Giles Parkinson
Built for comfort, not speed
The head of Penny Wong’s Department of Climate Change, Martin Parkinson (no relation) used an interesting analogy for an emissions trading scheme when briefing journalists at the green paper lock-up in Canberra this morning.
An ETS, he said, it was a bit like designing a car. And the art of setting emission reduction targets was a little bit like deciding on how quickly to drive it.
One wonders exactly what sort of car Parkinson would like to have built. One suspects something like an Austin Wolseley – slow, modest and rather old fashioned – big enough to put the political party in the back seat but nothing so bold as to startle the neighbours.
Whatever the concept, just now it’s merely a work in progress. We know it’s got a handbrake and lots of safety features, there are seat belts and air bags to mitigate any conceivable impact. This will please its most reluctant passengers.
All the other design features are still up for discussion. But all people really care about is the size of the exhaust pipe, or the emissions targets, because that is the only way for people to make sense of the options currently being canvassed. Oh, and the cost.
The reason there is such caution from Parkinson and his political masters is very much centred around the presumed price impact of such a scheme. That’s where the political debate is being fought. Forget the impact of the soaring oil price, or even that of coal, it’s the potential marginal cost of carbon that is what counts in politics just now.
Is this because of greed, or a lack of imagination about how the world could possibly survive in a carbon-free economy? Possibly an element of both. This is where the release of Treasury modelling later this year will be informative, and possibly help put paid to the doomsday idea that a post-carbon world would be like living in a 'hair-shirt' economy.
The initial modelling included in the Green Paper should soothe some of those fears. The impact on household electricity prices of a $20 per tonne carbon price is estimated at 16 per cent, and 9 per cent for gas and other household fuels.
But the overall impact on CPI is estimated at 0.9 per cent – higher for single parents and lower for high income families – and the government will implement schemes that mitigates the cost for the most vulnerable.
Put another way, the average household generates around 13 tonnes of greenhouse gas emissions each year. If the full impact of a $20 a tonne carbon price was passed on to the consumer, it would cost $260 a year, or $5 a week.
The treasury modelling should also give us more clues about the impact on various industries, and whether they have a case for direct subsidies or assistance in re-tooling their industry. The actual challenge these industries face will not be known until we see an emissions target and a trajectory, and how quickly these permits will be phased out.
So far, there are some promising signs. The government has, as promised, undertaken to introduce an emissions trading scheme by 2010. It has included a broad umbrella of industries that will account for 75 per cent of the country’s total emissions, including fuel, and most of these permits will be auctioned.
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