A leading economist has likened the effectiveness of the “flawed” production-based carbon pricing regime being considered by the Gillard government to doing nothing, arguing it will drive up costs and achieve little enviromental gain.
In a paper to be released today by the Committee for the Economic Development of Australia, Geoff Carmody, a founding director of Access Economics and a former Australian representative to the IMF and the OECD, warns a rerun of Kevin Rudd’s carbon pollution reduction scheme is likely to be ineffective and costly.
Faced with doing nothing for now or introducing a rerun of the Rudd scheme, “maybe Australia should do nothing except push for the collection of more data on the science on what the major emitters will do and on what policy measures are most effective”, the paper says.
Mr Carmody, a long-time advocate of pricing carbon based on consumption rather than production, challenges advocates of action to prove the justification for Australia, which contributes less than 1.5 per cent of global carbon.
He argues the only hard-nosed reason that Australia would act would be to materially improve chances of securing a global agreement that pushes the major emitters, including North America, China and India, to act.
“Without a global deal, cessation of all economic activity in Australia will make no significant difference to any athropogenic emissions-induced warming,” warns Mr Carmody, a director of Geoff Carmody and Associates.
He says some advocates of climate change create a false impression that Australian action alone with save the Great Barrier Reef and the Sydney Opera House.
In his paper, which updates 2009 research, Mr Carmody calls for the Productivity Commission to make an economy-wide cost-effectiveness assessment of all policy alternatives.
He argues that the debate between Labor, the Coalition — which is backing direct action — and the Greens — which supports “anything going” — is a “fruitless, unresolved” debate.
It only continued to have life because nobody was prepared to allow examination “by an impartial umpire of all possible options”.
He also attacks advocates of a soft start. “The problem is that a low emissions price will be ineffective in reducing emissions while adding all the “deadweight” economic costs inherent in a new tax.
“This suggests a new question: aren’t the costs of doing nothing at all less than the costs of doing nothing effective? Could the Productivity Commission look at this issue?”
Mr Carmody also takes aim at climate change adviser Ross Garnaut’s dismissal of the consumption model of pricing carbon, arguing that it is not too late to examine the proposal just because other parts of the world are using production-based models.
The Climate Change Department examined the consumption model but expressed concerns about the complexity of assessing the carbon content of manufactured items and warned that the rest of the world was looking at pricing carbon on a production basis.
CEDA chairman Stephen Martin, the former Keating government speaker, said the committee had decided to release Mr Carmody’s paper to inform debate in the multi-party climate change committee.
“We are not taking sides, not taking a political view,” Mr Martin said, but a number of committee members were concerned about emissions trading and its effect on exports.
Mr Martin said the committee wanted to draw attention to those issues.