The ABC of emissions trading

Published: July 08, 2008 - 09:09 PM

We compare emissions trading schemes

So what's all this fuss in the papers about an emissions trading scheme and what does it all mean? How on earth do we even begin to compare and understand the alternating policies put forward by the main political parties and the effect that they may have on our day to day living costs such as the price of electricity, gas and petrol.

At ShopAround.com.au we've come up with an ABC of emissions trading to help you compare all those arguments about what has to be done and the effect it will have on our economy.

A for action

Do we really need to take action on climate change now? There are a variety of competing arguments to compare. The Garnaut Report stated that not taking action could lead to catastrophic environmental damage including the drying up of active river beds and the disappearance of the Great Barrier Reef. Others, such as Sun Herald journalist Andrew Bolt, believe the climate change reporting is a big scare campaign and that the science actually supports the claim that temperatures have cooled in the past 10 years and the ice cap is not melting. (To compare Bolt's hypothesis to the Garnaut Report see Bolt's blog.)

B for business

What effect will it have on running a business? If you believe the business community it will make the cost of doing business in Australia prohibitive to the extent that it will reduce business investment, make us uncompetitive on the international stage which will in turn lead to Australian job losses and a downturn in our economy. Don Voelte of Woodside Petroleum has argued that as China and the US will not be introducing a similar scheme, Australian suppliers will compare unfavourably with their international counterparts and investment in research & development by business within Australia will reduce. Geoff Dixon of Qantas has stated that the scheme will add $100million per year to the cost of doing business for the airline which will lead to an increase in domestic aviation costs and a subsequent downturn in tourism.

C for cost

But isn't that just the point of any emissions scheme? The whole point of an emissions scheme is that the costs of goods that have an environmental impact in their production processes will rise in price. This is not to disadvantage consumers, but is engineered specifically so that consumers will change their purchasing behaviour and consume less of those goods that have a high environmental cost. At the moment, the environmental cost of goods is largely hidden, but taxing polluting goods in some way means that suppliers will raise their prices in comparison and consumers will pay more. To use electricity prices as an example, much of our power is now produced by burning coal which is a high pollutant. Under an emissions trading scheme your electricity or gas supplier would have to pay extra to supply you electricity and gas because they would have to pay to "pollute" the environment. So if you wanted to compare your electricity costs or gas prices using any of todays suppliers to what you would pay if an emissions scheme was in place you would inevitably pay more. And the whole point, would be to force you to change your behaviour to consume less electricity or gas in comparison to your existing usage so you can control your power costs.

Summary

The merits of any emissions scheme seem to boil down to a few key factors. What is in our control is the detail of any scheme, what goods are included or excluded such as petrol, are low income earners adequately protected from price rises if you compare their position before any scheme was introduced and how should business pay? But what isn't in our control is what the rest of the world does. Compare the relatively progressive approach of the power blocs of Australia and Europe against that of the US, India and China who have decided to take no action and act in their own national interest as opposed to joining any global movement for change. If Australia acts without its major trading partners taking action as well our goods are going to look very expensive on international markets in comparison.

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