PREAMBLE
On Tuesday 13 October 2009 Ecinya published a 3 page Insight note titled ‘Exercise caution in your approach to carbon credits.’ Having reviewed the paper this week we find that there is nothing much wrong with it and the points made appear to be still valid. It can be accessed by clicking here.
SOME FURTHER REMARKS IN NO PARTICULAR ORDER
(1) Folly in today’s world is relatively unaffordable. We have still not uncovered the errors of the Global Financial Crisis (GFC) nor are the subsequent economic errors of the recovery process in the public domain. Therefore, embarking on a frenetic debate or process about global warming is likely to cause more problems than it solves. We believe that global warming solutions are not yet a fulsome idea whose time has come.
(2) Ken Henry’s speech of last Friday in the City/ Village of the pristine state of Tasmania should be read. He is, in our view, saying that tax reform and the social and economic consequences that flow from it are incomplete.
(3) Global emissions are NOT a per capita problem and arguments that on a per capita basis Australia is a major emitter are misleading and deceptive and mischievous. Though there is a lot of sincerity in the global warming debate there is also a lot of self-deception and self interest.
(4) Our numbers are a bit out of date but the annual CO2 numbers for 2007 from Wikipedia are sufficently relevant to underpin (3) above. China in 2007 was responsible for 22% of CO2 emissions, the USA 20%, Europe 14%, and India and Russia 5% each and Japan 4%. There will have been some movement up and down in those numbers no doubt, but it is probably still accurate to say that 6 countries account for 70% of global emissions. Australia produces about 1% of global emissions.
(5) The Climate Change Committe has not even released a table of the world’s polluters and some people dispute the numbers anyway, but most of the disputes are semantics. Just as in golf we all know who the slow players are, so in global warming we know who the major emitters are as well. Let’s focus on them, for their benefit, and ours.
(6) India and China are large economies, but in per capita terms they are still relatively poor. Modernisation has become an imperative to obviate the scourge of poverty, and with modernisation comes a huge, pent up demand for electricity and manufacturing capacity to promote exports.
(7) After World War II America ceded a lot of its manufacturing capacity to Japan and when Japan became too expensive they moved to Taiwan, South Korea, and now China. They then became a nation of bankers receiving dividends and interest from direct investment in emerging countries. Global imbalances now exist that are not easily overcome and America has weakened itself by wars that have gone over budget and over time, too much investment in military hardware and software, the dot-com boom/ bubble, and now the GFC bust. America can only address its decimated industrial base slowly and hence its capacity to afford to meet its global warming desires and/ or obligations is skinny. Keynes once said: "Fundamental change does not occur quickly".
(8) Australia has squandered the Hawke-Keating-Howard-Costello legacy (the domestic surplus and zero sovereign debt) no doubt with good intentions but we have not yet resolved the costs of pink batts, other environmental schemes that have gone bust, the building-the-education revolution etc etc. Ecinya suspects there is a big black hole in the budget which will be exacerbated by the Queensland and NSW and Victorian floods recovery programmes. If we need to raise a paltry $1.8 billion from a taxpayer levy then things must be grim.
(9) The Mineral Resources Rent Tax has not been completed. It is rather strange, or ironic, or whatever word you want to use that it seeks to encourage the export of coal when coal usage all over the world is regarded as a source of global warming.
(10) It appears that most of the alternatives to fossil fuels are uneconomic and we need to know what the alternatives to produce electricity, and run cars and trucks, and households, might be.
(11) It is wrong to say that a carbon tax is doing "the right thing" when no numbers have been released. This debate has no similarities to the tariff debates of the Whitlam era, nor to the GST debate.
(12) Australia does not have a manufacturing policy. Do we want to produce cars, steel, bricks, chemicals etc, or do we want to import them from China when China is already the world’s number 1 polluter?
(13) How can we have an energy debate without talking about nuclear power? What is our energy policy?
(14) IF in the final analysis it’s all really about TAXATION how could we have a Henry Review that excluded the GST and now have a proposed formal gathering that seeks to also exclude the GST, or at best suppress debate on the GST? Ecinya has long believed that food needs to be included in the GST mix and all of the hidden taxes described by Henry need to be reviewed and most of them abolished. But more of that later.
(15) Given Wall Street’s 3 decade long transgressions, turning carbon credits into a tradeable security seems extremely dangerous.
(16) Australia must have very few ‘big polluters’ say 2000…. Ecinya favours direct action via technology and investment to mitigate their carbon output.
FINALLY
…… when the chickens have come home to roost the persons who built the imperfect hen-house are long gone and we the innocent, present and future, have to pick up the broken eggs.