The Greens don’t see it as our role to make submissions to the Garnaut review per se.

There is no suggestion that formal participation in the review would compromise our ability to comment upon it or criticise it. Neither would we have a problem with ‘legitimising’ the process by taking part. It is a good process and a worthy process. However, as a political party rather than a lobby group or NGO, we don’t see it as our role to make official submissions.

That said, we have had meetings with the good Professor to discuss our concerns and our issues, primary amoung which are setting the cap and ensuring full carbon accounting for forestry, but also including other aspects of the regime.

Ted Trainer
University of NSW.

15.4.2008.

This paper is a radically critical comment on the Garnaut Interim Report on the mitigation of CO2 emissions. Although Garnaut says the problem is very serious he assumes that it can be solved without significant difficulty. My criticism sketches the reasons for concluding that the problem cannot be solved, at any cost, in a society that insists on remaining committed to affluent living standards, high levels of production and consumption, and economic growth. The reasons are to do with what I see as the impossibility of scaling up renewable energy sources, geo-sequestration and nuclear energy sufficient to replace fossil fuels. There are several biological and technical limits to the proportion of our energy we can derive from renewables, which I discuss at length in my Renewable Energy Cannot Sustain A Consumer Society, (Springer, 2007.) The failure of the Stern Review and the IPCC Third Working Group (on mitigation) to deal with these issues is discussed at some length in two of my papers referenced in this Garnaut paper.

Garnaut makes no reference whatsoever to any of these issues. He rightly points to the need for huge reduction in emissions, but proceeds as if there is no need to consider how fossil fuels can be replaced. This paper indicates the limits to alternatives, and argues that it is not possible to explain how Australia’s expected 2050 energy demand budget could be met without using unsafe amounts of fossil fuels.

The 10 page paper can be found at http://ssis.arts.unsw.edu.au/tsw/Garnaut.html

Tim, Christine, I am interested in knowing if the Greens will be making a submission on the Garnaut ETS discussion paper? Or is the Garnaut review seen as a Labor instigated and controlled matter, and as such, formal participation in the review process could be seen as compromising the Greens ability to comment upon and criticise the review?

AUSTRALIA is faced, over the next generation at least and almost certainly much longer, with two environmental problems of great significance. They are, first, how to manage water and, second, how to find acceptable alternatives to oil-based energy. Global warming is not one of those two issues, at least for me, and I see it as a distraction.
I am going against conventional wisdom in doing so. But Western societies have the standard of living, the longevity and the creativity we have because we have learned that conventional wisdom has no absolute status and that progress often comes when it is successfully challenged.
If you listen hard to the global warming debate you will hear people at every level tell us that they don’t want to hear any more talk, they want action. I feel that the actions I have seen proposed, such as carbon caps and carbon trading, are likely to be unnecessary, expensive and futile unless there is much stronger evidence that we are facing a global environmental crisis, whether or not we have brought it about ourselves.
The story about anthropogenic global warming (AGW) doesn’t seem to stack up as the best science, despite the supposed consensus about it among “thousands of scientists”.

The above placed neatly on the front page of the Austrlaina yesterday, and buried behind everything every where a small release by Aunti (below).

Migratory bird numbers plummeting, study shows http://www.abc.net.au/news/stories/2008/04/10/2212835.htm

It seems the avian world is also in “Consensus”.

