Email of the day
Comment of the Day

May 23 2011

Commentary by Eoin Treacy

Email of the day

on carbon trading:
"I attach a report from the Department of Climate Change and Energy Efficiency This is an Australian government department set up by Kevin Rudd before he was deposed by Julia Gillard. Rudd set it up to install an emissions trading scheme, got cold feet, and got deposed because he back flipped after Copenhagen.

"The Department has been doing some reading (over the last 4 years) of published articles on climate change and we now have the attached document as a summary of the current level of understanding of climate change in Australia. You would not believe the expense put into preparing this report - excess of a hundred million. The word "uncertain" or a variation of it appears 44 times. However, the attached document is the sole basis upon which Australia will be thrown into a go-it-alone carbon price/tax regime.

"The uncertainty lies with the long suffering consumer/tax payer I think. Pray for us."

Eoin Treacy's view Thank you for this interesting report. As the prospect of higher taxes looms over many of us, the anthropogenic climate change argument has taken on new urgency. It is helping us to question just what energy policy should be about. Historically, consumers and governments have considered, availability, security of supply, energy output, risk of injury, environmental impact and price in their calculations of whether a fuel or energy source were viable. However, the anthropogenic climate change argument seeks to input a new criterion which, in most cases, supplants cost with carbon impact.

In straitened times, the attraction of carbon credits for many governments is obvious. They need to raise more revenue and will invariably follow the path of least resistance. The Green movement has gained such a high profile that a carbon tax is now considered the least objectionable revenue raising measure. As a result, governments all over the world have been implementing carbon related taxes. Carbon trading is a successful revenue generator but I have not seen research on how successful it is in reducing carbon emissions. It is certainly successful in raising the cost of doing business.

Let us assume that there is a vital need to reduce carbon emissions. How do we do it? Colloquially, there is the carrot or the stick approach. It seems to me that most governments are focused on coercion. Guilt, end of the world type prognostications, taxes and high cost alternatives to the status quo appear to be the favoured answer to the problem. Solar and wind are not capable of meeting base load requirements and are only competitive with oil at historically high prices. High energy prices act as a tax and reduce economic growth. Carbon taxes are an additional headwind to growth.

If we re-introduce price into the equation it takes over. Oil at $100 and more is an obstacle to growth irrespective of the anthropogenic climate change argument. The business of all policy makers needs to be to improve the standard living of those they look after. High priced alternatives to high priced energy are no alternatives at all. Natural gas is cheap, available, increasingly transportable and emits considerably less carbon than oil or coal. Nuclear energy is powerful, reliable, well understood, cost effective, emits no carbon and the waste can be managed. Widespread adoption of these two well established alternatives to oil would result is lower carbon emissions, lower energy prices, potentially higher economic growth and standards of living for citizens.

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