Home > Environment, Oz Politics > The return of the ETS

The return of the ETS

July 17th, 2013

As a member of the Climate Change Authority, I’m constrained to some extent in what I can say about the plan to bring forward the date at which emission permits will become tradeable, so I’m going to make a few points, and leave discussion to others

* The really big change, which went largely un-noticed, was the link to the EU scheme, announced by Greg Combet shortly after the carbon price came into effect. Bringing this forward by a year is a minor adjustment by comparison

* The offsetting savings announced today are mostly good, the most obvious exception being the biodiversity fund. I supported assistance to Carbon Capture and Storage in the past, on the general principle of backing every horse, but it’s time to admit that this horse won’t run

* The tightening of Fringe Benefit exemptions for cars is, I hope, a recognition that subsidising motor vehicle use in general isn’t going to save the domestic car industry, which has a small and shrinking share of the market. The impending demise of the Falcon should kill the presumption that fleet cars are likely to be Australian-made I hope this view is taken more generally. Preservation of the domestic industry is probably a lost cause, but if governments are going to try, they should do so with direct subsidies to domestic production not subsidies to car use in general.

* I hope Parliament sits again, and that the government puts the necessary legislation forward. The amusement of watching Tony Abbott voting *for* the carbon tax would be well worth the price of admission.

Categories: Environment, Oz Politics Tags:
  1. Hermit
    July 17th, 2013 at 11:58 | #1

    Even with the RET retained by either party the big question is what happens to the large coal fired power stations (eg Bayswater, Hazelwood) when they need replacement. Agreed CCS will not replace them but neither I suggest will a combination of wind and solar since electricity supply needs steady underpinning and the gas price is going up. I think the answer is coal use will shrink slightly but basically remain in place. Linking to the weak EU scheme makes this inexpensive. Meanwhile many of the worst carbon tax giveaways (eg free permits) remain in place.

    Therefore expect to be disappointed if we somehow get a few years of an EU modelled ETS. If there were any doubts things have barely changed today we have shiny new minister Mark Butler visiting Abbot Pt coal terminal. The script says he will tell them they are doing a heckuva good job and he hopes they keep getting bigger. It’s beyond hypocrisy more like deranged.

  2. TerjeP
    July 17th, 2013 at 12:45 | #2

    Carbon Tax > ETS > MRET


    Pick one, preferably the best, and discard the others.

  3. Ikonoclast
    July 17th, 2013 at 12:54 | #3

    I will comment on each point.

    1. The link to the EU Scheme.

    Firstly, I have made this point before and I will make it again. We should have a carbon tax not an Emissions Trading Scheme. An ETS creates an artificial market trading in permits to pollute i.e a trade in negative externalities (bads) when only trading in goods makes rational sense. It’s a (not so) elaborate neocon trick; create an artificial market and then game it. By contrast, a pigovian tax on a negative externality is relatively straightforward, controllable and effective.

    Secondly, linking a scheme fundamentally flawed in concept to an existing fundamentally flawed scheme that has already failed comprehensively! Oh yeah right, like that will work! (That was sarcasm.) If you are falling for the ETS you are falling for a neocon trick.

    2. CCS (Carbon capture and storage)

    It was obvious from day one of the CCS concept that it would not work. Any competent analysis from the points of view of energy costs would have immediately revealed it was unviable. The energy costs and thus financial costs (not to mention subsequent risks of out-gassing) were always going to be prohibitive.

    3. Fringe benefits on cars.

    It’s always a good idea to remove subsidies promoting fossil fuel use and cars.

    4. Parliament recall and Tont Abbott.

    If Abbot is re-elected (Gaia forbid!), then I guess the Climate Change Authority is toast, like our climate.


    Overall, an extremely disappointing performance from Rudd on climate change (and refugees/asylum seekers) so far. Rudd like all modern neocon politicians either has no idea what’s really going on with our planet or if he does he puts short term political expediency above all other concerns.

    I agree with Hermit that the response of our major parties to climate change is “beyond hypocrisy more like deranged”. Lip service to the problem, a weak as water response and vigorous pushing of more coal mines and coal exports all over the country. We have become a deluded society that can’t face basic empirical truths and the enormous contradictions and hypocrisies of our actions.

  4. Fran Barlow
    July 17th, 2013 at 13:13 | #4


    I have no fundamental objection to pigovian style levies on negative externalities and charges but I don’t accept your reasoning. Essentially, an ETS is a quota-based system for allocating the right to dump waste (in this case GHGs). There’s nothing artificial about that at all. A jurisdiction decides that only so much waste shall be dumped and allows putative dumpers to decide how much it is worth to them to do it, given that one option might be to avoid creating the waste or sequestering it themselves. The right to dump is a good, from the POV of the dumper.

  5. Jim Rose
    July 17th, 2013 at 14:23 | #5

    isn’t the carbon price so low in the EU that it is not worth the bother. does anyone expect the EU carbon price to go up by much?

