ASPIRATIONAL goals are not enough. While schemes such as Kyoto might help, they are insufficient to solve the problems posed by global warming. Not all countries are included.
China's projected carbon dioxide emissions to 2050 are five times what Kyoto will save.
The problem is one of market failure, in that the market price does not include the external environmental cost of greenhouse pollution. The main alternative solutions are "cap and trade" mechanisms for emission control or a carbon tax. A tax would be better but the former has been favoured because there seems to be no way that a global tax could ever be agreed upon.
However, there is a way that a global carbon tax could be introduced, and Australia would have a key role. Coal is the biggest greenhouse polluting fossil fuel because it is composed mainly of carbon. Most electricity generation worldwide comes from burning coal. Most of China's projected emission increases will come from coal-fired power stations. Australia, as the world's leading coal exporter, is uniquely placed to play a key role in implementing a global carbon tax, starting with an export tax on coal.
To avoid a catastrophic increase in sea levels, we are advised that we need to reduce global emissions by 50 per cent by 2050. The scientific evidence for this becomes clearer by the year. We need to do much more. Trading schemes are not really the market solution that they are claimed to be.
There are all sorts of administrative difficulties in setting and allocating the so-called "permits to pollute" and they do not provide the clear, long-term price signal that industry needs. By contrast, a carbon tax would be simpler to administrate, would provide a universal price signal, and would provide revenue that could be used to compensate those worst affected. The stumbling block is finding a way to implement a global tax.
It may be counter-intuitive that the first step to a global carbon tax can be an export tax on energy goods. But, given that demands are inelastic, exporters collectively will gain from the uniform implementation of such a tax. Exporters, or governments on their behalf, acting collectively, can benefit from the use of their market power to raise prices, in the form of an export tax on carbon.
Such a tax would ideally apply to all fossil fuels, including oil and gas as well as coal. However, a tax on coal, as a first step, would be effective. This is because coal is the most carbon-intensive fuel and is also the cheapest and most plentiful. Therefore, it would be the most beneficial target for a tax. A tax affecting the international traded price could then be extended to domestic coal markets. Generally, there would be a flow-on to other fossil fuel prices.
The initial implementation of a coal export tax would be more feasible than a general tax because the agreement of only a small number of exporting countries would be required and each would have an incentive to participate.
The revenue earned from an international coal tax could be invested in alternative energy production. A proportion could be used to compensate importers with greenhouse abatement assistance, or tax payments could be used as a credit in other abatement schemes.
Australia provides almost 40 per cent of world coal exports. Six Asia-Pacific Economic Co-operation forum countries together provide 80 per cent of world exports. Three APEC countries consume 40 per cent of world coal imports. APEC, therefore, includes all the major players in the coal trade, including China. Discussions at APEC would have been more productive if they had considered ways to implement a tax on traded coal, as a precursor to a more general global carbon tax.
Studies conducted at the National Institute of Economic and Industry Research indicate that a 25 per cent increase in the price of coal exports could benefit the Australian economy by about $4 billion.
A tax at this rate would be the equivalent of less than $5 a tonne of carbon dioxide emitted. It provides a window of opportunity for Australia to decarbonise its economy.
The severity of the possible consequences of global warming indicate that the situation can justifiably be described as a global emergency. Given Australia's dominant role in the world coal trade, it is incumbent on it to take a leading role in finding a solution. The proposals put forward here hopefully indicate the direction in which such a solution may be found.
Dr John Perkins is from the National Institute of Economic and Industry Research. This article is based on a paper to the Energy Working Party Conference, NIEIR, Melbourne
Macht kaputt, was euch kaputt macht! http://www.iww.org/culture/official/preamble.shtml
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