It now seems certain that when Tony Abbott is elected Prime Minister of Australia next year that we will not have a carbon tax. The forces of darkness and stupidity have won with their lies and misrepresentations on climate change. At best we will have an inefficient “direct action plan” than puts massively increased costs on the community and which will not (unless revised) be particularly effective. But should we not try to back this stupid policy since at least it gives us something? The fear of course is that the truly crazy IPA types and/or climate deniers will move to prevent any action at all on climate change.
The Coalition do support the MRET renewable energy targets and the rural CFI policies. Indeed they do have a rudimentary carbon-pricing scheme in place that will pay polluters to cut back their emissions. This scheme is equivalent to pricing carbon emissions but it is a tax-cum-lump-sum transfer policy to all polluters not just those that are trade exposed.
This latter scheme has many difficulties associated with it but it is a start. The price set for paying for carbon cutbacks ($15/tonne) is somewhat too low to secure serious mitigation effort but, in principle, these payments could be increased – indeed they must be if the Coalition is to meet its objective of securing a 5% reduction in carbon emissions by 2020 over 1990 levels – the same target as Labor. In addition, instead of earning $10b in revenues this scheme would cost the government around that amount (plus excess burdens of at least another $5b) to achieve the same mitigation as Labor’s current scheme. I assume too that the army of bureaucrats needed to implement the scheme would add substantially to these costs.
But the advantage of the Coalition scheme is that its tax cost is either effectively hidden in an array of other taxes or necessarily funded through reduced spending on schools, hospitals and social welfare. Indeed, perhaps such an inefficient scheme should have been advanced by Labor. The tax is probably well hidden and if the Coalition had successfully (though hypocritically) objected to it on the grounds of inefficiency, the pressure would be towards a more efficient scheme of the type currently proposed by Labor and implemented either by Labor and the Coalition.
In short I wonder whether successful policy in Australia today should not primarily target efficiency. The key objective in policy is to somehow promote the social welfare without having your policy deliberately misrepresented by liars in the Coalition, the IPA and the media (Channel 10 and The Australian). An explicit carbon pricing policy has been known for decades to be the cheapest way to address a pollution problem but this is irrelevant if the policy is unsaleable given rampant political dishonesty. Free carbon quotas have also been recognized as a way of insulating emissions exposed trade sectors, such as aluminum, from loss of competitiveness associated with carbon leakages. But such policies too are easily represented – we are “taxing our major carbon exporters but compensating them for the tax, clearly a confusion”. No, it isn’t but that lie is easily sold by unscrupulous politicians and IPA types who are deluded on the issue of climate.
To a point should Australia not accept and improve inefficient policies that do something? Acting to improve such policies may be a better strategy than living with the silly hope that Labor will turn its fortunes around and survive to implement carbon pricing. Nor is such a stance inconsistent with a longer-term rejigging of the scheme towards a more rational explicit pricing policy – longer-term it is most reasonable to assume carbon will be priced.