The topsy turvy approach to climate change

The crux of Tony Abbott’s Direct Action policy on climate change is having the government pay the worst polluters a fee as an inducement for them to reduce or stop their carbon emissions.

It is an odd policy, to be sure, and without any precedent – which means it is risky in terms of cost and effectiveness.

As Fairfax Media revealed yesterday, only 5.5 per cent of the 35 economists surveyed were in favour of the Direct Action approach to reducing carbon emissions versus 86 per cent in favour of a carbon price or emissions trading system. The only surprise in these findings was that 5.5 per cent (two respondents) were in favour of government payments to polluters.

The Direct Action policy favoured by the Abbott government throws up some interesting potential applications if indeed the economists are wrong and the government subsidy model works.

Let’s look at drink driving and the dreadful carnage, damage, financial cost and grief that drink drivers impose on society.

Why not have the government work out who the worst drink drivers are – say, choosing those with two or more offences – and through a direct action plan, give these offenders money not to drink and drive ever again. Would a cash flow of, say, $200 a month for as long as they didn’t get caught drink driving be enough?

If they never drink drive again, these sorts of payments, it could probably be argued, would be worth it. But what if, after giving them the money, whatever amount it is, they get back in their car after a night on the turps and offend again? Would the government get its money back? It’s unlikely and the policy will have failed.

And what if someone not on the list all of a sudden offends for the first time? Do they then qualify for the government handout? Would there actually be an incentive to offend so that you could qualify for the payment?

In another example, what about having the government pay fat and obese people some cash to lose weight? The benefits from a healthier society would be huge. Interestingly, there have been studies on this cash-for-fat policy that suggest it works – at least in the short run. When given cash that is linked to weight loss and then maintaining a lower weight, people do respond. Many heavy people do drop several kilograms. The problem is that this is expensive and lasts only for the duration of the scheme – as soon as the money stops, the studies find that weight goes back on and the problem is not fixed.

And what of people with a healthy weight or those that don’t drink and drive? It’s a bit unfair that the ‘offenders’ get money for their ways while the responsible ones get nothing.

Paying polluters to stop fouling the air rather than having them pay per tonne of carbon they emit is incongruous.

Economists know that price signals work. It is the central tenet of monetary policy, for example, where high interest rates discourage borrowing and encouraging savings to the point where the economy slows, while low interest rates have the opposite effect.

A tax on tobacco, as opposed to paying smokers to stop smoking, has worked wonders with smoking rates dropping from around 40 per cent of adults in the 1960s, to 24.2 per cent in 2001 and 17.4 per cent in 2011-12.

It is also a superior economic outcome to have the drunkard realise that it is better for them to drink in moderation or catch a taxi or to buy less alcohol because of a tax, and to have the overweight person switch from chips and donuts to tabouli and grilled fish without paying them to do so.

There is no guarantee the payment to polluters under Direct Action will work. And what will happen when the money allocated by the government is exhausted, or those polluters falling just below the threshold of a subsidy miss out?

The price on carbon, which has been in place since July 1, 2012, has resulted in a surge of clean energy production (albeit from a low base) and a drop in per capita consumption of electricity (albeit from a high base). It is working and this, after all, is what both side of politics are trying to achieve with their respective policies.

According to the economics profession in Australia, there seems to be little chance that Direct Action will work to reduce carbon emissions more efficiently or more cheaply than the current policy.

When a piece of public policy is working and there is no material impact on the real economy, the best thing to do is to keep it. This seems to be the case with the carbon price and it is especially the case when the alternative policy, which has the same objective, is obviously expensive and may not work.

Stephen Koukoulas is managing director of Market Economics and was an economics advisor to the former Prime Minister Julia Gillard. 

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Wonder why the ALP did not run this obvious analysis to counter Direct Action during the election campaign. Get what you vote for.

Why is a carbon price so hard for people to grasp.
Business pollutes and ruins the environment, that I use, for profit. That business should compensate me for the loss of said environment. If I use the outputs of that business I will pay the tax as the business is likely to pass the cost on.

