Sick Labor

Prime Minister Julia Gillard has at last begun the effort to explain her carbon price policy, but all agree she has a lot of ground to regain after scoring yet another spectacular own goal for Labor, this time by announcing a price on carbon without having any clear policy on compensating households. This while facing a Leader of the Opposition who will say and do anything for a populist scare campaign, his biggest bogey of all being a great big new tax. It is not so hard to think of how to present the issue to the public, as a journalist and a blogger demonstrate. Why cant Labor?

Labor has form, as former PM Kevin Rudd also scored a spectacular own goal last year by walking away from the greatest moral challenge of our time, global warming. Then there were the running sagas of home insulation, green loans and so on, which could and should have been explained, fixed and continued but which became such a political liability they too were abandoned. Labor has displayed staggering ineptitude.

There are many theories about why Labor is doing so badly: too much reliance on focus groups and the polls, the 24-hour news cycle, too much factional control, too beholden to big money and the media barons, and so on. These all have truth, but they are only symptoms and side issues. The real problem is that Labor abandoned its founding purpose decades ago.

Although a longer process was involved, a pivotal moment was the overthrow of Bill Hayden in 1983 and the take over by the right wing, led by Bob Hawke and Paul Keating. They had been seduced by economic rationalism, also known as neoliberalism, and they set about enacting the neoliberal program of deregulation, privatisation and government withdrawal from services.

Neoliberalism has always been bankrupt both as a political philosophy and as an economic program. This is easy to show at the level of ideas and is also evident from its mediocre economic accomplishments compared to the period 1945-1975, contrary to pervasive neoliberal propaganda. Ultimately, and not surprisingly, the worldwide dominance of neoliberalism led to the Global Financial Crisis. The GFC has substantially discredited neoliberalism in the public mind, but neoliberalism is so entrenched in the media, the bureaucracies and academia that better ideas are still almost invisible, unless you go looking for them.

Kevin Rudd can take partial credit for steering Australia through the GFC by departing from neoliberal gospel and undertaking Keynesian stimulus spending, however poorly explained and executed it was. The other factors that saved us were the mining boom, which is widely acknowledged, and our continuing addiction to borrowing, which is widely ignored thanks to neoliberal tunnel vision. Private borrowing is hovering around 150% of GDP, up from 25% fifty years ago and more than double what it was just before the Great Depression. The biggest part of that is mortgage debt, which is about 90% of GDP thanks to a housing bubble. As a result our economy is fragile and vulnerable to external shocks when it could have been healthy and robust.

However, after Rudds brief flirtation with heresy the thrall of neoliberalism quickly returned, and Julia Gillard has pledged to get the government deficit down as quickly as possible. This is despite government debt being only about 6% of GDP, trivial beside private debt.

The problem with neoliberalism for Labor is that it systematically undermines everything Labor used to stand for, which was to look after the little people. By succumbing to the neoliberal mantra that markets are always right and government is the problem, not the solution, as Ronald Reagan put it, Labor was reduced to applying bandaids to cover the wounds inflicted by its economic policies.

As a result Labor has progressively alienated itself from its old core constituency, the workers, and repelled what should have been its natural new constituencies, environmentalists and social progressives. As its membership has shrunk its connection with the community has been lost. It has been captured by those attracted to power for the sake of power. Such people lack vision, so they naturally focus on the short term – the news cycle, polls and focus groups – and they will take sponsorship from anywhere.

This was the context of Kim Beazleys disastrous decision in 2001 to meekly endorse John Howards actions blocking the Tampa and interring legitimate asylum seekers, innocent men, women and children, in remote concentration camps for years on end. Reportedly up to half the Labor membership subsequently resigned in disgust. Having taken the first step on that slippery slope, Labor was easily wedged by Howard into supporting his oppressive anti-terrorism legislation, and the issue has been a running sore ever since.

Since it abandoned its founding purpose and moral and legal principles, Labor has been perennially on the defensive. It has trapped itself in the right-wing framing of events, which leaves it no option but to be right-wing-lite, a little less bad than the other lot. To break out, it would have to remember its purpose, frame the issues clearly on its own terms, and then aggressively and articulately argue its case.

Australia is suffering a severe lack of political leadership. Though the grip of the major parties has weakened a little, they still dominate the political discourse. Until Labor either expires or re-discovers its founding purpose – protecting the little people – Australia will flounder while the world becomes increasingly uncertain and difficult.

 

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46 thoughts on “Sick Labor

  1. PeterJB

    “Global Crisis in Leadership Nearly Everywhere You Look”

    You will find the above headline over at Mish or
    http://globaleconomicanalysis.blogspot.com/2011/03/global-crisis-in-leadership-everywhere.html

    and here at the New York Times:
    http://www.nytimes.com/2011/03/17/world/asia/17tokyo.html?hp

    And, I have been say that we are experiencing a Global Leadership Crisis (GLC) for well over 4 years. Einstein also suggest same by inference.

    It is even worse as there is no one on the horizon that shows any potentail for that necessary Leadership that will be demanded from this point of time onwards.

    It is that time where the Australian Public must wake up and dissolve all current Parties, take control of the Responsibilities of Government in a free Republic – free from the UK and free from the USA.

    Thanks again Greg, and as usual a great post.

    peterjb

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  2. Kevin Cox

    Geoff,

    It is easy to pick on Labor but the same applies to Liberals and Greens. All major parties follow the dictates from the economics priesthood. Even you with your support of a price on carbon as a way of encouraging investment in green energy make the same mistake.

    In the 1950’s Ashby formulated “the law of requisite variety” which said that for a system to be controlled its controller had to have as many or more states than the system it was trying to control. Price fixing simply does not work in a market because the price cannot vary quickly enough to control the market. Price is meant to be the automatic controller in a market. If it is fixed or constrained it cannot do its job.

    Economists are all the time proposing solutions where price is manipulated in an attempt to control the economic system which is the exchange of goods and services of value. The main mechanisms used are regulations and taxation. As soon as you hear that a policy is being implemented with regulation and/or price control you know it is likely to have quite unintended consequences. A price on carbon to increase investment in renewables is one such policy. It leads to an increase in the cost of energy and is highly likely to lead to more exploitation of fossil sources of energy – because the tax can be used as bribes to the electorate and the higher the price the greater the bribes.

    The Liberals have a better idea which is direct action which is more likely to make a difference because it is not price manipulation. However Labor and the Greens can still rescue their price on carbon by requiring that all the tax collected be given back to the population to be invested in ways to reduce greenhouse gases . This satisfies the Liberals with their direct action. The Greens with a price on carbon. Labor with compensation for those most affected.

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  3. Geoff Davies Post author

    Kevin I’m a bit surprised by your comments.

    A tax (or subsidy) is not price fixing. The system is still free to find its own response, though it will be an adjusted response. That is its purpose. A carbon “price” of $20 will be added to other “production” costs, not substituted for them. At present the “price” is zero. In effect, it’s the price of a permit to emit a tonne of carbon dioxide.

