Isra-Mart srl: Devil in the details of carbon price plan

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Isra-Mart news:

I support a carbon price that will help Australia rapidly transition to a renewable-energy-powered economy – but the devil is in the details.

The price must be as high as possible, rise as fast as possible, and be complemented by other strong, effective renewable energy incentives.

Some claim a carbon price can do the whole job at the least cost, but this is a myopic way of looking at it.

We need to transition away from fossil fuels by investing in large-scale renewables – particularly solar power stations which have the storage capacity to provide power 24/7. A carbon price on its own will probably start far too low to make solar power stations economically attractive.

Renewable energy subsidies could be funded by carbon tax revenue, and by cutting the $12 billion of existing fossil fuel subsidies.

The government could also invest directly in zero-carbon infrastructure – high-speed rail for example.

A badly designed compensation package would defeat the intended price signal.

Compensation to households is good – it will help households to adjust, but it won’t damage the price signal as it is done through tax cuts.

Compensation to polluting industries is not so good – their compensation would be in the form of free permits, diluting and in some cases decimating the price signal.

There is a case for compensating trade-exposed industries, but any assistance should be based on the principled approach of the Garnaut Review, not the arbitrary handouts in Labor’s original policy.

A badly designed emissions trading scheme would not provide either price certainty or emissions certainty.

To prevent the permit price from crashing due to voluntary emissions reductions, the initial tax should be retained as a floor price.

To ensure the intended emissions outcome is reached in reality and not merely on paper, we should limit dubious international “offsets” which attempt to hide Australia’s emissions overseas.

Finally, land use should be handled separately to fossil fuels – even if Earth had as many trees as it did pre-industrially, the carbon cycle would still be completely overwhelmed by fossil fuel emissions.

A well-designed carbon price is an important tool in the climate change mitigation toolkit.

But a badly designed carbon price may be even worse than no price at all, if it locks in unlimited fossil fuel burning for another decade.