MW is unheard of, so on my numbers the capital return is upwards of $250/MWh.

    • Ok. Using the American figures with your carbon intensity figures, you would need a CO2 price of

      $41/tonne to compete with pulverised coal.
      $97.5/tonne to compete with natural gas.

      I don’t know how they get their capital return figures, but solar thermal can have a much better capital utilisitation for the key infrastructure such as generators when compared to say solar PV.

      A much better way of doing solar thermal is to heat molten salt, and then run a turbine from this stored heat. This kind of technology is already in operation in Spain, but with just 6hrs of storage (by Andasol). This means the generator has a capacity factor more like 50%, and this could be improved with more mirrors/storage.

      So you are right in saying that the mirrors of a solar thermal plant only ‘run’ 20% of the time. Which makes all the more sense to use Compact Linear Fresnel Refractors, which replace expensive curved mirrors with flat ones, and also use 1.5 – 3 times less land then parabolic mirrors.

      • Carbon E. Coyote

        If you use storage then yes it improves capacity factor but also comes with additional capital cost, say around 20% (haven’t researched this figure but it would be broadly right)

  16. You say, ‘The carbon tax is applied at an industry level, ie the top 1,000 emitters in the country.’

    But the largest players in the game, the miners , who extract the fuels will continue to export the ‘problem’ free of carbon tax.

    That is nonsensical.

    Conclusion: They are only implementing this as a precursor for the main feast, an ETS designed for the purpose of further transferring wealth, and power to the upper echelons of the financial elite.
    An ETS will make no measurable difference to the growth of anthropogenic CO2 in the atmosphere.
    The exponetially growing demand for energy will consume all economically recoverable fossil fuels within decades.
    If we are to survive as an industrialised civilisation we need a massive effort to develop cheap clean energy, not this ponzi carbon derivative trading scheme.

    • Here’s some food for thought.

      It is a paper by T Patzek and G Croft and their peak coal forecast using existing production data.

      http://xa.yimg.com/kq/groups/20593576/885722944/name/Patzek+and+Croft+2010+-+Peak+Coal+2011.pdf

      The stunning thing is they predict peak coal production in China by 2012.
      When you check, China’s coal imports are up 30% from 2009 to 2010 to 131 million tonnes net (imports minus exports).

      This may not seem significant in a country which already produces 2700 million tonnes of coal of year, but that’s still 5%, and by the looks of things those imports are set to grow further.

      The reality may be that while the rest of the world faces shrinking energy sources, Australia will be introducing a renewable energy system at least cost and enjoy the windfalls of a global coal shortage.

      • Interesting paper. Thanks Dave BD. I’m familiar with Peak Oil theory, less so with Peak Coal theory. I agree with Ralph above – it seems to me there’s a more plausible case to argue for near-term *measurable* and noteworthy impacts of Peak Oil, than there is for MMGW.

        Of course, just one alternate viewpoint to consider viz. this paper, is the simple reality that there is always *someone* out there who stands to profit (or can find a way to) from justifying and promoting any “scarcity” threat. I’m not in any way suggesting that this paper’s authors fit the bill.. I simply have no idea. Some research into their background, financial interests, funding of their respective Departments at Texas and Berkeley Uni’s clearly required.

        In my experience, adhering to a critically questioning philosophy of “Follow The Money” always stands one in good stead, especially in a world increasingly filled with claim and counter claim, all having serious ramifications if accepted.

  17. Hi David, yes healthy skepticism/cynicism in all things energy/economic is a must!

    The point like Peak Oil is not that we are about to suddenly run out of coal, but that the maximum ENERGY from coal production is likely to fall within this decade, or as the authors of this paper claim, by 2011.

    And it is not because we are running out of coal, far from it. The current reserves to production ratio is about 120 years.

    The point to remember is that like oil, we tend to find and exploit the biggest, easiest to extract resources first, by virtue of them being the easiest to find and most worthwhile to extract!

    So for example it is preferable to extract anthracite and bitumous coal (black coal) before sub-bitumous and lignite (brown coal) because it contains about double the energy for it’s mass.

    And if you look at America for example, that’s exactly what they have done.

    In 1998, they mined 1100 million tonnes of coal, for a total of 647 million tonnes oil equivalent.

    In 2008, despite mining more at 1142 million tonnes of coal, they only achieved 632 million tonnes oil equivalent.