Franky what you say is correct in my opinion, but only in isolation. As in cigarette tax example, it works because no one can import cheaper cigarettes to take advantage of higher local taxes. But in carbon tax case as Australian manufacturers pay the carbon tax, imports come in as carbon tax free, thereby we end up sending our jobs overseas with no net improvement to our environment, because pollution overseas doesn't stay overseas as we share a common atmosphere. Why is this so difficult for you to grasp?

he US and Chinese imports will also have a carbon price put on them.

SK - The carbon tax wasn't working as it compensated the polluters who were supposed to change their behaviour.

Relying on the economics profession for advice is fraught with danger - try talking directly to non-polluting businesses who just got another impost with no compensation and an inability to raise prices.

It was never a true market mechanism, just a creation of government. The best market mechanism is the price of energy which has already helped USA clean up their energy sources with no carbon tax. Relying on innovation to manage living in a $100 per barrel oil price world or in China's case living in a healthy environment are the market mechanisms that have the best chance of working - not a new tax.

Trouble is, the price on carbon is no more a tax than a speeding fine is. Calling it a tax was a fabrication by the coalition. It is intended to change behaviour and encourage innovation and to position Australia to move to a pollution-free future. And it has been working!

I can avoid speeding fines by driving responsibily, however, no matter how environmentally clean I am I will always pay the carbon tax. Even the ALP recognised this by moving from a carbon tax to a carbon price, but the compensation still goes to the polluters. A bit like govt raising an alcohol levy and sending the money to compensate the beer and wine companies?

Wrong in several respects, as usual. Polluters paid the carbon levy; although they get permits to pollute that were far too generous, tthe compensation went others.

Since the carbon levy on the top 250 polluters was introduced:
– Carbon emissions from the electricity sector fell in the first six months under the carbon tax, with much greater use of renewable energy and cutbacks in consumption. Electricity generation in Victoria fell 8.6%, and NSW 5.3%. Changes in the energy mix caused emissions in Victoria to fall 14.6% and NSW 10.4%. Consulting firm Pitt & Sherry described changes of this scale to be without precedent in the 120-year history of the electricity supply industry, although the Energy Market Operator had been overestimating growth for several years. One factor is the decline of manufacturing (e.g. the closure of the Kurri Kurri aluminium smelter in ’12). Others, the spread of roof-top solar panels (reducing growth in household consumption) and of appliances that used less energy.
– Real GDP has risen by 1.2% (annualised growth rate of 2.5%).
– Employment has risen by 53,400 people, made up of 30,000 new full-time jobs and 23,400 part-time jobs. The annualised rate of job creation is around 95,000.
– The unemployment rate has edged up to 5.4% in January 2013 from 5.3% in June 2012, just before carbon was priced.
– The stock market (All Ordinaries Index) has risen 25%, adding approximately $296 billion to the value of Australian shares. A further $30 billion or so of dividends have been paid to shareholders since June 30, 2012.
– According to RP Data, house prices have risen 2.8% since June 30, 2012, adding approximately $110 billion to the wealth of owners of houses.

Not that any of those are what you want to hear.

Meanwhile over in USA, their economy has been reducing carbon emmissions - without a carbon tax. The causal links between carbon tax and all the positives you listed are pushing credibility. Science and innovation are going to solve any environmental problems not a man made tax.

And that would have nothing to do with the depressed state of US economy for several years since the GFC ... sure, and US pigs and piglet fly!!!

Dante you are correct, kill the economy and you kill pollution.

Go to Africa and see pure non polluted environments. No running water or flushing toilets buy hey, wild animals don't need those things.

emissions have decreased in the US as a result of higher power prices. The market has sent signals to develop clean energy as they increase in price competitiveness relative to oil.

But I doubt whether the market forces left alone will respond to climate change in 50 years time as opposed to just short term price increases.

Doesn't the trend in emissions reductions in the US suggest the we will meet required emissions reductions to avoid catastrophic climate change? Or will it simply address high energy prices over the next few years?

