Business abandons Dr No on carbon

At last, business representation that got something right. And, of all the lobby groups, it’s the perennially weak-kneed Australian Industry Group that has done it. From the press release:

 “The Australian Industry Group today called on all sides of politics to support the immediate removal of the fixed price carbon tax and move directly to an internationally linked emissions trading scheme,” Ai Group Chief Executive, Innes Willox, said today.

“This would end the carbon tax and cut carbon costs by three quarters.  Electricity prices would drop by about 1.5 cents per kilowatt hour, an average cut of around 10 per cent for businesses and around the same for households.  Australia’s emissions targets would still be met, with abatement happening wherever it is cheapest, including overseas. 

“Full emissions trading without the carbon tax element would slash the uncompetitive burden that has been imposed on Australian industry and the Australian community and which is dampening jobs growth.

“Ai Group has long argued that an emissions trading scheme is the most flexible path to reducing greenhouse gas emissions at least cost.  And we’ve always said the fixed prices under the current regime are way too high.  Today, Australian companies are paying $23 per tonne. This is set to rise on 1 July this year and again in 2015 when it is set to reach $25.40 a tonne.  Our competitors in Europe are now paying around $6 a tonne and look set to stay at around this level for several years while United Nations CER permits are trading at less than $1.

“Australian businesses could be taking advantage of these low international prices through emissions trading.  Instead we are stuck with the Government’s high fixed prices. At the same time, the alternative approach from the Opposition would only permit domestic abatement without international linkage and, even on the most optimistic assumptions, would see abatement prices more than double international levels.

The AiG is Australia’s manufacturing lobby, one the sectors more affected by carbon pricing. At last a bloody business group that actually believes in markets. “Direct action” will cost far more simply because it’s a hand full of bureaucrats sitting around a water-cooler picking winners versus a carbon price that unleashes the innovative spirit of 7 billion people. It’s simple math.

Meanwhile, although I don’t agree with it, in part because it will screw up planning in the energy sector, the shift to a floating carbon price on an earlier timetable is certainly less damaging in the long term to the carbon mitigation project. The scheme remains in place and we won’t need to reinvent the wheel, again. And, it will be there as Australia’s contribution to the ongoing international effort to price carbon, thereby not setting back diplomatic progress.

Houses and Holes
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  1. a carbon price that unleashes the innovative spirit of 7 billion people

    All good, as long as you believe emissions permits sold by a foreigner to an Australian polluter, actually results in reduced emissions overseas.

      • I might believe it when a European electricity company is selling permits for a new wind farm, but I’d very dubious of permits bought from an Indonesian forestry company.

        • So don’t buy permits from an Indonesian forestry company. Most companies with a modicum of CSR already have a black-list of international permits they won’t buy from.

  2. hubris_and_hyperbole

    That pic is a seemless transition from the previous Dr No pic. I always though you got your pics from some sort of image library. Do you have photoshop experts working there?

  3. Get real. A carbon trading scheme makes no sense and will not work. That it is Goldman Sachs preferred model should set off immediate alarm bells. It is designed by the bankers for the bankers as another casino to skim. The good people at AIG just got orders from headquarters.

    • By that argument, we should ban anti-biotics because some unscrupulous pharmactical companies make them.

      ie. It’s not an argument.

      That’s not say the squid won’t try to game it. They will. IT’s up to regualtors to prevent it.

    • I think it more accurate to say that a Carbon Trading scheme makes perfect sense and will not work.

      The motivation is sell ‘nothing’ is enormous.

      The seller will do what they can to reduce the cost of ‘something’ to as close as possible as ‘nothing’ and that will usually mean doing close to nothing to produce nothing that looks a bit like something.

      The buyer doesn’t care if they get ‘nothing’ because what they want is a bit of paper that claims ‘nothing’ is really something.

      And of course the shiny suits will be all over it like a rash. After all the trade in nothings that look like somethings is their special subject.

