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EVEN more than the carbon tax itself, the central mechanism of the Gillard government's clean energy bills now making their way through parliament is the international carbon trading market.
Although the carbon tax will cost Australians $9 billion in its first year, our greenhouse emissions continue to rise under the tax. We hit our target of a 5 per cent reduction mainly by buying carbon credits on the international market, which the government assumes will be functioning by 2016.
I recently interviewed two of the best-informed international statesmen on this issue, and the interviews left me convinced that the international trading scheme lies halfway between a fantasy and a fraud and is never going to make a serious contribution to diminishing greenhouse gases.
The two statesmen are John Baird, the Canadian Foreign Minister, and Shyam Saran, the former Indian special envoy on climate change. For the record, neither is a right-wing attack dog, nor a shock jock, nor a denier, nor a neo-liberal or neoconservative ideologue, or any of the other labels the many taxpayer-funded advocates of a carbon tax use to demonise people the government disagrees with.
I have reported some of Baird's comments in a news story but they deserve fuller consideration.
The Conservative government of which he is part, under Prime Minister Stephen Harper, won an absolute majority for the first time at the last election on the platform of rejecting a carbon tax or an emissions trading scheme.
Australian policy should pay a lot more attention to Canada, for no other economy is so similarly structured to ours. Baird is a good friend of Australia, feels warmly towards the Gillard government, and speaks glowingly of his friendship with Kevin Rudd. He explicitly did not criticise Australian policy. But the implications of his words are deadly.
The fact that both Canada and the US have rejected a carbon tax or ETS, and that China, India and Indonesia equally will never go down such a road, means there is no prospect of global action on climate change anything like that which Australia is taking. Baird believes that neither Canada nor the US will ever implement a carbon tax or an ETS.
But it is his judgment on the international carbon trading system that is most devastating for the Gillard government's approach. I asked Baird whether Canada would ever join an international carbon trade. He replied: "There's nothing to join. Where is it going on today?"
More generally, on carbon trading he said: "One of the problems I have with that (approach) is that everyone just lines up to get credit. My province has a lot of trees, where do we get credit for that? We had an enhanced oil recovery project that pumps carbon into oil wells to get an additional 15 per cent of oil out of them and we had a pipeline importing carbon from the US. So they wanted to get credit for sequestration.
"I said to them 'You're not even doing it in our country.' They said 'We're doing something good, we want the credits.'
"(Carbon trading) is like a pyramid marketing scheme. You don't have to actually sell the dog food, you just have to get 10 of your friends to do it and you'll get royalties."
Baird says the Canadian government will reduce greenhouse gas emissions but it will do so through regulation. It is worth noting in passing that while Baird certainly made no comment on Australian politics, this is essentially the same as Tony Abbott's "direct-action" approach, which all the government's paid propagandists routinely mock.
Baird thinks his government's approach is more effective and less costly than a carbon tax or ETS would be: "We're bringing forward regulations to ban new dirty coal-fired electricity generating stations. The existing ones, when their life ends, they have to close. That will tangibly reduce greenhouse emissions. And you know what? We're not going to pay people for closing down a coal-fired power plant that had a life span of 25 years but has operated for 40 years, because they were going to close it down anyway."
Baird, who was twice Canada's environment minister, is too polite to use these precise words but says, in effect, that the international politics of climate change trading is a giant scam.
He offers this example: "If we all decided we had to lose 6 per cent of our 1991 body weight to be healthy, and I told you last year I lost 100 pounds anyway, that wouldn't be too credible as a commitment."
By this he is referring to Europe's use of 1991 as the base year for carbon calculations. Britain was switching from coal to gas. West Germany absorbed East Germany and then shut down East German industry. France ramped up nuclear power. None of these actions was taken for greenhouse gas abatement reasons but they all allowed Europe to claim outsize carbon credits.
Baird asks: "Where are the countries that are actually reducing greenhouse gas emissions from 1997 when they signed the Kyoto Protocol?"
Saran is an immensely distinguished Indian diplomat, who was head of the Indian Foreign Ministry before later serving as India's envoy on climate change. In a recent interview he told me: "Emissions trading was never seen as a mechanism for reducing global emissions. It was seen as providing a little flexibility at the margins ... How it is implemented is also important and has been subject to a lot of controversy. How do you judge what would have been business as usual and how do you judge what was actually avoided?"
There are many ways international emissions trading can fail to deliver as advertised.
The first is positive fraud, of which there has been a staggering amount in the European scheme. The second is paying people to do what they were going to do anyway. If you're a Third World country and you're planning to close down a dirty, coal-fired power station, you can pretend you weren't going to do it unless you get your payment.
And the third way is the perversity of incentives that the scheme sets up. Europe has paid more than €2 billion ($2.6bn) to China to destroy a greenhouse gas that is produced as a by-product of manufacturing a refrigerant gas. But it turns out the Chinese chemical plants involved make much more money destroying the greenhouse gas than they make selling the refrigerant gas. So they actually produced the greenhouse gas only so that they could be paid to destroy it.
There are a million other ways the scheme can be rorted, perverse or ineffective, yet the Gillard government's whole policy is predicated on us paying tens of billions of dollars for foreign carbon credits.
It's not a prudent way to deal with money and it's not going to be effective. In fact, really, it's nuts.
