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The crown capital management international relations review there’s nothing free or efficient about current Emissions Trading Scams10 Years AgoThe crown capital
management international relations review there’s nothing free or efficient
about current Emissions Trading Scams
From
1 July 2014, the Rudd Government promises to 'terminate' the carbon tax and
move to emissions trading scheme (ETS) linked to its European counterpart.
If
this latest climate policy promise is actually implemented, carbon prices are
not 'terminated'. They are determined by the ETS 'market'. Prices become more
uncertain and volatile. Is this a better approach?
With
a Federal Election imminent, on climate policy, we should review what we are
doing – and why.
Ministers
spruik an ETS as the most efficient, market-based, way to price and reduce
emissions.
Really?
What sort of 'markets' are the European and Australian ETS (both being 'cap and
trade' schemes)?
Demand
for emissions permits is determined by greenhouse gas emitters that must
account, and obtain permits for, their emissions. Liable emitters are
determined by governments. Governments allow many exceptions and selectively
provide substantial numbers of permits free of charge or heavily discounted.
Governments
also set the aggregate supply of permits within their jurisdictions, possibly
on the advice of a government-established advisory body, like the Climate
Change Authority in Australia. They also regulate energy supply sources (eg,
renewable energy targets). The Productivity Commission has already found these
extra layers of regulation to be very inefficient and costly. It recommended
their termination.
Given
total permit supply, permit holders can trade their permits, selling them at
mutually agreed prices to buyers. This trading part of the ETS is supposed to
ensure that 'the market' determines emissions reduction at the lowest cost. But
this trading is circumscribed by yet more government controls.
Under
'linkage' with the European ETS, and for access to other (eg, developing
country) permits, Australian emitters have limited capacity to purchase permits
offshore. There are even more stringent limits on foreign purchases of
Australian permits. So market arbitrage is compromised by more government
regulation.
The
ETS 'market' is defined and suffocated by extensive government regulation.
Aggregate permit supply is government-determined. It's subject to their policy
whims. Property rights are uncertain and evanescent. The ETS is a political football
where, as now, considerations other than reducing emissions often take
precedence. For example, a $6 carbon price is politically more attractive than
$25 for hip-pocket reasons.
To
describe these ETS models as 'free' – or, worse, efficient – 'markets' is a triumph
of rhetoric over reality.
Why
are we indulging in this regulatory orgy? Supposedly, we want to reduce
anthropogenic greenhouse gas emissions to limit global warming. Putting aside
the debate about the science – which, while healthy, hardly suggests all agree
the matter is settled – are we going about it the right way?
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