In reality the carbon tax was a company tax. No different to any of the dozens of other Company taxes effecting business every day.
The carbon price puts the value in the carbon itself. Human nature does the rest, if you make something valuable humanity will pursue it. Gold Diamond money, frequent flyer points. The more valuable the more humans will chase it. The value will always be available. Because the value is in the carbon. In this case a negative value. People are persuading positive value, switching to nonrenewable roof top PV and green energy contracts among other means. That is bringing down emissions, Human nature, people pursuing value.
In this Direct Action plan the value is put in the System, a System that the people are locked out of. A system of grants and fine. A system of bloated bureaucracy.
Why has Tony abbot and his church sold out their purported principles of the free market. Opting for a system of corporate socialism. Compensation for their losses in in the free energy market.

And of course the direct action policy is nothing more than a scam to hand over money for nothing to the Abbott Government's patrons and favourites.

How about passing an urgent regulation that no Business receiving a Government payout may contribute to ANY political party or candidate

Otherwise the money will end up in Liberal Party coffers. For a man who thinks Climate Change Science is crap, running such a scheme is fraudulent almost by definition

The Liberal Party must think they Australian People are stupid based on the evidence they voted them in.

How long before the other fifty percent of the Liberal Party that did not support Abbott's tilt at leadership get the additional numbers to throw him out and clean up the party - yet again - and how long before the Nationals wise up and stop behaving like dependent neutered pussy cats

HI Geofery
"SK - The carbon tax wasn't working as it compensated the polluters who were supposed to change their behaviour."
Don't you think you maybe slightly confused.
The direct action scam compensates the polluter.
Then your next paragraph has contradicted this statement.
America has droped its emissions because of a major recession. Economic activity has dropped.
And China needing to clean up its pollution. Would be a reason why they are bring in a carbon price and ETS.

One mistake in your thinking SK, it doesn't cost anyone anything to stop drink-driving or smoking.

But it does cost A LOT of money to reduce carbon intensity.

How about the local council paying me to reduce the amount of garbage I put out each week?

Not a bad idea. Perhaps make available well-priced composting bins?

Yep and it's going to cost a lot more under the coalition of the willing's Direct action corporate compensation plan.

"When a piece of public policy is working and there is no material impact on the real economy, the best thing to do it to keep it. This seems to be the case with the carbon price and it is especially the case when the alternative policy, which has the same objective, is obviously expensive and may not work."

'Tis old hat.... things are a changing.

Funny how no one talks much about global initiatives and co-operation. After all, that's the only path to actually address the problem. Australia beating itself harder than other countries won't help our climate. But we should figure out the best way to be prepared for the globally cooperative environment that will eventually arise.

"Australia beating itself harder than other countries won't help our climate" must go down as the statement of year. Of course it won't, is that therefore a good enough reason not to put a price on carbon?

If we always wait for someone else to start the process then, I think the process will never start.

By retaining a market mechanism on carbon price we signal our intention at being "prepared for the globally cooperative environment that will eventually arise". What sort of signal are we sending if we start paying polluters not to pollute?

Dante, name one climate scientist that has made a scientific invention?

Ok, I'll ask you an easy question, name one climate science body that is researching particle physics?

So, if you want to know how to cut pollution, then switch off your computer.

Hi Rau
The environmental mantra has been for as long as I can rember has been "Think globally act locally".
The carbon price is a global currency, that is working, It is to Australia's benefit to be in that market. A new fledgling market, just getting started. I dare say the Stock Market to was once a fledgling market.

This is a glib and dull analysis. The point is that if the community does not accept prices anywhere near the value of the externality. Thus a market will not deliver the environmental objective. So why endlessly flog a dead horse?