EVEN more than the carbon tax itself, the central mechanism of the Gillard government's clean energy bills now making their way through parliament is the international carbon trading market.
Although the carbon tax will cost Australians $9 billion in its first year, our greenhouse emissions continue to rise under the tax. We hit our target of a 5 per cent reduction mainly by buying carbon credits on the international market, which the government assumes will be functioning by 2016.
I recently interviewed two of the best-informed international statesmen on this issue, and the interviews left me convinced that the international trading scheme lies halfway between a fantasy and a fraud and is never going to make a serious contribution to diminishing greenhouse gases.
The two statesmen are John Baird, the Canadian Foreign Minister, and Shyam Saran, the former Indian special envoy on climate change. For the record, neither is a right-wing attack dog, nor a shock jock, nor a denier, nor a neo-liberal or neoconservative ideologue, or any of the other labels the many taxpayer-funded advocates of a carbon tax use to demonise people the government disagrees with.
I have reported some of Baird's comments in a news story but they deserve fuller consideration.
The Conservative government of which he is part, under Prime Minister Stephen Harper, won an absolute majority for the first time at the last election on the platform of rejecting a carbon tax or an emissions trading scheme.
Australian policy should pay a lot more attention to Canada, for no other economy is so similarly structured to ours. Baird is a good friend of Australia, feels warmly towards the Gillard government, and speaks glowingly of his friendship with Kevin Rudd. He explicitly did not criticise Australian policy. But the implications of his words are deadly.
The fact that both Canada and the US have rejected a carbon tax or ETS, and that China, India and Indonesia equally will never go down such a road, means there is no prospect of global action on climate change anything like that which Australia is taking. Baird believes that neither Canada nor the US will ever implement a carbon tax or an ETS.
But it is his judgment on the international carbon trading system that is most devastating for the Gillard government's approach. I asked Baird whether Canada would ever join an international carbon trade. He replied: "There's nothing to join. Where is it going on today?"
More generally, on carbon trading he said: "One of the problems I have with that (approach) is that everyone just lines up to get credit. My province has a lot of trees, where do we get credit for that? We had an enhanced oil recovery project that pumps carbon into oil wells to get an additional 15 per cent of oil out of them and we had a pipeline importing carbon from the US. So they wanted to get credit for sequestration.
"I said to them 'You're not even doing it in our country.' They said 'We're doing something good, we want the credits.'
"(Carbon trading) is like a pyramid marketing scheme. You don't have to actually sell the dog food, you just have to get 10 of your friends to do it and you'll get royalties."
Baird says the Canadian government will reduce greenhouse gas emissions but it will do so through regulation. It is worth noting in passing that while Baird certainly made no comment on Australian politics, this is essentially the same as Tony Abbott's "direct-action" approach, which all the government's paid propagandists routinely mock.
Baird thinks his government's approach is more effective and less costly than a carbon tax or ETS would be: "We're bringing forward regulations to ban new dirty coal-fired electricity generating stations. The existing ones, when their life ends, they have to close. That will tangibly reduce greenhouse emissions. And you know what? We're not going to pay people for closing down a coal-fired power plant that had a life span of 25 years but has operated for 40 years, because they were going to close it down anyway."
Baird, who was twice Canada's environment minister, is too polite to use these precise words but says, in effect, that the international politics of climate change trading is a giant scam.
He offers this example: "If we all decided we had to lose 6 per cent of our 1991 body weight to be healthy, and I told you last year I lost 100 pounds anyway, that wouldn't be too credible as a commitment."
By this he is referring to Europe's use of 1991 as the base year for carbon calculations. Britain was switching from coal to gas. West Germany absorbed East Germany and then shut down East German industry. France ramped up nuclear power. None of these actions was taken for greenhouse gas abatement reasons but they all allowed Europe to claim outsize carbon credits.
Baird asks: "Where are the countries that are actually reducing greenhouse gas emissions from 1997 when they signed the Kyoto Protocol?"
Saran is an immensely distinguished Indian diplomat, who was head of the Indian Foreign Ministry before later serving as India's envoy on climate change. In a recent interview he told me: "Emissions trading was never seen as a mechanism for reducing global emissions. It was seen as providing a little flexibility at the margins ... How it is implemented is also important and has been subject to a lot of controversy. How do you judge what would have been business as usual and how do you judge what was actually avoided?"
There are many ways international emissions trading can fail to deliver as advertised.
The first is positive fraud, of which there has been a staggering amount in the European scheme. The second is paying people to do what they were going to do anyway. If you're a Third World country and you're planning to close down a dirty, coal-fired power station, you can pretend you weren't going to do it unless you get your payment.
And the third way is the perversity of incentives that the scheme sets up. Europe has paid more than €2 billion ($2.6bn) to China to destroy a greenhouse gas that is produced as a by-product of manufacturing a refrigerant gas. But it turns out the Chinese chemical plants involved make much more money destroying the greenhouse gas than they make selling the refrigerant gas. So they actually produced the greenhouse gas only so that they could be paid to destroy it.
There are a million other ways the scheme can be rorted, perverse or ineffective, yet the Gillard government's whole policy is predicated on us paying tens of billions of dollars for foreign carbon credits.
It's not a prudent way to deal with money and it's not going to be effective. In fact, really, it's nuts.
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