Kyoto comes with problems

Having placed Kyoto ratification as the No. 1 priority, former diplomat Kevin Rudd wakes up to reality.

Rudd thinks ratifying Kyoto gives us some advantage in that our bureaucrats can sit at every negotiating table.  But the advantage is only consummated if, as a result, we are able to gain concessions.  This is hardly in spirit with the post Kyoto mind-set of selfless measures designed to promote some greater good.

Moreover, in ratifying Kyoto, Rudd is solemnly pledging to achieve a level of emission reduction that cannot be met except by placing the economy into a sharp recession.

This is notwithstanding that Australia received a uniquely generous Kyoto target (108% of 1990 emissions) and has only been able to avoid something well in excess of 120% of the 1990 level by redefining the emission base and abandoning further agricultural expansion.

If Australia ratifies an agreement in 2008, knowing that its 2012 target cannot be achieved, this will surely be recognised as a cynical gesture and will not generate diplomatic good will.

Much of the debate on how to bring about reductions in greenhouse gas emissions has focused on "economic instruments".  These involve either placing a tax on emissions or setting a ceiling on them and allowing companies with rights to emit to trade those rights.

Both approaches set compromises between costs that are imposed on the economy and the reductions in emission levels.

Some activists promoting emission reduction programs would prefer to avoid using taxes or tradeable rights.  In some cases this is because of a deep distrust of economics and a conviction that forcing people to do things they might otherwise avoid would actually leave them better off.  This is not ostensibly the view of those in the political mainstream.

Often a consideration in the introduction of such selective instruments is the advantage they provide in terms of political support.  The benefits are concentrated on a few parties and the costs, though greater, are so dispersed that hardly anyone notices them.

Regulatory interventions for greenhouse reasons are now legion.  There are hundreds of policies and subsidies designed to promote wind farms, biofuels and a host of other matters.

Greenhouse policy is spawning an array of interventions similar to the old industry assistance policies that gradually strangled the economy in regulatory distortions.

Australia's economic health owes a great deal to these having been largely eliminated by the Hawke, Keating and Howard governments.

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