Don Aitkin exhibits another fine example of what it means to be unnaturally conservative in a rapidly changing world.
The editor is practicing a surprising integrity by publishing the Aitkin article on the front page of the Australian.
It is good to see alternative opinion having representation.
I for one however will never confuse opinion with good science nor will I equate the word consensus in this context with opinion. As Dr Aitkin seems to be trying to achieve.
In the 70’s there was a growing concern that air quality in the US could be directly linked to among other things the health of the breathing. Pretty obvious really. It took however over 30 years and millions of man hours of exacting study and concurrent collection of statistics to actually create enough traction to create change in industrial practices. And only then when there was a competitive advantage visible for a motive. This despite the formation of the EPA in the 70’s, and legislation created to enforce that change.
The global environment is a big thing and so is the understanding of it. Opinion is just that, opinion. Dr Aitkin has one. Describing millions of man hours, sweat and tears, the verified proofs and building of incontrovertible evidence as opinion is infelicitous. Using the media trick which creates a link by semantic association is gimmickry, no more relevant than a quack in the face of a deluge. Creating a CONSENSUS=OPINION hype is in my opinion quackery of the lowest order.
The consensus the front page Australian article speaks of is in actual fact just verified work, verified again and again and again and again ad infinitum, despite 40 years of selfless toil and career risk, finally there’s a body of good solid work as evidence justifying all that effort. The last 10 years in particular have been very difficult for those working toward creating an awareness of an obvious reality. What we are doing collectively is not healthy for us or the environment.
Sure there needs to be more research, that’s how science works, it consistently carries out QA self analyses. That cannot happen however in the kind of environment people like Dr Aitkin promote. That environment hands all the controls back to the idiot child of unregulated industrial enterprise. The same world which created the problems which the natural world is attempting to address by a response triggered by its investigators. It has been proven beyond any doubt that industry cannot self regulate.
“junk science” is a term created by the status quo in the 80’s to undermine work perceived as a threat to unregulated free practice. A web site was created and regular media releases where issued to promote the interests of various industrial identities, by actively undermining researchers publishing work with obvious health and environmental warnings implied by the body.
Exactly the same methodology as used by Aitkin has been used against environmental science recommendations for as long as the dichotomy between health the environment and big industry has existed.
This renewed push by the old flat worlders to throw a tree across the recently re aligned tracks of the politics attempting to control the global industrial juggernought is transparent. Its entirely see through when the impetuous of expanded coal exports and the interest of the nuclear industry lobby is viewed through it.
Its just opinion motivated by greed Dr Aitkin, but I am sure you would call it pragmatism.

You must post comments in strict order of moderation and publication/insertion to the site, NOT in order of chronological receipt!

Please notice what has happened to the response order and replies in this thread. Zoltar@17 responds to mcfarm@13 and 15, but these been moved and are now @14 and 16. You have inserted a moderated comment AFTER Zoltar’s response was published, but placed it BEFORE his actual post in the thread. This throws the whole thread out, makes it difficult for anyone else to follow, and renders the numbering of post system useless.

This is a slow moving thread and perhaps it’s not so important in this case, but in a hot topic it would make a real mess.

Mcfarm @13, I agree that the secondary trading in permits (and its derivatives), will do nothing of itself to reduce emissions, I view it as just a needless layer of financial parasites that will increase the overall cost to the community in addressing climate change. Supporters of trading will argue that a secondary market and derivatives are essential for establishing a price for permits heading off into the future, and that it is this future price that will drive the decarbonisation of the economy. I believe they are half right on this point, having a future price on emissions is essential* in order for businesses to embrace emission reduction decisions with a long term payback/benefit.
*essential as a form of coercion in a market driven solution, it is not essential if actions are mandated by regulation

The need for a secondary market and for derivatives to set a future price, I view as a complete furphy, a future price can be achieved by the establishment of a price floor. For example if the price floor is set at 90% of the average price of permits in the preceding year, then this immediately establishes a baseline price many years into the future. $20/t this year means a minimum of $18/t next year, $16/t the year after, $14/t in the 4th year, $13/t in the 5th year etc. This 90% of average as a floor price was deliberately simplistic, a more realistic formula might be [90%, or if there is an overshoot in emissions then, 100% + n*(%overshoot of last years emissions budget)] * average of last years permit price. Where n here is an escalation factor that may change over time depending upon the emission trajectory we are on and upon how essential it is that we meet our budget. I would envisage values of n between 2 and 5. Under such a price floor formula the “future price” would depend upon the likelihood of Australia’s emission reductions being within budget, for n=2 and a likely emission overshoot of 2.5% the future price for emissions would appreciate at a minimum of 5% per year.

