The greenhouse gas emissions market is where agenda-driven environmentalists hook-up with vested interests in creating opportunities for trading rights. Sarojini Krishnapillai of the Australian Conservation Foundation dangles a $750 carrot of billion emissions market he says will be lost to Australia unless we ratify the Convention (Letters 15 January). Rothchild's Richard Martin (AFR Opinion 23 January) praises the Carr Government for creating such a market by forcing electricity suppliers to buy greenhouse credits or reduce emissions in other ways.
Other State Labor Governments have joined NSW in pursuing these goals. The Governments have hired John Hewson, Chairman of Global Renewables, Gwen Andrews, the ex-head of the Australian Greenhouse Office, environmentalist Phillip Toyne and others to prepare a report designed to embarrass Canberra over its refusal to sign Kyoto.
In fact, making money on buying and selling carbon emissions is no more wealth creating than making money out of trading taxi cab licenses. In both cases the scarcity and consequent need for a rationing mechanism is solely created by government.
Like money earned by trading taxi cab licenses, that earned from a market for carbon emissions will also have a negative impact on overall levels of income. Some countries however might gain. These would include the countries which can readily meet their target emission levels and are able to sell their surplus emissions to other less fortunate countries. In addition, developing countries might gain a competitive edge because under the Kyoto Protocol they have no targets and their developed country rivals would have to carry an additional cost impost.
Australia is a loser on both counts.
With regard to emissions trading, Australian industry would end up paying others for permits. This is in spite of us having serendipitously had our original Kyoto target reduced by 10 per cent as a result of us redefining our forests. Compared to the target, set at 8% above 1990 levels, even with the amended base, we are likely to have emissions at 12 per cent above the 1990 level. This is notwithstanding considerable costs incurred in the government's insistence on significant amounts of energy being sourced from exotic sources like windfarms that are 2-3 fold more expensive than the conventional energy that Australia has in abundance. It is also in spite of the expenditure of the Australian Greenhouse Office and its State based counterparts in promoting emission reductions.
Compared with other developed countries, Australian industries are also more heavily involved in competition with those developing countries which face no Kyoto penalty. If Australian ratification of Kyoto were to increase electricity prices by a third, as some estimates suggest, this would spell the gradual demise of Australia as the location of high energy cost industries. Such industries, especially aluminium smelting, re-located to Australia having been priced out of Japan and other countries by increased energy prices following the OPEC crisis of 25 years ago. As a nation, Australia would be the poorer for this loss of these industries, but global emission levels would be unaffected -- they may even rise -- since the production would migrate to those countries with no onerous Kyoto obligations.
Moreover, the measures agreed by the Kyoto signatories can never have more than a trivial affect in reducing emissions to the levels said to be required. The pain from the present measures would need to be amplified many times over in order to make headway in reducing atmospheric levels of carbon dioxide.
This adds to the doubt regarding the scientific basis of a global warming trend (no discernable warming has been recorded in the post 1979 satellite readings), and underlines the weaknesses of the Kyoto protocol and the soundness of the Commonwealth's approach in refusing to ratify it.
However, the possibility remains that global warming will result from growing carbon dioxide and other human induced emissions. And if measures are to be taken to combat this, Australia will need to shoulder its part of the burden alongside all other countries. Considerable analysis of the issue and its solutions has already been undertaken in Australia by such bodies as our scientific academies, ABARE and the Lavoisier Society, and by consultants like ACiL Tasman. But major breakthroughs in energy use technologies or policy approaches will be necessary to reduce emission levels if global warming turns out to be a reality.
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