  6. KiwiInOz
    July 17th, 2013 at 15:55 | #6

    @Jim Rose

    It will only go back up when all the free permits are expunged from the market and/or when there is a rapidly declining cap and trade.

  7. Tim Macknay
  8. Ikonoclast
    July 17th, 2013 at 17:12 | #8

    @Fran Barlow

    We’ve had this argument/discussion before so we had batter not rehash it. Part of our differences do hinge on semantics (mine as much as yours).

    Suffice it to say, I would much prefer to see a carbon tax set at a price which would properly price the negative externality. I think J.Q. has previously mentioned something like $50 to $60 a ton as meeting that benchmark.

    The fact that an ETS has never got within cooee of that mark and that Australia’s price bids fair to collapse to $6.50 to $6.75 a ton with an ETS indicates the real world failure of any ETS to price CO2 emissions properly.

    On the other hand, the failure to politically get a pigovian tax in place at the right price indicates the real world failure of that process too.

    Meanwhile, the CO2e forcing being built into the climate system (which reacts in a delayed manner) is becoming a greater and greater concern. “Fiddling while the world burns” is the phrase that comes to mind.

  9. Kevin
    July 17th, 2013 at 17:54 | #9

    John, can you give a breakdown on the effects of the green cuts used to offset the revenue loss? Do they not leave some of the emission reductions undone? And if so, to what extent.

    What about all the public service cuts? Although the latter is usually more based on political rationale more so than economic rationale.

    Speaking of politics, why are The Greens so crazy. They killed the last ETS and now they’re threatening to kill this one. Can someone tell me why the hate ETSs? It’s completely outrageous. WTF is wrong with them?

  10. July 17th, 2013 at 19:07 | #10

    I’m interested in our interaction with the European ETS. I presume (perhaps wrongly?) that there are currently a certain number of permits in the European ETS that allow holders to emit C02, and that this number is a bit too high, hence the current low cost of permits there.

    When we join the ETS, does that mean we’ll have to decide how many permits we need and add them to the European scheme? Or more likely all the members of the EU scheme (which would now include us) get together and decide on the total number of permits.

    Or is it much more boring, and we simply use the price of the EU scheme for our own permits, and sell as many as our local market wants to buy?

    Any clarification would be welcome!

  11. Sam
    July 17th, 2013 at 19:15 | #11

    @Fran Barlow
    My problem with this move is soley the drastic reduction in the average price per tonne. Everything else is really just so much noise. If we are really going to $6-10, policy will be largely ineffective no matter the specifics of the scheme.

  12. Markos Valaris
    July 17th, 2013 at 21:24 | #12

    @ Sam and others,

    The price per tonne does not matter in a cap and trade scheme, so long as the call is set appropriately low. If emissions godown the price goes down, and that’s a good thing. The real question, about which I hope John might be able to enlighten us, is precisely what the cap is going to be, and how it’s going to adjust in the future. Is areal reduction from current levels in the cards?

  13. Fran Barlow
    July 17th, 2013 at 21:45 | #13


    {The Greens} killed the last ETS


    a) That’s what R**d (v1.0) wanted — he wanted the Libs to split and to prevent us from sharing the credit so …

    b) it was designed it to be unsupportable by us — a polluters’ payday with pathetic targets based on CC&S working …

    He turned the “great moral challenge” into a Macchiavellean game of chicken. He almost got his dream scenario. Almost … so close, but no cigar, and then after the fact, he wanted us to releive him of the downside and taint ourselves with his nonsense.

    FTR we have nothing against an ETS. We just don’t like total polluter rorts.

  14. Fran Barlow
    July 17th, 2013 at 21:50 | #14


    If we are really going to $6-10, policy will be largely ineffective no matter the specifics of the scheme.

    As I said, we were going there within 12 months anyway. If the industry subsidies are sharply pared, including the free permits, and the cap is lowered and a lot more than 249 businesses are subject to the scheme it might not be much worse in practice and the price might be more like $14.

    I agree that’s not enough but the ALP have played this really poorly so we are stuck with their mess.

  15. Kevin
    July 18th, 2013 at 00:09 | #15

    @Fran Barlow

    Do you have some sources on your claims about Rudd ETS 1.0?

    On Sam’s comment about the ETS being ineffective and Fran’s comment about giving out permits, I don’t see how it follows that the ETS would therefore be ineffective. ETSs cap emissions. So the effectiveness is determined completely by the cap set. Even the government handed out all the permits for free, it should still make no difference to the maximum carbon emitted… because the maximum is capped.

    So the price of permits and how many the government hands out for free is completely irrelevant to effectiveness of the ETS in helping the environment.

    The only way that “hand outs argument” can be invoked in via Mankiw’s carbon tax theorem:
    ETS = Carbon tax + Corporate welfare.

