Wednesday, November 25, 2009

CPRS Is Not The End Of The World

The Telegraph today has run a front page story telling us that the proposed Carbon Pollution Reduction Scheme will cost us all $1100 per year in increased living expenses. According to the Telegraph, electricity will increase in price by more than 20% by 2012, while grocery prices are expected to rise by 5%. Gas and other fuels will also increase in price, although the impact on the price of petrol will be softened by a reduction in excise. Altogether, there is no doubt that things generally will cost more. But is that really any surprise?

The whole point of manipulating the price of anything in this fashion is to influence behavior. In this case, the idea is to change the nature of the entire economy, encouraging a move away from activity which is emissions intensive towards the so called “low carbon” economy. In that respect, a scheme which did not make such things as coal fired electricity more expensive would simply be a waste of time. In fact, the concessions already given to emissions intensive trade exposed industries have been criticized by climate crusaders for that very reason.

So why go to all the trouble of changing people’s behavior and shifting the focus of the economy? It certainly seems to be a lot of expense and trouble to go to, so there must be a motivation for doing so, especially when it involves added expense and inconvenience. What we have been told is that the cost of doing nothing would actually be greater. What we have been told is that paying a little more now will save us all from a much worse cost as time goes by. Although the emissions trading scheme might well increase our cost of living by $1100 a year, we are told that not having such a scheme will cost us all a great deal more.

But how are we to know if that’s right when it seems there is no shortage of sceptics, some of them with impressive scientific credentials, who are prepared to say that the science is wrong, or that emissions trading won’t make a difference, or that the whole thing is a massive fraud to cover up the redistribution of the world’s wealth? There’s no shortage of conspiracy theories, ranging from the downright whacky, right through to ideas that sound pretty reasonable, such as the view that climate change is occurring naturally and anything we as human beings do is insignificant and potentially futile. It can be tempting to throw up the hands and plead that it is all too hard, and simply give up.

Unfortunately, the truth is that the bulk of credible scientific opinion is that climate change is real, that human activity is having an impact, and that if we don’t do something to change our behavior it will only get worse. It is true that the cost of living will go up, but it always goes up anyway, and if the climate crusaders are even halfway right it’s a small price to pay to prevent a far greater cost. But it is also true that there will be money to be made from not just emissions trading, but from renewable energy technologies, ecologically friendly manufacturing, and a whole range of new opportunities. Money is made from economic activity, and nothing generates more activity than large scale change.

Yes, change of such magnitude also inevitably brings dislocation and displacement, which means that there will be winners and losers. Some people will be better off, and others will be worse off. The challenge for any government presiding over such a change is to provide assistance for those who are left worse off, to compensate them if necessary, and to help them to find their way to the new opportunities which will be created. But the bottom line is that just because the price of electricity is going to go up doesn’t mean that it’s the end of the world. In fact, it could be said the end of the world, at least as we know it, is precisely what this is supposed to prevent.

1 comment:

Paul Crosby said...

THe ETS is just a tax. When factory emitted Heavy metals were identified as causing health problems, the goverenment did not say, it is Ok for one company to pollutue excessively so long at they either pay money to the government or could find another company that did not pollute by the same amount below a limit.
Pollution should be regulated not taxed