Climate change backflip could pay dividends

Having portrayed a global treaty to reduce carbon emissions as essential and inevitable, the Rudd Government has abruptly changed tack and now sees an emissions reduction program to be unnecessary and costly.  This remarkable reversal echoes changes by other governments.

It opens up possibilities for lower government spending and taxing on a scale not seen since the collapse of the Soviet Union in 1991.

That event brought a "peace dividend" through lower defence spending.  We now have the potential for a "climate change dividend" from government eliminating spending on measures designed to reduce carbon emissions.

If global warming from carbon dioxide emissions was ever a threat, only a radical emissions tax could have countered it.  Hopefully, Mr Rudd's deferral of Australia's prospective carbon tax, the Emissions Trading Scheme, is a staging post to its final abandonment.

Removing the prospective ETS tax burden paves the way to eliminating the investment risk of the ETS tax to firms, especially power stations and energy intensive businesses.

That tax risk has meant no major new Australian power station has been commenced since 2002.

Abandoning the ETS carbon tax also means an immediate annual budget saving of $1 billion.  But the ETS tax would have reached $18 billion a year by 2020 and grown further in later years, causing massive economic dislocation.

Putting $18 billion into perspective, it is similar to total Defence spending and about 40 per cent of federal health spending.

For the average wage earner, though much of the carbon tax was hidden, its cost was over $1000 a year.

A recent US survey found only 2 per cent of people would willingly spend that on carbon abatement measures.  Doubtless the government's private polling is saying the same.

So bang goes the climate change program which one (disenchanted) admirer referred to as "the policy that defined" Kevin Rudd.

But further savings are available to contribute to a "climate change dividend".

In addition to saving future crippling greenhouse gas taxes, there are myriad existing costly measures that should also now be abandoned.

First, according to the Australian Audit Office there are 550 individual budget items.  These include energy subsidies, funding of energy research, propaganda programs to the public and all the associated public servants administering this spending.

In total, the government wastes $3 billion a year of taxpayers' funds on these matters.

A second set of measures is as a result of regulatory requirements for 20 per cent of electricity to come from renewables by 2020.

Aside from hydro, which provides 5 per cent of electricity, renewable electricity costs three times more than electricity from conventional sources.

The annual costs of the 20 per cent requirement are set to grow to about $2 billion by 2020.

In addition, the greenhouse scare has spawned regulations on commercial buildings, houses, and a great many other purchases.  The "five-star" energy requirements alone add $7000 to the cost of a new house.

Canberra's backdown on the ETS offers the prospect of lower taxes.  But the Victorian Government hasn't got the message.  Pursuing the most costly means of reducing greenhouse gas emissions, it has just ordered 30 gas-to-electricity generators for homes at $45,000 a pop!

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