    A carbon tax makes producers pay a cost of production that at present they are not paying. It is actually (partially) rectifying a market failure. For markets to work well the full costs of production need to be passed to the selling price.

    Regulation is quite different, though appropriate in cases where, for example, life is directly threatened. We don’t allow poisons to be dumped in the water supply.

    We don’t know what Gillard et al. might do yet, but Garnaut proposes to feed a fair bit of the tax back to households, with incentives and help to make their houses more efficient, etc. So they can still do what you propose, which I agree with.

    It would be nice if they didn’t feed so much back to polluters (thus defeating the point), but the main targets are likely to be “trade-exposed” industries, for which some argument can be made.

    It would also be nice if they eliminated the direct and indirect subsidies to fossil fuels, amounting to around $9 billion per year by some estimates. That is a major market distortion, and a perverse one at that. We pay extra to pollute the planet.

    The Liberals, even if they meant it, are proposing a mish-mash of picking winners. A well-designed market mechanism (which the pollies don’t seem to be able to deliver, I agree) would allow people to find the most cost-effective ways to reduce emissions.

    Given how the pollies routinely rort market mechanisms on behalf of their rich mates, I think a “price” or “tax” is, politically, the next best thing, because it’s a little less easy to manipulate.

    I think you’ll find Christine Milne, of the Greens, is Australia’s best-informed politician on the science, the market mechanisms, the technology and the potential for jobs and thriving new industries. That’s not such a high accolade, given the troglodytes in parliament, but she has a fair bit of good sense. No she’s not a saint and I do have my own criticism of the Greens (for not being bold enough usually).

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  4. Kevin Cox

    When a price is put on carbon then the intent is to change behaviour. The behaviour that we wish to change is the behaviour of investors to invest in green technology. At the margins it is to reduce the behaviour of consumers but as the price of green energy will be the same as fossil energy people will not change behaviour from the most convenient. Let me assure you investors will not invest in green energy simply because of the carbon price. The evidence from Europe is that a price on carbon at best has held green house gases constant.

    People who talk about encouraging investors to invest in green energy have not spoken or observed investors. The profits that are made on burning coal and oil are enormous and my estimate is that the price of carbon to make investors move from coal and oil for energy are at least a double and more likely to be three or four times. Do not forget that the price of petrol and coal can drop considerably and people can still make a profit.

    I don’t mind a price on carbon as a symbolic gesture but it will not make much difference to investors. Investors want profits and if they can make a profit they will burn coal. The best way to stop the burning of fossil fuels is to make renewables cheaper and to start to drop the price of ALL energy.

    The price of renewables will drop by at least 20% for each doubling of production. This is observed with all technologies. The cost of producing renewable energy is 90%+ financial – that is the cost of money and the repayment of the money.

    Put massive investment into renewables with interest free loans repaid from the profits that come because even at today’s prices renewables are profitable without interest and with the loans repaid over the life of the asset. The price of energy will drop. This will drop the price of oil and coal which in turn will lead people to think of better uses for oil and coal – like food, clothing, building materials, etc.

    This is the only way we will start to reduce emissions at a rapid enough rate to make a difference.

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  5. Geoff Davies Post author

    So Kevin you argue on the one hand that the price of carbon needs to be much higher, and many would agree, including me. (Removing perverse subsidies would be part of that.)

    You also argue for, in effect, a subsidy (due to foregone opportunities?) or anyway a reduction in price of renewables by your particular mechanism, and I have no argument with that either.

    By all means let’s get creative about disincentives to burning coal and incentives to using available energy.

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  6. Kevin Cox

    A price on carbon is not needed and does not help move the world to renewables. I am not arguing for a subsidy on renewables either. I am saying that a price on carbon is irrelevant to the the problem. I am saying that using interest free loans to build renewable energy plants IS NOT a subsidy but is the way we should fund all new assets. However, we don’t do it for everything because there are some new assets (like fossil burning plants) that it is best to discourage.

    The economics that I am encouraging is an economics based around increased productivity – which is doing more with less – and getting this increased productivity through investment.

    This is what individual firms do. If you want to get innovation and increased productivity you get it mainly through new investment and in new companies not through manipulation of prices. We should do the same thing with the development of our community infrastructure.

    Our economies are set up to stifle community wealth creation and to restrict wealth creation (productive investment) mainly to the private sector and under the control of people who already have wealth and are mainly interested in preserving wealth not in increasing it.

    I want all of us to be creators of wealth as well as all being consumers.

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  7. PeterJB

    @ Kevin Cox
    “Our economies are set up to stifle community wealth creation and to restrict wealth creation (productive investment) mainly to the private sector and under the control of people who already have wealth and are mainly interested in preserving wealth not in increasing it.”

    You have this quite correct my good fellow, and that is the way it has always been and shall remain until something is done about it. The Australian Government is organized to inhibit growth through Policy for purposes of the Recursive harvesting for the selected elite, and to restrict wealth creation by the proletariat which must, a priori, digs holes or take salary; it is easier to tax this way. Wouldn’t want any of the convicts getting big ideas, would we?

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  8. Ronald Bastian

    Both Geoff’s and Kevin’s points are greatly appreciated and indicate what is great about our democracy where we can speak our minds and stimulate thought, ideas and vision. I just wish that Governments/Parliaments worked this way so that we may understand just who has real knowledge of a subject and who is just taking up space. Well done guys, I take off my hat to both of you and hope others might continue this very topical and important debate.

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  9. PeterJB

    Thanks Kevin,

    I have placed your Blog on my watch list and viewed your material. I wonder if you had more success with writing ministers than I – where I have had zero! I have been told that ministers are too busy to meet with, discuss issues with, or read correspondence from their constituents.

    Probably all down the US Embassy with Mark Arbib selling old files and rumours.

    Luckily for us, the life dynamic are not linear and natural justice does exist.

    cheers
    peter

    PS I have just posted a new Blog at:
    http://verbewarp.blogspot.com/2011/03/operation-death-star-australis.html

    Ho hum

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  10. Kevin Cox

    Peter,

    I do not expect to get a response from ministers but I work on the principle of “dripping” water on a stone and try to have many drips operating:)

    I try not to insult or abuse people because people will not listen if you do not hear them and try to see things from their point of view. Most politicians are trying to do the right thing but they are bombarded with information and opinions and must have great difficulty working out what should be listened to and what should be ignored.

    I try to have positive suggestions on things to do rather than just criticisms. The carbon tax is an example. Although I think it is a poor approach to getting substantial change to investment decisions I try to make suggestions to make it to work more effectively as it is going to happen.

    There has been a major change in the way the world works and that is the deployment of the WWW and the mobile phone. We are only just starting to understand how these technologies can change the way we cooperate and work together but it is happening and happening at an increasing rate.

    What appears to happen is much like nuclear reaction. Ideas bounce around between people like neutrons. Occasionally an idea meets a receptive person and that person spreads it in many directions. If enough receptive people pass on an idea then the idea can spread rapidly and hence cause a change. If the message is not clear enough or people are not yet tuned to receive it or pass it on then it damps down – but echoes are left in the collective conscience and if the idea is a good one then it will get a little further each time it comes out.

