Apr 14, 2011

Carbon price compo for business v households: not the same thing

Labor would like us to think businesses will act just like households when it comes to carbon price compensation. Experience suggests otherwise.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

Another speech, another step closer to the policy that will not die: Greg Combet yesterday gave a couple of further clues as to why Labor’s preferred carbon price scheme will be the CPRS under another name.


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39 thoughts on “Carbon price compo for business v households: not the same thing

  1. John

    Greg Combet will compensate households through tax cuts and transfer payments:
    “Millions will be better off under a carbon price.”

    You can thank Tony Abbott’s scare campaign for this permanent redistribution of income from the rich to the poor.
    Who would have thought that the Liberal Party under Tony Abbott would become responsible for socialist welfare policies?
    Neocons will be turning in their graves.

  2. JamesH

    Excellent comparative analysis Bernard; this sort of thing is why I subscribe.

  3. Captain Planet

    Outright compensation or transitional assistance will only result in our corporate “citizens” taking everything that is given to them, and then crying like babies in however many years, that they are unable to cope with the expiration of the compensation / assistance, and holding the country to ransom, demanding permanent special treatment.

    Free permits clearly don’t work as they eliminate the price signal, despite what some might think.

    All money raised from the Carbon Tax, and the longer term sale of permits, must go towards subsidising the only industry which is deserving of help and will actually play a role in decreasing the impact of a Carbon Price on all other industries.

    Renewable Energy.

    To say that a carbon price will “change behaviour” in terms of energy consumption sounds great. It is very difficult to choose to buy your energy from renewable sources when the industry does not yet have sufficient infrastructure on the ground to provide that energy.

    We need to create this change in two ways:
    1. Make CO2 emitting activities more expensive. A Carbon Tax will do this.
    2. Make non – CO2 emitting alternatives available. The prevailing orthodoxy places faith in market forces to do this – In theory, private industry will rush out and build windfarms and electric car infrastructure all over the place to supply zero carbon energy. IN practice this will take an unacceptably long time unless direct assistance is given to these industries – and the blindingly obvious source of funding is the carbon tax itself.

  4. Jimmy

    I find it hard to believe that the top 1000 emitters in the country will choose “business as usual” rather than spend say $20 a tonne reducing emmissions they can sell permits for for $25 a tonne and be able to market themselves as “green”, especially when the compensation will eventually be removed and they will be forced to make the investment anyway. I would of thought not doing this would be acting against the best interests of the shareholders.

    Captain Planet – Transistional Assistance is necessary to avoid a massive shock to the economy, big emitters can’t just flick a switch and start emitting less they need time to adapt.

  5. Scott

    The price signal to business is only one aspect of the ETS.

    The major aims of an ETS here is to reduce emissions and compensate for carbon’s externality effects. The fact that only a limited number of permits get distributed every year (and the number of permits reduce every year to a Government decided limit), means that a reduction in emissions will occur if an ETS is implemented correctly. It is better if these permits get auctioned off (to provide compensation to the government for the externalities as well as to accurately price carbon), but initially free permits are acceptable as a means of enticing business into the program. The problem with the European model was that initially, these free permits were overallocated (so emissions actually increased for the first couple of years). However, as long as this does not occur with the Australia model, reduction of emissions is assured.

    After that, it is up to business to decide whether they will reap the profits of trading or not. Some businesses will decide it’s all too hard and ignore the trading aspects of the ETS to focus on it’s core business. Others will use carbon trading strategies as a competitive advantage. But like everything in business, let the directors and shareholders decide what is good for their own companies.

  6. david

    Abbott is being cornered like the rat he is.

  7. D. John Hunwick

    As Bernard Keane has well-argued – the most sensible approach is NOT to have free permits. The real reason for this is that the decline in CO2 emissions is now more urgent than ever. The climate scientists that really know what they are talking about (and feaured on Crikey) are saying the 2 degrees of warming (or 450ppm of CO2) is a dangerous level not a possible safe one. To be slow in responding to this only increases our chances of passing some irreversible tipping point that will make life on earth hell for all our descendants

  8. kuke

    Yes, excellent post thanks.

    How much will the carbon rise each year by? This is the key. And if it changes into an ETS, how do we keep rising the minimum price?

  9. Frank Campbell

    “the unlikely phrase ‘millions will be better off under a carbon price'”

    When a caahbun price cheerleader like Bernard Keane realises there’s a rancid smell emanating from this govt. policy, you know the game is up. It’s no longer a tax, it’s a bonus! The magic pudding has become steadily more supernatural since the cooks announced it, matching the ALPs slide in the polls rather neatly. If this goes on, everyone will end up with an enormous cheque and their own coalmine. Result: Labour landslide, mostly mullock heap.

    But Darth Combet-I worry about him. He exudes more anxiety than a family of Freuds. That fixed, obsessive stare. The thin censorious mouth. The endless chain of engineering similes: market “mechanisms”, policy “settings” , price “signals”, “adjustments”…the Controller’s technocratic dream….

    Maybe it’s just ALP desperation. After all, they’ve staked the lot on this idiotic tax. It’s a carbon referendum. In effect a referendum on anthropogenic global warming, or rather belief in it. The polls don’t look good there either. Declining belief since 2006.

    As even Keane is aware, the tax will not change corporate behaviour. Too small for a start. And now Gillard’s giving away all the revenue to bribe voters. Fuel will be excluded next. Farmers and their farting stock are already exempt. That leaves thermal coal. Killing that will drive up power prices even faster than now. The alternatives are laughable: not a baseload renewable technology in sight- and no money for the essential R and D. More wind turbines, useless unreliable power at 3 times the cost? Or Solar the Unready? A billion dollars spent on domestic solar managed just 0.1% of power production. A sickening subsidy to the the middle class: you pay for their carbon guilt.

    In a decade we’ll look back on this collective mania with disbelief.

    2020: in the long dark corridors of The Lodge, the Prime Minister pedals remorselessly, the lino worn thin. Now permanently naked except for his Tour de France helmet, he’s no longer allowed out, but is always voted in.

  10. Jimmy

    Kuke – rising the minimum price under an ETS is easy you just cut the amount of permits available.

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