    Note that this isn’t “corperate welfare” in the sense of giving money to polluters (that’s Direct Action), it’s corporate welfare in the sense that money that could have taken away from polluters isn’t taken… but that’s a fiscal issue, it make no difference to the environmental impact because, it’s capped.

  16. Ikonoclast
    July 18th, 2013 at 00:11 | #16

    @Fran Barlow

    I have to admit after excoriating Julia Gillard for caving in to mining capital, I ought to be just as critical of Kevin Rudd. He simply is not serious about preventing CO2 emissions. He called climate change “the great moral challenge of our times” and then offers this insult to our intelligence (after several previous insults). Maybe Rudd is just another lying, hypocritical BBB like Joh. I am beginning to believe so.

    The whole situation is beyond hopeless. We’ll never do anything about climate change, that’s clear.

  17. Kevin
    July 18th, 2013 at 00:18 | #17

    Too much melodrama. How is Kevin Rudd not serious about reducing carbon emissions? If he wasn’t serious, he would have scrapped the carbon tax for real (and saved political face). But instead, he kept the tax and accelerated the movement to an ETS by 1 year ahead. People also make the argument that he’s not serious because he shelved the first ETS. That’s also an unfair criticism, as he simply didn’t have the votes to pass it then.

    What do you want him to do?

  18. Ikonoclast
    July 18th, 2013 at 08:11 | #18


    Too much melodrama?

    “Speaking of politics, why are The Greens so crazy. They killed the last ETS and now they’re threatening to kill this one. Can someone tell me why the hate ETSs? It’s completely outrageous. WTF is wrong with them?”- Kevin

    What do (did) I want Kevin Rudd to do? Simple, when he was first elected he could have implemented a carbon tax graduated to reach a full price on the negative externality by 2012/13. We could have been there by now. IIRC the Senate would probably have been deadlocked on a strong carbon tax. All he had to do was make the carbon tax part of the tax bill and hold a double dissolution.

    “If the Senate twice fails to pass a bill from the House of Representatives, under certain specified conditions, the Governor-General may simultaneously dissolve both houses, in which case elections are held for all seats in both houses. This double dissolution procedure is the only exception to the rule of fixed terms for senators. If the deadlock persists after the elections the Governor-General may convene a joint sitting of the two houses to resolve the matter.”- from aph(dot)gov(dot)au

    Hypocritical AND gutless, that’s Kevin Rudd. This doesn’t mean I have any respect for Jullia Gillard or Tony Abbott. Regular readers of this blog will know I condemn them all. You see the problem is they are all neoconservatives dedicated to the rule of capital (monied interests) over people. That is fundamentally why we can never get any real change.

    BTW, the Greens reject an ETS because they know it’s a neo-confidence trick. The whole purpose of an ETS is to delay real action on a carbon price or to game it and depress it if it comes in. However, even the Greens do not understand economics or political economy. That’s why they too rabbit on about balancing the budget even during a recession.

  19. Sam
    July 18th, 2013 at 08:39 | #19

    @Fran Barlow
    “As I said, we were going there within 12 months anyway.”

    There’s no need to take the express train to Hell, when we’re already on the slow coach.

  20. Hermit
    July 18th, 2013 at 08:57 | #20

    The EU handed out too many permits for a combination of reasons.. to help poorer countries like Poland, to help smelters who can’t compete with Asia and to win early support from business. Now they’re finding it hard to rein them in. As a result Germany opened two new coal fired power stations in 2012 and several others are nearing completion. Things are happening that weren’t supposed to.

    The other way the cap can be thwarted is via illusory carbon savings from offsets. Under the Kyoto clean development mechanism a ‘developing world’ emitter only has to emit less than a presumed entitlement to earn a credit. That gets the EU off the hook cheaply but perversely world emissions actually increase. The EU knows how to fix these problems but is slow to act.

  21. David Irving (no relation)
    July 18th, 2013 at 08:58 | #21

    Kevin, if Rudd were serious about reducing carbon emmissions, he would’ve introduced measures that showed some signs of actually doing something about it. He didn’t.

  22. Ikonoclast
    July 18th, 2013 at 09:58 | #22


    Yep, the ETS is useless. It has been diluted and gamed to the point that it is meaningless. Meanwhile CO2 emissions just keep rising. I give the world 0% chance of controlling emissions by pre-emptive action of any kind. The only factors that will control man-made CO2 emissions will be economic collapse, population collapse and/or resource shortages and limits to growth.

    We have blown the chance of making a controlled landing into a sustainable, renewable economy. Now, physical and biological forces will enforce a crash landing on us. The economic pain (not to mention other outcomes) will be something like 10 times greater than under a controlled transition.

  23. wilful
    July 18th, 2013 at 10:09 | #23

    Professor, I’d be very interested in your considered views on Greg Hunt’s speech in melbourne this week: http://grattan.edu.au/events/event/the-coalitions-climate-change-strategy/


    Worthy of a separate post, I would hope.

