If I were you, I wouldn’t start from here (or now)

I’ve had a quick look at the report of the PM’s Task Group on Emissions Trading. It gives a pretty good summary of the main issues, constrained by the political requirement that it should not even look at the obvious implication of an argument for participation in an international emissions trading scheme, namely that we should ratify Kyoto forthwith. The choice of 2012 (when Kyoto expires) as the target date neatly avoids the issue, as well as meeting the political imperative of not endorsing what Labor has proposed.

The main implication of the Report is that we should have got started on all this ten years ago (or at least, back in 2003 when Howard killed the idea), and that we’ll now have a more costly adjustment path than if we had acted sooner.

Something of a surprise is that the McKibbin-Wilcoxen hybrid idea didn’t get more than a couple of brief mentions. Some of the leaks I saw suggested that the Task Group might go this way, as did Howard’s rhetoric about an “Australian, practicaL” scheme. As I mentioned a while back, the big problem with this idea is its incompatibility international trading, and this is presumably why the Task Group didn’t go this way.

53 thoughts on “If I were you, I wouldn’t start from here (or now)

  1. On inclusions and exclusions from what I suggest we call the Shergold Plan, I notice that there are brave words about how as much of the economy as possible should be included, except for agriculture and waste. But when it comes to “trade-exposed, energy-intensive� industries, inclusion becomes, effectively, exclusion.

    These industries are nowhere listed in the Shergold Plan, as far as I can see. Appendix L makes an attempt at definition, but I haven’t found any actual list. No doubt Shergold and the Rodent have a private list. These industries are to get special “transitional arrangements� which include their being given free permits every five years sufficient to cover both direct and indirect emissions of existing plant, plus additional free permits to cover the direct emissions of new plant (pp.116-117). “Over time� (undefined), the number of free permits for direct emissions would be adjusted downwards to the number which would be needed if the relevant firms were operating at “world’s best practice low-emissions technologies�. Free permits for indirect emissions would, so far as I can see, be available as long as the “transitional arrangements� were operating.

    These “transitional arrangements� amount to excluding “trade-exposed, energy-intensive� industries from the National permit scheme, and calculating a separate cap for each plant which could be called part of a “trade-exposed, energy-intensive� industry. These local caps would initially be whatever emissions the plant is causing, directly or indirectly. “Over time�, they would be calculated according to whatever a “world’s best practice low-emissions technology� is. If they are not exceeded, fine; the free allocation of permits will always cover the emissions. If the local caps are exceeded, Shergold says permits would need to be purchased in the market (every other industry would have to pay the “fee� for exceeding a cap). However purchase of permits in such a situation seems unlikely because in the next paragraph Shergold says: “…the emissions cap under the [National] scheme could be adjusted upwards to account for emissions as a result of new investments in the trade-exposed, emissions-intensive sector� (p.116). So the National cap would just be adjusted upwards by an amount equivalent to the emissions caused by the new investment.

    The obvious fudges, aside from the pretty monstrous idea of a separate set of caps itself, are the uncertain duration of these “transitional arrangements�, the definition of “world’s best practice low-emissions technology� and the delay before benchmarking of plants against “world’s best practice� would begin. All of these are as indefinite as the length of a piece of string, and are obviously subject to political dealing. I remember that the State Governments’ National Emissions Trading Taskforce (August 2006) plan simply excluded aluminium smelting, cement making, iron/steel making, petroleum refining and ammonia manufacture from initial coverage, and I suspect that Shergold’s private list of “trade-exposed, energy-intensive� industries would include these and perhaps more.

    That’s enough for one day, and I’ve barely scratched the surface.

  2. Gordon,

    You just waded into the ickey pool that forms around a failed philosophy. It all sounds like a bunch of kids playing “tag”, the game quickly develops things that are “bar” and there become endless rules about how quickly one can retag the tagger, on and on and on.

    No one is going to instantly drop using carbon energy, that is impractical. What is needed here is rapid development of alternatives and that takes money. The only robust solution is to apply a universal carbon tax which will work internally to build availability of alternative energy solutions.

    The tax would work exactly the same ast the GST and would have the benefit of being claimed back by exporters (as GST is) thereby not disadvantaging our export trade.

    The endless arguement about permits concessions tradeable emissions, etc is doomed to failure simply because there are too many interested parties. Worse, the argument will stall any action for a long time yet to come.

  3. So, in 1997ish 95+% of the US Senate is against Kyoto, but by 2003 they’re almost half for a domestically controlled similarish system in The Lieberman-McCain Climate Stewardship Act. Yet 4 years after that, nothing like it has been proposed again (or if it has, it hasn’t passed) even with more Democrats in 2006 than in 2003. Perhaps some of the initiatives since 2003 that have been proposed by Bush was sufficient? Or all they all just postering? Some of each, probably.

    Anyway, the bill would have capped 2010 aggregate for 85% of the 2000 US GHG emissions (as defined by the EPA’s Inventory of U.S. Greenhouse Gas Emissions and Sinks) in electricity generation, transportation, industrial, and commercial economic sectors, by having the EPA Administrator promogulate regulations to limit such emissions. It excluded agricultural and residential sectors and allowed the Admisitrator to exempt certain subsectors if he (or in other words the people that work for him at the agency) determined it was not feasible to measure the emissions of those subsectors. The Commerce Dept would have been the one to re-evaluate the levels of allowances to see if they met those of the UN FCCC. Those allowances would have been either grandfathered or auctioned. Some flexibilty mechanisms, penalties and the allowance system are discussed. It would also have established an NSF scholarship program for students of climate change areas and the Commerce Department researching technology transfer and the impact of the Kyoto Protocol on U.S. industrial competitiveness and international scientific cooperation.

    Interesting. Wonder why it didn’t pass. Seems like some good ideas.

    Now that I think about it, that makes the Supreme Court decision to have the EPA relook their non-regulation of the GHGs in the case not make much sense. If Legislative wanted the EPA to do something, they would have passed the bill, and if Executive wanted the EPA to do something, it might have directed them to do so (although conceptually, Executive has decided to decentralize it and let the agency decide it appears). In light of that, I’m very confused how the Judicical could have determined that’s what the Clean Air Act covered. Oh well.

    Click to access 05-1120.pdf

    Click to access 05-1120.pdf

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