The momentum has now swung right behind emissions trading schemes globally and in some instances, with assertions that, if countries that don't have emission trading schemes, they will be penalised with tariffs. At least that is what we are now hearing from Kevin Rudd, the Australian Prime Minister, but it remains nonsense.
This website has always been against emissions trading schemes, it favours a tax like VAT, and it believes that we should take time to reflect on what an ETS means.
The ETS is making a commodity out of carbon which, like all commodities, will be priced. It will also hand out concessions to industries to help them make the transition from a high carbon to a low carbon economy. As carbon is priced, this amounts to a cash hand out of public money to the concessionary industries. It might be best to park that thought. Hand outs have been predicated against anticipated demand, available technologies, ecomonic growth and government set targets. In other words, they are against forecasts. The notion is that carbon heavy industries will be able to use carbon credits to ease their way to a low carbon economy. It just so happens that many carbon heavy industries are also essential industries. The idea of a trading scheme is that governments will reduce carbon credits over time, in line with over carbon reduction targets, and that if these industries don't meet targets, they will have to buy credits, from others with credits to spare, to comply with targets. It is assumed that as targets reduce, the price of these credits, or carbon will increase, forciing companies to introduce low carbon technology or they will be out of business. Increases in the carbon price, it assumes, will be more or less constant, in which case carbon will be an unusual commodity.
As you can see, there are some big assumptions in all this logic. Making carbon a commodity is a mistake. The transition to a low carbon economy needs to be planned and as the mining industry will tell you, it is difficult to plan against a commodity price. A commodity will also attract speculators, not great if the market is funded in part from public money. There is also the assumption that the carbon price will rise in a more or less consistent pattern. If it tracks oil, as appears to be the case, that might not happen and it will make planning for these industries more difficult. There is also the issue of hand outs. Essential industries will be given credits (and boy are they pushng for them). If the amount of credit is too high, these industries will receive windfalls, too low and they could be broke, and in some cases like power generation, that they will need to find money from the public purse. Taxpayers will then pay twice!
You can see a real mess brewing here. The transition to a low carbon economy shouldn't be about market forces. It should be about a planned response, governments stepping up to use their resources to create accessible markets for sustainable products, and, about a carbon tax, so that each of us knows, can count and be responsible for the environmental cost of a product or service we buy. Watch this space, the ETS might just be the next sub prime market.
