Wednesday, July 30, 2008

Political Management of Australian ETS II

Wow! Despite leaking to the papers at the weekend Nelson did not have the numbers in Shadow Cabinet yesterday to significantly move Coalition policy on the ETS.

So you can pretty much ignore my previous post.

Paul Kelly writes about the politics of climate change and the ETS in the wake of this development here. It seems like NZ politicians should read it.

The politics of emissions trading is dominated by four events.

First, emissions trading is a de facto new tax that arises from pricing carbon. The notion that you can de-carbonise the economy without pain is ludicrous. New taxes are usually unpopular. But this will be presented as a "saving your planet" tax and many people will buy such a polemic. ...

Second, those who think the economics are on the side of delay are wrong. While action now has a price, action later means the final price gets higher. As Howard learned, any leader branded a delayer will be ruined. ...

Third, climate change requires national action but a global solution. ...

This weakens the case for action. So Rudd must argue that Australia has a responsibility as a global citizen to contribute to the solution. But he is trapped in the prisoners' dilemma: each nation benefits from having the problem solved while minimising its own share of mitigation. ...

The fourth event, revealed in Rudd's green paper, is that Labor lacks the nerve for a pure system of emissions trading. It is drawn to political fixes and carve-outs from the carbon price. It plans to offer 30per cent of pollution permits for free, give assistance to generators and cap the carbon price in the early phase.

The risk was highlighted by Garnaut: a hybrid system inviting endless political negotiations and compromises, weakening economic competitiveness for little gain on emissions. The moral is that implementing an emissions trading scheme is an epic task.

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