The Greens have proposed a carbon tax as an interim measure to begin cutting carbon emissions. Although there are strong reasons to favor an emissions trading scheme over a carbon tax in the long run, I think it’s time to look seriously at this option. Here a few points in no particular order.
* since the price of carbon is initially capped under the CPRS, it’s just like a carbon tax in the short run
* the way to dispel public fear of a new tax is to bring it in. Look at capital gains tax and GST, both the subjects of highly successful election scare campaigns (in 1980 and 1993 resp) and both now uncontroversial.
* the capture of the political right by delusionism is now irreversible, as can be seen from the embrace of the obviously loony Lord Monckton. There’s no chance, now or in the foreseeable future of a deal with these guys. In particular, the version of the CPRS negotiated with Turnbull and briefly supported by the majority of Coalition members is unsalvageable in every respect. There’s no way the deal can be modified enough to get Liberal support now, and on the other hand it’s too much of a dog’s breakfast to take to a double dissolution.
* The Greens will almost certainly regain the balance of power in the Senate after the next election. Much as the government dislikes it, they are going to have to rely primarily on deals with the Greens to get legislation through in future. They might as well start dealing now.
In general terms, the government lost control of the debate with the defeat of the Turnbull compromise ETS last year, and has done nothing to regain it. Turning up with the same discredited compromise in February makes no sense at all. This is a time for firm action, not more delay.
John Quiggin 
GST and CGT both entailed corresponding tax cuts in other areas. A carbon tax isn’t a bad circuit breaker but the revenue it raises ought to be allocated to tax cuts not handouts or subsidies.
Isn’t a carbon tax an attempt to capture an externality whose cost falls on the wider public? So allocating revenue generated from such a tax to carbon emissions abatement should make sense. While at the moment carbon emission is a free gift there’s no reason we should keep giving it and plenty of reasons to cease.
I am pretty much convinced that the govt wants only to delay. CPRS or carbon tax, either will hit voters pockets close to an election and the Rudd govt is committed to one thing only and that is to win the next election. Should they win the next election they may just grow some cajones to take some weak action early in their 2nd term.
Both major parties are far too captured by the coal lobby to do anything effective about curbing ghg emissions.
As I understand it if the ETS current legislation passes there will be a fixed charge of $10 per tonne of CO2 levied on large emitters from July 1, except where avoided by free permits and offsets. This is a floor price cap scheme not strictly a carbon tax which in theory doesn’t have exemptions and deductions. However everything is now on the table. Absent loopholes $10 per tCO2 or 1,000c per tonne or 1c per kg should add about 2.5c per litre to petrol and 1c per kilowatt hour to conventional black coal fired electricity, hardly financially ruinous. I’m not sure what tonnage of CO2 it would apply to but if it was 300 Mt the levy would raise $3 bn, a tidy sum.
I favour a restricted give-back but even that is fraught with peril. It could cover the already budgeted insulation scheme or it could go on the black hole pun intended of carbon capture and storage. I believe wind and solar photovoltaic electrical are dead ends but solar water heating is OK, now extended to nonsolar heat pumps in an uncanny example of Orwellian doublespeak. I also favour natural gas conversions for heavy vehicles.
I put it to Abbott, Brown and the independents that from July 1 we impose a $10 a tonne CO2 levy with no free permits or offsets. The revenue will go exclusively on green subsidies with a short term payback.
The Greens’ proposal is not a bad start, IMHO. Not sure so whether the proposal to allocate 50% of the tax revenue to assist less developed countries is a good idea at present. Wouldn’t it be better to use the money to assist with the further development of renewable energy technologies and then donate the IP to less developed countries (or sell physical stuff at cost)? Perhaps this part of the proposal is a negotiation factor.
Maybe you, JQ, and other readers are bored with my theoretical stuff but, given that I haven’t been asked to shut up, I’ll try once more. IMHO, there are two problems with a global cap and trade system. Firstly, the wealth distribution between countries is still too unequal and the wealth distribution within the so-called ‘rich’ countries has become more unequal (ie the divergence between the theoretical minimum wealth condition and observables looks to me to be too big). Second, the cap and trade system does not provide enough prices to bring about changes in energy production technologies (the investment time horizon for new technologies is often, if not typically, longer than the cap and trade period agreement). Furthermore, as was pointed out by several commenters, this system is likely to result in a lot of trade in paper (financial contracts). Finally, there are other existing significant negative externalities and some potential new ones (eg nuclear power). Adding one market without completing it makes everybody potentially worse off. These were my reasons when commenting in favour of the tax system discussed on this blog quite some time ago.