The problem is that most externalities are not priced properly as they are difficult to measure and price and people can't see a short term benfit. Italian tomoatoes on our shelf cheaper than Aussie tomatoes - we should have a food mile tax. How do you price a kilometre? A re there different rates for different foods? There should be a sustainability and welfare tax for animals raised for food production. How do you price it and how do you explain that the steak now costs double? The consumer wont like it as they mostly don't care where or how the cow was raised. That is the problem with the carbon price. It is difficult to measure and price. A lot of people should simply be directed to the Tragedy of the Commons problem.

Until the politics disappears from the "global warming action" debate and there is tri-partisan agreement on a way forward there will be no meaningful progress ... its disappointing that valuable corporate knowledge and wherewithall will be junked along with the carbon tax but if that is the only way to move on to an adult discussion then so be it.

I agree with most of this article but it's a bit dishonest on some points. Carbon emissions and electricity consumption have more gone down due to factors other than the carbon tax. One is the RET (renewable energy target). The other is the GFC. As can be seen all over the world, energy consumption drops when economic activity drops. No doubt there is some merit in the article, but making broad generalisations without analyzing the facts is pretty ordinary journalism.

Finally, the problem is the international issue. Australians aren't interested in paying the cost of reducing emissions if the US/China/India aren't going to join in with us in an international scheme as it'll just mean Aussie jobs offshored to lower cost countries that don't have an ETS. This could perversely result in increased global emissions since high intensity activities that were previously done in Australia efficiently (eg smelting) are shipped offshore to places that don't have an ETS but are less efficient and pollute more to produce the same output as us. This isn't rocket science and anyone who doesn't understand this by this stage of the debate is probably shouldn't go outside without a minder.

One other thing. The idea that a carbon tax of $20/tonne (or thereabouts) caused a switch to renewables doesn't really seem plausible. From what I've read most estimates are that it'd take a price of about $200/tonne to make renewables cheaper than coal. That number might be dropping as technology improves but it's sure nowhere near $20. I'd be interested in what Stephen has to say on this.

You are spot on with regard to RET but wrong re GFC as the contributors to a reduction in electricity consumption. For your argument to be valid our GDP would have gone down (it went up) and few people would be in employment (it too went up).

It's disingenuous failing to give credit where credit is due.

And your assertion that other countries are doing nothing or not enough is classic Libs propaganda, and if they really believed in that then why invest in Direct Action?

Or are you saying that Abbott & Co is going to gift away our money to polluters knowing that "Australians aren't interested in paying the cost of reducing emissions if the US/China/India aren't going to join in with us in an international scheme"?

I think there is confusion in your arguments, just as there is deliberate misinformation as to what other countries are doing.

GFC, what is that? I voted for Abbott and that didn't occur. Labor stuffed the economy locally by being too pro trade union .

The GFC was a very elaborate Hoax organised by Kevin Rudd on one of his many overseas junkets.
Kevin convinced 51 other countries to pretend they had been infected by toxic CDO's, which tanked their Share markets, banking systems, and property markets, leading to Sovereign Debt blowouts.
All of which shows how deviously cunning Labour and KRudd really were.
And they really thought we'd fall for that one................Come on, get real.

Oh James
The Renewable energy Target is a goal, it's not a causation.It is the "what" question, 20%by2020 I think is the first goal post.

Well, it seems we really need international co-operation to make find a real solution to this. Trouble is it seems the UN is foundering every which way these days, especially the Security Council. With currency wars leading to beggar-thy-neighbour policies what hope do we have before we are staring eye-ball to eye-ball with Doomsday?

Dishonest point of the article: It assumes net benefit to Australian climate action as in benefit in reduction of global temperature over the cost of Australian climate action - minimum $500 per household per year and more per business.

The article sided with the economists who when asked a theoretical question provided a theoretical answer. The question asked: which is the most efficient/least cost method of reducing CO2: ETS or direct action? Economists love price signals, and are quite comfortable with making their models work with listing their assumptions. The ETS is a bigger plan and would theoretically produce more result. The economists were not asked to factor in cost and benefit into their answers.

