Kevin Rudd has no policy ideas that might actually improve the lot of Australians generally so he constantly resorts to tokenism. And global warming is the BIG bit of tokenism for him. There is no pretence that his proposed climate policies will make any discernible difference to the climate so the only rationale is that Australia will be "setting an example" for India and China. That India and China are likely to be influenced by Australians cutting their own throats is laughable, however. The Indians and the Chinese will cetainly be laughing. Nonetheless, Don Quixote Rudd seems set on his nonsense so there is much discussion of the policies concerned. Three current articles below -- JR

Climate cure more costly than the disease

DEMOCRACY, as Arthur Balfour said, is government by explanation: but the explanations must be good ones. The Garnaut report was to explain the basis for the Government's climate change policy. Unfortunately it leaves open more questions than it answers. This is because the encyclopedia Garnaut and his team have produced does everything except what it was supposed to do: cost a target for greenhouse emissions reductions. That, we are told, will come later, with the delay being due to difficulties in the modelling of emissions reductions and their economic costs.

That a delay would occur is hardly implausible. But given that the primary purpose was to present those estimates, why didn't Garnaut simply delay the completion of his report? Surely the public, having ordered the steak, would hardly find it satisfactory to be served only the vegetables, with a promise that the steak would come with dessert?

The failure to present any estimates of the cost of emissions reductions is important because it makes the report unbalanced. Working on the principle that a risk perceived is a risk indeed, the damage climate change could cause is explained at length, but there is no corresponding discussion of the costs and risks involved in action to prevent climate change from occurring.

The absence of costings lets the report off the hook. Since it doesn't weigh up the probable costs and benefits to Australia of alternative policy options, it isn't forced to grapple either with the likelihood of effective international agreement actually being reached or with the consequences of implementing an ETS if it isn't. As these risks, and the costs of going ahead regardless, are not properly weighed in the balance, the report too often reads like a call to arms, rather than objective policy analysis.

This feature of the report is accentuated by its one-sided presentation of material. Nowhere is this clearer than in the report's discussion of the harm climate change could do the living standards of future generations of Australians. Estimating the extent of that harm is fraught with judgments and assumptions, and some will think the report understates the costs, while others will think the opposite.

But what is important about the report's estimate is the one thing the report never mentions: which is that it is hardly a huge number. If one accepts the report's estimates of the real income loss consequent on adverse climate change, then fully offsetting that income loss would require putting aside each year an amount that would be about 0.7 per cent of Australia's GDP in 2008, and which would decline to less than one-third of 1 per cent of GDP by mid century. This assumes a real global rate of return on investment globally of 6 per cent, which is reasonable by historical standards and consistent with the strong economic growth projections set out in the report.

Given a government committed to a budget surplus in the order of 1.5 per cent of GDP over the economic cycle, this level of saving could be achieved with little or no sacrifice to consumption. Indeed, one could readily double the report's estimate of the loss (say, to even more fully reflect non-monetary losses) without that conclusion being in any way undermined. This is important not only because it puts the issue in perspective, but especially because it sets a ceiling on the acceptable costs of an ETS.

Any ETS that costs us more than the precautionary savings set out above would be difficult to justify, as it would impose a larger sacrifice than needed to preserve future living standards. Indeed, given the risk that our own abatement efforts will have little consequence, and that global agreement will not be reached or will prove ineffective, the amount we should be willing to spend on an ETS ought to be even lower than that ceiling, thereby freeing up some income for the precautionary saving we will need should harmful climate change occur. The report could and should have explained this much, but it doesn't. Nor does it explain as directly as would have been desirable the consequences of its preferred approach to allocating permits globally, which is on a per-capita basis.

Australia will continue to have a very small share of world population and hence, under a per-capita allocation, would obtain a small share of global emissions permits. At the same time, our comparative advantage means that we should specialise in emissions-intensive industries, such as agriculture, minerals and energy. Given per-capita allocation of emissions permits, to do so we would have to buy permits from overseas, which would partly transfer to foreigners the gains from our resource endowment.

Perhaps this wealth transfer is desirable; but it is no less desirable for the public to understand that such a wealth transfer would occur, potentially on a very significant scale, were the report's recommendations accepted.

This tendency to understate problems with the preferred approach is also apparent in the report's treatment of the transition to an ETS. The report acknowledges that there may be a case for a "slow and low" start, with a capped emissions price being set for a two-year period. What it does not explain is why the uncertainties that make such a gradual start sensible would be materially reduced after merely two years. By the end of 2012, it will still not be clear whether an effective global regime will come into place; and even the response of the Australian economy to an ETS will remain highly uncertain, as the adjustment processes will take many years to work. In the meantime, new shocks will emerge, as the world economy itself continues to change.

All of these uncertainties are best dealt with by retaining a capped carbon price that reflects the benefits of abating later rather than now. Such a capped price would ensure that even after 2012 the costs of any abatement do not exceed the benefits, which especially in the near term, are likely to be very modest. Yet this too the report does not confront, other than by assuming that uncertainties will melt away.

