Climate change and carbon trading:

Mark Byrne writes: Re. “Kohler: Business concern over carbon trading, but Wong’s not talking” (yesterday, item 18). When Alan Kohler promotes such an important discussion, it is easy to excuse his miss-spelling the name of James Hansen, one of the best known climate scientists. Hansen cites Peter Barnes as the source for his proposed carbon dividend. A brief review of Barne’s framework provides a fascinating read. Essentially he proposes giving all citizens a dividend in nature’s “capital”. “[Mining] the insights … from the classical theorists such as Adam Smith and the dismal Thomas Malthus to John Maynard Keynes.” Things have come to a pretty pass if further commodifying the environment is the best way that I can see us saving it. Paradoxically, I can see how his proposal could better “redistribute wealth and in doing so to change fundamentally the genetic code of corporate behaviour.” With a100% dividend the challenge then becomes funding essential collective projects such as improved transport networks, intercontinental high-voltage DC transmission and other infrastructure, without becoming subservient to tyrannical mono/duo/oligo-polies.

David Bowyer writes: Niall Clugston (yesterday, comments) asks about the case for “carbon trading” rather than a “carbon tax”. The carbon trading system will broadly work as follows. The government/carbon regulator will determine an economy-wide carbon emissions target in line with the targeted maximum concentration of carbon in the atmosphere (for example, 550 parts-per-million). This will translate to an economy-wide target limit of so many million tonnes of carbon emissions in a given period. The regulator will then auction or allocate carbon permits equivalent to this amount of emissions. These permits must be purchased by companies covered by the emissions trading scheme so that they can then acquit their actual carbon emissions. Since carbon permits will be freely tradable financial instruments, the market will determine the appropriate price of carbon at any given time — based on the usual laws of supply and demand — for the finite number of carbon permits available which in turn are based on the level of emissions targeted by the regulator. In other words, carbon trading entails the regulator determining the desired level of carbon emissions and the market determining the price of carbon. A carbon tax would work the opposite way. If the regulator established a carbon tax of (say) $30 per tonne of carbon, companies would then adjust their operations — expanding or reducing capacity and production accordingly — to whatever level of carbon emissions at which they could still operate profitably once factoring in the additional cost of carbon. In other words, implementing a carbon tax entails the regulator determining the price of carbon and the market determining the level of carbon emissions. Clearly to achieve the desired outcome — a cap and/or reduction in overall carbon emissions — policy makers would prefer a system that allows the government, rather than the market, to mandate how much carbon may be emitted; hence the case for a carbon emissions trading scheme rather than a carbon tax.

Adam Rope writes: Re. “Richard Farmer’s political bite-sized meaty chunks” (yesterday, item 9). Richard Farmer appears to being deliberately misleading — I might say a typical ploy by climate change sceptics — when questioning Penny Wong’s statement about the “cost of climate change”. The “cost of acting”, Richard, is a simple, local, financial one — what it will cost for all Australians economically if we take action now to try to reduce greenhouse gas emissions. The “cost of not acting” has been calculated by many, far wiser than I, to be much, much greater, and not limited to just the Australian economy. The “cost of not acting” will have ramifications across the globe both environmentally and economically, across a range of issues, including water and power supply, agriculture, human and animal migration, biodiversity and global GDP. A simple Google search on “cost of climate change” brings up nearly 23 million sites, and so we don’t really need green or white papers to make a reasonable assessment ourselves.

The housing affordability crisis:

David Imber writes: Re. “Fixing politics: the housing affordability crisis” (yesterday, item 10). What a spot on article by Ben Eltham on the causes of our housing crisis and the reason we are only seeing marginal efforts by our Governments to solve it. I am pleased that after many years of worsening housing conditions for lower income Australians we finally have a consensus that the crisis principally affects those renters in the private rental market and that almost all singles, and lower income couples, are now effectively locked out of home ownership. What is still struggling to be accepted (a tribute to the loud and self interested media mastery of the property and real estate industry) is that while we do have a market for housing it is a market rendered dysfunctional by a series of inconsistent and often regressive taxation policies that blatantly favour existing owners, developers and investors (especially speculators). We really do risk generational wealth inequality until Governments realise that there are actually many more people locked out than those who are actively seeking to exploit the market as it stands. And that Governments actually have a role in making markets work not in perpetuating their dysfunction. And that even “mum and dad investors” have kids and are generally happy to accept more modest returns for a fairer and more certain system that benefits them. Now is the time for level headed discussions in every jurisdiction on how to reform the taxation system to reward investment in affordable housing and end the free ride for speculators and spivs at the top end. It is also time for Governments to cease indulging in the fiction that small scale tinkering at the edges is making more than a minor difference. At the very least they should massively reform residential tenancies legislation to accept the increased and longer term renters who are now at the mercy of a market that working against them.

Robert Murfet writes: I was just looking at your article on the housing crisis in Australia. It says that there are 100,000 on the streets. This is grossly misleading. If you researched the issue just a bit more you would find that there are primary, secondary and tertiary levels of homeless people in the 100,000 figure. Only the primary are on the streets (my estimate is that this is around 14,000). Muddying the waters by talking about the larger numbers allows the various levels of government to obfuscate and not confront the critical issue of not getting services to the 14,000 immediately.