  24. Fran Barlow
    July 18th, 2013 at 10:37 | #24


    Do you have some sources on your claims about Rudd ETS 1.0?

    Two. The first was close to Bowen and the second to Albanese, but they merely confirmed what seemed obvious by September/October of 2009. There really was no other plausible way to interpret R**d’s management of the issue.

    it should still make no difference to the maximum carbon emitted… because the maximum is capped.

    In theory yes. In theory it distributes the burden of acquiring emissions permits onto unprotected emitters. I see this as poor policy.

  25. Tim Macknay
    July 18th, 2013 at 11:15 | #25


    Speaking of politics, why are The Greens so crazy. They killed the last ETS and now they’re threatening to kill this one. Can someone tell me why the hate ETSs? It’s completely outrageous. WTF is wrong with them?

    Kevin, nothing particularly crazy went on, just the inevitable political positioning that takes place when dealing with these complex, fraught issues.

    The Greens didn’t “kill” the first ETS, they voted against it because it made political sense to do so at the time. The composition of the Senate at the time meant that the Greens couldn’t affect the outcome on their own.

    At the time the Government was faced with the choice of seeking to deal with the Opposition, or building an implausible majority composed of the support of the Greens, Xenophon and Fielding. Rudd chose to deal with the Opposition, which was rational considering it was officially in favour of an ETS at the time. Apparently he also deemed it expedient to distance himself from the Greens at the time as well. I assume this was for electoral reasons. Unsurprisingly, the Greens opted to criticise the proposed policy for being inadequate (which was true) and oppose it.

    As their vote would not affect the outcome, the Greens were able to vote against the ETS on the grounds that it wasn’t good enough without looking like hypocrites (at least to their base).

    After the 2010 election the situation was entirely different. The Greens were in a position to affect the outcome, and the Government needed them to get legislation through both Houses of Parliament. There was also no possibility of the the Opposition cooperating. In those circumstances, the Greens were in a position to influence the nature of the scheme, and would also look like hypocrites if they voted down a halfway decent proposal.

    In this very different environment, both the Government and the Greens found it expedient to “bury the hatchet”, and the result was a carbon price policy that was an improvement over the earlier one (albeit marginal, and not in the way Fran has suggested – the present scheme is just as generous to industry, and no more or less dependent on CCS, than the previous one).

    By 2012, the situation had changed again. The carbon price policy negotiations were over, Government was languishing in the polls, Greens support had also declined, and the level of cooperation between them was increasingly perceived as an electoral liability by both parties. Hence we saw the Greens distance themselves from the Government, by claiming (spuriously) that it had breached its agreement with them.

    Now with Rudd back in the helm and wanting to bring forward the ETS component of the scheme, there is at present no incentive for either party to be seen to be cooperating with the other. If Labor wins, of course, the situation will change again, as the Government will need the Greens to get its legislation through Parliament.

    So no insanity, just practical politics.

  26. July 18th, 2013 at 11:26 | #26

    Quite a few people are obviously on the ETS. The problem is not that the Emissions Trading Scheme won’t work. It will work more or less perfectly. The problem is that it is designed to achieve only a very small cut in greenhouse gas emissions by 2020. The carbon price under the ETS will be so low because it dosen’t cost much to cut emissions and so the price can be quite low and the ETS can still achieve what it was designed to do. The problem is that given the low cost of cutting emissions and the danger that global warming presents the world and particularly Australia, we are acting in a most unwise manner by letting the carbon price fall rather than increaseing the emissions cut target.

  27. July 18th, 2013 at 11:34 | #27

    The media portrayal of this interests me. The carbon tax is portrayed as unpopular, but I’d say that the average person heard the scare campaign, and then noticed that the world did not end on July 1st last year, and then forgot all about the carbon tax.

    So if you take your definition of “popular”as being what most of the populace wants, then I don’t think the carbon tax is unpopular.

    Its portrayed by the media as being unpopular, and the media should be honest with us as to who is feeding them this line, and rather than making it a political issue, maybe the media could get the people pushing the “unpopular” line on air and ask them some tough questions.

    They could start with something like, “You make widgets that sell for $x. With a carbon tax they would cost an extra $y. This isn’t very much – why is this so important to you?” And then follow up with, “But the effect of recent changes in the exchange rate is an order of magnitude bigger than that. Why are you focusing on such a minor cost?”

  28. July 18th, 2013 at 11:37 | #28

    Ronald Brak :
    The carbon price under the ETS will be so low because it dosen’t cost much to cut emissions and so the price can be quite low and the ETS can still achieve what it was designed to do.

    This is a very optimistic point of view! Even for our very modest goal of a reduction of 5% by 2020, I’d imagine the cost needed would be well above $30 per tonne.