    This is explained by the rapid increase in brown coal production in America to offset black coal production declines.

    Have a look at the BP Statistical review for world production of different energy sources.

    http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2008/STAGING/local_assets/2010_downloads/Statistical_Review_of_World_Energy_2010.xls

    And before you deride the results of BP as vested interest, the stats in general match with the EIA and IEA. These organisations are happy to give past production data, they just generally give very rosy/unrealistic forecasts of future energy consumption.

    As far as I’m aware the authors have used these results to argue against carbon capture and storage, as it would remove half the energy of an already dwindling resource. If you had to burn coal for energy, you are far better to install the latest power stations that have higher efficiencies than their older counterparts, and use this to stabilise our energy supply as we move to renewables such as wind, solar thermal and geothermal.

    • Hi DaveBD,

      Thanks for the additional clarifications.

      What really gets up my nose is the fact that TPTB are permitted to happily create trillions out of thin air, and funnel it through vested interests (ie, primary dealers) and thence (theoretically) into the broader economy – meaning that he who gets first use of the free money “makes the market” for anything and everything – whereas, those seeking funding for alternate energy tech development have to beg, borrow, and scrape to get third hand money, at interest (payable to the banksters). And due this fact the evidence from abroad seems clear to me, they mostly exist on the back of massive taxpayer-funded subsidies.

      If “we” were serious about the alleged threat of catastrophic MMGW – or indeed, Peak Oil/Coal – then to my mind there is absolutely no logical reason why such a supposedly existential threat would not have “us” passing laws to ensure that trillions in free money was created and pumped directly into alternate energy tech R&D.

      The fact that this obviously does *not* happen speaks volumes for the (lack of) true belief in the theory by the “players”. The absolute lack of sincerity of those elites, vested interests, and their assorted hangers on all preaching TEOTWAWKI due to human-released CO2 (or indeed, Peak Oil/Coal).

      If we can happily allow the Fed et al to create trillions from nothing for the primary benefit of Goldman, JPM etc, then clearly – faced with a supposed existential threat – we *COULD* just as easily insist that those same trillions be funnelled into alt. energy R&D.

      We don’t. Instead, new ways to tax and impoverish society (via debt servitude), while create a new artificial “commodity” market, are invented as alleged “solutions”. So it’s clearly a BS scam by the all-powerful bankster class. And the evidence backs that assertion.

      • But global corruption and greed doesn’t necessarily reflect on our ETS.

        And yes, if you believe in the collective wellbeing of society, then it is clear that we ought be moving away from fossil fuels to sustainable forms of energy.

        But now consider in America. The top 1% recieves 25% of their income. It is concievable that in an energy constrained world they would be completely unaffected, and that business as usual is by far in their best interests, as renewable forms of energy could potentially cause a significant redistribution of wealth.

        Consider also that, faced with future energy declines, the US has decided to act militarily. This should be obvious in their continued forrays in the Middle East. It is comical to watch them suggest budget cuts while leaving military spending out, when this consists of half of government expenditures.

        Consider that they spend $600 billion a year to maintain their energy dominance when this could instead be spent on real sustainable solutions. I’d imagine within a decade you could replace all electricity generators in America.

        The solutions are obvious, unless of course you prefer power and priviledge to global wellbeing.

        • Can you explain how exactly “renewable forms of energy could potentially cause a significant redistribution of wealth.”?

          More particularly, I’d very much like to know exactly how a transition to renewables would result in a redistribution of wealth *from the rich to the poor* … and not the other way around!

          For clarity, I am strongly against wealth redistribution. IMO, it – and taxation of any kind more broadly – is nothing more than legalised *theft*, thence cronyism. However, I’m very interested to see if you can make a plausible case for a “positive”, “classical” (ie rich->poor) redistribution of wealth thanks directly to a transition to renewable energy.

          Again for clarity, I have no problem with renewable energy in principle.

    • Note of course that without a bit of encouragement, and some method of transferring the wealth/energy of existing fossil fuels to renewable energy production methods, we would inevitably enter a period of exponential energy contraction.

      Using a carbon tax or ETS is one method to do this. And it is much easier to make the transition, and to research sustainable energy sources BEFORE you enter the period of terminal energy decline.

      All this needs to be considered with a monoculture agricultural system that is requires a stable climate to operate.