Adam Schwab writes: In yesterday’s Crikey, Ben Eltham of the Centre for Policy Development, bravely tackled the housing affordability crisis. Like most think tanks, Eltham and the CPD appeared to over-complicate an issue which isn’t really that complicated. Housing, like any other good, is subject to basic economic forces of demand and supply. Demand is spurred by migration and increased birth rates — both of which are skyrocketing at the moment. Last year, almost 200,000 migrants moved to Australia. Great for the A-League, not so good when the country is in the midst of a housing and water shortage. Supply meanwhile has been restricted by a number of factors.  First, our major cities have limited growth space (especially near the key business areas). Second, almost every council in Melbourne and Sydney takes a strident anti-development line, grossly restricted the density of dwellings that can be constructed. Third, building costs have increased dramatically, reducing profit margins for developers. Eltham blamed the tax environment for jacking up demand, however, while a grossly inequitable system, negative gearing and capital gains concessions do not reduce the number of dwellings constructed or the overall supply/demand equation (rather, they are effectively a tax on non-landlords: stupid — yes, a cause of the affordability crisis — no). The suggestion that the Government “wind back the huge tax breaks for wealthier property investors and homeowners, and use the money saved to invest more in public housing and rental assistance” is a nice gesture, but won’t help renters. For a start, removing tax breaks for investors will further discourage investment in housing, reducing supply of available rental properties and further increasing price (it is the lack of supply which has caused Melbourne rentals to increase dramatically in the past twelve months). Further, providing “rental assistance” would be similar to the first home owners grant — causing the price of rentals to increase by the amount of the assistance (rental housing is hardly a luxury good), effectively giving that money straight back to the landlord.

Brendan Nelson and the Democrats:

Luke Miller writes: Re. “Bye bye Brendan. Oh, and farewell to the Democrats too” (yesterday, item 2). As a supporter of the Australian Democrats I am sad to see the party lose all its senators. As a person who loves this country, I never understood why someone would donkey vote in an election but the thought of having to rank Labor, the Liberals and the Greens in some order of least worst to most worst really rankles with me. Yes the collapse of the Democrats was all self-inflicted, but why could the system sustain only one top-notch forward-looking party while allowing sectional, small-minded parties to flourish? I hope the Democrats come back and prove the naysayers wrong.

Alan Lander writes: I don’t care if Brendan Nelson goes — but can his hair stay? I was beginning to like what it had to say.


Keith Perkins writes: Re. “Notes on life in Mugabe’s Zimbabwe, part 2” (yesterday, item 4). Where’s George, Tony and John when you need them? Surely Mugabe must have some Weapons of Mass Destruction hidden away somewhere.

The Polygamy question:

GT Carroll writes: An inquiry with Centrelink will confirm that there are plenty polygamous marriages here right now. And the additional ‘wives’ are receiving single mother benefits.

Hedge funds:

Simon Drimer writes: Re. “FY08: less than a bottler for our finance ‘experts’” (yesterday, item 19). A 2004 Asti Spumante, Adam Schwab? You’d actually put these guys in a bottle? They definitely belong in a cardboard cask with the words “One extra litre free!” on the outside. Your comment about feng shui reminded me of normal practice for hedge funds domiciled in my part of the world (Singapore). Hedge funds that have Chinese Singaporeans on the executive team commonly use fortune tellers to, errr, assist in the identification of market opportunities. Perhaps this would be unsurprising, if not expected, by local (Singaporean Chinese) investors. But to the many non-local investors in these funds, I think they would find the partial use of geomancy to determine timing, asset allocations and stock picks, to be somewhat startling, don’t you? It would be interesting to see if the universe of hedge funds that uses geomancy destroyed even more value for investors than run of the mill hedge funds, in the long run.

Babcock & Brown:

Kelly Hibbins, Babcock & Brown, writes: Re. “Babcock flick passes new Children’s Hospital to tax haven” (yesterday, item 3). There are a couple of bits of information that would allow Crikey to have a more accurate picture of the Royal Childrens’ Hospital Project in Melbourne which Stephen Mayne wrote about yesterday. Starting with tax, there is no tax angle to this deal — the RCH PPP project remains owned in its existing Australian structure and hence subject to Australian tax laws. While the investment in the project is now ultimately owned by Babcock & Brown Public Partnerships Limited, there is, as I am sure you are aware, nothing unusual about UK listed investment companies being domiciled in Guernsey. So far as the transfer of the project to BBPP is concerned this had been contemplated for a long time by all parties and the necessary consents had been obtained. BBPP is a specialist long term investment company for PPPs worldwide whose investments include other interests in PPP projects in Australia so there is nothing unusual in this. Babcock & Brown Investment Management Limited does advise BBPP but BBPP has a majority independent board, independent chairman and BBPP was independently advised on value. As Premier Brumby noted, the project is in construction and there will be no change to the project or indeed to its management. Finally, with respect to taxpayer value, the general view of PPP — both in Australia and the UK where it has been studied extensively by the UK National Audit Office — is that PPP does indeed offer value to the taxpayer through being faster, cheaper and better designed than the alternatives. We hope this will be proved in the case of RCH too.

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