Lord Monckton – never heard of him until recently. He is also an unknown entity in my circle of friends. Initially I thought ‘Lord’ was his first name. Wrong. It turned out he won a noble prize at birth! If this world hadn’t become so serious and, in a sense, silly in some quaters, he would be called an eccentric (maybe not in Paul Keating’s language) but not a climate science skeptic.
If Labor truly want to pass some kind of legislation that can actually reduce CO2e emissions then they must do a deal with the Greens. That may mean a carbon tax in the nea term, but that would depend upon the compromises needed in order to get the numbers from the Greens.
I agree with Prof Q. that the Liberals as a party have crossed over into the abyss of delusionism when it comes to AGW (Tony Abbott might be able to spot that other Tony out there in the Deluniverse, blogging away). But we knew that awhile ago; just didn’t want to admit it. Good luck and more power to the Greens.
@TerjeP (say tay-a)
Surprisingly, you make a comment that I agree with. None of the money should be waisted compensating industry. The tax money raised out to be used to relieve those on low incomes and others mainly through tax cuts. Some might also be used to reduce debt.
I think both a carbon tax & an ETS miss a vital point, neither specifically target fossil fuels.
For this reason I favour a Fee and Dividend system. The fee being collected at the mine, well head or port of entry (where the imports are from nations that don’t tax fossil fuels at source). The dividend being returned to the community as a flat lump sum. This give the community the option to invest in fossil fuel saving measures.
This will be inflationary, but ultimately some inflation will be need to enable low energy production methods to win out over high energy ones.
@Gnoll110
In principle, there is no need to target fossil fuels as it is the release of greenhouse gases that is targeted. Coal and oil can be used for purposes that do not involve the release of greenhouse gases and the greenhouse gases may be ‘captured’. However, in practice you may be right. It may very well be that what you are suggesting is more workable and less susceptible to clever people finding clever ways of avoiding the penalty but that is not so clear.
Any of the approaches would have a one off impact on prices, and hence, would not be inflationary in the sense of having a persistent impact on inflation.
As John notes the govt have well and truly lost the debate and continue to do so in spectacular style – their lack of engagement on the issue will cost them dearly.
At least the name is truthful about what it is, a big fat government tax grab to try to fill their deficit hole.
nice to see Tony Abbot’s bogan-targeted catchphrase about the “Great Big Tax” has already managed to fill the deficit hole in Rationalist’s head.
I agree with JQ that the CPRS is politically dead at the moment. The hopelessly compromised CPRS that was designed for a now nonexistant bi-partisan consensus and the government didn’t make much effort to sell it to the general public. This is the same strategy as the CGT and GST anyway.
This solution has simplicity going for it especially if it was revenue neutral in someway, either through tax cuts to buy off the greedy and selfish upper middle class liberal heartland or subsidies for low income earners it would be an easy sell. Get rid of the free permits and it’s a winner.
Any electorally palatable way of putting a price on carbon then it will be a step forward. I still believe that a market that deals with externalities is a better way to generate solutions than big government winner picking like nuclear. If solar and wind could compete on price with other methods of power generation with carbon priced why stop them?
With the credibility of climate science crumbling and the AGW scare losing momentum, there will be neither a CPRS nor a Carbon Tax in the foreseeable future. Most Green commenters, including John Quiggin, underestimate the impact of Climategate on the credibility of climate modelings. Calling the doubters “delusionists” won’t win you any more fans either as there is currently a clear shift towards global warming skepticism.
Unless and until fresh and more reliable data and science show continuing global warming, and point at CO2 as the cause, there will not be any further serious action on the part of the government (Labor or Liberal) to curb burning of fossil fuels.
nice try sHx
sHx, When the world says, “Give up,”
Hope whispers, “Try it one more time.”
and this, In reality, hope is the worst of all evils, because it prolongs man’s torments. ~Friedrich Nietzsche,
@sHx
New word: ‘Climategate’. I understand some eccentrics have come up with the idea of building a fence in the atmosphere to keep ‘bad climate’ out and ‘good climate’ in. Nothing wrong with creating a script for a movie.
