December 17, 2008 | Graham

Rudd’s 39% by 2020 CO2 reduction – boiling the frog slowly

Kevin Rudd’s ETS plan or “Carbon Pollution Reduction Scheme” as it is officially called, is a radical plan which starts off cool but in 12 years’ time will end up boiling hot. It’s not a 5 to 15% reduction in CO2, but a whopping 29 to 39%.
The only sensible way to measure increases or decreases in Australia’s CO2 emissions is per capita. With our population growth rates, doing anything else will penalise us vis-a-vis those countries with stable, or declining, populations, like most in the EU.
Population growth of somewhere around two percent per annum, depending on immigration levels, means that a zero increase in national emissions actually means that by 2020 in twelve years’ time, every one of us would have to emit about 24% less CO2. Add Rudd’s five to 15 percent reduction to that, and we’re talking reductions of 29 to 39%.
While the government might be able to use the dosh garnered by auctioning-off permits to “pollute” to bribe key constituencies now, you can’t achieve reductions of the magnitude proposed, without raising prices substantially across the whole economy, ultimately more than defeating the benefit of the bribes. As you get closer to achieving your targets the total value of permits shrinks as the number of “polluters” falls, even though each “polluter” might be expected to pay more for their permits.
The problem is that by the time the real cost becomes apparent it will be too late to unwind the system. That’s why green activists like the idea of trading schemes rather than taxes. They’re much harder to unwind.

Posted by Graham at 6:51 am | Comments (3) |
Filed under: Environment


  1. You’re kinda missing the point, Graham. Our energy costs will have to rise, and our population will also have to contract.
    And my understanding is that cap and trade systems are not the favourite approach of green groups, as they permit too much benefit to the polluters. An outright tax on carbon is more flexible and gets to the source and provides direct incentives.
    Gee, I’d love to have this discussion in 10 years time.

    Comment by ronda jambe — December 17, 2008 @ 12:02 pm

  2. Given the tenor of this post, and the one from yesterday, could it be that Kevin Rudd and Penny Wong have got it right, based on the Goldilocks principle?
    As Labor faces a hostile Senate, and as there is no way of reconciling the Bob Brown/Clive Hamilton/Tim Flannery position with the Wilson Tuckey/Barnaby Joyce/Piers Akerman one, is there no virtue in a moderate, middle ground position?

    Comment by Terry — December 17, 2008 @ 1:22 pm

  3. Graham — exactly right about the trading v taxes. Proponents of trading have explicitly said that one of the main benefits is that a trading system will be politically harder to remove.
    If climate change policy is inevitable, then somebody needs to put a (revenue-neutral) carbon tax back on the agenda.
    And when I say “revenue-neutral” I mean that it should be linked to other tax cuts, so that we are NOT increasing the size of government and the inevitable distortions that entails.
    Another issue is that a carbon tax stays constant, while a trading system will become steadily more restrictive over time.
    Ronda — our population doesn’t have to contract. Though the population growth will continue to slow naturally as the population ages.

    Comment by John Humphreys — December 19, 2008 @ 11:23 am

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