CARBON TAX LETTER to the EDITOR

LETTER TO THE EDITOR 11/7/2012

Is it time we sought some truths regarding the impact of the carbon emissions tax?

Perhaps your readers would like to read a most illuminating article by senior writer, Greg Sheridan, published in The Weekend Australian on Saturday 7/7/12.

Sheridan makes some very salient points, backed by some expert opinion provided by Warwick McKibbin and Nicholas Linacre.

Firstly, the Gillard Government’s own Productivity Commission has revealed that no economy anywhere in the world has produced a scheme like Australia’s carbon tax. Specifically at $23 a tonne.

This is despite the Gillard government continually quoting schemes, such as in the EU and the US States, (California – yet to start, and the one in the north east), as if they have been in operation for considerable time and are reducing emissions. However, an expert in this field, such as the ANU’s Warwick McKibbin, maintains that the downturn in the US economy has done more to reduce emissions than anything else, as has also been the case in Europe.

In fact, the US does not have a national carbon emissions reduction scheme. Its neighbour, Canada, says it will never have one. Another major economy, Japan, is coping with its internal disasters, while South Korea is yet to establish a scheme and even New Zealand has modified its low price scheme.

Another truth is that in Europe, for example, where some carbon credit trading exists, prices are very low, (about E5). Why then is Australia imposing such a burden on the economy with a high price in the form of a tax ($23 per tonne), as well as maintaining a floor price of $15 a tonne when the tax moves to a trading scheme?

Given some constraints in the Gillard scheme, Australian companies will seek to purchase cheaper permits overseas, (or even move operations off-shore).However, World Bank expert, Nicholas Linacre, doubts whether an international trading scheme will ever work. He suggests most low cost credits are coming out of China but are unacceptable to buyers due to the veracity of their schemes. Again, China, like the US, does not have a national scheme, but one restricted to a couple of provinces.

Little is also said about the developing world. For example, India, another looming economic giant, declared in March this year, it would not even consider scaling back more greenhouse gas emissions until after 2020 -- and then would do so only in exchange for Western dollars.

Finally, is there any truth to the notion that a market based system of trading credits actually reduces carbon emissions to impact on greenhouse gases?

Apparently not, according to Warwick McKibbin. The only evidence of this occurs in computer generated models supposedly replicating the real world, (and subject to numerous assumptions.)

The truth is, however, that through the Gillard Government’s emissions trading scheme, a considerable burden is being placed on the economy in the form of a tax (to be followed by an elevated floor price), not replicated anywhere else in the world, not guaranteed to work, nor be effective in reducing greenhouse gases.

This scheme will have a serious impact on our future competitiveness in a global market; and in the end, our standard of living.

This impost is a high price for Australians to pay for a political decision enabling the Gillard government to cling to power.