Another one for sHx, When hope is hungry, everything feeds it. ~Mignon McLaughlin, The Neurotic’s Notebook, 1960
Hope is independent of the apparatus of logic. ~Norman Cousins
There’s a whole page just for people like you. http://www.quotegarden.com/hope.html
I find it highly unlikely that the Labor government will support anything coming from the Greens. By taking on a scheme such as this would be implicitly painting them as credible, something Labor cannot do. I have never seen anything constructive in the ALP approach to this issue. However, rhetoric does seem to work wonders of most of the Australian population which appears to be their “low cost” alternative.
I think John Quiggin is right – the ALP needs to start dealing with the Greens now.
If the ALP thinks it can push its policy unilaterally, then it needs to go down the joint sitting path (ie double dissolution).
Due to our electoral system, this will increase the representation of minor parties in the Senate from the States (because 12 senators will be vacant).
While a subsequent joint sitting could pass the ALP scheme, (due to the numerical domination of the HoR) it complicates ongoing government and future legislation due to the new senate.
Plus there is expense and distruption with a double dissolution.
the ALP simply must deal with the Greens, and the Greens have to deal with the ALP and not pose as wacky uncompromising Trots or a blackmailing rightwinger like Harradine.
@Rationalist
Interesting logic as usual.
Now the climate hoax was created decades earlier in anticipation of the need for a stimulus package and the consequent need to raise revenue to pay off the debt through a disguised big fat tax.
Very spooky… Wait, just about to check for Reds under my bed. Most risible.
@sHx
“Unless and until fresh and more reliable data …”
I am afraid the data will never be ‘fresh’ enough or ‘reliable’ enough for your purposes.
@Freelander
Got it in one. No evidence will suffice for some of these people.
@sHx ,
The field data tells a solid story of climate change and technological man’s part in it. The personal views of a few scientists towards some crap papers and some serial pests is quite sad to see but it isn’t a blight on all of the scientists’ work.
Science in the trenches is always messy: strong personalities are usually involved at the forefront of any field. Indeed, this is often because of strong competition, either to beat another team to a significant result in the field (eg Crick and Watson diminishing Franklin’s contribution along the way, and their striving to copy and beat Pauling in the race to determine the correct structural model of DNA), or to oppose and beat someone else’s theory, in contrast to their own. While the personal level may involve intemperate language and the like, when it gets down to the science itself the professional integrity of the scientists comes out in the way that they argue their case rationally, and from the accepted facts – it isn’t arbitrary, as they must convince their peers and answer to their criticisms.
The media representation of science to the public is a cartoon version, one that is adeptly exploited by some of the denialist crowd to diminish climate science, and by extension, science as a whole. This is rather unfortunate. It doesn’t change the science or the reality one jot.
Before anyone mentions the glaciers and the 2035 date, I’ll point out the generally overlooked points:
1) The original source actually stated 2350;
2) The Indian government website stated 2035;
3) From there it went viral as 2035, it seems;
4) When it eventually wound up in the IPCC report, at least one editor objected to it in Draft 2 – Deltoid aka Tim Lambert has the details on his blogsite;
5) The IPCC editors violated their own rules on citation in that they did not trace the claim of 2035 back to the original, peer reviewed, source. The IPCC committee deserve being crucified over this loss of control in the review process, as it was a simple transcription error in the date that started this whole thing in the first place.
But, it still does not change the scientific results one jot.
I find it amusing the way that denialists see AGW as a popularity contest. If the majority of people get together and decide that it is not happening, then democracy rules! No AGW! If only the totalitarian planet would listen…
Right on!
Despite what the monomedia say about voting for the minor parties, voting for the Liberals/Nationals and ALP just proves to the ruling classes that you’re an idiot.
@Freelander
I do think we need to target fossil fuels, they are the root source of the extra carbon in the carbon cycle. The atmosphere, oceans, soils and biomass are so interlinked, it’s nonsense not to think of them as one, as the biosphere or the carbon cycle. The atmosphere CO2 level is just one measure of the state of the whole system.
Global warning is only one reason to move away from fossil fuels. There are others, they fall into three groups: population pressure, resource depletion and habit destruction.
Over the last 250 years we have used fossil fuel to both greatly increase population and to increase the effect that each individual can have.
Fossil fuels are not renewable. They are resources that will be depleted by their very nature. That mean that ultimately there will be a peak production, followed by a population crash with lots of collateral damage to other systems/the environment on the way down.
In a race with resource depletion, we have habit destruction. In addition to global warming there are things like ocean acidification and deforestation (try clearing large swaths of forest without a bulldozers, chainsaws and lots of cheap diesel). There are lots of other localised examples of habit destruction that are also only feasible with cheap energy, the Three Gorges Dam (plentifulness cheap concrete) springs to mind.
