The Dog’s Bollocks

Truth is like a dog’s bollocks – pretty obvious if you care to look.

Economic opportunity and the ETS

Spooner - The AgeMalcolm Turnbull gave a creditable performance on Lateline last night as he stabilised the Opposition’s hitherto shambolic stance on climate change and an emissions trading scheme. Turnbull has returned the Opposition to its policy stance enunciated during the death throes of the Howard government – with the caveat that they’d like to delay it another year.

Turnbull wholeheartedly endorses the need for an ETS, so the remaining quibbles concern when it should be introduced and the rate at which it kicks in once it’s started. 2012 is probably soon enough, according to Turnbull, who repeatedly reminded us that an ETS is ‘very complicated’. In other words, he is trying to buy time and concessions on behalf of the big emitters in the Australian economy. As I’ve said before, an ETS can’t be that difficult. As suggested on last night’s premiere of The Hollowmen, you can go the full policy monty in 18 months, so 2010 is definitely do-able.

The Opposition is ever keen to focus on the costs imposed by an ETS, as if there will only be negative impacts for the economy – ‘we don’t want to get too far ahead of the pack’. While details remain to seen, it is likely that the initial imposts for the individual will be in the order of a few hundred dollars a year – less than the impact of a tax cut foregone – which the electorate is largely prepared to wear, as long something is done. The biggest losers will be the extractive and fossil fuel industry Corporations, and even they will either be given generous concessions or pass the costs on to consumers wherever possible. It is this interest group that Malcolm is representing with the ‘hasten slowly’ warnings.

Yet this week’s G8 meeting gives symbolic encouragement to the notion of Global action on emission reduction. One likely outcome of the 2008 US Presidential election will be a commitment to a US ETS which will be legislated sooner rather than later, whomever wins. Last year the Global ETS market was worth about $64bn, according to the World Bank, more than doubling from $31bn in 2006. That value would soar to more than $3,000bn a year by 2020 if the US introduced carbon trading.

The world is moving closer to a global ETS. With the US on board, it will become increasingly difficult for India and China (who are both signatories to the Kyoto Agreement) not to do likewise, especially in the face of their customer economies imposing carbon tariffs on Chinese products.

So where does all this leave Australia? If there was the likelihood of a rapidly expanding global market for say, coal or iron ore, our businesses would be gearing up for it post haste, years in advance, in order to cash in on the boom. Yet the Opposition want us to drag our feet until we see what everyone else does first. At the least, there will be massive profit opportunities in the Carbon market for our market traders, but more significantly there will be a booming global market for carbon-neutral technologies (even ‘clean’ coal). Given our history of innovative invention – carbon-neutral technology is an ideal economic opportunity for Australian businesses to prosper, which might also go some way to ameliorating our worsening trade deficit.

That is the misfortune of all this dithering, dallying and delaying on behalf of the fossil industries. Australia is missing out on transformative opportunities presented by the inevitability of a global ETS. The sooner we get on with it, the better off we’ll be as a nation. We don’t hear the Liberals, the self-appointed proponents of business and the economy, talking about the opportunity costs involved in further delay.

But then again, we never were really that good at the entrepreneurial side of business – unless it involved digging stuff up, growing stuff or chopping stuff down and selling it the highest bidder with as little effort as possible. Value adding? Down-stream processing? What’s that??

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Filed under: Big Picture, Economics, Environment, Politics, ,

3 Responses

  1. wes george says:

    Economic Opportunity? ROTFL. Please Slim, tell us. For Who? Since “we have never been good at the the entrepreneurial side of business” (speak for yourself, mate) We should cripple our economy and become a banana republic? That’s ultimate a recipe for poverty. ETS is an opportunity for Australia to regress 30 years of economic reform. Unreformed dinosaur ideologs with no vested interest in our national economic future might find this a pleasingly spiteful reverse our what economic success we have had. But for anyone with kids and a life, it’s utter poison.

    You post should be titled “How to snatch defeat from the jaws of success: The ETS, of course…”

    Garnaut’s report contains, shrouded in fashionable language, economic policies and philosophies that have often been applied in the past and utterly failed to produce the desired outcome.

    What’s remarkable is that these discredited economic philosophies are so far removed from an effective Information Age response to “climate change” as to reveal this government’s ideological agenda.

    The first of Garnaut’s historically failed propositions is a direct punitive tax regime to control a complex problem that isn’t well understood, this is the most enervating approach imaginable.

    The structural outcomes of punitive taxation are well understood in economics. Only the most ideologically partisan or historically blind could surmise this approach represents innovation or intellectual rigor.

    As usual, the unintended consequences of ETS didn’t receive a 600-page study by an eminent academic. Instead, we are urged to rush in discredited economic policies from eras long past with a concerted campaign of fear mongering nonsense.