Finally, there are the instances where there is at least the semblance of partisanship. Garnaut's response to calls from the Opposition for the fuel excise to be reduced should an ETS be imposed is a case in point. Any such reduction, he suggests, would send the wrong signal to developing countries, especially those which continue to heavily subsidise fuel consumption, and would in any event be economically unjustified.

However, there is no more virtue in unduly taxing a commodity than there is in unduly subsidising it: both distort relative prices and reduce efficiency. Fuel prices are already trebly taxed: by the excess mark-ups arising from the OPEC cartel, by the fuel excise and by the GST. Compounding the distortion by adding a fourth tax, without adjusting the others, would be both inefficient and inequitable.

In short, this is a report that costs the problem, but says little or nothing about the costs of its proposed solution. As for its proposed solution, it does not even seek to systematically compare it with alternatives: rather, it acts as if the only options were complete inaction on the one hand, or its version of an ETS on the other. And for all of its 500-plus pages, it is at times uncomfortably thin on analysis, appealing to fears and hopes rather than likelihoods and realities.

Yet the policy decisions the report calls for are of huge consequence: they cannot be made on the basis of romanticism and generous impulses. To claim those decisions must be made immediately is as reckless as it is nonsensical: rather, what is needed is a far more careful testing of the facts. That the Opposition has been debating these issues is therefore hardly worrying; what would be terrifying is if the Government were not to. For without such a full debate, the greatest threat to Australia's future prosperity will lie not in the climate, but in ourselves.


A climate backdown of sorts

Top 1000 polluters only to need permits

Penny Wong has assured businesses they will not face a GST-style red tape tangle when the Rudd Government introduces its planned emissions trading scheme (ETS) to tackle climate change. The Climate Change Minister revealed yesterday only the 1000 biggest polluters of the business world - such as power companies - would have to purchase emissions permits under the system, The Australian reports. But she also insisted the ETS, the subject of a green paper to be released on Wednesday, would encompass the entire economy.

Senator Wong's comments came as the Make Poverty History movement called for the Government to create a new migration category for climate change refugees - Pacific Island residents whose homes are likely to be inundated by rising sea levels.

The Climate Institute think tank also released a report warning that Australia needed to do much more on energy efficiency to maximise its response to climate change.

Senator Wong's long-awaited green paper will give the first real indication of the detail of the Government's ETS plan and will come less than a fortnight after its climate change adviser, Ross Garnaut, released a draft report recommending a comprehensive scheme to begin in 2010. Government sources said it would focus not only on emissions trading, but would cover a broader agenda as part of a carbon pollution reduction scheme.

Interviewed on ABC television yesterday, Senator Wong said the Government would put a limit on permitted carbon pollution and issue permits up to that limit to big polluters.


Big labor union challenges Rudd on climate policy:

Keep energy and resource jobs in Australia to cut global greenhouse: AWU

Up to 15,000 Australian jobs could be under threat, Australia's biggest energy and resource union, the AWU warned today. Australian Workers' Union (AWU) National Secretary, Paul Howes, said that industry, government and unions need to look at ways we can 'green' our energy-intensive and export-oriented industries - so that we can keep good jobs here and not go to overseas markets, like China or Brazil or India.

AWU wants Regional Australia in Climate Change debate: The AWU leader warned that this national community debate cannot just be concentrated in the capital cities - but must also involve the regions. " Professor Garnaut undertook a national tour of Town Hall meetings to speak directly to the public after he released his Draft Report. " That was good. But all the meetings were in capital cities. Our economy today depends on the industries and jobs in Regional Australia - where the energy and resources sector is based. " The people in Regional Australia will suffer the hardest hit - especially if we are wrong-footed on climate change. The AWU is not prepared to abandon the regions. These jobs in Regional Australia are integral to the future well-being of our nation."

How AWU jobs can help in the battle against greenhouse gases: Paul Howes went to Geelong in Victoria to launch this major 32 page analysis the AWU commissioned from Per Capita, an independent think-tank committed to developing a progressive Australia. The Per Capita report, released today suggests ways that we can keep these good jobs here - and help these energy-intensive industries become more environmentally friendly.

" We know by keeping good jobs in industries like these smelters and refineries here in Australia we are actually helping in the battle against greenhouse gases," AWU National Secretary, Paul Howes, said.

"The Federal Government must help these industries to clean up their act, and bring in new technologies such as carbon capture and storage . If we do that then decent, well-paid, secure jobs will not be lost to Australia - and taken off-shore to countries like China, India and Brazil whose pollution levels are far-far higher than we have here in Australia.

" For every tonne of alumina made here in Australia we have 50 per cent less emissions than the same tonne made in China. So if this industry shifts to China because of Climate Change imposts we only worsen global pollution," Mr Howes said.

Report shows we can generate significant green job opportunities by keeping energy and resource industry alive: Key recommendations in the Per Capita report call for:

* Government to consider providing partial exemption for five years, or a temporary exclusion from ETS, or a discount on carbon market price.

* Aluminium industry aggressively investing in developing own carbon-neutral energy resources which would themselves generate significant job opportunities.

* Industry to meet future demand growth through efficiency gains.

* Government offers income tax credits to stimulate job creation.



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