Flexibility a key in emission reduction policy

This week in Canberra the Government and Opposition issued rival plans for handling emissions of greenhouse gases.

The policies from both sides are targeted at reducing emissions by 5 per cent by 2020.  This really means a reduction of 27 per cent in 2020 emissions per head, because the target base is the year 2000.  And if worldwide emissions are to be reduced to a level the Government believes necessary to prevent global warming, Australia's reduction will have to be 80 per cent.

Mr Rudd thinks global warming is the greatest moral challenge of our time.  He went to the Copenhagen conference on climate change last December determined to use his skills to ensure a meaningful agreement on carbon reduction.  The conference collapsed when China, now the largest emitter of greenhouse gases, refused to cut its emissions.  China recognised that such measures would undermine its economic growth.

Oblivious to these international developments, the Government is sticking to its Carbon Pollution Reduction Scheme (CPRS).  Central to this is the emissions trading system, a form of tax on the carbon component of energy.

There are different assessments of what this tax entails.  One Treasury estimate puts it as raising $16 billion a year in tax by 2020.  Treasury's modelling for the Government's Garnaut Climate Change Review put the required tax by 2020 at $53 per tonne of carbon dioxide.  This doubles the cost of electricity, taking $30 billion a year from people's pockets.  In today's money that's $1200 per person -- largely in increased electricity charges.

This is in addition to existing measures.  These include energy ratings on new houses and the requirement that forces electricity retailers to provide 20 per cent of their supplies from renewable sources.

Renewable energy is three times the cost of conventional sources.  Such measures and the various subsidies, like taxpayer-supported rooftop panels, together already amount to a $3 billion a year slug on the taxpayer and energy consumer.

The Coalition's plan adds to the multitude of programs aimed at reducing emissions but rejects the carbon tax component, which it sees as a scattergun approach.

Instead it intends to combat emissions by a series of rifle shots, costing only one-twelfth the Government's CPRS price tag.

Predictably, the Government claims the Coalition's plan would not deliver the claimed reduction in emissions.  It is probably right, but Mr Abbott's proposals have the great merit of avoiding locking in a vast new tax and bureaucratic control system that Labor's CPRS entails.

The Coalition plan provides a sort of insurance policy that can be intensified or abandoned depending on future circumstances.  This is important because Australia's emission reduction measures are irrelevant unless all countries adopt similar plans.  And the failure of the Copenhagen Conference probably rules out any prospects of an international treaty.

Moreover, almost every day brings fresh revelations discrediting the science behind global warming projections.  These have falsified forecasts about the imminent demise of Himalayan glaciers, disputed predictions of the disappearance of the Amazons rainforests and have started to question the historical data which forms the basis for any action.

All of this counsels against Mr Rudd's CPRS, which stores up irrevocable future costs.

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