    If Garnaut’s ETS were to go ahead in 2010, Australia’s economy would quickly devolve into the Argentina of the Asia Pacific region. It certainly might lower our carbon footprint, alright—assuming the electric doesn’t go out and we all revert to burning wood to light our McCaves…)

    A global ETS tax is certainly not in the cards, as Slim claims. Not in our lifetimes. The only opportunity is for us to cripple our economy while the Asian Tigers roar on. With ETS, in a decade, manufacturing might well return to our shores, because Aussie labor could be cheaper than Asian labor thanks to the ETS suppression of economic incentive to invest and develop our economy. Some opportunity, Slim.

    The second of these proven loser concepts is to redistribute the wealth bled off our economic infrastructure to whoever is most fashionable with the government of the day. That’s why guvs love taxes. It increases their authority and reduces your autonomy.

    Garnaut proposes 50% of the appropriated wealth will go to “low income” families. If the real agenda was to lower carbon emissions then redistributing free cash bonuses to citizens to spend on increasing their C-footprint is counterproductive.

    The third proven economic error in Garnaut’s report is to reckon it can offset the tax burden imposed on the Australian export economy through compensation to effected business. So why impose the tax burden to begin with?

    Garnaut’s working assumption is that government bureaucracies (which will have to be massively increased) are wiser than the marketplace.

    Compensation to business will fail because marketplaces are fluid complex systems, a bit like the climate, while governments are inflexible, ad hoc and all decision-making is ultimately filtered politically. Moreover, compensation will be seen as unfair by our trading partners and impeded the functioning of the marketplace.

    Most diabolical of all of Garnaut’s ideas is the unspoken, underlying authoritarian philosophy—your private property isn’t an inviolate civil liberty, but simply a part of the collectivist whole to be appropriated as the federal government imagines it requires.

    Keating warned we could become a banana republic. Again, look at the outcome in Argentina when such ancient ills were visited upon its economy by a collectivist government in recent times:

    http://s.wsj.net/article/SB120692466040375723.html

    This is the course upon which the Rudd government has set our nation and Luddite Slim hails as economic opportunity.

    For who?

  2. slim says:

    Hi Wes. You really should get a blog! That’s one hell of a comment covering a lot of turf that I won’t even begin to address as I doubt it will be useful or productive for either us.

    As other have observed, climate change has polarised our polity. You’re either with us or you’re agin us. However, it remains the most significant political debate in Australia and will be the defining issue for the Rudd Government – win, lose or draw. Some of us are of the opinion that it was a major contributing factor in the demise of the Howardian Era.

    All polling suggests that a substantial majority of the population are concerned about climate change and want something done about it. Many interest groups, especially fossil fuel and carbon dependent industries are resisting any action to curb carbon emissions. That’s the reality of it. As a former science student I have been aware of the concept for more than 30 years. That it is now a vibrant political issue doesn’t surprise me. There are people who like things just fine way they are and don’t want any action taken. That doesn’t surprise me, either.

    A global ETS? Yes, I believe there will be, and sooner than you think. Many leading global CEOs believe there will be. The US will have an ETS within a few years, regardless of who is president. The US Supreme Court has ruled that CO2 emission is pollution and thus must be subject to the usual regulations about polluting.

    Who knows what’s going to happen with China? I has a middle class, I heard today, of 200 million people in just 10 years. It still faces unimaginable levels of poverty and environmental degradation is happening at an alarming rate. Who knows what will come out of those dynamics over the next few years. The Chinese are nothing if not astute – they will act if they see the need. And if climate change is real, then they will be under pressure to deal with it from their own people. They are already Kyoto signatories.

    My prediction is that there will be a close to global ETS very shortly after the post-Kyoto negotiation. Megabucks will be involved, creating an explosion in global demand for low carbon emission technology. Australia can hang on tight to its coal industry or it can redirect coal subsidies to alternative energy add-ons. The early adopters and innovators will make a lot of money. That’s how free enterprise works.

    Clearly you seem to be of the opinion that climate change is not caused by CO2 and to limit emissions is foolish and destructive. That’s your prerogative.

    We’ll know whose prediction is true in another decade or so. Bookmark this post for ten year’s time and we’ll see who won.

  3. Dave Bath says:

    I’d agree about the strong economic opportunities:
    (1) Look at the trade benefits of teutonic government support for solar cells, clean cars, windmills, etc. Such governments know the world will be clamoring for such products, and want to be the major suppliers.
    (2) The vulture capitalists in Silicon Valley are investing massively in clean energy and efficiency (detailed in a recent New Scientist major article).

    Those denying the economic opportunities from changing markets (think “creative destruction” if you are a capitalist) are like people worried about the job prospects of candle-makers when gas and electricity were invented, or scribes and vellum manufacturers when Gutenberg and Caxton were introducing the printing press.

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The Dog’s Bollocks

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The Dog's Bollocks: "Bollocks" is one of my favourite words, and this is now one of my favourite blogs and I've only been reading it for five minutes. – John Surname

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