Combet removes the floor and pulls the carpet on carbon trading

Greg Combet, the minister for climate change [AGW], is the government's 'silk purse out of a sow's ear' man, and accordingly, was left to announce that the floor price for the 2015 transition from a carbon tax to an emission trading scheme [ETS] was being lowered and tied to the European trading scheme.

Even by the entertaining standards of this current federal government this announcement is remarkable. It follows on from a sustained barrage by most of the senior ministers that the floor price was a good thing and would, in Gillard's words, provide "stability".

Combet's announcement and subsequent media interviews concentrated on the heavily promoted idea that the bulk of the rest of the world is on song with Australia's carbon tax and that the tax will not be as big a burden as Abbott's scare tactics have made it out to be. Both of these points are demonstrably fallacious as I have recently shown in the case of the alleged world consensus on the carbon tax and the idea that the effect of the carbon tax will be slight.

Combet also garnished his announcement with the view that the Australian floor price's connection with the European scheme will give true market bona fides to the Australian ETS when it starts.

Nothing could be further from reality. As Rereke Whaakaro notes the European ETS is not a market based scheme. Each nation within the European Union (EU) has a National Allocation Plan (NAP). These plans are mandated by Brussels, the headquarters of the EU. European Unit Allowances (EUAs), or carbon credits, are allocated to physical installations within the Member State's NAP. EUAs were intended to be backed by Kyoto carbon units (known as AAU's), but that was only to permit "currency exchange" between EU and non-EU countries, the EU can operate its ETS without the rest of the world tagging along. The EU maintains a separate registry that holds information in addition to the minimum required by the UNFCCC registry. The major differences are that each allocation is identifiable so the EU knows them by name and every transaction between trading entities is recorded and checked for any irregularities. In effect, a full audit trail of all transactions is kept.

Unlike a market the price of the carbon credits, EUAs, can be manipulated at will by Brussels and the current price of around $8 Australian is due to the arbitrary price setting by the central committee in Brussels.

By tying the Australian carbon price into the European scheme in effect the Australian government will be conceding control of a major element of the Australian economy to the EU.

The world's only true market trading scheme in carbon credits was run out of Chicago after being started up by Al Gore and Obama among other note-worthies; the Chicago scheme closed in 2010 with the value of the carbon credits having a true market value of 10 cents a tonne.

In fact if the EU ETS scheme was not based on artificial prices it would have collapsed like the rest of the world's carbon markets.

Despite the artificial price setting member states of the EU scheme like Germany and Ireland have dropped out or closed their carbon bourses and strangled their ETS to prevent criminal activity which abounds in the European system. .

Even California, Combet's poster state for an ETS, has not implemented its scheme due to complex litigation. And New Zealand has postponed any expansion of its ETS scheme, as has the rest of Europe because, even with non-market price fixing, the price of carbon is still too low to sustain investment in renewable energy.

Which leaves China. China is Combet's default position; but in every aspect to do with AGW, renewable energy and carbon trading China seems to be playing a classic game of 'say one thing and do the opposite' in the national interest.