36 thoughts on “Mike Steketee nails it

  1. hc – The problem you have is that you are relying on the Climate Institute and on information that is way too complex for most people. I do know that most people understand food and taxes but don’t understand the intricacies of carbon measures. It may not be the best thing but that is why pushing through anything substantial has been so hard.

    It is far easier to find ways that the average person understands such as support for domestic solar panels than to subsidise dirty industries. More talk is not the macho way and is frutrating for Action Man but it is more likely to lead to better and longer lasting solutions which actually address the issues since all of the arguing has got us precisely nowhere.

  2. Jill Rush, when all is said and done both Party’s will need to have their election commitments fully costed subject to Clause 29 of the Charter of Budget Honesty Act 1998. My understanding is the Coalition are running a phoney campaign and cannot meet their commitments without going into the red.

  3. @hc

    The polluters knew the permits would be worth diddly squat in a few years time so it would have made sense to flog them off as quickly as possible. It’s not as if not meeting a target was going to see them shut down or suffer any serious penalty. They could always have bought some dodgy REDD credits if needed for a lot less than they got flogging off the permits.

    OTOH, if they were forced to buy them in a tightening market …

    Putting aside what I would have wanted, it is worth exploring what a modest start that would have been bettter than nothing would actually look like.

    It would have been built around the following:

    1. No free permits: All permits auctioned
    2. All sectors in
    3. Border tariff arrangement meeting no discrimination test
    4. Cap reduces emissions 1% every year until 2015 and then 1.5% every year thereafter until 2020; provision for lower cap to reconcile if other related jurisdictions come on board
    5. No REDD credits

  4. Fran, why assume the quotas would be worth noting in the future? They were to be tightened under the original Garnaut proposal. You are objecting to a hypothetical scheme that no one was planning to introduce.

    It’s interesting that you support BTAs which are primarily designed to protect the traded goods sector but oppose free permits to carbon exporters and producers of import-competing local goods. The two measures are trying to do the same thing – tax the local consumption of carbon. I can’t see how you can protect exporters without exempting them from carbon charges and this is an important source of carbon leakages. If you levy local exporters a charger and their foreign competition faces no charge then production will switch toward the foreign producers and carbon emissions by these foreign producers will increase as well.

    These were the issues that guided the original ETS design. If it had gone through without the inept and incompetent opposition from the Greens Australia would now have in place a sensible approach to addressing it’s carbon emissions.

    Quotas would have been cut over time so Australia eventually met reasonable targets and the value of these quotas would not have gone to zero but would have increased at something like the rate of interest.

  5. hc, I tend to agree with Turnbull that today’s ‘politics is about conviction and a commitment to carry out those convictions’ and Labor is now paying the penalty for dumping the ETS. But having said that it is not too late for Labor to get back on-track by making a pact with the Greens.

  6. @hc

    Fran, why assume the quotas would be worth nothing in the future?

    The European scheme was similar and that’s what happened there. It’s the same thing as what happens when you just print money. It loses its value and people who know that try to swap the notes for tradeable things that don’t lose their value.

    It’s interesting that you support BTAs which are primarily designed to protect the traded goods sector but oppose free permits to carbon exporters and producers of import-competing local goods.

    To be consistent with GATT principles the BTA would have to follow the principle of non-discrimination. One way of doing this would be to assess the carbon-intensity of the incoming goods and levy only what was required to make the said goods no more carbon-intensive than the traded goods with which these were competing.

    This demolishes the arguments about fugitive emissions. One could then use the money raised to assist the country hit by the BTA to lower their carbon-intensity — perhaps funding improvements in their energy, transport or other infrastructure or perhaps even buying up assets and bringing in changes.

    That’s a hugely different proposition than free permits.

    It is largely a furphy though. Aluminium smelting for example — one of the big winners under the Rudd’s Pollution Rewards scheme, is not only heavily subsidised already here but is amongst the dirtiest in the world.

    The turth of the matter is that the will to introduce an adequate scheme or even a transitional one to a minimal scheme was never there. What this ugly episode showed was that the Greenhouse Mafia wwre in charge of both major parties. As you will recall, the Greenhouse Advisory Group set up by Howard and utterly dominated by big filth was inherited by Rudd and left almost completely unchanged (they added a wave power person for cosmetic reasons).

    The sad thing is that Rudd could, if he had wanted, have put up a scheme and forced it through in August of 2009, as the Liberals would have pleaded nolo contendere or faced a wipe out in a double dissolution. It was the ineptitude and bad faith of Rudd and his rightwing gang of apparatchiks that lies at the heart of the debacle we now see being played out.

    Looking at the farcical process by which Rudd and Turnbull ensured that there would be no progress on this matter and its final passages in the coming election reminds me a lot of “Gloria Clemente” from White Men Can’t Jump. It seemed that when the CPRS fell over, almost everyone got what they wanted. A bad schem had been blocked. The polluters weren’t going to be paid but they would continue to dump for free. The Liberals had a leader they liked. Rudd didn’t have to deliver on his promise. It seemed like the Liberals had cast aside the next election …

    Sometimes when you win, you really lose, and sometimes when you lose, you really win, and sometimes when you win or lose, you actually tie, and sometimes when you tie, you actually win or lose. Winning or losing is all one organic mechanism, from which one extracts what one needs

  7. I think Australia could get away with imposing a carbon export levy on coal and LNG if we have a compatible domestic scheme. Reason being that we are by a country mile the world’s No.1 coal exporter and may eventually place second behind Qatar for LNG exports. Buyers might have real difficulty getting the amounts they need from alternative politically stable suppliers. If Japan’s steel industry for example sourced all its coking coal from South Africa it might be a tad awkward as the ships of shame snuck around the Australian coast.