  29. Tim Macknay
    July 18th, 2013 at 11:45 | #29

    This is a very optimistic point of view! Even for our very modest goal of a reduction of 5% by 2020, I’d imagine the cost needed would be well above $30 per tonne.

    Imagining isn’t a particularly reliable way of estimating costs, though. ;)

  30. Alan
    July 18th, 2013 at 12:05 | #30

    The ETS was always an integral part of the scheme agreed between the Greens and Labor at the start of this parliament. ETS 2 was enacted with Greens support and does not have the plethora of loopholes that were demanded by the opposition and by the affiliated unions in 2010. The fixed carbon tax was enacted with Greens support as a transition measure before the introduction of ETS 2.

    As the OP notes, whether ETS 2 comes into force this year or next year is not really a major issue. It certainly does not justify the level of angst in this thread.

  31. July 18th, 2013 at 12:14 | #31

    John Brookes, why on earth would you think that we need a carbon price of of at least $30 a tonne to get a 5% reduction by 2020? Other carbon trading schemes around the world have demonstrated that $30 a tonne is not necessary to meet our target. Cutting emissions is cheap. A simple change in light bulb efficiency standards has cut our carbon emissions by about .14% and other efficency measures are also low cost. Then there’s rooftop solar which now provides electricity at a much lower price than the grid and wind power is now competitive with new coal and gas. (Not that anyone plans to build new coal and there’s not much interest in new gas either.)

  32. wilful
    July 18th, 2013 at 12:54 | #32

    For those who can’t be arsed reading Greg Hunt’s speech, for work purposes I’ve had to prepare a quick summary. Any comments or criticisms would be welcome (noting that it’s for an uneducated audience and has to remain short). Link the Hunt’s speech provided by me above.

    Direct Action Plan summary.

    As recently detailed by the Shadow Minister for Climate Action, Environment and Heritage, the “Direct Action Plan” election policy proposed by the Coalition is a simple economic mechanism to reduce emissions within Australia. The policy intends to achieve a five percent gross reduction in national emissions from a 2000 baseline by 2020, which is the same as the initial ALP target.

    The essence of the policy is that a reverse auction will be conducted to purchase abatement. An independent government authority, such as the existing Low Carbon Australia, will call for bids for emissions reduction from business-as-usual (BAU). The least cost emissions reduction in terms of dollars per tonne of abatement would be purchased.

    A separate authority, the existing Clean Energy Regulator, would verify and approve methodologies for calculating the amount of abatement procured, including the important calculation of BAU.

    The fund would be sector-neutral, accepting bids from any entity or group of entities that can demonstrate abatement beyond BAU. Examples provided by the Shadow Minister include power plant clean up, capping landfills, electricity retailer domestic energy efficiency campaigns and carbon storage in agricultural soils.

    The aim is to commence the system on 1 July 2014. The auctioning authority would have an initial budget of $300M in FY 14/15, rising to $500M and then $750M by FY16/17. The Coalition will hold a White Paper process, consulting industry on issues such as the timing of the auction process and the setting of baselines.

    Two particular concerns with the Direct Action Plan have been raised by independent experts. The first concern is that calculating BAU is fraught with methodological difficulties, particularly for some sectors. Many of the calculations use variable or arbitrary values. The government will pay for abatement against a hypothetical BAU baseline that cannot be estimated with certainty.

    Professor Garnaut’s Climate Change Reviews (2008, 2011) analysed the various policy options, especially market mechanisms, to reduce emissions. He commented on the undesirability of using an emissions baseline to measure emission abatements, stating: “The choice of algorithm [to estimate the baseline emissions] introduces a high and unavoidable degree of arbitrariness . . .” and; “this would raise transaction costs and encourage rent-seeking behaviour . . .” (p310, 2008).

    However, measuring and accounting for the specific emissions from the stationary energy and cement manufacturing sectors is reliable. Buying and selling carbon measures for these sectors can be done with relative confidence.

    The second concern is that the Direct Action Plan is unlikely to be able to readily accommodate higher targets for emissions reduction in later periods as it becomes increasingly economically inefficient. As the cost of abatement increases, and particularly where there is stronger international agreement for targets that limit global warming to 2 degrees (a target that has bipartisan acceptance), the Direct Action Plan is unlikely to be able to purchase sufficient abatement at a reasonable cost to the budget.

  33. Hermit
    July 18th, 2013 at 13:04 | #33

    They say Methodists disapprove of premarital sex because it might lead to dancing. I suspect Direct Action might lead to No Action.

  34. derrida derider
    July 18th, 2013 at 13:42 | #34

    The current low price of tradeable permits shows one big advantage of an ETS over a carbon tax.

    Remember the aim is to limit the amount of CO2 being put into the air, not to punish greedy capitalists. Now when your economy is going gangbusters said capitalists are going to want to put a lot more of the stuff out – and precisely for that reason it will cost them under an ETS as permits will automatically be expensive because everyone else wants them too. Which adds the maximum discouragement to pollution at precisely the time in the business cycle it is most needed, yet also at a time when it causes the minimum short-term economic damage (indeed, slowing things down a bit may be welcome).