What the economists were not asked is something like this: which do you think will deliver the best cost/benefit return to Australia in terms of lowering the global temperature: ETS or Direct Action? This would really throw them off as there has not been cost/benefit analysis advanced underpining Australian climate action. As there are key assumptions in the model that have improbability to them at this point in time - such as the world working in concerted unison on climate action - then the whole benefit may fall apart and then we are just left with cost. So then with no benefit which model would have the least cost to Australia and the answer is Direct Action, so then Direct Action Wins.

I believe the author here is skewing the Direct Action plan by saying the payment would be first. Is this right? I have heard that the CO2 reduction would be first and proven before payment.

A big direct action missed in all this is the Renewable Energy Target. The plan was to be among a leading group of nations in the world by targeting a 20% RET by 2020. Then energy consumption started to drop so Labor/Greens then wanted to lock the RE absolute energy target, and with dropping demand this will then jack up the RET to perhaps 25%. Let's not forget that most RE is more expensive then other sources of energy - so everyone will be subsidising this direct action.

There is a flaw in Stephen Koukoulas' argument in my opinion.

If you put a carbon tax (at the levels proposed for a decade or more to come) on power generation, say a brown coal power plant, the dirtiest most polluting plants. It will still produce power CHEAPER than renewables.

It will not cause it to close.

So all you are doing is raising the power price to consumers and reducing the profit of the power generator for no net emission reductions.

On the other hand, if you shut the plant down via direst action, emissions from the plant cease and the power it supplied is replaced by cleaner power. Even if that power comes from black coal it is still a net benefit as it is cleaner.

When there are no emission free alternatives that a tax will make viable then direct action is the best action to take.

Direct action has caused most of the emission reductions we have had so far. PV subsidies are direct action, insulation is direct action, not allowing new coal plants is direct action.

Plus, give me a break, asking economists whether a complex financial system is a good idea will only give you one answer.

And by the history of economist predictions lately it seems the wrong answer is almost guaranteed.

I was going to comment on what is a well articulated sensible argument by Stephen but Ive decided not to bother joining this rable of ignorant rants that have no idea of how to put forward a well thought structured or fact based argument. I thought that a leading Liberal might be better placed to do that so heres what Rob Stokes said yesterday in the SMH.
Dr Rob Stokes is the NSW parliamentary secretary for renewable energy and energy innovation.

Last week the body charged with the development and maintenance of the national electricity market, the Australian Energy Market Commission, set out its priorities for developing the electricity market.

One sentence in the report grabbed my attention in particular: "Stakeholders are concerned that network costs of consumers with solar are cross-subsidised by other consumers, due to current inefficiencies in network tariffs.''

In other words, energy companies want households with solar panels to pay more to access the electricity grid than customers without solar. The idea is that because electricity pricing reflects the total volume of energy taken from the grid, households generating some energy are not paying their fair share of the cost of being connected to the network, and should therefore compensate those who buy more electricity.

This is a really bad idea. First, it is unfair. In the past few years, more than 1 million households have installed solar panels on the understanding that they would pay the same amount for electricity they buy as everyone else.

Second, it is discriminatory. Solar panel users are not the only electricity customers having an impact on the electricity grid. The installation of cheap, imported airconditioning units in hundreds of thousands of households in recent years is a big contributor to the rise in capital spending by networks to enable them to meet peak demand.

However, I cannot imagine anyone seriously arguing that households with airconditioners should pay more network costs than other customers.

So, why is solar energy being targeted? Perhaps because solar-powered households buy less electricity than non-solar households with airconditioning?

Read more: http://www.smh.com.au/comment/electricity-industry-must-open-its-eyes-to...

If Robe Stokes , sitting NSW member and parlimentary secretary is worried then Im worried!

Stephen, not to argue the merits or difficulties of the proposal, but your comparison has a built-in problem.

The coalition proposal is to appeal to shareholders of big business by offering them money directly to their bottom line, if they make a change to deliver a desired policy, in this case reducing pollution. Obtaining this cash requires re-engineering of physical plant or business processes to achieve that outcome and get the cash, giving a windfall to shareholders as a reward for achieving this infrastructure change.

