Thursday, March 17, 2011

Garnaut sheds light

The smoke around Australia's carbon tax is clearing with the release of the latest update of the Garnaut report. While we still have a Labor government this report carries weight and it is being considered at a multiparty climate policy committee meeting today. Garnaut backed Labor's carbon price which is effectively a tax and it starts next year, at a price of between $20 and $30 tonnes on Garnaut's recommendation (compare EU $20.50, NZ 19.50 and forecasted for the mighty state of California:$12.95-15.95; with the global offset price being $16.95). Then we will graduate to a emissions trading scheme with a market-set carbon price.

Professor Garnaut did not think much of Tony Abbott's "Direct Action" style of approach. Abbott's plan is to select particular emission reduction projects and pay for them out of the government's coffers. Too arbitrary to win the heart of an economist. Garnaut has built in plenty of compensation for polluting export industries like aluminium and steel. They would get 90% back initially then down to 60% later. Initially that's a quarter of the revenue raised.

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