A few thoughts on the carbon scheme

New for June… a Lego house with solar panels on the roof.

Lego house 5771 - with solar panels

Here’s a few thoughts on the carbon scheme announced yesterday:

1. I simply don’t understand how the deniers can continue to be taken seriously by anybody when the vast majority of climate scientists agree there’s a problem that needs to be fixed.

It also seems a peculiar view that the world’s population can continue to burn fossil fuels in huge amounts with no consequences.

2. It’s true that Australia represents only a small fraction of overall global emissions. But people are are watching, and influence is important. On any issue, people look to those who are leading the world. Here’s a small example: while I’m not even sure I agree with it, it turns out that inner-city Melbourne has been hailed as a world leader in pedestrian-friendly streets. If we have any hope at all of convincing others to do something about reducing emissions, we have to get our house in order.

3. The scheme sounds like a pretty good start. If the modelling is right, it’ll have a minimal effect on the overall economy (0.1% of GDP) while providing a good price signal that big companies in particular need to find better ways of doing things.

4. The Opposition’s view on this doesn’t make sense to me. A plan of direct action? There seems to be agreement from economists that this is less efficient than a pricing scheme:

The main finding of the research is that the experience from these six schemes indicates that a general price on carbon emissions is preferable to specific measures. – markets are generally more efficient in encouraging innovation than direct government intervention. — CPA blog

And wouldn’t direct action be far more like a socialist response than letting market forces figure it out? Interesting quote from Alan Kohler about just who wants what:

For what it’s worth, what I think is that the entire scientific, business, bureaucratic classes – all the serious people – are in favour — Alan Kohler on Twitter

Those against carbon pricing are the Shadow Cabinet (and not even all of them) plus some attention-seekers. That’s all. — Alan Kohler on Twitter

5. There’s some niggles. The Australian Railway Association notes that with petrol exempt and heavy (road) vehicles exempt for some time, railways, which should provide a less carbon-intensive way of moving people and freight, will be disadvantaged by not being exempt. One estimate is that it may push up public transport fares by about 2%.

6. The second niggle (but a political reality) is that the scheme is aimed squarely at the big emitters, and with lots of compensation to individuals, there’s little or no incentive to change personal behaviour. Hence, petrol is exempt (but as Phil Hart from ASPO said at a recent PTUA member meeting, including it wouldn’t have made much of a price difference compared to what will happen when peak oil really kicks in).

7. Personally I’m not sure if I’ll end up ahead or behind in economic terms. The Estimator tool on the government web site told me “The household situation described by the information you have entered is not covered by the scenarios used by this Estimator.” Oh well.

From the looks of it, wealthier people can’t count on the tax changes to get all their costs refunded. But then, they are precisely the people who can afford to cover their roofs in solar panels themselves to cut their electricity and gas costs, and cut their direct emissions and costs that way.

8. Niggles aside, I do think it is important to get the ball rolling on reducing emissions, and it does seem to me that putting a price on pollution sends an important market signal that will get that process underway.