NCPA - National Center for Policy Analysis


July 17, 2008

The Group of Eight may be waking up to the cost of fighting global warming, but in Australia, the opposite is happening.  Prime Minister Kevin Rudd has promised to implement an emissions trading scheme by 2010.  Rudd just wants to do what every Labor politician likes: tax industry and redistribute the proceeds, at huge cost to the economy, says the Wall Street Journal.

Earlier this month, economist Ross Garnaut released a report on climate change and how to combat it.  The report says the solution is in removing the links between economic activity and greenhouse gas emissions:

  • The report suggests selling artificial permits that allow companies to "pollute."
  • Industry would either fold under the cost burden or pass those costs onto consumers.
  • Meanwhile, the government would haul in huge revenues from the permit sales.

Garnaut and Rudd both acknowledge that emissions trading would be costly -- especially in a country where natural resources account for around half of all exports.  To alleviate this government-created problem, the Garnaut Review suggests some government-directed money shuffling:

  • Up to 30 percent of sales revenues would go to trade-exposed, emissions-intensive export industries; in essence, this means the government would pay companies to stay in Australia rather than move to a country that doesn't impose arbitrary costs on business.
  • Another 30 percent of this indirect tax would go to research, development and commercialization of new, low-emissions technologies.
  • The bulk of the proposed handouts are reserved for households, to relieve the regressive income distribution effects of the emissions trading system.

The Garnaut Review estimates that Australia accounts for only 1.5 percent of the world's total greenhouse gas emissions; therefore, what Canberra does is largely irrelevant, says the Journal. 

Source: "Cap and Redistribute," Wall Street Journal, July 14, 2008.

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