    The idea of interest free loans as a way of creating new money tokens is as old as money itself. This is what we do when we print notes or coins on material with no intrinsic value. It gets perverted when the money tokens have value in themselves such as being made of a precious metal or having an interest coupon attached.

    Today we create money tokens using electronic bits that have no value. We can distribute these new money tokens easily and we can attach conditions to these new money tokens.

    Doing this sensibly and without an interest coupon means we can alter the emergent properties of our money system so that inflation is eliminated, wealth is broadly distributed, and new money is used to create new sustainable wealth creating assets.

    It is very easy to do and it happens all the time with the rise of companies like Google, Amazon, Cisco, and with hopefully the company I founded called Edentiti. Initial capital comes from people buying shares that give no dividends only a promise to repay when the business generates wealth. Buying new shares directly from a company is interest free money.

    We can do the same with community organisations and use new money to deliver community resources like water, energy, education, health, credit, public transport etc. That is, we give equity in these wealth creating activities to the community who uses them and we do it with interest free loans.

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  11. Geoff Davies Post author

    I’d just like to note that my accusation of “sick labor” involves much more than a carbon tax, which was Kevin’s main focus, and really a side issue.

    My point is that Labor was seduced by the free-marketeers, and thereby abandoned their founding purpose. You will see in my other writings that I’m not against markets: on the contrary, they are powerful, but they need to be harnessed to the purpose of supporting a decent society. We can debate which kinds of markets might work best, as Kevin has done, without contradicting that point.

    Labor needs to actively advocate making markets subservient to society. That’s how it was in the fifties and sixties, the era of our greatest economic advance, so that is how they can argue it’s good economic management to manage markets. Bob Menzies did it, and he’d be called a raving leftie by today’s extremists.

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  12. Ronald Bastian

    Just to follow-on from Geoff’s blog regarding Bob Menzies….a few years ago someone posted a link to a radio broadcast by the “then” PM, Robert Menzies entitled, “The Nature of Democracy”. Menzies, if alive today would disassociate himself from the current (so-called) “Liberals”, pretty much as Malcolm Frazer has. His speech includes such inspiration and “honesty” that my reading it changed my mind about him as I was raised in a working class family of six kids and existing on a frugal single-income family with my Dad a communist sympathiser to boot. Economic jargon today is infintely “beyond” the grasp and interest of “everyday”
    Australians as we seem to live in a world that is constantly focussed on “jargonistic” language that defies anyone to enjoy certainty and a happier, safer future. Top-end wealthy corporations act like cannibals that
    expect to maintain full control over society and Governments including the dictating of all policies that may appear to have a negative effect on any future profits. This is possibly the venomous nature of “capitalism” and while we are blatantly aware that of the “chrematistic” nature of economic processes, it may be too late or just “too hard” to alter the course to the many options that Geoff offers to us in his writings. As a “kid” in the 50’s and married with a family in the 60’s, my heart aches every time I consider the difference of those era’s with the spurious and vile behaviour of the likes of Tony Abbott, John Howard before him that in my opinion, sounded the “death knell” for what was a compassionate and empathetic view of things by Robert Menzies back then when “democracy” was un-sullied and dis-assembled by neo-liberalism as well as the latter-day labor men like Hawke and Keating.

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  13. Kevin Cox

    Geoff

    The point I am trying to make is that using price to control a market is not a sensible idea.

    A price on carbon is an artificial imposition on the price of a commodity and attempting to change investor behaviour this way is unlikely to significantly change investor behaviour. Any artificial imposition of a cost by government decree is seen by most people as a tax and our experience with taxes is that they are ineffective when it comes to changing behaviour. Taxes on gambling do not significantly reduce problem gambling. Taxes on alcohol do not significantly reduce consumption of alcohol. Taxes on cigarettes do not significantly change smoking habits.

    A tax on producing fossil energy will at best marginally reduce green house gases.

    This idea that we can significantly alter behaviour by manipulating the price of things is an economic dead end. I despair of the Greens because they are putting so much faith in an idea that will not work quickly enough to make a difference. I wish they would concentrate on ways to make renewables cheaper instead of trying to make fossil fuels more expensive. It is much easier to sell the idea of reducing carbon emissions by reducing the cost of energy than it is to sell the idea of reducing carbon emissions by putting a tax on energy.

    This is not a discussion about making markets subservient to society but of pointing out that a price on carbon is an ineffective way to change investor behaviour while changing the cost of investment will rapidly change investor behaviour. It is not consumer behaviour that is critical but investor behaviour. We have become conditioned to this idea that value is measured by the price we are willing to pay for consumption instead of value being about cost of producing things we consume. We need to concentrate on investment in renewables not on consumption of energy which is why the Coalition idea of direct action is more likely to make a difference than a price on carbon.

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  14. Ronald Bastian

    While Geoff is sharpening his pencils, I hope you don’t mind me putting in my 2 cents worth on taxes and whether they are “significantly ineffective”. As long as I can remember we have always complained about being “over-taxed’ as a Nation. Perhaps if we think about it more as a way the Government recoups goods and services that considerably damage and threaten our health and our built environment. For well over the last decade, the leading water providers have had a “Pollution Tax” imposed on them similar to the proposed “Carbon Tax”. The more significant pollutants they introduce into any receiving waters, the more they pay, so it’s basically a tax to pollute and has proven to “significantly” reduce phosphorous and Nitrogen levels as it is closely monitored by the EPA. That is just one example. I also believe that the “other” taxes such as Tobacco have had a significant reduction of people who smoke, to oppose this tax that feeds back to the health system and any other taxes collected for the list you mentioned is a methodology to fairly charge those whose behaviour places more cost demand on society, therefore demonstrating an understandable degree of “equity”.. Investors to me are, in the main “gamblers” who live to win, but blame “someone else” when things don’t go their way. They despise “taxes” of all sorts and resist wherever possible any attempts to deprive them of their wealth that they always maintain they “worked hard for”….fair enough, that’s their prerogative but it’s unrealistic while living in the framework of any Government that has a responsibility to provide a plethera of commitments to an entire nation.
    The coalitions ideas are, at the moment, just that “Ideas”, I love the “thinking” behind them but we require the “figures” and the “plan of action” not just snapshots and a “wish-list”. The carbon tax might only be something to “kick-start” the positive action required, renewables can be cheaper if manufactured here in “OZ”, but as the coalition has been hell-bent for the last couple of decades in “destroying” our domestic markets and manufacturers by “cuddling-up” to the USA, those manufacturers must feel, right now, as I mentioned before, rattled by the “uncertainty” of any commercial support, banking institutions, and the threat of a possible change in Government that strongly believes in a “free-market” economy where anyone brave enough to venture into manufacturing “renewables” here in Australia can and most certainly will by “crushed” by overseas corporations who are in a position to offload their goods cheaper than they can be made here, at least until they have forced the “locals” out of business. That is “Capitalism” , that is happening in every Capitalist “free-market” economy” so please don’t expect those who hang on to their savings and spend it on goods and services domestically to display a lot of angst about the personal “wants and desires” of the minority of those known as “Investors”. It is the clear responsibilty of Governments to generate income from those who make the most negative impacts on the society as a whole, in order to fund the costs of reparation and restoration. Why do some people find that so difficult to comprehend?