We’re going to have to find a lot of low energy (and likely high labour) ways to feed, cloth, shelter and fore fill ourselves. We need to wean ourselves off fossil fuels and develop new production systems while the biosphere normalise itself. I think fossil fuel specific Fee & Dividend system is the best way to wean ourselves.
A lot of our current efforts are misdirected. Take for example the current ‘Go Veg’ campaign, which I think is just wasting people attention/efforts for reason I’ve outlined here.
@Nick R
The planet is just another conspirator in the great socialist scam to stop the developing countries from achieving a western standard of living. George Soros, Al Gore, probably the British Royal Family, the banks and the laws of physics are in on it. Only the Freedom loving lone wolfs, the La Rouchites and the League of Rights can see it for what it is.
Too true Michael 🙂
Can’t trust those sneaky laws of physics
where’s the Illuminati in all this?
Not sure, but I’d wager it’s in there somewhere. Has anyone compiled figures correlating chardonnay drinking with funding received for cooking up the climate data? Where is Andrew Bolt on this important issue?
@Gnoll110
There is a lot of simplistic and misdirected action being taken or proposed. Aren’t well designed markets supposed to handle this kind of complexity (at least in theory)? I still haven’t given up the idea of a well designed ETS (not the CPRS however).
@Gnoll110
Gnoll – so I take if from your comments that if somebody invented an unlimited clean energy source then that would be a bad thing? For you – it’s not about CO2 emissions and climate change, it’s that humans are now overrunning the planet due to technological progress?
I guess that, in a nutshell, is what feeds a lot of the ‘delusionists’…. they are concerned that a lot of people are using climate change concerns as a cover for broader social/ideological objectives.
Back on thread: JQ – I can’t see the ALP doing a deal with the Greens, it would significantly damage their chance of being relected. The vast majority of Australians see the Greens as the loony left. If the ALP does a deal with the loony left then it damages the ALP’s mainstream credibility.
Oh, they’re far too clever to be caught; that you can’t see them in it is clear evidence that they’re co-ordinating the whole show. And only a fool denies such clear evidence.
Yup the absence of evidence is like a smoking gun.
@Michael
Markets have their place, but this isn’t a ‘natural’ market, like say food. It’s definition is highly abstract. These designs so far aim at carbon generally, not fossil fuels specifically.
The problem at it’s most basic level in the burning fossil fuels creates a large flow of geologic carbon into the biosphere. A flow that is minute other wise.
Winston Churchill said:
I don’t see a well drafted ETS or even a carbon tax doing what is necessary.
@Andrew
It’s a bad thing if it’s cheap and we keep using it to exploit the planet as we see fit.
A cheap clean renewable power source still allows population increase & the associated habitat destruction that entails. Global warming & ocean acidification go way, but deforestation & localised habitat destruction would still happen.
It’s a natural thing, all organisms will exploit whatever resources it can get its ‘hands’ on.
Can our angels overcome our demons?
@Andrew
Actually I should say some climate change goes way. Deforestation in its own right is a massive driver on regional drying. Eastern Australia’s water issues may be just as much a result of deforestation and hard hoof grazing. But I can’t find a control to compare it with! 😛
Michael – I was surprised to learn that the liberal heartland is not merely greedy but greedy and selfish. Shocking. No doubt they eat babies also. Luckily people who vote for the ALP and the Greens are genereous and selfless souls who work hard and share everything they own.
Yawn.
There are several very good things about the Greens’ interim carbon tax proposal.
Firstly, it can take us past the deadlock, and Australia can finally have a comprehensive carbon pricing policy.
Secondly, as PrQ says, “the way to dispel public fear of a new tax is to bring it in”. In the current political climate, it is impossible for the government to make sensible decisions, about targets and scheme caps. By introducing a carbon tax first, the uncertainty is reduced.
Thirdly, the finance for developing countries (approx 10% of the money raised) will help make a global deal possible.
Fourthly, it we can break the deadlock here with this proposal, there may be a chance that it can be done in the US as well.
@TerjeP (say tay-a)
At this stage if you are in the upper middle class and your main concern is tax cuts then in my book you are greedy and selfish. Since Abbott has chosen to side with denialists I regard his stance as irresponsible. The baby eating comment is just stupid. Your comments aren’t any fairer than mine. I didn’t say that the liberal heartland doesn’t “work hard”. Are you saying that Greens and ALP voters don’t?