    Conversely, when you’re in a depression no one is going to want to pump as much CO2 out nor be happy to bear the extra cost of a tax on it. Fortunately the cost of permits will then be very low precisely for that reason .

    That’s what we’re seeing now in Europe – the free permits at the start of the scheme did cause real problems (and were the reason the Greens insisted on a transitional tax instead for Australia) but low prices there now primarily reflect low economic activity.

    Think of a carbon ETS as an automatic stabiliser, both for CO2 emissions and for the economy. A properly set up market can actually work miracles sometimes.

  35. derrida derider
    July 18th, 2013 at 14:27 | #35

    @Fran Barlow
    Fran is right about what Kevin was up to – my sources have him being much more concerned about simultaneously splitting the Libs and marginalising the Greens (very successfully for the former, not so much for the latter) than actually cutting emissions.

    In his defence there is still a good argument that the details of Australia’s ETS really don’t matter so much because Australian policy should be more about putting Australia in a position to credibly push for (and later to implement) an international scheme than about direct carbon reduction. We are, after all, only a small country. From this viewpoint tapping into the European ETS, flaws and all, is a very positive move.

    On free permits generally their effect depends whether they are given as well as or instead of paid ones – that is, whether they blow out the cap or not. If its as well as then their nastiness is because they are blowing out the cap, not because they’re free.

    If they’re instead of paid ones, then they will just jack up the cost for those who do have to pay (since they now have less of the cap left). That might be unfair, but from the planet’s POV it’s no problem – we still have the same amount of carbon being spewed out as if the permits weren’t free. Its the total amount of permits, not who pays for them, that matters.

  36. Hermit
    July 18th, 2013 at 15:28 | #36

    It doesn’t doesn’t help when major players scoff at the rules. The US reduced emissions by switching from coal to gas but that has halted as the gas price rises. China tells us about pilot ETS schemes but the coverage seems weak. Somehow the rest of the world needs to get China, the US, Russia and India to fall into line. Far from that Australia aides and abets some of those countries by supplying them with cheap coal.

    The third phase of the EU ETS envisions ‘border adjustments’ more bluntly carbon tariffs. It could be a compliance headache so it might be better as a blunt instrument. The exporting country must get mainly ticks on a checklist of domestic measures otherwise their goods and services get an arbitrary punitive tariff. The legal mechanism is already in place with anti-dumping provisions. Laws on interstate trade would prevent say California putting tariffs on goods from the rest of the US. I wonder if a small alliance with Australia and Europe as cornerstone members could start the ball rolling. Balls is what it will take.

  37. Ernestine Gross
    July 18th, 2013 at 17:55 | #37

    I concur with derida, derider on the ETS mechanism.

    I could add, the idea of trying to deduce from the EU’s ETS what the ‘right’ price is, is wrong. The idea of ‘one world one market’ and therefore 1 price for every tradeable thing is naive (see Debreu 1959 for an explicit argument). It is naive in the sense that ‘the world’ would have to be a ‘little’ space with uniform properties. This is not the case.

    Given that the EU is not ‘the world’ and the EU’s ETS is ot a global ETS system, it follows that their system was designed for their conditions. Trading in certificates is, IMO, more important in the EU than in Australia because there are so many power plants in several countries and these power plants have different life expectancies and different technologies such that the reduction in ghg emissions can be better matched with other economic objectives such as the decision as to when a particular power plant should be closed down.

    I am unclear at present as to how the Australian ETS is to be linked to that of the EU.

  38. Hermit
    July 18th, 2013 at 18:41 | #38

    Apparently offsets under our Carbon Farming Initiative will be sold in Europe though I think they are also a bit suss. Big emitters here will be able to buy certified Euro offsets though the 2015 plan was to limit them to 12.5% of an emitters carbon liability. The EU says it will greatly tighten up the use of carbon credits. For example the Chinese CFC scam is no longer a source of EU carbon credits though over a billion dollars worth got through the system.

    I agree not everybody can afford to pay even $1 for CO2. I think that means we must pay more for steel and aluminium, either because of carbon pricing or the use of high cost noncarbon energy here or overseas. If for some reason we want to save the domestic industry use some other form of support eg Holden style cash. A wide coverage ETS with minimal concessions should at least produce what might be called a ‘well tested’ CO2 price.

  39. Kevin
    July 18th, 2013 at 19:42 | #39

    Yes, melodrama. Rudd could have called a double dissolution and in hindsight he probably should have. But I don’t blame him for not doing so because double dissolutions are not normal and can be risky and he wanted a full term.

