Wednesday 9 July 2008
Emissions Trading: Why we SHOULD NOT wait!
I entirely admit that this should have been posted a while ago, but better late than never!
So I've been working for a client these last few days who is very interested in issues of climate change and a carbon emissions trading scheme, and that has allowed me to hear a lot of perspectives (some more informed than others) in regards to the scheme. I get to hear political commentary, news bulletins, talk back programs, announcers rabbiting on about how God'll take care of the weather, you name it!
So what's all the fuss about? Well basically, the new Australian Government, led by Prime Minister Kevin Rudd, is fulfilling one of its election promises in regards to fighting climate change, which is bound to have a drastic effect on Australian economic and social factors, particularly in terms of agriculture. So Rudd commissioned a report from his Climate Change Advisor, Ross Garnaut (pronounced GARR-NO), in order to establish what industries should be included in an emissions trading scheme, what goals should be set, and who will be most effected.
The trading scheme is bigger than the GST, and represents probably the largest economic policy this government will make. The first step of the carbon emissions trading scheme involves collecting information from businesses about how much carbon they release at this time - this is the step being undertaken now, as businesses are required to keep records from July 1 2008. This information is then used to cap (or limit) the amount of carbon to be released throughout the country. Businesses pay for carbon credits to be given to them, basically giving them permission to pollute to a certain point. Some will obviously get more credits than others, and should a company fall short of using up all their credits, they are allowed to sell those credits to other businesses, who basically want to pollute more than the government thinks they should. As a result, businesses are punished for polluting more (as they need to pay more) and rewarded for polluting less (as they get money back from their credits). In this way, not only are carbon levels capped, but they're actively reduced as the capitalist system seeks to build profits and cut expenses as best it can. Basically it allows the environmentalists to exploit capitalism, as opposed to the other way around.
The problem which has arisen is that the federal opposition, which originally supported an emissions trading scheme, seems to be coming up with whatever excuse it can to get the Australian public to turn against the idea. This is despite former Prime Minister John Howard supporting plans for emissions trading at the release of the Shergold Report during his time in power. Let's have a brief look at some of the main opinions, oops I mean 'problems', to do with carbon trading:
1. Prices will rise: Naturally! When businesses pay more, these costs are transferred on to the consumer. The thing is that the industries in which we'll see most price rises are those which we should be discouraged from using! Most notably, energy and petrol. Both of these are, of course, necessary for everyday use, however one of the basic principles of economics is that prices change behaviour. If we really are going to commit ourselves to cutting the carbon levels of this country, we need to both change corporate behaviour (through emissions trading) and change person behaviour. Yes it hurts, but the truth is that ever since global warming became a big issue in my mind, and ever since petrol prices started going through the roof, I have been actively not asking as much from the car, using more public transport and foot power, and turning off my computer at night, as well as lights and heaters. As the Garnaut report confirms, the poor will be those worst effected by a trading scheme, but if the Government follows Garnaut's suggestions, they will also receive compensation drawn from the extra money made by the carbon tax. Similarly, public transport investment would increase under the system, allowing for those who previously relied on cars to take a train or bus and help reduce carbon emissions personally.
2. We should wait until other competing export economies such as China and India adopt a similar system: The basic premise behind this argument is that Australia's export economy will suffer under an emissions trading scheme. This, I believe, is true. What this argument does not address, however, is the fact that Garnaut's report suggests investment and support for export industries so as to allow Australia to remain competitive. I heard a very good analogy from economist Peter Martin, in which he told the following story: A town decides one day that it wants its dry and empty well to bring up milk for just one day, so all the townsfolk agree to place a cup of milk in the well during the night. So the night passes and in the morning all the townspeople flock to the well for the novelty of seeing the bucket come up with milk, but all that comes up is water, because every family has thought either "nobody will notice if we don't put in a cup of milk" or "we'll just wait to make sure the other families do it first before we put milk in, because otherwise we'll lose our milk and nobody else will". The point is that if we just sit around waiting for other countries to take action, and those countries are sitting waiting for other countries to take action, then what ends up happening is that no action is taken at all. As one of the big players in the Australasian region, we need to take a leading role and show that we are committed to combatting climate change. This in turn will lead to other nations understanding when we make climate change requests as part of our diplomatic discussions, as we have already shown our dedication to the issue. Furthermore, it is important to add that most European nations have already committed to an emissions trading scheme more rigorous than that which is being proposed by Rudd. Also, the state of California has also implemented such a program. India and China already have rates below those of Australia for most exports - the reason people choose to import from Australia is because of quality, not price. If they had simply wanted the cheaper product, their business would already be with one of the lesser developed nations.
