Carbon plan is Kyoto by another name


Australian Financial Review, 15th August 2003

There’s no point swapping one environmental evil for another, argues Des Moore

Treasurer Costello and Environment Minister Kemp are apparently proposing the creation of a market permitting Australian businesses with high carbon dioxide emission rates in their normal operations to trade them off with those having low emission rates. This threatens to involve much more than a simple marketing arrangement.

Underlying it is an objective of suppressing Australia’s overall rate of CO2 emissions below what would occur if business activities continues without government intervention. Such suppression requires government action either to force existing high emission businesses to reduce their operations or to stop new high emission businesses starting. A trading system accompanied by regulatory emission requirements for certain businesses would thus have the same adverse economic impact as a direct carbon tax.

The Ministers’ proposal seems inconsistent with the decision by Australia, along with the United States, to refuse to ratify the Kyoto Protocol. That still has insufficient signatories -and Russia is under heavy US pressure not to provide the signature required to make it operative.

Under the Protocol developed countries would reduce emissions of greenhouse gases (CO2 being the most important). The aim is to mitigatethe allegedly damaging increase in average world temperatures that an UN-appointed group of scientists (the Intergovernmental Panel on Climate Change) predicts if economic growth proceeds unimpeded.

Australia has not challenged this analysis, although Prime Minister Howard has correctly observed "the Protocol would cost us jobs and damage our economy". In fact, Kyoto compliance would hit Australia with a double whammy — a loss of competitiveness from having to reduce our emissions while developing countries would increase theirs without penalty. Our energy intensive export sector would be particularly hard hit.

It is scarcely surprising, therefore, that the Prime Minister has asked for further consultation with the business community of the two Ministers’ proposal to implement Kyoto de facto — and particularly as an emissions trading system would make it harder to continue to refuse to ratify the Protocol.

The Ministers’ rationale appears to be that, as Australia offered voluntarily to attempt to meet the emission target allocated it under the Protocol (to limit - by 2012 - emissions to 108 per cent of those in 1990), commencement of emission-reducing action now would give businesses greater certainty in planning future investments in an emission-reduced environment. They also suggest that adverse economic effects can be readily absorbed given the continued strong performance of the Australian economy.

However, any trading system would be unlikely to produce a clearly defined quantum of lawful emissions and the only investment certainty is scarcely one we should seek, viz the deterrence of energy-intensive investment (including foreign investment). Realistically, even if a trading system were clearly to delineate emission rates, Kyoto would add to investment uncertainty overall, particularly given the difficulty of assessing the extent to which emission-free developing countries would exploit their increased competitiveness.

Better for the Government to provide businesses with an assurance that, while it will continue (as it has being doing) measures to encourage improved efficiency in energy use, it will not force reductions in emissions. Such an approach could well enhance Australia’s attractiveness to foreign investors.

The Government should also establish an official inquiry into the IPCC’s scientific and economic analysis, and the processes used in compiling its report. Many (including no less than 22,000 scientists around the world) have expressed serious doubts about the validity of that analysis. There is a lesson in the long history of badly wrong assessments by ‘experts’ predicting that, unless certain perceived problems were solved, society or the economy or the environment would run into major difficulties.

As recently as 31 years ago, for example, no less than 14 Fellows of the British Royal Society and 36 holders of UK university science chairs issued a dramatic "Blueprint for Survival" endorsing the then fashionable Club of Rome thesis that, unless governments commenced action to stop population and economic growth, the world would run out of resources.

No such development has occurred or is in prospect. Those scientists failed to recognise the capacity of humans to innovate and respond to the challenges of life.

Such failures sound a clear warning signal against accepting expert analysis calling for governments to exercise restrictive powers over the lives of the citizenry. If it does become clearly established that global warming is giving substantive cause for warranted concern, the future generation will be richer, better informed and able to respond in circumstances where even the doomsters imply there should be time to do so.