What if the ETS passes?

The Rudd Government’s ETS legislation is being re-presented to parliament in a couple of weeks time. The Government is doing its best to torment the Opposition by counting down the days and reminding them that failure to pass it a second time will provide a trigger for a double dissolution.

Malcolm Turnbull was very concerned about a double dissolution and would have allowed the legislation to pass. Tony Abbott opposed it and has dared the Government to bring on an election, but three members of his party crossed the floor.

The Greens opposed the legislation because they regarded it as not radical enough. But if they changed their mind and voted in favour of it the second time, and the same three Liberals crossed the floor, it would pass.

Why would the Greens do that? Perhaps because they see little chance of achieving anything more to their liking, with the IPCC now looking shaky over its Himalayan glaciers predictions and the Climategate scandal. So it cannot be assumed the ETS is a dead duck; there is a chance it might get through. What then?

One possibility is that the Government would delay gazetting it. Implementation would be a huge anchor on the economy, with fuel and electricity prices rising, and there are plenty in the Rudd Government who are only interested in using the ETS as a wedge issue against the Opposition. They secretly hope it never eventuates.

Another possibility is that free carbon permits would be handed out for as long as most of the world does nothing. The net effect would be little more than the dead weight cost of setting up the scheme (although that’s not to be sneezed at).

A third is that the Government will set about implementing the scheme, driven by the zealous Wong, only to discover in a couple of years that it has not achieved anything positive and is indeed crippling the economy just as many said it would.  In that case it might have to unwind the scheme, as California is now contemplating. From the Wall Street Journal, 11 Jan:

California Cap-and-Trade Revolt

A ballot measure would suspend the law until joblessness falls.

Could Californians finally be serious about turning around their sputtering economy? One hopeful sign is a ballot initiative that would repeal the Golden State’s version of a cap-and-trade carbon tax.

This feel-good law to reduce the state’s carbon footprint was enacted with great hoopla by the Democratic legislature and Republican Governor Arnold Schwarzenegger in 2006 when the state’s economy was growing and the jobless rate was 5%. The law requires that starting in 2012 the state must ratchet down its carbon emissions to 1990 levels by 2020. The politicians and green lobbies told voters this energy tax would create jobs—the same fairy tale many in Washington are repeating today.

Now the jobless rate is 12.3%, 2.25 million Californians are unemployed, and the state government is broke. So Republican Assemblyman Dan Logue has begun collecting signatures for “The Global Warming Solutions Act,” a ballot initiative that would suspend California’s cap-and-trade scheme until the unemployment rate falls below 5.5%. He’s aiming to get it on the November ballot.

No matter what one thinks of climate science, it makes little sense for an individual state to unilaterally impose major new tax and regulatory costs on its own industries. The impact of California’s gesture on global temperatures will be infinitesimal, but the economic impact will make the state even less attractive to start or expand a business.

A 2009 study by economists at the California State University at Sacramento and commissioned by the California Small Business Roundtable found that the implementation costs “could easily exceed $100 billion” and that the program would raise the cost of living by $3,857 per household each year by 2020. So much for the free green lunch.

The law all but encourages outsourcing to Nevada, Texas, China and India. Even the liberal Sacramento Bee, which supports the law, says that policy makers should be “candid about the real costs of the transition it is contemplating. . . . Industries that are energy-intensive will move elsewhere.”

Meanwhile, a new study commissioned by the Governor’s Office of Small Business Advocacy estimates that the direct cost of current California regulation is $175 billion, or nearly twice the size of the state general fund budget and about $134,000 per small business each year. The Golden State already has the second most business-unfriendly regulatory climate in the nation, after New Jersey and before the cap-and-trade law.

The stakes here are huge, and not merely for California. This is the first serious effort to roll back the environmental extremism that has dominated state capitals in recent years and is now ascendant on Capitol Hill. The green lobbies and businesses that have a monetary stake in cap and trade—including big utilities that want subsidies and Silicon Valley political capitalists investing in solar and ethanol—are sure to spend heavily to stop it. They know that an electoral defeat in the greenest of states could end their national and global hopes for cap and trade.

For Californians the issue is simpler: Whether they want to continue to impose burdens that encourage employers to locate anywhere except their once prosperous state.

23 thoughts on “What if the ETS passes?

  1. Rudd and the public face of the ALP oppose nuclear.

    I suppose it may get enough bipartisan support in a conscience vote.

    If the ETS passes and we have really bad economic data, nuclear looks more attractive. I hope the more practical, hard headed, union backed Ministers really push this idea to Rudd.

    The idea that nuclear power is a decidedly non left wing cause in Western nations is just bizzare.

  2. I think an ETS that passed would be a drawback to Rudd, since smug self-righteousness won’t feed the economy, and the world wouldn’t be following us. Those pretensions were shot down by copenhagen. since Mr. Abbott is against such a scheme, this would be good news for him! It might make Rudd a one-termer!

  3. I thought only two liberal senators displayed a complete lack of intelligence, Judith Troeth and Sue Boyce. The above article should be sent to them (and I shall do so) to try and make them see sense this time around.

    The election of Scott Brown in Massachusetts makes a US ETS even less likely than it was before so the comment:

    “No matter what one thinks of climate science, it makes little sense for an individual state to unilaterally impose major new tax and regulatory costs on its own industries. The impact of California’s gesture on global temperatures will be infinitesimal, but the economic impact will make the state even less attractive to start or expand a business.”

    becomes even more relevant to Australia.

  4. There will be an election before the end of this year. Even if the ETS is passed this year I doubt it will have progressed far enough down the implementation road to hurt voter sentiment (beyond the current level of opposition) before voting time. I expect Rudd will get a second term even if the ETS passes.

