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Will Australia's emissions policy encourage global action?

By Geoff Carmody - posted Wednesday, 16 November 2011


Will any global ETS crack as emissions ‘caps’ tighten? A climate policy equivalent of monetary policy ‘quantitative easing’ is possible. We’ve seen over-issuance of emissions permits before.

If governments can debauch the paper currencies they issue by printing more of them and letting inflation increase, why not (again) for emissions permits? The consequences are much less visible immediately.

Under any ‘patchwork’ world ETS, ‘kicking the emissions reduction can down the road’, as with the E.U. approach to debt today, seems quite possible. Each ETS participant may seek to offload its adjustment task to others, even though, collectively, that is impossible.

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I don’t think any world ETS will work. Developing countries and North America probably won’t join. Any ETS will be a market for paper shuffling, speculation, price volatility and little global emissions abatement.

Focusing on national emissions production, plus international trade in permits, as embodied in the Government’s policy model, is a recipe for continued global failure, continuing the sorry mess starting about two decades ago, from Rio through Kyoto, Bali, Copenhagen, Cancun, (probably) Durban, and beyond. 

If we want to act, best we focus on reducing our own national emissions consumption, hoping others, eventually, do likewise. 

This focus includes emissions imports and excludes emissions exports, and works like the GST.  This ensures no adverse effects on our competitiveness, and avoids the disincentives and potential rorting inherent in international trade in emissions permits when emissions prices will start at very different levels. 

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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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