Carbonomics

I promised myself that I’d stay away from Global Warming, at least until some new wrinkle turned up that promised some sort of interesting discussion. But seeing as GE is away, surfing apparently (you’ll forgive my antipodean snickering as I try to visualize this), I thought I’d look at the common approach to the issue that seems popular among left-leaning western democracies these days: the Carbon Tax.

A potted history of Australian politics in 2010: Prime Minister Julia Gillard went to the last federal election promising there would be no carbon tax. Before her, PM Kevin Rudd had promised there would be one. Several things ensued: first, his popularity in the polls plummeted to the point where most commentators wrote off the Labor Party at the next federal election. Then, his Education Minister (the aforesaid Gillard) advised him to drop the tax. Rudd accepted this advice. Given that Rudd had already proclaimed Global Warming the great moral and economic challenge of our time, his backdown merely made him appear weak and lacking in conviction. His polls slumped even further. So then, he was challenged in a party room spill. By—you guessed it—the very same Gillard.

The electorate responded to all of this at the polls with the greatest swing against a first-term government seen since Federation. But not quite enough to return the Liberal-National coalition to government. Labor cut deals (the precise details of which we’re unlikely to ever be told) with three independents and the new lower-house member from the Australian Greens to form a makeshift coalition that has governed a hung parliament till the present. It’s telling that ever since, at every press conference at which Gillard has announced some new policy initiative, the leader of the Australian Greens, Senator Bob Brown, has pointedly loomed behind her in camera shot. No-one’s fooled as to who’s really running Australia at the moment.

Ventriloquist: Bob Brown (second from left) announcing new Carbon Tax

Surprise, surprise: right on cue, Julia’s backflipped. So now, Australia will have a carbon tax. Or a “Carbon Pollution Reduction Scheme”, if you prefer. It’s just that Gillard isn’t calling it that, so she hasn’t exactly broken her election promise. No, what we’re getting is an emissions trading scheme. One in which emitters of carbon dioxide trade with each other for the privilege, on a per-tonne basis. Only, (and this is the bit that is clearly at the behest of the Greens) for the first year the price of CO₂ will be fixed at a level decreed by the federal government: in other words, a carbon tax in all but name.

I’m not an economist. Never had a lesson. But I think I get the fundamentals of how this is supposed to work. In a nutshell, make carbon dioxide expensive to produce, and people will use less of it. Says so right there in the Economics 101 textbook. After all, tobacco taxes stopped people smoking, didn’t they?^* The government, of course, has left out one or two little things. First, they figured that there was nothing business could or would do in retaliation to this new tax. They’ll just lie down and cop it sweet, right? Silently and obediently pass on the costs to consumers, who will go on to use less CO₂. Thus saving the planet. Or something pretty close to it.

Incidentally, to make sure I wasn’t missing something fundamental in all this, I ran it past a mate of mine who is an economist; in fact, he lectures the subject at one of our most prestigious Graduate Schools of Business (and parenthetically, he’s a convinced AGW believer). He reckons I’ve got the basics pretty much right.

Of course, it’s all bunkum. Manufacturers here have threatened en masse to take their operations offshore, to countries with no carbon tax. And with little or nothing in the way of our strict emissions standards, either. The result: a net increase in CO₂ emissions, devastation in an already-dwindling Australian manufacturing sector, skyrocketing unemployment, and carnage at the polls next time round. Why would a Labor government, of its own volition, do something which is simultaneously ineffective, economically devastating, and politically suicidal?

It’s bunkum, and those behind it know it full well. That’s why they’re fixing the price of carbon (for the first year only, they say, but I’ll lay any odds they’ll extend it just as soon as they think the voters are used to the idea). They don’t dare leave the price of CO₂ to the market; they’ve seen what happened to the Chicago Climate Exchange, what’s happened in Europe, in New Zealand, and the growing number of states in the USA who are pulling out of proposed state-based emissions trading schemes.

So now, our government’s in damage-control mode. They’ve had the Climate Change Minister, one Gregory Ivan Combet (former secretary of the Australian Council of Trade Unions, and darkly rumoured to be privately sceptical of AGW) in the media today declaring that 50% of the proceeds of the new tax will be returned as compensation to households most affected by the inevitable price rises in electricity and essential commodities.

Pardon me? The whole point of this exercise was to change individual behaviour by inflicting pain, wasn’t it? But now, it’s turning into something else. First, it’s a garden-variety wealth redistribution from high-income households to low-income ones, by a Labor party for whom wealth redistribution is its métier. Second, it’s a far more cynical redistribution of employment, from Australia to the developing world, at the behest of a Green party of unreconstructed communists delighted to see the decadent capitalist world getting its just deserts. And third—as far as I can make out—it is some sort of scorched-earth policy by a federal government which is staring down the barrel of certain defeat at the next election, having deceived the voters and imposed on them a Carbon Tax they have rejected at every available opportunity.

And in the end, not a molecule of carbon dioxide is saved.

^* Didn’t they???