    The problem here is you’re putting all the blame on Rudd. Rudd didn’t kill the first ETS. The Greens did. Then Turnbull offered to save it. Then Abbott killed it. Then Rudd delayed it because he had no choice other than a double dissolution. To say that Rudd isn’t serious about climate change is disingenuous. If we wasn’t serious, he wouldn’t have tried so hard to get an ETS through and he wouldn’t try yet again now. If he wasn’t serious, then he would have terminated the carbon tax and climate change policy.

    You want an ETS? You got a ETS.

  40. July 18th, 2013 at 20:25 | #40


    Greg Hunt’s scheme seems to be constructed for corruption.

    On the funny side, could you put forward a plan to insulate houses to reduce emissions and get it paid for by the coalition?

  41. Ikonoclast
    July 18th, 2013 at 22:31 | #41


    I don’t want an ETS. I want a tax.

    However, it’s a waste of time arguing now. I find the above discussion, including my own fruitless comments, quite amusing in a black humour sort of way. The whole argument is risible. It’s already too late. What’s risible is people still arguing about miniscule adjustments and inadequate measures that will do nothing about climate change. It’s like arguing about giving someone 3 mls of blood when they need 3 litres (6 units).

  42. Alan
    July 18th, 2013 at 22:59 | #42


    The Greens did not have the numbers to pass or reject an ETS without the votes of Xenophon and Fielding. Xenophon was a maybe, Fielding was not. It follows that the Greens did not kill the ETS.

    The culprits, in no particular order, were opponents within the inner cabinet, opponents within the Labor caucus, opponents within the LNP caucus, and Rudd for not standing his ground against Gillard and Swann and calling a double dissolution.

    The weird thing is we are now back in 2010. The election is likely to produce another hung parliament and another minority government dependent on Wilkie, Bandt and possibly the Katteristas for confidence and supply. Of course that could change with the campaign.

  43. Ikonoclast
    July 19th, 2013 at 06:00 | #43


    And almost all those people you mentioned either don’t know the facts of climate change and don’t believe it or do know the facts and still don’t believe it. The latter category say they believe but their “belief” is not operational. It is not leading to effective action or even to any action at all in a lot of cases.

    The latter category (who do know the facts but don’t believe the phenomenon) seems to cover a lot of people when it comes to matters like Limits to Growth and Climate Change. They do intellectually know the basic facts and accept the validity of the quantification and science but emotionally they don’t really believe it. There is an enormous difference between intellectually “knowing” something and viscerally understanding the full implications of it. This is where people are getting stuck. The very fact that they still think they have to time to fiddle around and play political games at the 11th hour tells me they don’t viscerally understand the full implications or anything like it.

    The natural system will have to teach the broader populace and their politicians some salutary lessons. In other words, large numbers of people will have to reach the position where they feel in imminent danger of death or ruination. Then they will believe this situation is for real.

  44. Alan
    July 19th, 2013 at 07:08 | #44


    You can focus too much on motivation. I personally do not care whether Politician X is sincere in their beliefs or not. I do care about their actions. Moral indignation may feel good, and heaven knows it’s a vice I cannot claim to be free of, but it does very little to change the state of the world.

    I will say that both major parties are dominated by people who have very little time for learning or thought because they spend 24/7 on mobile phones plotting how to swing a caucus vote or throw a pre-selection. Those are not necessarily skills, as Gillard and Abbot exemplify, that lead to understanding the state of the world beyond Capital Hill.

  45. rog
    July 19th, 2013 at 07:10 | #45

    @Ikonoclast The reason why there is an apparent disconnect between evidence and action is that for much and maybe most of the world there are other more pressing priorities. Wars, poverty, disease, inequality are issues more evident than climate change. Tony Abbott touched on this by calling the ETS a ‘..so called market for invisible stuff..’ mocking the ‘do gooders’ for imposing a cost on those that may not be able to afford it.

  46. Ikonoclast
    July 19th, 2013 at 08:35 | #46


    Motivations affect whether the horse is trying or not. Without the proper motivation, people and politicians don’t try hard enough. I am suggesting that is becoming clear that people won’t try, really try, to fix this problem until they are sh** scared. Unfortunately, by the time they become that scared it will be far too late.

    And yes, you are right that Capital Hill is a little, self-referential world. That will change too when the ruined masses riot.

  47. Ikonoclast
    July 19th, 2013 at 08:45 | #47


    So true, and yet wars, poverty, disease and inequality will multiply when climate change really takes hold.

    The other point is that Australia does not have (in the main for most people) wars, poverty, disease and inequality as excuses. Here the only “excuses” are ignorance, stupidity and complacency. Given that probably over half of the Australian voting public do understand and accept the existence of the basic problem, then the lack of action and the lack of pressure on our government(s) can only be complacency. This in turn stems from a lack of understanding of further factors like the built-in change already in the climate system, delayed impacts, positive (worsening) feedback loops and the ramifying, compounding and exponentially developing problems that will result from climate change. It also stems directly from a lack of imagination; the inability to extrapolate mentally, emotionally and even viscerally where all this is heading.

