Yale economist William Nordhaus puts it well in his new book on the economics of climate policy:

Whether someone is serious about tackling the global-warming problem can be readily gauged by listening to what he or she says about the carbon price. Suppose you hear a public figure who speaks eloquently of the perils of global warming and proposes that the nation should move urgently to slow climate change.

Suppose that person proposes regulating the fuel efficiency of cars, or requiring high-efficiency lightbulbs, or subsidizing ethanol, or providing research support for solar power — but nowhere does the proposal raise the price of carbon. You should conclude that the proposal is not really serious and does not recognize the central economic message about how to slow climate change.

To a first approximation, raising the price of carbon is a necessary and sufficient step for tackling global warming. The rest is at best rhetoric and may actually be harmful in inducing economic inefficiencies.

There are two ways of viewing hybrid cars. From a hardline carbon abatement position, they’re a distraction from the real challenge of dealing with climate change, which requires a significant increase in the price of carbon. They’re only slightly more fuel efficient than most vehicles, and anyway, plug-in hybrids in a country like Australia will use coal-generated electricity to charge up.

The critical challenge in transport — which must be included in an emissions trading scheme — is to ensure people have access to viable alternatives to cars, which means investment in mass transit, enabling them to respond to increases in the cost of transport by switching modes.

A realist position probably accepts all that, but acknowledges that Australians are still too wedded to their cars and Governments are too slow to provide public transport, to seriously consider alternatives to an entire lifestyle based on motor vehicles. Hybrid vehicles, especially if they pave the way for lower or no-emission vehicles in the future, can provide a transitional mechanism to a low-carbon future while we carbon junkies make the mental leap to other forms of transport, or wait for our politicians to do so.

We wealthy carbon junkies, that is, because the poorer amongst us probably can’t quite stretch their budgets to afford a hybrid. And many low-income earners live in areas with the worst public transport.

Problem of course is that our policy settings don’t really reflect either of these positions. In fact, they’re a self-contradictory mess. As Greens Senator Christine Milne says, while welcoming the hybrid announcement, the Government has “a policy platform which is still skewed very heavily in favour of the polluting and gas-guzzling options.”

We’re still investing heavily in roads over rail and public transport. We encourage company car use via fringe benefit tax concessions. We still subsidise the manufacture of regular, petrol hungry automobiles. And in the meantime, we wait for the Government to work out what’s in and what’s out of an emissions trading scheme that won’t kick off until 2010.

Democracies, it seems, aren’t very good at coping when one of the basic parameters of their entire social and economic framework changes. The unedifying spectacle of our politicians arguing the toss over 2 cents a litre versus 5 cents a litre the other week confirms that. Attracting hybrid manufacturing to Australia is undoubtedly a canny political ploy by the Government. Quite apart from anything else, those vehicles come with a green aura that seems impervious to any scepticism. But they’re not going to do much to address climate change.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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