      And finally, while global temperatures might only have risen 1C in the last 200years, at the poles this translates to about a 2C rise and a rapid reduction of permafrost.

      We don’t want Siberia to defrost. The fossil record look completely different either side of past spikes in methane gas concentration (which has 20 times the global warming potential of CO2 but is relatively short lived in the atmosphere).

      Obviously a 5% reduction in Australia’s CO2 emissions will do squat diddly, but from where else should you start?

      Europe could equally have said the same thing, and yes you could argue that it has done little to curb global emissions, and that they were resource constrained anyway. But the rest of the world can learn from Europes experience, and has already profited from the technology transfer due to massive improvements in wind turbines.

      Imagine if Australia could do the same, and actually held onto our innovations in solar thermal and solar pv….

  18. “Using a carbon tax or ETS is one method to do this.”

    Can you support this claim?

    With respect DaveBD, I think your statement here, and much of the remainder of your post, is incredibly naive. Again with respect, it sounds to me like you have swallowed the banksters’ propaganda… hook line and sinker.

    Do you honestly believe that *any* new CO2 tax / trading scheme will actually function efficiently, and effectively result in “transferring the wealth/energy of existing fossil fuels to renewable energy..”?!?!

    The brutal reality is that any new tax/impost on existing energy sources will simply be (a) squandered in funding the “necessary” massive new admin., regulation, and enforcement bureacracies; and/or (b) doled out to whatever special interests the reigning political “class” of the day wants/needs to bribe in order to retain power.

    “We don’t want Siberia to defrost.”

    Maybe you don’t. But those who live there (and nearby) beg to differ –

    http://www.businessinsider.com/russia-wants-global-warming-2009-7

    … and have done for a long long time –

    http://www.time.com/time/magazine/article/0,9171,838704,00.html

    I’ve yet to see anyone make a plausible argument for why a (alleged) warmer world would be a bad thing, a world where man was unable to adapt to any changes, and thrive (ie, feed more people) as a result of increased plant growth thanks to higher CO2 levels, and the opening up of vast new agricultural areas (eg, Siberia).

    More on topic though: by your own admission the great, revered, pioneering EU experiment in CO2 tax/trading has done little to curb actual emissions of CO2. Actual global emissions continue to rise.

    Let’s not even get into the fact that wind power – for all the “massive improvements” you’ve cited (due massive tax-payer subsidies) – remains utterly useless for replacing baseload power.

    I’ve nothing against development of alternate energy tech. As per above, I would happily advocate creating trillions in free money for R&D. I have great issue with impoverishing society via unnecessary taxes and/or new bankster-driven “commodity” trading markets, all in the name of “saving the planet”, when if the claimants were serious and had a clue, they’d simply be pressing for laws to get free money from the Fed for alt tech R&D, to make alt tech cheaper for the masses than fossil fuels.

    The MMGW proponents actions do not match their words. This indicates gross insincerity, or stupidity.

  19. Hi David

    I suppose large scale renewable energy can still be controlled by an elite class, or by whoever developed the technology. I would still say that because renewable energy is by its nature widely distributed, it is more likely that the proceeds from renewable energy will be more widely distributed.

    A wealth redistribution is equally if fossil fuel producers make less money while renewable energy producers make more money.

    Constructing and maintaining renewable energy systems should also require more workers than conventional fossil fuel industries.

    And in terms of electricity production in general and the systems that it supports, it’s a little bit harder for another nation to come and steal it off you. For example you couldn’t go into China and say ‘Hand over your electric rail network!’ but you can go to the Middle East and take off with its oil. So it makes it harder for one group of powerful individuals to control all energy sources, resulting in distribution of the proceeds.

    But its interesting that you are against wealth distribution of the top 1% of American earners, when they command 25% of its income. Do you think they devised special technologies that transformed American society? Or that they paid their taxes like everyone else?

    Or is it that they discovered long ago they can just print money, tax those who save through inflation and when the debt burden becomes unsupportable they just socialise the losses? And whenever someone comes to challenge this position you use your contacts in politics to alter the result in your favor.

    The irony is that the people that complain the loudest about wealth distribution or government intervention are often recieving the most benefits from both. Its like the Tea Party saying ‘government is bad!’ while its elites use the government’s military to invade any country they choose. The double think is impressive!

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