Economy
Soviet-era Lada without wheels
Ben Quin
Alex, ( A Grand Experiment in Economics )
I disagree – the Wong scheme is a Soviet-era Lada – without wheels.
Does your Charity extend to purchasing emissions permits at auction every year? And if so, what do you envisage will be the impact on employment of your proposal?
The Wong political logic holds that funds raised through the auction of emissions permits will be returned to “low-income” households to help them offset the increased costs of goods and services caused by the introduction of the ETS.
Therefore, your “Save the Barrier Reef” Charity might invest $100 million in year 1 of the scheme to reduce the pool of emissions available in that year by about 10%. It would need to do this every year for at least the next 4 years, until the new emissions target was set. You have invested $500million in 5 years and likely to need much more in years 6-10 if your scheme is to hold its ground.
All of these charitable donations would end up going to the poor consumers, whose consumption is helping drive the destruction of the barrier reef in the first place. Your scheme would also likely have the effect of increasing the pool of poor consumers in need of support, as more of them would have lost their jobs as a result of your charitable activities forcing the price of emissions permits higher than they need be (due to increased scarcity of permits to trade within the system).
This seems very odd indeed.
I would prefer first to see more analysis of the potential for re-jigging the tax system. Companies that make big inroads into emissions reductions should be rewarded with reductions in employment-related taxes first (and perhaps even reductions in profits tax), before surplus proceeds from permit auctions are redistributed. This would stimulate higher employment in sectors that can most quickly reduce emissions, and offset employment loss in other sectors finding it more difficult to reduce emissions. There is no loss of tax revenue to the government, providing the Federal and State tax departments can agree to the swap.
Consumers would have to bear more of the load of higher prices under this scheme, but this may be a better target for your charity – supporting the acquisition of energy saving devices for households. But that takes us back to where you started.
Let’s at least try to put the wheels onto the Lada before setting off on this journey. I will continue to argue for the immediate start of a pilot study of the proposed ETS in Tasmania.
Tasmania’s economic diversity and its separation from the Australian economy make it an ideal location for an economic trial of this nature. If we hit troubles, Tassie can be buffered by the wider Australian economy. We could examine Turnbull’s ideas for incorporating land-use into the scheme and the emerging problems with National competition policy (eg can Hydro Tas give cheap low-emissions power to State-based industry?). Within months, we could discover much of what needs to be discovered to give Australia confidence in whatever scheme is finally agreed to be introduced.
Confidence will provide momentum. And as we have seen in the global financial economy recently, without momentum, nothing will happen.