Mcfarm, when dealing with a limited quantity of emission permits (if you exclude the international trade in permits), and with demand for permits anticipated to exceed supply, then this means that some businesses/individuals are going to miss out (or get less than they wanted) each year. The task is to distribute these permits in the most equitable way possible, and that’s not so easy. I feel that an auction has some benefits over a direct sale, though neither is perfect. In particular, I’d like to see the auction of permits broken up into sections/sectors, so you have similar classes of business competing against each other for the bulk of available permits, together with a common pool available for all to bid on. The breakdown could be big emitters and small emitters, it could be by industry sector, or state, or region based, or some other method. 20% of all permits may be reserved in a common pool, and it should be this common pool that is most highly contested. Which ever method is used (auction or sale) there will need to be actions taken to correct “market failures”, such as having charities (like meals on wheels) compete with business for emission permits. We also don’t want to see a sole trader’s lawn mowing/gardening business, with a comparatively modest green house intensity, put out of action because an aluminium smelter has bought up the last available emission permits to produce another couple of tons of aluminium.

Mcfarm, monitoring and enforcement of emissions is critical under any scheme. The Garnaut ETS talks about “make good provisions” (p44) for those with emissions in excess of their number of emission permits. This assumes of course that there are permits that a business/individual can buy that have not already been consumed. I would like to see any penalties and make good provisions suitably onerous that no business would deliberately choose to overshoot their number of permits. The penalty could comprise a payment of [the number of permits that they are short * the minimum price for permits achieved on the day of permit trade which had the highest minimum price in the last 12 months * x%], together with a limitation imposed on the business/individual as to their eligibility to compete in the sectorial market for permits at the next auction (for large breaches). The make good provision could be a requirement to surrender the number of permits they were short this year in the following year, they would still need to purchase permits in the following year for their anticipated next years emissions on top of this. A limited eligibility to compete in any sectorial market in a subsequent year would force the business/individual to purchase a greater share of their permits in the more tightly contested common pool market, this is a deliberate additional penalty for non compliance.

I’ve touched on the auctioning of permits, the setting of a floor price, and penalty/make good provisions in this post, but there are quite a few areas that I still haven’t addressed. Such as: the international trade in permits, and the risks inherent in this; the treatment of Trade Exposed Emission Intensive Industries; banking, borrowing and hoarding of permits; abatement; etc.

Tim, Christine, I am interested in knowing if the Greens will be making a submission on the Garnaut ETS discussion paper? Or is the Garnaut review seen as a Labor instigated and controlled matter, and as such, formal participation in the review process could be seen as compromising the Greens ability to comment upon and criticise the review?

Submissions to many of the papers generated in the Garnaut process close on April 11, submissions on the ETS closes on April 18.

From ABC news online today;
“ESAA chief executive Brad Page says the Government’s role is to set a clear emissions target and put a price on carbon emissions.”

What ESAA are arguing is that government should not tell the industry and market how to achieve the efficiencies required to meet the targets and afford the price. They argue “set the target and price, then get out of the way and let the market determine the best way to do it.”

This is probably in response to NASAA’s Jim Hansen calling for a halt to coal fired electricity expansion, but interesting nonetheless.

Anyway, my caveat is that the government must stay in the way or we may end up with nuclear power generation if the market is left to it’s own devices.

The trading system, as supported by all political parties, does the following;

- it introduces price flexibility (aka instability) by allowing carbon permits to be freely traded and hoarded. The only variable will be price, as the amount of carbon emissions will be ‘fixed’.

- it will be inefficient at reallocating resources (in this case price). Market systems work best when they allow more ‘goods’ to be produced to meet demand. But this is not a ‘free’ market, as the ‘goods’ (carbon emission permits) will be, by government decree and issue, a limited and restricted commodity.

So in essence the only thing the market gets to play with is price, as all else is controlled by government and the supporting science.

Given the above, why bother creating an unstable market trading system at all? Why not have the government set the price annually, based on the desired and then quantify results, all with a known revenue base?

The government will have to set the initial price of carbon for trading to commence - not unlike having a reserve price for your house at auction - Zoltars’ floor price set at commencement. The risks of having a no reserve auction should be obvious to all house sellers and eBay peoples.

So if the government must determine a reserve (floor) price for auction, why not do that every year based on the feed back the sales will provide. The government will most definitely get feedback (complaints and lobbying) whether by auction or fixed price, the method of sale will be irrelevant.

A trading system will not eliminate lobbying for carbon regulation modification. The major players will argue the science, and/or lobby for a weakening of the science based figures based on the effects on the economy/employment/exports, and/or argue for an increase in the number of permits issued for the same reasons. I believe this lobbying has already started.