3. Climate change isn't even happening anymore: There are numerous scientific studies showing a continued increase in global temperatures as carbon output increases, and this is not just correlation but causation. For more details from people much smarter than me on meterological and scientific issues, see the World Meterological Organisation's website or skip to their 2007 climate report.
4. It's such a complex system that it will be too easy to get it wrong: This is the most upsetting and frustrating of all claims. If governments were to shy away from complex policy, then policy would not exist at all. The tax system? Complex. Education system? Complex. Health system? Complex. Stupidity and an 'easy ride' should not be embraced - so let's look at what the 'complex' issues are, address them, and get on with turning climate change around. We've already waited long enough.
5. Australians will lose jobs: The Garnaut Report, as well as numerous studies have shown that job loss will not be an issue under emissions trading so long as the appropriate levels of education and training are provided to switch 'dirty energy' workers into the new 'green collar' jobs. In a Sydney Morning Herald article of September 7 this year, the Construction Forestry Mining Energy Union (CFMEU) stated that carbon emissions would change such industries, but "there will be other technologies deployed along the way and our members ... have got every reason to have a bright future across a range of different energy sources". So even those in mining are feeling positive about carbon emissions trading.
All in all, this is an issue that can't have us sitting on our hands humming "God Save the Queen". Rather, we should take some time to assess the different options, use the recommendations of the Garnaut report, and start up the program in 2010. I am also very passionate about his suggestions to utilise some of the extra revenue gained from carbon emissions to go back into assisting those who will be hardest hit such as single-parent families and pensioners. Furthermore, investing in public transport is something which is desperately needed across Australia, particularly in Sydney where the situation is, well, bad to say the least. Hopefully new Liberal leader Malcolm Turnbull will take a different approach to Brendon Nelson and embrace the idea of tackling climate change ASAP. If we could have bipartisan support of such measures, then things would move a lot faster and effective change - as opposed to needless and unhelpful 'opposition for opposition's sake' - could finally eventuate.
So let's get moving, no more waiting!
So I've been working for a client these last few days who is very interested in issues of climate change and a carbon emissions trading scheme, and that has allowed me to hear a lot of perspectives (some more informed than others) in regards to the scheme. I get to hear political commentary, news bulletins, talk back programs, announcers rabbiting on about how God'll take care of the weather, you name it!
So what's all the fuss about? Well basically, the new Australian Government, led by Prime Minister Kevin Rudd, is fulfilling one of its election promises in regards to fighting climate change, which is bound to have a drastic effect on Australian economic and social factors, particularly in terms of agriculture. So Rudd commissioned a report from his Climate Change Advisor, Ross Garnaut (pronounced GARR-NO), in order to establish what industries should be included in an emissions trading scheme, what goals should be set, and who will be most effected.
The trading scheme is bigger than the GST, and represents probably the largest economic policy this government will make. The first step of the carbon emissions trading scheme involves collecting information from businesses about how much carbon they release at this time - this is the step being undertaken now, as businesses are required to keep records from July 1 2008. This information is then used to cap (or limit) the amount of carbon to be released throughout the country. Businesses pay for carbon credits to be given to them, basically giving them permission to pollute to a certain point. Some will obviously get more credits than others, and should a company fall short of using up all their credits, they are allowed to sell those credits to other businesses, who basically want to pollute more than the government thinks they should. As a result, businesses are punished for polluting more (as they need to pay more) and rewarded for polluting less (as they get money back from their credits). In this way, not only are carbon levels capped, but they're actively reduced as the capitalist system seeks to build profits and cut expenses as best it can. Basically it allows the environmentalists to exploit capitalism, as opposed to the other way around.