    If they can do it for cigarette packets I think we could even include a message. The tax invoice could read ‘Forgotten something? Under the Kyoto protocol we all promised to burn less fossil fuel. This tax invoice is to remind you of that decision.’ At $10 a tonne of CO2 the levy would be about $24 a tonne on thermal coal (FOB price ~$100) , $26 on coking coal (on $200) and $13 a tonne on LNG ($400).

    Rather than all the hassle of calculating carbon embodied in imports of finished goods (eg steel ingot, outsourced call centre services) we would simply levy fossil fuel exports and let the finished goods come back in without additional charges. It could mean that goods from China used electricity made from Indonesian coal instead of our coal. We’ll find some other way to remind the Indonesians they aren’t helping. The Chinese could ask for a refund of the levy if they promise to spend it on green tech and we will be mercifully spared the farce of carbon credits. This approach is administratively simpler and enables Australia to be a leader not a follower for once.

  8. The real problem, as some have noted, is US selfishness. There’s a way to deal with that. The rest of the world can gang up against them by instituting a global price on carbon and penalizing the US through trade sanctions and tariffs until it comes around. The question is, what country is going to provide the leadership to do this. Certainly leadership is not going to come from Australia, because Australia is too cosy with the US, and the rest of the world knows it.

  9. I wonder how much of the drop in public concern for climate change is affected by large areas of Eastern Australia temporarily coming out of drought; around here it’s green, the dams are full, the mild winter conditions are generally more welcome than hard frosts and prospects for upcoming catastrophic fires seem much reduced compared to even a year ago. That the same mild winter were it dry, would greatly limit the opportunities for safe hazard reduction fires and be setting the stage for more Black Saturday’s is, right now, not a real consideration.
    Meanwhile the opponents of action on climate trot out the same old arguments – highlighting short term costs of serious action but assiduously downplaying or outright denying long term costs that come with failure to act being most popular – that and promoting the view that coal miner’s jobs must have priority over and are innately superior to solar farm construction jobs or pretending the decisions of the world’s biggest exporter of coal and highest per capita emitters are inconsequential, or pretending the current political aversion here and globally to action can somehow be permanently sustained against the inexorable growth of real world consequences and impacts. And sharp growth in direct economic costs. It disturbs me that as those costs rise, the urge to expediency could well see ever more short term ‘economic’ responses that are inconsistent with the requirement to reduce emissions and add to rather than reduce the further future costs. More coal plants to power more air conditioners for the heat waves that will come seems like the policy responses of politicians who are brain dead.

  10. @Hermit

    I think Australia could get away with imposing a carbon export levy on coal and LNG if we have a compatible domestic scheme.

    We absolutely could and in a way this highlights the absurdity of claims that high taxation of Australia’s mineral resources would ‘cost jobs”. In fact, in almost any conceivable scenario in which China’s economy doesn’t either collapse (or resort much more significantly to that other unmentionable low carbon technology) coal imports to China will continue to escalate forcing up the price. Removing fuel subsidies and tax detectability of dirty energy would be a start. Placing an export levy would also be good.

    From the 1st Quarter 2009 to the 1st Quarter 2010 Chinese coal consumption grew by 28.1%. It’s currently tracking consumption of 3 billion metric tonnes per annum, but at 7-8% growth the energy required to sustain this will force this figure up by about that amount even if growth in supply from all other energy sources increases at the same rate, which is extremely optimistic. After coal (about 80% of stationary energy, oil is next and thereafter the remainder are in small single figures led by hydro). Drought is putting pressure on hydro and so one has to wonder about the longterm capacity of hydro to grow at this rate. We know that oil is finite too.

    Anyhow, let’s be conservative and say that China’s stationary energy demand only doubles once every 10 years. That means by 2020 it is using 6 billion metric tons per year and by 2030 12 billion … What this means is that Chinese coal consumption (already three times that of the US) grows by three times current US coal consumption by 2020, roughly six times that in the following ten years etc … with all the mining rail, and port infrastructure that implies. Even assuming the World Coal Institute’s assumption about Chinese RAR coal is right, (about $110billion metric tonnes) it will (assuming 7% growth pa) by 2030 have consumed about 20% of the total reserve. Of course, China is also a coal exporter. Its exports are in addition to these figures.

    China will import something like 150 million tons of coal this year (about 5% of its usage but 60% of Australia’s coal exports). If they double their imports — which is possible, Australia simply won’t be able to meet the demand, at least without lots of new coal transport facilities. The limiting factor on growth is not going to be taxation of coal but capacity constraints on the system. Even if Australia were to push up the price of its coal, Chinese demand will still be greater than we can supply. They have to keep buying, and one suspects other suppliers are not going to undercut us — why would they? India’s economy is just as dependent on coal as China’s and they also want to grow their economy by 7% pa … and although they are only consuming about 1/6th of China’s current consumption, they too are going to be in much the same position.

    Even if no price is attached to carbon, it is hard to escape the conclusion that the price of oil will continue to escalate as the best sources are tapped out, and since diesel fuel is also key to coal extraction (and composes such a significant portion of Chinese energy supply) this too will place upward pressure on coal prices everywhere. Given that no country can be without energy supply and almost all industrial supply is from coal, one has to imagine that many countries are going to start placing restraints of one kind or another on exports of coal either in the form of caps or levies. So really, getting in early and effectively doing this makes perfect sense from Australia’s POV. In the much longer run escalating prices, (and dwindling water supplies) will cut Chinese demand but in the short to medium term (5-15 years), this (along with LNG) will be a seller’s market.

    Why give the stuff away cheap?

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