Tax Carbon To Pay For Better Infrastructure

Newcastle Herald

Monday July 28, 2008

Phillip O'Neill

THE game plan in Australia to address global warming is the emissions trading scheme, or ETS. The ETS will make carbon polluters buy permits from the Government, forcing up the price of the things, like electricity and petrol that emit a lot of carbon when they are made or used.

The aim of the permit scheme is to raise the price of the things that generate high-carbon emissions and so entice consumers to spend on things that generate lower emissions.

In other words, the ETS acts through price effects via private consumption. For example, by making petrol more expensive, people will use cars less.

Already, though, there are major problems emerging with the ETS proposal. What's the point of hoisting such a complex system onto Australian markets if the world's big carbon polluters stay out of the game?

How do you reduce carbon emissions in two big polluting sectors agriculture and electricity generation where there are no known low-carbon alternatives? What do you do with industries like steel that compete with cheap imports from countries that don't run similar schemes?

Already the list of proposed exemptions and compensations makes the Federal Government's ETS look rather narrow in effect. Will we end up with a complex, expensive intervention but a pathetic result?

A final worry, and this concerns me the most: the ETS works via "the market", persuading consumers to buy low-carbon products because they are cheaper.

But what about the public goods and services that are provided by governments, not the market? These are things like trains and buses, arterial roads, coastal shipping facilities, and so on. A market mechanism, like the ETS, doesn't generate these things.

As we know, in Australia, with its small population size but vast open spaces, governments are the only organisations capable of organising the provision of such vital infrastructure items. Critically, these are the very things that will provide enduring solutions to global warming.

It's the bleedin' obvious isn't it that increasing petrol prices doesn't shift commuters onto public transport if there isn't any? Or that raising diesel prices can't shift road freight onto railways or coastal shipping lines that simply don't exist?

So what's the alternative? My idea still involves a bit of pain. There's no easy solution to the global warming problem. But I think my scheme gives benefits to Australia whatever the rest of the world decides to do.

Also, we need a scheme that we can start straight away, tweak and adjust as we know more about the problem and potential solutions. Finally, we need a scheme that addresses the need for public infrastructure. I don't think the ETS will do these things.

I call my alternative the "TRB scheme" because it relies on three government powers: tax, regulate and build.

First, I suggest a carbon tax. Tax our use of carbon, be it petrol, coal, air travel, whatever. And try and tax carbon imports, though I have no idea how.

Second, use the carbon tax collections to build energy-saving infrastructure. Like public transport and freight-rail and coastal shipping services. The more we tax carbon, the more and better the infrastructure facilities we can build. Show the public where the money's going. Start with a low-carbon tax, monitor the effects and benefits. Build public trust as we go.

Third, concentrate all new employment in regional centres to make it easy for people to use public transport and efficient arterial roads to get to work.

Fourth, regulate to make all new cars and trucks meet low-emissions targets. Like we did to get rid of lead from petrol, and smokers out of the pub. So too regulate to make all buildings, residential and commercial, comply with six-star energy ratings. Users get their money back from lower electricity bills from this measure in any case. As Sam says, it make's sense. And regulate to make all products infinitely recyclable. Get rid of waste altogether.

Two big problems will remain with my TRB scheme. How do we reduce greenhouse gas emissions from our farms? (Although, revitalising farming nearer our cities can't be a bad start.) And how do we shift out of coal into new forms of electricity generation? These are the tough ones. But the ETS doesn't have a mechanism to solve these either, so at least my TRB scheme leaves us no worse off.

The fifth part of the TRB scheme could well be the most important of all. Once we've got traction with rising standards of living and falling greenhouse gas emissions, let's export our new technologies and best practices to Third World nations to show how they too can achieve high standards of living without cooking the planet.

Professor Phillip O'Neill is director of the Urban Research Centre, University of Western Sydney.

© 2008 Newcastle Herald

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