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  15. Kevin Cox

    Ronald,

    I am not saying that increasing prices does not change consumption but that the changes are insignificant in relation to the problem. Also the effect of price increases “wears off”. If price increases were significant in dropping consumption and encouraging alternatives then we would expect the recent price increases in petrol to have dropped consumption and increased investment in renewables. This has not happened.

    We have to have alternative sources of energy at cheaper prices before we will get any significant reductions in energy from fossil fuel – and that only comes from massive investment. If investors have coal and they can still sell the energy produced by burning it at a profit then investors will continue to burn fossil fuel and not invest in renewables. Increasing the price of all energy will not reduce the profits from burning fossil fuel. We need to make burning fossil fuel unprofitable before investment decisions will change and that is best done by reducing the price of renewable energy through reducing finance costs. It is unlikely to come from increasing the price of all energy.

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  16. Ronald Bastian

    Interestingly enough Kevin I find myself heading in a similar direction to yourself in that I have been in my past life an active voice for the environment, especially in regard to the mindless carving-up of large tracts of ex-Government land that is sold-on cheaply to developers who allow poorly constructed housing that have minimal standards throughout the home that requires air-conditioning almost 365 days a year……………..while we talk about saving energy and developing “renewables”, these “Minimum Standard builders” are being allowed to slap-up poorly designed dwellings that are in no way “energy-efficient” or even children-friendly. I am constantly finding new and “do-able” ideas of all persuasion with regard to the development of renewable energy programs and associated products. There are magazines published by the “Alternative Technology Association” that are chock-full of options, and of course,we can’t ignore the hybrid cars etc..if we decide that they are part of the answer then we must find ways to assist vast numbers of Australians to buy them..perhaps a Government initiative to provide interest-free loans, or… Stop the collecting of GST on renewables only for a designated period. Great ideas and solutions can only begin by engaging the “faithful believers”. Current Governments and their representatives can no longer claim to be honest, decent and prepared to “stand-up” for the “Common-Good”. We have lost faith because of their recent actions as well as “inactions”. We show no respect for them anymore..Americans call their leader “Mr President”, we call our leader “Julia” or just “Gillard”, they have lost our respect because they “play” politics and the retention of power it seems is most uppermost in their daily considerations, as well as placing “spin” to the media when faced with the most important and crucial “needs” of our society.. I believe that, Australia is possibly the best “placed” Nation in the world to initiate programs and strategies that can take us into the future almost “bullet-proof” from Global warming. But are we strong enough and clever enough Kevin ? IF ONLY..
    That is something that I struggle with daily.

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  17. Kevin Cox

    Ronald,

    We are strong and clever enough.

    Geoff says Labor has failed to explain how households can be compensated for an increase in energy prices. He says Labor should have better explained and then better implemented green loans and home insulation.

    I am arguing that all these policies, while they appear to address the issues, will always fail because they are based on a faulty model of how the economy works. The economic model that is used, by all parties and almost all economists, for thinking about and creating policies is the idea of the economy being a stable system and moving from one stable state to another. It is thought of as a balloon that is being blown up. With each puff of air (increase the money supply) the balloon gets a little larger but it is still in a confined stable ball like shape. Economic policies based around prices are external pressures put on different parts of the balloon to change its shape. We push on the fossil fuel area of the balloon hoping that it will distort the balloon to expand the balloon in the area of the renewables.

    An economic system is not like a balloon but more like a forest. Each plant within the forest is an economic entity that lives and dies and interacts with its neighbouring plants. The forest exists in a natural environment and is dependent on it. The forest however, can change the natural environment to make it more likely that the forest as a whole will survive and prosper.

    Once we start thinking along those lines then we can formulate sensible policies. The approach that I am suggesting to address the level of green house gases in the atmosphere is to encourage the growth of economic entities, such as renewable energy plants, that do not emit green house gases. This contrasts with a policy of trying to restrict the growth of economic entities that emit green house gases. The idea is for the renewables to outgrow and dominate the energy producing part of the forest.

    We can do this by Rewarding individual economic entities that use relatively less energy but require those entities to use their economic Rewards to invest in ways to build and expand renewable energy plants. We encourage the beneficial plants in the forest to outgrow the fossil fuel burning weeds and so make fossil fuel burning contribution to the economy insignificant and hence limit the damage they do to the forest environment.

    Policies based on changing prices are policies that are like distorting an ever expanding balloon that will ultimately burst. Policies based on investment are policies that grow a sustainable living economic forest.

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  18. Ronald Bastian

    Kevin,

    I like your thinking, and it possibly parallels in some regards, the position I have supported for many years, but, if we are talking about, “literally” creating a “Memorandum of understanding” (of sorts), with fossil fuel burners that will see them invest in forest re-growth without collecting any carbon taxes then I would have to think very hard and long about a number of side-issues here. As quickly as we are planting trees, vast areas of our landscape is being bulldozed for massive housing and industrial developments in, for example, Western Sydney and the NSW Planning Ministers (past and present) have managed to override the local planning laws in order to fast-track the progress of “destruction” simply to appease the likes of the “Lend Lease Corporation” who contribute huge donations to both major parties, so in NSW, it doesn’t really matter who wins the election on the 26th, we are in for the same infuriating planning mismanagement that we have been suffering for decades and will continue to do so….so, as I am at least one person who has a “more-than-average” knowledge of what values vegetation means to “lock-up” carbon, we MUST stop those bulldozers and the “crummy” houses and the squeezing-in of more and more people into an already stressed-out region regarding it’s health, water and transport system. I appreciate and give a great deal of credence to all/any fresh and credible suggestions, but “time” may be an issue for most of them. As you said Kevin, we are strong and good enough, any many of us are “well intentioned”, however, you must agree that any alternatives must be presented as a typical business plan, e.g. a “document” with numbers, time-frames, benefits and impacts etc etc…If the coalition were to get serious and submit to public scrutiny a “renewables” Plan of action with all the numbers and detail etc…..then they may start to achieve some sort of credibility instead of acting like the worst kind of recalcitrants and “bad losers”. This nation needs, at this time especially, ALL parties to come together and place all/any ideas on the table that may be of some benefit to the reduction of greenhouse gases…A “united” front is what is required, I need it, the Nation needs it, otherwise we will continue to treat each and every one of them as nothing but a bunch of egotistical bad-mannered children who refuse to play the game in an intelligent and responsible manner. Do they not realise that they are holding in their hands the lives and livelyhood of every Australian, now, and into the “unknowns” of the future. That is how they all appear to me right now, and I believe that this nation is becoming more frustrated with them as we collectivelly face what Rudd called “The greatest moral challenge of our time”. The key word is “Moral”, because the influence placed on ALL levels of Government by the powerful and rich lobbyists will forever be considered “Immoral” and certainly “un-democratic”, as long a “greed” equals “power” and “power” sets the agendas and courses for our future.

