Can Copenhagen cut climate costs?

1. raise relative prices for carbon, but minimise effects on real incomes;
2. make the same contribution to lower emissions globally as nationally;
3. minimise “free rider” impediments to a global deal;
4. be comprehensive to minimise evasion and internal “carbon leakage”;
5. be competitiveness-neutral at least until all countries are “on board”;
6. allow countries freedom to choose between approaches, subject to principles 1 to 5; and
7. minimise national compliance and administration costs.

This framework allows evaluation of alternative policies. A production model won’t comply with principles 1-5. A consumption model will.

These principles (especially 2) suggest international trading in emissions permits is just “carbon leakage”.

The Government claims an “evidence based” policy approach. The CPRS is very poor evidence.

On the evidence, we’ll soon see a really large reduction in emissions compared with (desired) “business as usual”. It has nothing to do with climate policies. It’s compliments of the international economic crisis.