  5. I really hope this doesn’t pass.

    I keep track of every expense I make.

    Electricity is up 22% from 17.1c/kwhr to 22.7c/kwhr
    Water is up 55% from 1.45/kL to 2.25/kL.
    We average groceries was $234 in 2009, up from $186 in 2010, and I think I am getting less for my money.
    Even little things like house insurance has gone up. In the last 3 years my house insurance went from $604 to $686 to $753, about 10% P.A.
    Car registration has gone from $509 in 2008 to $649 in 2009! 27.5% in one year! From what I could work out this years will be $740.

    A big sqeeze is going to hit the lower-middle over the coming decade. I am now paying down my homeloan at 70% of my income. Its going to be impossible to live with any debt soon.

  6. The Greens have now said they will back a modest carbon tax ($20 per tonne of CO2e). If it is just on electricity and transport then Labor ought to leap at it.

  7. I hope it passes as it should teach the public a lesson. They voted in these trogs and misfits. It’s like a lesson a parent allows his young child to learn .. sometimes a good hard lesson the hard way is what is needed.

  8. A tax is still a tax, and as such is an impost upon business and individuals. It is farcical for anyone to be proposing any form of scheme designed to limit carbom emissions by punitive means when the rest of the world is not going to come on board. All the more so when the science is increasingly looking very shaky. We still come back to:

    “No matter what one thinks of climate science, it makes little sense for an individual state to unilaterally impose major new tax and regulatory costs on its own industries. The impact of California’s gesture on global temperatures will be infinitesimal, but the economic impact will make the state even less attractive to start or expand a business.”

    We know the Greens are anti-free market and anti-development so they’re desperate for anything that suits their agenda. What’s Rudd’s excuse for wanting to hinder economic growth and send jobs overseas?

  9. We know the Greens are anti-free market and anti-development so they’re desperate for anything that suits their agenda. What’s Rudd’s excuse for wanting to hinder economic growth and send jobs overseas?

    He doesn’t give a shit. He’s plugging for the UN job and passing the ETS would give him a better look with the world’s left and more prestige to get over the line.

  10. Actually it looks like the $20 carbon tax proposed by the Greens may exclude agriculture because they are saying it will be bases on the current CPRS framework. If it was further narrowed to electricity and transport and if the revenue was used to abolish payroll tax and/or reduce income tax instead of being spent on renewable subsidies and handouts it might actually be a sensible reform. I think it would reduce Australian emissions in a mostly no regret manner.

  11. Pingback: Skynet operative? « conscientia2012

  12. The problem with the Green proposal is that it doesn’t not include matching tax cuts… so it will be a net increase in the size of government and will be unambiguously bad for the economy.

  13. Given a choice between the Rudd ETS and the Greens carbon tax with no matching tax cuts… Both are bad for the economy but will either be worse than the other?

    Is all government unambiguously bad or is there a better and a worse option for government “feel good” action on climate change?

  14. I think the Greens carbon tax would be less bad if it wasn’t intended merely as a temporary measure prior to an ETS. The reason I think it is less bad is that it would correctly frame the debate in terms of “what are we prepares to pay to reduce emissions”. Of course John is correct that it still entails more government.

  15. The IPCC story is developing fast:

    http://www.timesonline.co.uk/tol/news/environment/article7000063.ece

    “The Sunday Times has since found that the scientific paper on which the IPCC based its claim had not been peer reviewed, nor published, at the time the climate body issued its report.

    When the paper was eventually published, in 2008, it had a new caveat. It said: “We find insufficient evidence to claim a statistical relationship between global temperature increase and catastrophe losses.”

    Despite this change the IPCC did not issue a clarification ahead of the Copenhagen climate summit last month.”

    And this blogger finds that the IPCC is a serial citer of the WWF:

    http://nofrakkingconsensus.blogspot.com/2010/01/more-dodgy-citations-in-nobel-winning.html

    “In a section on coral reefs and mangroves, a WWF report is the IPCC’s sole reason for believing that, in “the Mesoamerican reef there are up to 25 times more fish of some species on reefs close to mangrove areas than in areas where mangroves have been destroyed.”

    When the IPCC advises world leaders that “climate change is very likely to produce significant impacts on selected marine fish and shellfish (Baker, 2005)” it doesn’t call attention to the fact that the sole authority on which this statement rests is a WWF workshop project report (see the “Baker” document below).”

    The Baker reference is:

    Baker, T., 2005: Vulnerability Assessment of the North-East Atlantic Shelf Marine Ecoregion to Climate Change, Workshop Project Report, WWF, Godalming, Surrey, 79 pp.

    The correct answer to “what are we prepared to pay to reduce emissions” is increasingly looking like diddly squat.

  16. In (where else?) ‘The Australian’, they report that grants have been allocated to bodies on the basis of the report about disappearing glaciers! We could soon see someone prosecuted over this, since they seemed to know that the IPCC report was wrong, but didn’t refuse a grant to look into it…
    Nice work, if you can get it!

  17. More to the point, Nuke, it is bodies associated with Rajendra Pachauri who are receiving the money:

    http://www.timesonline.co.uk/tol/news/environment/article6999975.ece

    “Rajendra Pachauri’s Energy and Resources Institute (TERI), based in New Delhi, was awarded up to £310,000 by the Carnegie Corporation of New York and the lion’s share of a £2.5m EU grant funded by European taxpayers.”

    And what of the scientist who is responsible for the bogus claim about Himalayan glaciers melting away by 2035?

    “The same release also quoted Dr Syed Hasnain, the glaciologist who, back in 1999, made the now discredited claim that Himalayan glaciers would be gone by 2035.

    He now heads Pachauri’s glaciology unit at TERI which sought the grants and which is carrying out the glacier research.”

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