Australia to Start Carbon Trading Scheme

The US and Australia are the only two developed economies that haven’t signed up for the Kyoto Protocols on cutting greenhouse gas emissions, which are the cause for much of recently observed global warming. Australia’s Prime Minister John Howard has just announced that Australia will begin a carbon trading system that he says will be better than those in place in Europe. Of course, it won’t happen until 2012, and the target for greenhouse gas reduction isn’t due for release until next year. Mr. Howard, thus, has earned a slouching ovation.

Mr. Howard told an annual meeting of his Liberal Party, “Implementing an emissions trading scheme and setting a long-term goal for reducing emissions will be the most momentous economic decision Australia will take in the next decade. If we get this wrong it will do enormous damage to the economy, to jobs and to the economic well-being of ordinary Australians, especially low-income households.” He’s right, and he has clearly decided that doing nothing is no longer an option either.

The link between greenhouse gas emissions, global warming and the recent drought that is knocking the Aussie economy on its backside isn’t metaphysically certain – but it’s close. Farm production has plummeted, a major blow to exports, and residents have been told to cut back on water consumption (prompting some less-serious Australians to say “make mine a beer, then”). While the drought could be part of a natural cycle, Australian voters want their political leaders engaged in the problem somehow.

The opposition Labor Party (the Aussies don’t use the British spelling) enjoys a lead in the opinion polls. It has painted the Liberal government as dithering and ineffective on environmental issues, and it’s announced a plan to reduce carbon emissions by 60% by 2050. Given there is a general election later this year, Mr. Howard had to do something.

Australian business is already getting ready. The Australian Securities Exchange, owned by ASX Ltd., will start a futures market for carbon emission permits [ETS] as soon as it can. Robert Elstone, chief executive officer of ASX Ltd., said in the statement, “Once sufficient detail of the ETS is known, ASX will be in a position to facilitate emission trading at the earliest opportunity.” AGL Ltd., Australia’s biggest electricity and gas retailer, BP Plc’s Australian unit and Royal Dutch Shell Plc’s Australian unit all back the ETS trade.

Director of Monash University’s Centre of Policy Studies economist Philip Adams told Emma Alberici of the Australian Broadcasting Corp., “Our modeling suggests that even the most extreme form of targets that have been suggested for 2050 would lead Australia’s GDP to be around about five per cent below what it otherwise would’ve been. Well that’s like saying instead of the economy growing at three per cent without a target, it would be growing at roughly on average around 2.75 per cent.” Sounds like value for money.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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