  48. rog
    July 19th, 2013 at 17:12 | #48

    @Ikonoclast I disagree with your characterisation of the voting public. ABS data reveals that a majority of people lead a hand to mouth debt deendant existence with most savings being in compulsory super. Costs do hurt.

  49. Jim Rose
    July 20th, 2013 at 11:46 | #49

    Ikonoclast :
    So true, and yet wars, poverty, disease and inequality will multiply when climate change really takes hold.

    If major global warming is to be soon, the case for adaptation is greatly strengthened because the case for mitigation has been overtaken by events – it is too late to do anything other than adapt.

    No amount of action between now and 2020 will affect the climate in the 2020s because of the amount of time greenhouse gases take to affect temperatures.

    The case for CO2 mitigation rests on heading climate change off at the pass.

    As Richard Tol observed in his truly excellent 4 pages WHY WORRY ABOUT CLIMATE CHANGE?, ESRI Research Bulletin 2009/1/1 that :
    • Climate change is likely to have a positive impact in the first half of the 21st century, and impacts turn negative later.
    • The initial positive impacts are irrelevant for policy.
    • The workings of the climate system are so slow that they cannot be avoided even if emissions were to fall to zero tomorrow.
    • The part of climate change that can be influenced by climate change policy has net negative impacts.

  50. Hermit
    July 20th, 2013 at 13:40 | #50

    Here’s several ways climate change will affect us short term
    - snow season washout NSW and Vic
    - poor wheat harvest WA and high bread prices
    - poor hydro NSW Vic and Tas vs 7% of power in La Nina years
    - 46C summer temps decimating the frail elderly
    - mega fires too big for volunteers to control.

  51. Ken Fabian
    July 21st, 2013 at 08:36 | #51

    Jim Rose said

    it is too late to do anything other than adapt.

    It isn’t like a switch that’s either on or off – there is ample opportunity to make things much worse by abandoning all efforts to mitigate.

    Adapting is a given – mitigation is a choice. I think that as far as informed choices go, it’s rational, logical and ethical. And essential. For those elected to positions of responsibility and trust on our behalf to willfully ignore the expert advice at their disposal, to remain ignorant on purpose, for the sake of party unity, populism, or as spokespeople for powerful interest – which latter decide where to stand based not on the validity and seriousness of the science of the problem but on whether their interests are advantaged or disadvantaged by the policies that choice to mitigate brings – is a profound betrayal of that responsibility and trust. When they actively involve themselves in cultivation of ignorance and misinformation to make it widespread and popular – which lots of conservative politicians do – I think they are doing something much worse than simple poor decision making.

    I think that our embedded deniers and obstructors are as pleased by public perceptions that the problem is so hard as to be beyond solutions – “it is too late to do anything other than adapt” – as they are with evidence of entrenched climate science denial within mainstream public thinking – the “invisible gas” crowd; both result in BAU being percieved as the only option. “Too hard, too expensive… too bad!”

  52. Hermit
    July 21st, 2013 at 10:17 | #52

    Just watched the ABC Inside Business interview with Origin Energy CEO Grant King. To paraphrase he said at $6 carbon price our old coal fired power stations will be replaced with new coal fired power stations. King doubted the Europeans would get to anything like $24. Decision time on major baseload replacement is less than a decade away.

  53. Jim Rose
    July 21st, 2013 at 10:40 | #53

    I do not think that open borders will win as many votes as Dr. Tad thinks.

    It is good for rallying the young troops around policies that shock the out-group. I wonder if he still supports tariffs on goods imported from developing countries?

    Dr Tad or a fellow travellers should run for parliament on this idea. It is dead easy to get into upper houses in Australia. Even the DLP rose from its ashes to get into the Senate.

    Rudd’s PNG policy aims to stop people entering by dangerous means: leaky boats. That is a separate issue from the size of the refugee quota.

    Every country has a limited amount of sympathy for foreigners. As Adam Smith argued long ago, sympathy drops away with social distance.

  54. Jim Rose
    July 21st, 2013 at 10:41 | #54

    oops, wrong thread

  55. July 21st, 2013 at 11:19 | #55

    I see once again that people have need of my vast scientific knowledge bequeathed to me as a result of being educated in Queensland: The more carbon dioxided we add to the atmosphere, the hotter the earth will get. If we decrease the amount of carbon dioxide we add to the atmosphere the earth might still get plenty hot, but, and this is the point, it won’t get as hot as if we hadn’t decreased the amount of carbon dioxide we add to the atmosphere.

  56. July 26th, 2013 at 16:43 | #56

    Hey I know this is off topic but I was wondering if you knew
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    I’ve been looking for a plug-in like this for quite some time and was hoping maybe you would have some experience with something like this. Please let me know if you run into anything. I truly enjoy reading your blog and I look forward to your new updates.

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