      On the bright side we will have a huge international team of paper pushers wandering the globe trying to confirm that a certificate claiming to be for something but really nothing was in fact for something.

      “But Mr Regulator – the vast forest we were supposed to plant got frost bitten and we are due to replant very soon…….”

      “But Mr Regulator – we believed that our special reduced farting cows would really do just that…”

      If you want to discourage the use of carbon just tax it when it comes out of the ground, oil reserve or shale seam.

      • If you want to discourage the use of carbon just tax it when it comes out of the ground, oil reserve or shale seam

        I agree, and so does James Hansen.

        • The issue there is that quite a bit of petroleum products are used as feedstock and never combusted. i.e. the carbon never gets released.

          The current Carbon Tax is as close as it gets to what you’re suggesting – without penalising feedstock hydrocarbons. Tax fugitive emissions and tax upstream suppliers of petroleum products. It is however also vastly unpopular.

      • MB is an evidence-based blog, right?

        There is already far more evidence of scams, fraud, and corruption of schemes built on a “carbon price”, than there is evidence of such schemes having any positive impact on their alleged goal of CO2 emissions reduction.

        As Dystopian rightly points out, anything that finds favour with the Goldman Sachs’ of this world must immediately command deep and abiding scepticism.

        • There’s lots of evidence of scams fraud and corruption in governments around the world too.

          I suppose we should all just descend into anarchy then hey?

          • I’d say “ascend” into anarchy.

            Seems many do not understand the actual meaning of the term.

            Ever notice how any threat to the established hierarchical power structures is vilified with the baseless and misleading accusation that anything but the continuation of the status quo automatically means something opaquely terrible called “anarchy”.

            Ooooooooo … booga booga.

          • drsmithyMEMBER

            Seems many do not understand the actual meaning of the term.

            Or they have a more realistic view of how anarchy would actually work.

            A world of unbridled might-makes-right would not be a pleasant place. If you want to see what anarchy would look like, watch what happens in a schoolyard.

    • I’m just waiting for some Labor flog to grab it and use in their election campaign material.

  4. Pretty hard to argue that, if you want to price carbon, trading is the best option for Australia. Big emitters would far rather pay someone else to offset their emissions (meaning they can get the cheapest available carbon offsets) than pay the government a fixed price.

    Better to burn the coal here without transporting it than pay for transport (more emissions) to burn the coal elsewhere in a power plant that is likely older, less efficient and more polluting. I think the argument to stop burning coal is very strong theoretically, but practically it ain’t gonna happen any time soon. Either we burn it or they burn it.

    Eventually the glut of permits will be used up, then the price will gradually rise. Coal burners can then make the decision when to stop burning coal based on economics, rather than politics.

  5. Everyone seems to be forgetting that the main reason for putting a price on carbon is to bring about a transition to a low-carbon economy.

    Whatever mechanism is used, for this to work the price of carbon has to ratchet up more or less continuously, either by steadily increasing the regulated price, or by steadily reducing the volume of permits to create a calibrated shortage.

    That way investment gets channeled towards lower carbon technologies, because of the anticipated future price of carbon over the life of the asset, even if a higher-carbon alternative would be more cost effective in the short term.

    In other words, the carbon price starts doing its job well before it starts to hurt.

    .. assuming, of course, that investors have some faith in the stability and longevity of the regulatory arrangments.

  6. That way investment gets channeled towards lower carbon technologies,

    Or to other areas where the price is set lower.

    In many ways, by sending manufacturing overseas.we’ve been transforming into a lower Carbon economy for along time.

  7. Business may be accepting an ETS which if you are going to tax Carbon is sensible enough although i agree with Dystopian on the likely outcome.
    However business is not accepting the Gillard model either.

    You’re getting an even worse tilt to one side around here of late.

  8. What can I say? I saw a programme the other day in reference to Al Capone.

    ‘We are in the wrong game, the margins in milk are more than we make in bootlegging and legit.’

    The thinkers don’t defend us. unfort tis the warriors.