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  19. PeterJB

    I am delighted and most encouraged to read the commentaries of this Blog; indeed of a much higher intellectual plane than where we find our wallowing leadership.

    May I ask you to to extrapolate, for a moment or two, the scenario where 5% of Australians share your mental and ethical heights, which at this projected and awakened time, and in strict concordance with natural physical principles, creates a critical mass that lifts the spectrum of Australia’ population’s thought processes from that of Pavlov’s dogs to where the contributors of this Blog are today, as evidenced herein.

    Gentlemen, what need have we then (or indeed, now) of today’s leaders and their crude implementations, rank impositions, crasse rantings and bloody betrayals of self agenda? As then we will indeed be in a state of Anarchy or in an ordered society of higher intellectual comprehensions and their naturally evolving higher order of moralities of Men?

    This I propose is where the bite of evolution differentiates into men more or less in conformation with the ideas of Jean Baptiste Lamarck.

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  20. Ronald Bastian

    Thank you Peter, Geoff and Kevin,

    On that note I believe I will now have a nice cup of green tea and a refreshing nap….

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  21. Geoff Davies Post author

    Kevin-
    I find your arguments hard to follow, so these comments will just touch on a few points.

    Sulphur emissions from power plants were dramatically cut in the US with an emissions trading scheme. They were cut well ahead of schedule and for less than even the environmentalists estimated. Plant operators simply found efficiencies they hadn’t looked for before. The ETS added a cost to production, so it was a tax if you like. It worked. Your claim that taxes will never significantly affect behaviour is not supported. I’m sure there are other examples but I’m not going to troll for them now.

    The point of the carbon price is indeed to change *investor* behaviour. It is Tony Abbott who is screaming about the cost to *consumers* (and assuming no changes of behaviour anywhere in the economy).

    I understand that you have a scheme to reduce the costs of investment that could be applied to renewables. It is a *positive* cost intervention, also known as an incentive. I don’t see that an incentive will *necessarily* work much better than a disincentive in changing the behaviour of the hard-nosed investors you refer to. Nor do I see much point in continuing to debate you on this, as I don’t understand why you insist.

    You can argue that a $30 carbon price is not *enough* to change investor behaviour a lot, and I would agree. But that’s not the same as saying a tax can never work.

    The whole *point* of any intervention is to make clean energy a better investment than dirty energy. It’s the politicians who keep fudging that. Oh yes, remember? I was arguing that Labor’s sick, and that’s an example.

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  22. Kevin Cox

    Geoff,

    As you point out the efficiencies found with the SO2 case were found after the investments were made. The important factor in this case was not the cost but the absolute limits on emissions. This forced investment. It was the investment made because of the limits that made the difference not the price.

    I say a price increase is ineffective when there is only a price increase. This has been the experience with carbon trading and taxes in Europe over the past few years. Emissions have still gone up. They have stabilised in Denmark where investment is mandated but gone up everywhere else.

    The only way to change investor behaviour is to make it so that investors cannot make a profit with polluting energy. Increasing the price of fossil energy will not make it unprofitable until there are enough renewables to replace fossil energy because the price of renewables will be set at the highest possible price. Consider oil. The price of all oil is the price of the last barrel of oil not the price of the first few billion barrels. Oil from Saudi Arabia is still produced at less then a dollar a barrel but sold for the price of oil from the deepest part of the Gulf of Mexico.

    When a business sets a price it sets it at the price it can get which is unrelated to the price it costs to produce. So if you are going to get a price on carbon to work then you have to put in place enough renewable energy plants to supply the energy needed before any carbon price will change investment decisions.

    The critical factor is to get investment. The dynamics of the system is that if we encourage investment by reducing the cost of investment then the price of carbon will start to be effective when we have enough renewables to start to replace fossil energy. Until then it simply makes all energy more expensive.

    If we are going to put a price on carbon then the money collected should be invested directly in renewables. A price on carbon is not enough on its own to get investment in renewables on the massive scale we require.

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  23. Ronald Bastian

    Kevin and Geoff,
    I think the subject is in danger of becoming “over-cooked” and not appearing to be capable of reaching a resolution judging by the differing views on the subject.
    It seems to me that you Kevin might be inclined to be a supporter of Tony Abbotts suggestions of addressing the issues by investments in renewables only with the hope that they will be capable of reaching the desirable targets without the need for a tax of virtually any sort. You also appear to protect the fossil-fuel polluters by standing idle while they pump-out their pollutants into the atmosphere while others who are attempting to tackle the issue with a plethera of renewable energy programs are planting saplings, installing solar panels and wind turbines etc with the hope that this will also meet the targets by the same time. That will not happen and it is simply unrealistic to believe so. Please refer back to what I have stated earlier regarding the horrific negatives our planet faces when we have current local and State Governments allowing, condoning and even supporting, widespread destruction of vegetation for housing knowing that the vegetation they are removing is possibly one of the largest single living things that is capable, more than anything else for the locking-up of carbon. The same vegetation that also manufactures oxygen at the same time. Do you really believe that the Liberal coalition will take positive steps to STOP housing developments in order to protect the very thing that keeps us breathing…a “green” coalition ? No way kevin….No offence but I am over it on this subject, it’s a no brainer.

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  24. PeterJB

    Try this discussion Gentlemen:

    http://www.thedailybell.com/1899/Anthony-Wile-with-Bill-Bonner-on-the-Failing-US-Bond-Market-the-Coming-Hyperinflation.html

    Please note the consistent point of view with mine on the Bond market…

    which means that this is more relevant: http://verbewarp.blogspot.com/2011/03/operation-death-star-australis.html

    “The same vegetation that also manufactures oxygen at the same time.”

    You really mean that the same vegetation that also manufactures oxygen from the carbon dioxide that we constantly produce, a priori, Yes?

    “Do you really believe that the Liberal coalition will take positive steps to STOP housing developments in order to protect the very thing that keeps us breathinga green coalition ?”

    Its a given – NO – Abbott speaks but it means nothing at all – look at this guy during his University days – and you would find any excuse to permanently incarcerate him… he is not such a nice person at all and definitely not someone that you should trust, au contraire.

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  25. Kevin Cox

    Ronald,

    I presume that what you say is a “no brainer” is that a carbon price will stop greenhouse gas build up in the atmosphere because it makes polluters pay for polluting.

    This argument seems to make sense. Unfortunately the evidence is that it doesn’t work if all we do is put a price on carbon.

    The human race will not stop burning fossil fuel until it cheaper to produce energy by other means. This will only happen if we invest massively in alternatives.

    I am saying that making polluters pay is good sloganeering but does little to address the problem of directing investment resources to where it is needed.

