Thursday, July 7, 2011

Carbon tax

Remember when the earth was cool
And consequences rare
When we could burn up energy
Without a thought or care

We did not know the Piper
Who piped his Siren’s song
Would one day demand payment
To make us right the wrong

We must now pay the Piper
Who piped our song of greed
And now demands his payment
If we are to be freed



The sea-level rose an average 1.8 mm a year last century but the rate of increase is accelerating alarmingly and currently exceeds 3 mm a year and three times that in some places. And as the icecaps melt and the warming seawater expands it is set to get a lot worse. Modelling showing metres of seawater rise by 2100 was recently considered pessimistic by but increasingly looks like being in right ball park. We are on the verge of global catastrophe. And if you doubt that, spare a thought for the people of PNG’s Carteret Atoll who are the world’s first Climate Change refugees. They have already relocated to Bougainville as their islands disappear beneath the waves and they will soon be followed by many others across the rising Pacific. This is a key point that seems to be lost in the current carbon tax debate. We don’t have time to argue the point about disadvantage or to delay action until other nations take action. We must start moving to a low carbon economy and Australia as a world eco-power with so much to lose from sea-level rise and climate change in general must show leadership.

I think the government is going about it the right way. Put a price on carbon to provide reasonable incentives to industry to reduce emissions without wrecking the economy whilst protecting the vulnerable as we transit to a low carbon economy. Moving too far too quickly will be political suicide and doing nothing is not an option. My guess is that we will end up with a carbon price of about $25/tonne similar to Europe. Australia missed a golden opportunity to take bipartisan action on climate change a couple of years ago and history will vilify those responsible for the demise of the Emissions Trading Scheme that followed the demise of the then Leader of the Opposition.

But while we consider the negative consequences of a carbon tax we should also think about opportunities. Investments in alternate energy and agro-forestry will likely prosper but our real advantages are in less obvious areas such as environmental science and technological leadership. Our geographical location close to the booming economies of China, India and SE Asia also gives us a significant advantage over our competitors with respect to mineral resources. The embodied emissions in a tonne of Pilbara iron-ore over its life cycle from mine to China will for example be much less than a tonne mined in central Brazil and shipped half way around the world.

Yes, it will be difficult to ensure adequate compensation for vulnerable groups impacted by a carbon tax. Industry will also be disadvantaged in the short term by moving more quickly than our competitors but there is a place for leadership and most industrial leaders understand the opportunities associated with first mover advantage. What should be obvious to everyone is that this is not an issue which will go away. We can take decisive and early (already a bit late for that) action or we can play catch up later when forced by circumstance. The main difference between climate change and natural disasters like cyclones and floods is the time scale. But unlike a flood or cyclone situation when everyone pitches in and helps regardless of cost we seem content to sit back and ignore the situation. We have enjoyed the dance and it is now time to pay the band.

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