Combet removes the floor and pulls the carpet on carbon trading

China's carbon tax will be on real pollutants not carbon dioxide; China's production of renewable energy is overwhelmingly for export to other nations such as the EU and Australia and China is investing in nuclear and coal power at an increasing rate. In addition China will continue to import vast amounts of coal none of which will be subject to a carbon tax.

Given this it seems extraordinary that Combet should continually refer to China as an exemplar for Australia's carbon tax policies.

The real sting in Combet's announcement about decreasing the floor price for an ETS and aligning with the EU is the impact on the budget revenues. Those revenues depend on an increasing carbon tax and then an ETS floor price of $15. With the current ETS price in Europe around $8 per tonne, a third of the Australian carbon tax, and that amount the product of artificial support, the reliance by Combet on forecast revenue would seem to be overdone by at least 300%.

The government has already spent revenue from the carbon tax before it has come on stream in the form of the various compensations to the Australian electorate. If the future revenue is down by 2/3's that becomes a very hole and a very large debt. Debts have to be repaid; so while Combet and the government are currently scornful of Abbott's fear campaign about the effects of the carbon tax it looks as though they are stage managing those effects so that they are minimised before the election with one giant hangover to be felt after that next federal election.

That is really scary.