    I am saying let us have mandated investments in renewables and in other ways of reducing the level of greenhouse gases in the atmosphere.

    This is directed investment that we know will work and does not require polluters to decide it is not longer profitable to pollute.

    I am also pointing out that we can do this without increasing the price of energy and with an increase in our overall wealth.

    We can do it in the following way.

    1. We Reward people the less energy they consume.
    2. We give Rewards as interest free loans that must be invested in ways to produce energy with fewer greenhouse gases.

    This will rapidly bring down the price of renewable energy because we know that each doubling of capacity of any technology reduces the unit price output from the technology by a minimum of 15%.

    If done well it is likely to eliminate inflation, and redistribute wealth more evenly throughout society.

    It can also be tuned to address other issues like putting water back into our rivers and even reducing our population growth.

    Trying to put a price on carbon is a distraction.

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  26. Geoff Davies Post author

    Kevin-
    The European emissions trading scheme was so poorly implemented it actually subsidised some polluters, so it is not a measure of whether such schemes can work. Otherwise I don’t think you’ve cited any evidence for the assertion you must have repeated twenty times in this thread: taxes won’t work, you have to invest directly.

    I didn’t say “As you point out the efficiencies found with the SO2 case were found after the investments were made.” On the contrary I find this statement very puzzling. The scheme changed the kinds of investments made, to ones that reduce SO2 emissions.

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  27. Ronald Bastian

    Kevin

    OK Kevin, let us address your concerns piece by piece…in your third paragraph you said “This will only happen if we invest massively in alternatives.”. I Say: Have you actually listened to what the Government is proposing regarding the use of the collected Carbon Tax ?
    Besides using some of it to compensate low and middle income earners most affected by the predicted cost rise in energy, money will be directed into funding the “Renewables energy sector”, investing in Research and Development to promote and support the alternative energy programs. That money will come from the taxes colected from the main polluters, not the taxpayers salaries and earnings as the coalition plan to do.
    Rewarding people for using less energy is already happening, we, the public can already save heaps by behaving more frugally in our homes and the information to do this has been around for ‘yonks”.
    You say that the “Human Race” will not stop burning fossil fuel until it is cheaper to produce energy both other means. Kevin, if it was cheaper to produce energy by other means, Corporations would be doing it. Fossil fuel burning is cheaper and therefore return huge profits as long as the practice is not curtailed in some way.
    The Super Profits Tax and the Carbon Tax is simply a “Re-distribution of Wealth” which is something that you and the coalition doggedly refuse to support.
    Any Government initiative that effectivelly equates into a “re-distribution of wealth”, necessary for the overall good of a Nation should never be tagged with a slur of “Good Sloganeering”, that domain belongs to the liberal coalition and is “so Abbottesque”.
    Just in finishing off…Inflation is a necessary “beast” that lives “comfortably” withing the house of Neoliberalism. In order to keep pressure on lower wages they need to have in existence a moderate level of inflation in the economy to support their manipulation of the markets and wages. For further explanation I suggest you read “Economia”.
    A price on Carbon…”Trying” to put a price on carbon?..I believe the horse has already bolted Kevin and I believe I have responded as best I can with even my very limited knowledge…I think the subject needs a rest..I know I do.

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  28. Kevin Cox

    So I cannot use the European experience as evidence because it was poorly implemented? http://www.heatisonline.org/contentserver/objecthandlers/index.cfm?ID=6991&Method=Full

    The sulphur dioxide reduction came about because investments were made because of the cap NOT because the price increased. Once investments were made in alternatives then it was found that the alternatives were cheaper than processes that emitted sulphur dioxide. The price on emissions was not the direct cause of the investment. The CAP was the direct cause. I am not arguing about CAPS. I am arguing that a price on emissions is not the best way to encourage investment.

    I have described how increases in the price of oil has not changed investor behaviour.

    I have described how investors make investment decisions and described why an increase in price that does not impact the profitability of burning oil will not change investor behaviour. I can give dozens of examples where we have stuck with old technologies even though new ways are better because of dominance of profits from money manipulation not from increases in productivity.

    I have described a way to make a price on carbon effective by making sure the money collected is used to invest in renewables.

    I have described a way to encourage investors by reducing the cost of investment in renewables so that we can have cheaper renewable energy today.

    Perhaps you can tell me what it would take to convince you that there is a much better way to get investment in renewables than putting a price on carbon?

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  29. Kevin Cox

    Here is a good reference that shows why Denmark is the only country to get a reduction in emissions with a price on carbon.

    http://www.abc.net.au/rn/rearvision/stories/2010/2977448.htm

    The reason is that the money collected was directed to investment in renewables.

    It really doesn’t matter where the money for investment comes from as long as it comes. However, as I have repeatedly said the cheapest, most efficient, most politically acceptable way that will have the lowest impact on inflation is via interest free loans.

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  30. Kevin Cox

    It seems that I am not the only one who is sceptical about the effectiveness of a price on carbon on reducing pollution.

    There’s also mixed news for the Coalition’s long-running scare campaign on electricity prices … 79% of voters believe a carbon tax will increase the cost of electricity, but 78% believe they’ll rise without one, which the Coalition has been anxious to downplay. But there’s also mixed views on the effectiveness of a carbon tax — only 42% of voters believe it will make big polluters reduce their carbon emissions, while 43% disagree. And only 41% believe a carbon price will increase investment in renewable energy, compared to 38% who don’t believe it will.

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  31. PeterJB

    Let me say this, if I may, please:

    Do not expect a “leadership” voted into power that they don’t understand, off the streets as it were – by the popularity of the stack of lies so high, it spills radioactive fallout across the globe, and lies that they actually will give to the voter, money that does not come from their pockets, and money that the government doesn’t own or produce – but that money belonging to one part of the production worker force – where that voter that receives this money from his fellow taxpayers, is usually and most often, money that which he/she doesn’t need or deserve – but is designed to make comfortable and a bribe to continue the vote accordingly, – not to understand anything about governance at all, nor to respect the responsibilities of office and his fellow man.

    Do not expect these “leaders” to know anything of economics, nor its relationship to socio-economics, nor justice, natural Law, and natural Justice, philosophy, mathematics, of Universal Laws, biology and most importantly music theory, in any comprehensive way.

    Expect this “leadership” to be elected by the shape of his backside, or by the way he dresses, or the way he speaks and or by the way his clammy hands falsely clutch that of his wife when cameras are ever present or most likely the lies and promises that will make your lives more comfortable once office has been gained.

    You may debate taxation and free markets economics, but I tell you that those that you call “leaders” have no idea what you are talking about, or for that matter any interest, and neither do those bureaucrats that are more prolific than rabbits in their risk free trade and enterprise of the evasion of risk and responsibility and the preparation of flawed great Laws for the Lawmakers, none of which have the slightest clue about that which they do, except to extract more money from you and the general public to be spent upon more promises and offers of bribes the next time they step up to the hustings.

