Les Hosking knows a bit about markets in general and establishing new futures contracts in particular – he was CEO of the Sydney Futures Exchange for 14 years. And unlike most of the parties pushing carbon trading schemes, he doesn’t seem to have a vested interest.

Which gives extra weight to his letter in the AFR criticising the government drift towards a carbon market.

“Here we go again, with state and federal governments debating the design of markets. Now it is carbon emissions. It is all going according to the script so far. Suddenly after decades of warning, we now have an urgent critical issue,” writes Les, before reminding us of the output of previous government-designed markets – the wheat single desk, the wool floor price, the Australian dollar before it was floated, early coal sales to Japan.

“Government intervention that insulates a market from global activity does not have a good track record,” he says.

He is also mindful of the high failure rate of new markets developed by the private sector:

Very few become truly efficient and effective, even those that copy other successful markets.

Carbon emission is the most fungible global product of all time. Supply is out of control and unpriced. The product has a borderless uninhibited import and export flow and its major producers are bent on free uninterrupted oversupply.

Creating production caps and then legislating a national trading scheme in isolation of more significant global influences that does not damage Australia’s economy will be very difficult.

But there will be plenty of people and corporations that won’t want to hear any criticism of whatever camel of a carbon market eventuates.

The investment banks running and trading it will make lots of money, the major domestic polluters will pass on the cost and run ads claiming to be green and the governments will point to the trading system to show the electorate that “Something Is Being Done”.

And the governments will run their own ads claiming to be green as well. Just before elections. Like the NSW government is now.

Peter Fray

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