The comparative example of giving cash to a drunk to stop drinking is flawed here, because (a) it is an individual, not a big business answerable to its shareholders, and (b) because no hard-to-undo underlying change has been required in order to get the cash, so the behavioural change could indeed be short-lived.

If a business reverts its operation to again cause pollution and fails to receive a payment, shareholders will have something to say.

Of course, the commercial reality is that the company will probably wish to spend no more than the handout in modifying its processes, but quick wins in pollution reduction are likely to be obtained and entrenched, and this is an objectively good outcome.

Or paying farmers not to produce foods that are in over-supply ... wait that was the EU policy that resulted in mountains of butter.

Big emitters of carbon pollution have known about this problem for 15 years which is plenty of time to get their house in order. That they haven't is testament to either a) head in the sand attitudes, or b) thinking they could get away with it by inventing doomsday scenarios.

Neither patterns of behaviour should be rewarded with payouts.

The world didn't end when we introduced mandatory requirements for minimum working age, the 8-hour day, occupational health or environmental standards despite all of them being resisted. Companies simply need to adapt. Those who adapt best will survive, and those that don't will go to the wall. This is how the market works.

So Russell Harris, the "Big emitters of carbon pollution have known about this problem for 15 years which is plenty of time to get their house in order" ?

OK let's look at one of those "big emitters", the brown coal power plants in Victoria.

These plants were built by Governments and late privatized and sold to pension funds more or less to raise revenue.

How do you get a brown coal plant to get its "house in order"? You can't, it was purchased in good faith from the Govt with the expectation of a long term amoritisation of the capital cost. The owners may be running a dirty plant but they were victims of a bait and switch.

A carbon tax applied purely and cleanly would just strangle those companies slowly over decades.

Direct action is fairer, pay them to close. The "big emitters" were just following Govt direction.

Hazelwood is reputably the dirties power station in Vic.
But I don't think the company who owns or runs it. Is housed there.
Not Hazelwood is a tool nothing more. A vehicle for collecting profit.
Just like any other organization company or individual tradesman for that matter. Must from time to time fix or replace their tools and equipment. When the equipment is a major expense, replacing it or fixing it takes planing. It's only prudent business practice.
!5 years is ample time to plan for the time when this peace of major equipment will no longer be economical to run. Repair or replace. Or maybe decommission.
If the company has a loss from decommissioning that plant. Like any business put it down as a tax right off.
They are in business with in a market based economy. They shouldn't expect a socialist style welfare payment, on top of the tax refund.
Abbots Direct Action is corporate socialism, welfare for the company.

The real problem with the direct action policy is that only a few organisations have an incentive to reduce reliance on processes that emit greenhouse gases - those that get the money. With a price on carbon, by contrast, everyone has that incentive. And the incentive flows through the economy through the price signal, which is the way that the market economy works with all other goods and services.

So what's new about this article. Instead of asking the theoretical question of economists, their views should have been sought on carbon price schemes currently in operation. The European emissions trading scheme doesn't work because of over allocation and corruption. The Australian carbon tax scheme doesn't work because it is the equivalent of increasing the tax on cigarettes but providing consumers with a rebate to compensate for the additional tax

The direct action approach is the scheme you have while you waiting for Europe, China, USA and others to implement workable emission trading schemes. It's not unduly expensive, will do some good, and will not significantly impact on the traded goods sectors.

Paying people not to do something is nothing new, and it works. Just look at all the welfare that's paid out to people NOT to work. Meanwhile, businesses struggle to get people for many roles because it is easier being on the dole. I guess you could define that as a success, Stephen K.

What's really topsy turvy is a supposed Left Wing party pushing a market based solution, i.e user pays, while the supposed Right Wing party pushes the socialist solution, i.e. the government will pay for the problem to be fixed.

The only possible way this could have come to pass was that Abbott, in his usual aggressive, ham fisted approach, said no to a carbon tax, (because that is what he does), and then was stuck for an alternative.