@Andrew
Typical right-wing fantasy and fabrication:-
Seems this Andrew fellow is a bit of a Tory nutter.
@TerjeP (say tay-a)
I should have added that Abbott’s slogan has been that the CPRS is a “Great Big New Tax”. He disingenuously wants to have a bet each way. Lets reduce carbon dioxide without making carbon pollution more expensive. Who is he targeting with this?
have you got a link to that TerjeP?
@Ernestine Gross
Correction: Peter Wood’s post led me to re-read the linked reference in JQ’s post. The Greens’ proposal is to use approximately 10% of revenue for developing countries and not 50% as I stated by mistake.
“the way to dispel public fear of a new tax is to bring it in. Look at capital gains tax and GST, both the subjects of highly successful election scare campaigns (in 1980 and 1993 resp) and both now uncontroversial.”
That’s a misreading. They are only uncontroversial in the sense that we are stuck with them so there’s no point arguing; they have been taken off the agenda (explicitly, in the case of the GST and the Henry Tax Reform‘s remit). Many of the fears about those taxes really have come to pass or are in progress. Just bringing taxes in doesn’t dispel fear, it overrides it. It’s a “we have heard no complaints” thing.
“…the version of the CPRS negotiated with Turnbull and briefly supported by the majority of Coalition members…”.
Er… it was never supported by the majority of Coalition members, Turnbull just claimed he had assessed the sense of the party room that that was so – but others present denied he had done so accurately.
For what it’s worth, I shared many of Ernestine Gross’s reservations about emissions trading from the beginning.
The trouble is that the carbon tax proposed by the Greens would have no effect on carbon dioxide emissions. Our modelling indicates strongly that a tax at this low level will have no effect upon coal-fired generation and, given the relatively low price elasticity of demand for electricity at the retail level (probably because electricity has been so cheap in Australia), the demand side effect would be negligible and difficult to spot given the srong secular growth in demand. The coal fired generators don’t begin to switch off power stations until carbon is at about $70 a ton. But the trouble then is that there has to be enough low carbon generation capacity available to meet the shortage in supply if consumers remain reluctant to cut back. What we really need right now are very large subsidies to encourage the rapid provision of low carbon emitting generation to fix the supply side. It is clear that the private sector cannot do this for perfectly understandable reasons. Using royalties received from coal miners would seem to be the ideal source of such subsidies.
“This is a time for firm action, not more delay.” Yes, but Labor isn’t that committed on this issue and would much rather negotiate with the LibNats to make weaker policy than negotiate with the Greens to make it stronger. That the Greens proposal makes a lot of sense only makes it worse but it’s easier to keep on delaying and pretending it’s the recalcitrance of the Right that’s stopping effective action; it keeps their own entrenched denialism from breaking out and doing to them worse than it’s done to the Liberals. The last thing Labor appears to want is Greens support plus a few genuinely concerned Libs crossing the floor.
Actually, any carbon tax should include the carbon imbedded in imports and definitely needs to be added to the price of fossil fuel exports. Given Australia exports more greenhouse production via coal and gas exports than it produces locally, exports shouldn’t be excluded. But I’m not holding my breath.
@Gnoll110
The problem of not seeing a well drafted ETS is that at the moment, none exists. We need to draft one.
As a purely interim measure, I see a carbon tax as something we could look at … but it would have to be about $40 per tonne with the clear promise of incrementing to $100 per tonne within say, 5 years and then incrementing by about 3% per annum. It would apply to everything — no exemptions.
While that was in force the government could devise an ETS which would set the baseline for permits at whatever the market set based on reaching 25% below 1990 by 2020. Once the scheme was in force, industries could opt out of the tax by joining the ETS.
An escalating schedule of tax payments and an accompanying ETS running in parallel, would allow industries certainty and they could choose whichever method suited them better. I suspect by 2020 most industries would have switched to the ETS since this would allow them to be rewarded for offsets, purchase permits offshore in approved schemes and so forth.
When this was bedded down I’d favour removing the MRETs since they would be superfluous.
On the broader issue, I certainly reject the notion that the Greens are seen as the “loony left”. Even those who give the ALP their first preference tend to acknowledge that the Greens have a serious message and are worthwhile. The ALP should negotiate with them in good faith — had they done so seriously, it’s conceivable that Humpreys and Troeth could have been brought over along with Xenophon, and at worst the ALP would have a clear point of difference with the Libs.