    “”The tax that was supposed to soak the rich has instead soaked America. The beneficiary of the income tax has not been the poor, but big government. The income tax has given us a government bureaucracy that outnumbers the manufacturing work force. It has created welfare dependencies that have entrapped millions of Americans in an underclass that is forced to live a sordid existence of trading votes for government handouts.”
    — Paul Craig Roberts
    (1939- ) Economist, former Assistant Secretary of the Treasury in the Reagan Administration (“Father of Reaganomics”), former editor and columnist for the Wall Street Journal, Business Week, and Scripps Howard News Service.
    Source: The Columbus Dispatch.

    “The only ends for which governments are constituted, and obedience rendered to them, are the obtaining of justice and protection; and they who cannot provide for both give the people a right of taking such ways as best please themselves, in order to their own safety.”
    — Algernon Sidney
    (1622-1683) English statesman, writer, Whig leader
    1672

    “Beneficence is always free, it cannot be extorted by force.”
    — Adam Smith
    (1723-1790) Scottish philosopher and economist
    1759

    And you Gentlemen, with all due respect, are a having a conversation for your own sakes – as I guarantee, nobody in government is the least bit interested, nor will they ever read your words and comments.

    I recommend reading Bureaucracy by v. Mises to begin.

    respectfully

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  32. Ronald Bastian

    Peter,
    PeterJB,
    You are of course absolutely correct (especially about bureaucrats), and I wouldn’t wish my outpouring of “opinions” to be taken too seriously, especially by “any” politician as I have made many attempts to exchange ideas and opinions with them and, like you and kevin and possibly others, I believe my efforts never got past the first “Staffer” that received it. You are absolutely correct in stating that politicians are possibly the most “unqualified” individuals in an equally ignorant and “forgiving” society and I believe that most career “Pollies” are attracted to political careers for the same reason that a flea is attracted to a dog’s bum… having said that, it is something of a relief for me to exercise my “freedom of speech” knowing that it is still allowed as it appeared to be seriously “under-threat” during the “Howard Years” where a number of people were “acted upon” by the Federal Police using the coalition’s created “Sedition Laws”. I guess we should be grateful at least that we can put those threats behind us, unless of course Mr Abbott manages to (ever) gain the Prime Ministership, and if one can believe what you have already enlightened us about his past, then, we might just see those laws re-instated…So Peter, for the moment I will just appreciate the fact that “you” (and others) are taking the time to read and respond to my “rants” and “opinions” (with respect) and, strangely enough, that suits me fine…….
    Ronald Bastian -Australian retiree (1939-2011?)

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  33. PeterJB

    Well Ronald, what I said @ PeterJB | March 20, 2011 at 11:15 am |above
    I meant – as that to which you reply just so there are no misunderstandings; I also enjoy the discourse.

    And as you bring the context to the fore, “leadership” is murdering their constituent right across the face of the planet at the present moment – so one should expect the same here when circumstances threaten to expose their shame. Abbot for sure as he is seen internationally as a budding Stalin.

    Leaders need to preside over – and they desperately need to preside over anything even failure.

    I have spent much my life in the company of these feral creatures that can extract the meat between your teeth from 50 paces and empty your wallet before your aircraft has landed on their shores; sewer rats all.

    Attributes: it is all about attributes and temporal signatures; all unique and forth telling. I don’t mind dying for Truth – screw them all.

    But in the meantime, let us enjoy the conversation of Gentlemen, as you all put forth, in an environment without fear; instilled fear. Such has always been the way of Australian politics.

    respectfully,

    I copy this link here as it is the most probable outcome for Australia at the present moment.
    http://verbewarp.blogspot.com/2011/03/operation-death-star-australis.html
    peter

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  34. PeterJB

    Perhaps Gdentlemen,

    It may be possible to drown the applied ignorance of our “leadership” and all that hangs off them in eager anticipation with sound arguments for non radioactive Thorium in the Nuclear Process as our alternative for on-line power generation.

    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8393984/Safe-nuclear-does-exist-and-China-is-leading-the-way-with-thorium.html

    and from Oz research (which is usually very top stuff when untouched by the hands of the animals with natural political attributes).

    http://www.aph.gov.au/library/pubs/rp/2007-08/08rp11.htm

    Certainly, learned arguments and debates should be most welcome but heed, this is not a call for another Tax by M’s Gillard and her and the other lot, but a viable alternative.

    However, there are many other alternatives.

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  35. Doug Evans

    Dear all

    I note Geoff Walkers comment that Labors commitment to an ETS is merely one example of the neo-liberal economism that characterizes current ALP thinking, and that discussion of the relative merits of carbon tax vs ETS or ETS vs Direct Action is peripheral to his piece. Nevertheless I think the discussion on the relative merits of various approaches is interesting and even important and will try to add to it.

    In respect of the value of an ETS as a mechanism for reducing GHG emissions, if you havent seen it already you might be interested in the analysis by Friends of the Earth (Europe) of the EU-ETS. The report entitled ‘The EU Emissions Trading System: Failing to Deliver’ makes salutary reading.
    The FOE media release can be found here: http://www.foeeurope.org/press/2010/Oct14_Dangers_of_carbon_trading.html

    The Introduction to the report which can be downloaded reads in part:

    “Launched in 2005, the European Unions Emissions Trading System (EU-ETS) is the largest carbon trading market in the world. It is the EUs principal policy mechanism for reducing greenhouse gas emissions in the power generation and industrial sectors. But the EU-ETS is not delivering the CO2 cuts required by science, historical responsibility and sound financial practices.

    The first carbon trading trial phase in 2005-2007 was an abject failure. At 2298 million tons of CO2, the 2007 cap was actually 8.3% higher than verified 2005 greenhouse gas emissions.

    Businesses were therefore free to increase emissions or set emission permits aside for the next EU-ETS phases. Anxious to avoid having to make short-term investments in emissions reductions, industry lobbying against higher, effective targets has been extremely effective.

    In the current 2008-2012 phase, the average CO2 cap is 2% lower than 2005 emissions. But in seventeen out of twenty-member states including France, Poland and the UK, 2012 caps are still higher than measured emissions in 2005. Overall, twenty-one out of twenty seven member states sought 2012 emissions caps that were higher than 2005 emissions (with the richest EU member state, Luxembourg, pushing for a 52% increase).

    There are now so many unused permits that most industries covered by the Emissions Trading System (responsible for almost 50% of EU emissions) can legally avoid making any cuts before at least 2016. Whats more, there is no obligation to reduce emissions in Europe.

    Through the United Nations Clean Development Mechanism, EU-ETS sector businesses may invest in projects outside Europe. Known as offsetting, this avoids domestic cuts, frequently even fails to reduce emissions in developing countries, and may also cause significant social and environmental problems. Adding up paltry CO2 emissions caps and offsetting loopholes reveals a dangerous gap between science and political reality.”