Somebody smarter than Abbott, - got a handy pet anyone? - came up with Direct Action because it put control of the whole shebang in Abbott's hands making it easy for him to walk it back so that ultimately nothing happens that might help the planet but hurt the incomes of his lords and masters.

Thus, here we are, with the tax payer having to pay billions for Abbott's fig leaf, while nothing happens to address global warming, but the profits continue to flow.

Actually even greater profits because the above mentioned lords and masters will be lining up for a piece of the direct action handouts.

You gotta love it.

Yes you gotta love it.

Labor has no mandate for a carbon tax and is forced by the Greens to bring in a carbon tax years early. So what to they do in response to an imminent climate problem?

They bring in a long term socialist redistribution of wealth program that changes the whole basis of our economic system for the worse and they call it economic reform. They then spend ALL the money and more it is predicted to bring in mostly direct welfare policies.

but it gets better....

In the following couple of years they progressively water down the tax, due to its disastrous effects economically and politically, to the point the revenue in no way meets the expenditures.

A colossal failure and worse when you remind yourself that all the emission cuts were going to be due to purchased permits from overseas many decades in the future.

During all this time Labor peacocks around as if they have single handedly saved the planet with Australia's carbon tax.

"long term socialist redistribution of wealth program". That sounds familiar... ah thats right (sorry for the pun), its somthing tony abbott was talking about the other day.
Lets get this straight; if a central government distributes wealth/taxes with no input from individuals - it is a socialist policy. This is common for many government schemes and how you describe the direct action model. Individuals have no way of controlling the way their money is spent because it is part of general revenue; others with greater power or influence control how your money is being spent.
However if a central government imposes a cost on a particular commodity, behaviour or service - it is sending a message to the market; that cost of the commodity, behaviour or service is not in alignment with societal norms and needs to be adjusted. AKA carbon tax/ carbon price. Now before you all get up on your Hayek horses, just understand this approach has been used for many other things in the market: tobacco, alcohol, guns, etc etc.
This is called a market failure (eg the invisible hand wasn't paying attention) and government intervention is necessary. Anyone who doesn't believe that government should take this role is a T-bagger and should declare themselves as such. The market has its place - when it does what its supposed to.

This is not about Lords and Masters - this is about a cost of $500 per year on households and many times this for the average business (mine about $4,000 per year based on $500 average household cost) - all with no cost benefit justification for Australia that it will do anything for the global climate.

Another Abbot theme here is not sending billions of Australian dollars a year overseas. According the the Labor/Greens plan I believe by about 2020 $3 billion a year were to go overseas for carbon credits because under the Labor/Greens plan there was no hope of meeting the 5% reduction target (also no hope for the Coalition, and no hope for many nations who have unrealistic CO2 reduction pledges). There was concern that all this money going overseas that lots would end up with dodgy outfits and market traders rather than intended purpose. So instead of sending all the money overseas, the Direct Action plan would have direct control and the money would be spent here in Australia. Abbott also wants to crank back on overseas aid or bring it closer to our shores. So there is a theme here.

And Anthony - please explain how this is going to work - China may very likely expand their CO2 by 230% between 2000 and 2020 - because their economy has been on a relative roll - then how will it work as there will need to be an unrealistic 470 Australias cutting 5% between 2000 and 2020 to compensate. And to extend the comparison - 470 Australias needing to spend $3 billion a year on carbon credits and then how will all these credits be realistically paid for by governments and supplied?

There is a lot of detail to the remedy that many just assume will take care of itself. Many don't like any questions about the remedy. Many are religious believers in climate action yet they don't seem to know it and can not stand any questions about their faith.

So are you advocating action or inaction? Or action as long as it doesn't impinge on you? Where does your $4000 figure come from?