The problem which has arisen is that the federal opposition, which originally supported an emissions trading scheme, seems to be coming up with whatever excuse it can to get the Australian public to turn against the idea. This is despite former Prime Minister John Howard supporting plans for emissions trading at the release of the Shergold Report during his time in power. Let's have a brief look at some of the main opinions, oops I mean 'problems', to do with carbon trading:
1. Prices will rise: Naturally! When businesses pay more, these costs are transferred on to the consumer. The thing is that the industries in which we'll see most price rises are those which we should be discouraged from using! Most notably, energy and petrol. Both of these are, of course, necessary for everyday use, however one of the basic principles of economics is that prices change behaviour. If we really are going to commit ourselves to cutting the carbon levels of this country, we need to both change corporate behaviour (through emissions trading) and change person behaviour. Yes it hurts, but the truth is that ever since global warming became a big issue in my mind, and ever since petrol prices started going through the roof, I have been actively not asking as much from the car, using more public transport and foot power, and turning off my computer at night, as well as lights and heaters. As the Garnaut report confirms, the poor will be those worst effected by a trading scheme, but if the Government follows Garnaut's suggestions, they will also receive compensation drawn from the extra money made by the carbon tax. Similarly, public transport investment would increase under the system, allowing for those who previously relied on cars to take a train or bus and help reduce carbon emissions personally.
2. We should wait until other competing export economies such as China and India adopt a similar system: The basic premise behind this argument is that Australia's export economy will suffer under an emissions trading scheme. This, I believe, is true. What this argument does not address, however, is the fact that Garnaut's report suggests investment and support for export industries so as to allow Australia to remain competitive. I heard a very good analogy from economist Peter Martin, in which he told the following story: A town decides one day that it wants its dry and empty well to bring up milk for just one day, so all the townsfolk agree to place a cup of milk in the well during the night. So the night passes and in the morning all the townspeople flock to the well for the novelty of seeing the bucket come up with milk, but all that comes up is water, because every family has thought either "nobody will notice if we don't put in a cup of milk" or "we'll just wait to make sure the other families do it first before we put milk in, because otherwise we'll lose our milk and nobody else will". The point is that if we just sit around waiting for other countries to take action, and those countries are sitting waiting for other countries to take action, then what ends up happening is that no action is taken at all. As one of the big players in the Australasian region, we need to take a leading role and show that we are committed to combatting climate change. This in turn will lead to other nations understanding when we make climate change requests as part of our diplomatic discussions, as we have already shown our dedication to the issue. Furthermore, it is important to add that most European nations have already committed to an emissions trading scheme more rigorous than that which is being proposed by Rudd. Also, the state of California has also implemented such a program. India and China already have rates below those of Australia for most exports - the reason people choose to import from Australia is because of quality, not price. If they had simply wanted the cheaper product, their business would already be with one of the lesser developed nations.
3. Climate change isn't even happening anymore: There are numerous scientific studies showing a continued increase in global temperatures as carbon output increases, and this is not just correlation but causation. For more details from people much smarter than me on meterological and scientific issues, see the World Meterological Organisation's website or skip to their 2007 climate report.
4. It's such a complex system that it will be too easy to get it wrong: This is the most upsetting and frustrating of all claims. If governments were to shy away from complex policy, then policy would not exist at all. The tax system? Complex. Education system? Complex. Health system? Complex. Stupidity and an 'easy ride' should not be embraced - so let's look at what the 'complex' issues are, address them, and get on with turning climate change around. We've already waited long enough.
5. Australians will lose jobs: The Garnaut Report, as well as numerous studies have shown that job loss will not be an issue under emissions trading so long as the appropriate levels of education and training are provided to switch 'dirty energy' workers into the new 'green collar' jobs. In a Sydney Morning Herald article of September 7 this year, the Construction Forestry Mining Energy Union (CFMEU) stated that carbon emissions would change such industries, but "there will be other technologies deployed along the way and our members ... have got every reason to have a bright future across a range of different energy sources". So even those in mining are feeling positive about carbon emissions trading.
All in all, this is an issue that can't have us sitting on our hands humming "God Save the Queen". Rather, we should take some time to assess the different options, use the recommendations of the Garnaut report, and start up the program in 2010. I am also very passionate about his suggestions to utilise some of the extra revenue gained from carbon emissions to go back into assisting those who will be hardest hit such as single-parent families and pensioners. Furthermore, investing in public transport is something which is desperately needed across Australia, particularly in Sydney where the situation is, well, bad to say the least. Hopefully new Liberal leader Malcolm Turnbull will take a different approach to Brendon Nelson and embrace the idea of tackling climate change ASAP. If we could have bipartisan support of such measures, then things would move a lot faster and effective change - as opposed to needless and unhelpful 'opposition for opposition's sake' - could finally eventuate.
So let's get moving, no more waiting!
Labels: climate change, emissions trading, Garnaut report, Kevin Rudd
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