    The International Panel on Climate Change (IPCC) has made it plain that to stabilize global greenhouse emissions at 445 535 parts per million CO2e (Co2e allows for the greenhouse warming capacity of other gases eg. methane) global emissions need to peak between 2000 and 2015 and reduce by 2050 to somewhere between 50 and 85% below 2000 levels. The scientists best estimate is that this would stabilize temperatures at between 2.0 and 2.4C above the pre-industrial equilibrium. This would give us about a 50/50 chance of avoiding runaway climate change. Not great odds and the EU – ETS is plainly not going to deliver its part of this task.

    The FOE report continues:
    In this context, ongoing reliance on the Emissions Trading System is a risk that cannot be taken. The EU must urgently increase its emissions target to at least 40% and ensure that these cuts are domestic. This calls for strong political
    will. Rather than depend on the uncertain, ineffective, and unfair Emissions Trading System, the EU must privilege other forms of action. This includes tougher laws to develop renewables and increase energy efficiency, as well as carbon taxation and incentives for public and private investment to pay for emissions cuts.

    Given the well known multiple inadequacies of the failed Rudd CPRS and Labors apparent determination to use this as a model does anyone think we are likely to do better than the EU?

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  36. Doug Evans

    Apologies
    The reference to the EU-ETS appeared while I was away from the screen. So I guess what I added was not news. On the question of ETS vs Direct Action I tend to be convinced by those who maintain that both approaches are necessary components of an effective climate change mitigation strategy.

    In a research paper for The Australia Institute ‘Complementary or
    contradictory? An analysis of the design of climate policies in Australia’ argue Richard Denniss and Andrew McIntosh argue that there are three steps essential to the design of an effective Climate Mitigation policy.

    1. Remove fossil fuel subsidies (In Australia between 2010/11 and 2013/14 these have been calculated as a staggering $39.1 billion)
    2. Put a Price on Greenhouse gas emissions (Labor is trying again to do this).
    3. Develop a suite of complementary policies ‘designed to change
    behaviours that are less responsive to changes in price than would usually be assumed in economic models.’ (This might be construed as a version of the ‘Direct Action’ the Coalition says they have in mind).

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  37. Kevin Cox

    Doug,

    I agree with both 1 and 3 and suggest an alternative to 2 that gives renewables an economic advantage over fossil fuels. Instead of increasing the price of fossil fuels we reduce the cost of investing in renewables by giving renewables interest free loans.

    We can give interest free loans in a responsible way by ensuring that the profits from the sale of the energy goes first to repay the loans.

    We amplify the effect of the interest free loans by awarding them to individuals the less energy they consume.

    What this does is put in place two feedback mechanisms that amplify each other and we know how effective this is in feedback systems.

    This approach will rapidly reduce greenhouse emissions and I believe enable us to economically start to reduce the levels of gases in the atmosphere within a few years. The interesting question is going to be how low do we go – but that is a problem I think we would all agree is worth having.

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  38. Doug Evans

    Geoff
    Interest free loans to consumers or renewable power generators or both? What would the loan money be used for – buying and installing hardware? What is the cost per KWh of GHG-free power and how does this compare with fossil fuel generated power? Isn’t this still a critical comparison for the lender (The government)? Hasn’t subsidizing domestic rooftop solar (for example) been shown to be extremely expensive per tonne of atmospheric CO2e spared?

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  39. Pingback: Replacing the ALP | Better Nature: commentary by Geoff Davies

  40. Kevin Cox

    Doug some numbers for you to do your own calculations.

    The Capital Cost today for renewables is about $6,000 per continuous kw. Some like geothermal are about $4,000. That is on average $6,000 will buy you electricity from renewables of 24 times 365 kwhs over one year.

    Renewables running costs are about 1 cent per kwh. That is repairs, looking after them, cleaning them etc.

    The price of electricity at the factory gate in NSW was 6cents per kwh in 2009.

    With those numbers renewables pay for themselves within 14 years. However, we know that for every doubling of capacity of a technology the capital cost drops by about 20% so we can expect renewables capital cost to continue to drop so that by the time they replace fossil fuels the capital cost will be less than $1000 per continuous kw.

    We also know that energy prices are not going to drop and will most likely rise. We also know that the demand for energy is not going to go away – we will consume as much of it as we produce.

    As renewable energy plants have few moving parts they last a long time. The Snowy hydro stations are still producing energy 50 years since installation and they are more complex than many renewable systems.

    When you build an asset that will produce more value than it costs to build then creating interest free credit to fund its development will not cause inflation. If we created all our “new money” with interest free credit for renewables then we would find our inflation rate would drop to zero and we would stop this nonsense of using asset bubbles, or of borrowing money from overseas, as the way to increase the money supply.

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  41. Kevin Cox

    Ronald,

    I am happy to have a carbon price if it had a chance of working. I just think the environmental movement is wasting too much time and effort and putting their hopes on something that is not going to work. If we get a carbon price then the money collected from the increase MUST go to funding ways of reducing carbon in the atmosphere and even then the evidence is that it will at best stabilise the rate of increase not reduce it. Announcements like the ones you point out fill me with sadness as the carbon price debate is such a waste of time. The argument that it is better to do something than nothing is one I used to think had validity. I have changed my mind. The further we go down this dead end path the harder it will be to extract ourselves.

    Here is a pricing alternative that will work and will reduce the cost of energy.

    http://cscoxk.wordpress.com/2011/04/19/increasing-investment-in-renewables-through-energy-discounts/

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  42. Ronald Bastian

    Kevin –
    I haven’t looked at your “link” as yet but before I do there are particular perceptions you state that should be addressed.
    Point 1: Many people believe that a tax on carbon as planned by the current Government will, by collecting a tax based on the amount of carbon discharged by only the largest polluters to be re-invested into renewables and compensation payments WILL WORK. You do not agree.
    Point 2: The (ATA) Alternative Technology Association is not an “Environmental Movement” as you say. They are the very people who are researching, identifying and promoting the very renewable products that you are so strongly arguing for to invest in.
    Point 3: Industries that will be paying the carbon tax must be forced to find ways to reduce the amount of carbon emitted as a cost saving incentive, just as any other business must do.
    Point4: It has already been stated ad nauseum that the tax collected WILL go towards reducing the carbon emmissions and only the “political naysayers” and recalcitrants will continue to “pluck” such comments out of the air without any science to back it up whatsoever.
    I will now go to your web site (with open mind) and see if I can extract any simpler and easily identifiable alternatives to that which is being debated at this time. I shall return….

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  43. Kevin Cox

    Ronald,

    The evidence from Europe is that a price on carbon at best holds greenhouse emissions. This is in Denmark where all the money collected is used to develop renewable sources. The reason is that investors will not invest freely when they can get better returns elsewhere. An increase in the price of energy does not reduce the profits on fossil energy.

    We have to force investment in renewables so that the “learning effect” comes into play and the cost to build renewable systems drops as we build more and more systems.

    You will find that my proposals force investment in renewables by giving people who consume less energy discounts by reducing the cost per kwh the less you consume. These discounts must be invested in ways to reduce green house gases.

    This approach is guaranteed to work whereas the current approach of a price on carbon has not worked.

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