The proposed action thus far brings costs that do not appear to be covered by the benefit. The benefit is just assumed. As this is business Spectator, someone should advance the business view of investment by business case, cost/benefit, and return on investment (and in a business this is return on investment compared to other projects to spend the money on). With this climate action the costs are more front loaded with supposed benefits decades down the track - and thus the time value of money comes into play amplifying the upfront costs while reducing the value of the benefits. So costs are around $500 per household, and much more for businesses and I suggest a carbon tax cost in one year of around $4,000 for my business as that is the proportionate difference between my household electric bill and that for my business.

As the proaction side appear not to concern themselves with the exercise of return on investment, and cost/benefit, and major assumptions required to make their model work, and don't want to answer questions as the above in regards to the remedy, then perhaps there is no benefit or at least benefit that gets easily overridden by the costs.

There is talk about keeping temperature increases to no more than 2C by 2100. How about this resolution, say the global climate action stops the increase to 2.1C and keeps it to 2.0C up. So then what is the benefit of reducing the rise by 0.1C up? Perhaps it will be nil, and then all the money would have been better spent on climate mitigation, or growing our economy so we may better afford future climate mitigation. But according to some unless we do the action the world will end - so you gotta go for the remedy! There clearly needs more analysis in regards to the science and global politics as well as financial review of the remedy. It does not help that the climate models have errored on predicting too much warming and have not proven reliable.

"Jul 16, 2013 - KEVIN Rudd today pledged family savings of between $380 to $420 a year would be produced by his overhaul of the Government's carbon tax." If we start with Rudd's number then figure that the carbon tax would go from about $24 per tonne to the European $6 per tonne under the Rudd plan - that there would be about a quarter more savings if the Carbon Tax/ETS were completely eliminated - down to $0 - and maybe round a bit and we get $500 per household per year, which Tony Abbott used recently. The $500 is average per year per household, I extrapolated to $4,000 per year for my business based on my annual household electricity bill compared to my annual business electricity bill. These amounts are every year.

A number of Greenies are on record saying you need a carbon tax of $50-$60 to have some impact, and under the Labor/Greens plan of linking to a European ETS Australia will be spending $3 billion a year on overseas credits by 2020. And as discussed above it will take about 470 Australia's spending about $3 billion on overseas credits to compensate for China's expected rise in CO2 by 2020 - then maybe this severe excess demand for credits in and of itself will really cause the carbon credit price to go through the roof.

Blue Planet - where is your cost/benefit justifying an Australian ETS?

See ipart http://www.ipart.nsw.gov.au/files/2f03abae-b009-425d-8347-a1e00099a976/F... For an average household consuming 18kWh per day (6.5 MWH per year) the impact of the carbon tax @ $23 per tonne is $172 per year. This is consistent with what I quoted to you. As indicated to you earlier Stern (2006) and others have stated the long term benefits far outweigh the short term costs. It all depends on the time frame

Welcome to the USA children, where everyone gets their way.

1. You can believe in God and teach your children that the world is square.

2. You can belong to websites that tell you that we are all going to die.

3. You can become politically active and blame your low I.Q. on a genetic conspiracy to keep the servants of the world, working for their feudal masters.

4. You can become an academic by doing a 12 month course in climate science and lecturing to all those, who earn more than $30K a year that their lifestyle is killing baby frogs.

5. Or you can become a meteorologist and tell people every day that the temperature is different from yesterday.

Or you can learn what energy is and how to access electrons without burning coal, but that's no fun it requires research - stuff that man, I just want the kudos of being profound.

Ken,.....I'm pretty sure 2. is accurate :)

Julias broken promise created Clive.
Now its a joke he will have the last laugh.

Bernard, Newtons 3rd law of motion: "For every action there is an equal and opposite reaction".

For every climate scientist, there will be an anti climate scientist.

No one can argue against Newton, not even the profound doods who did the 12 week course.

The failure to get a legally binding agreement to reduce emissions at Copenhagen was the final setback to ETS or any other model being an effective means of reducing global greenhouse gases.Carbon taxes applied by governments is the only sensible way to incorporate the cost of carbon pollution into prices to discourage carbon-intensive industries and promote a green economy.