The efficiency gains (carbon emission reduction)will be determined by the incentives and/or disincentives of the system. The trading system will require businesses to pay as much as they can afford for the permits whilst simultaneously reducing their dependence on them. This assumes the business in question can afford to do either, and it will be a delicate balancing act if they can.

Some business will have deep pockets, largely due to their histories of externalizing the cost of carbon. This will be further assisted if they can pass on the increases to a captive customer base - think coal generated power. These industries will be the major players in a trading market with a fixed quantity good/commodity.

Market manipulation. There are many historical examples of businesses and people ‘cornering the market’ of a limited or restricted commodity. In the process of ‘cornering the market’ many livelihoods were destroyed, and even the commodities credibility and viability has been badly burnt. This has been done with silver and other commodities, why not the limited issue of freely traded and hoarded atmospheric carbon permits?

Once a trading system has been set up as the pinnacle of environmental responsibility and efficiency, it widens the ever opening door for nuclear power generation. Of course this will be countered by the Greens and public opinion so that government policy will be swayed against it, but that’s my point.

In the end, government policy should (and will) decide who are the winners and losers in this carbon trading game. So why waste time, effort and money with a carbon trading system that will, by Garnaut’s own admission, require massive government supervision and intervention?

Those of you who are old enough may remember just how hard it was to police the ‘midnight valve openings’ that allowed toxic discharges into Australia’s rivers. Not only was it hard to catch them at it, it was hard to prosecute and gain a conviction. Initially the fines imposed were less than the polluter would spend on champagne at a corporate lunch. Monitoring of the rivers, analysis of the pollutant and tracing to source, and big fines pushed by public opinion saved the day.

So what about those that break the carbon emissions ceiling or cap? How will this be monitored? Will it be monitored? How will it be proved that company X actually did the emitting? And what will be the disincentive to breaking the cap? Will it be a fine, or something more draconian?

Whatever the answers to these questions, it won’t be a market trading system that provides the answer! Again it will be government agencies and/or private certifiers that will monitor and control.

So all this monitoring and certifying information will be gathered, which will allow a government to set various usage/efficiency benchmarks, which in turn will allow a price for carbon emissions to be set based on desired outcomes - no market trading system required!

1. Christine agreed with the Garnaut ETS’s use of permit revenue to address energy efficiency. I’m not quite sure where Christine got this idea from, the word efficiency appears in numerous places in the Garnaut ETS, these are normally associated with policy efficiency, or economic efficiency, rather than energy/greenhouse efficiency. On p79 as part of the summary of the ETS (also p8), efficiency gets no mention as a use for permit revenue (payments to households is mentioned though).

2. Christine was pleased to see that …. (the Garnaut ETS) …. supports retrofitting Australia’s housing stock for better efficiency …. (as a) …. sensible use of funds from emissions trading. I think that Christine may be guilty of reading in the ETS what she wishes to see rather than what is there. Neither the words housing, nor retrofit appear anywhere in the Garnaut ETS. The most applicable sections that I could find on this issue appear on p18 and p53

“Individuals and households will be affected by the extent to which firms pass on higher input costs in the form of higher prices, including for consumer products. If governments were to decide to assist households for the impact of this on their disposable income, assistance could be provided through the tax and welfare system or by assistance to household’s adjustment to greater efficiency in energy use, or through support for new technologies to reduce dependence on emissions-intensive goods and services.”

“In the case of households, there is a strong environmental as well as equity rationale for returning the revenue from the rent value of the permits that is passed through to households, in an economically and environmentally efficient way. …. Policy instruments for returning rents collected from households could include adjustments to the social security and income tax systems, and assistance through information or capital subsidies to support efficient household adjustment to higher energy prices. This will be discussed more comprehensively when the Review presents its full reports.”

By my reading this translates as: payments to households is purely an optional measure in the ETS; assistance for greater efficiency in energy use by households is but one of several options for such payments; and “support for efficient household adjustment to higher energy prices” is about an efficient process/policy, it takes rose coloured glasses to interpret this as retrofitting the existing housing stock for greater efficiency. Its quite possible that I missed something during my reading of the ETS, but I failed to see the Garnaut ETS offering much support for retrofitting existing housing at all.

3. “The Greens strongly support Professor Garnaut’s recommendation that all permits should be auctioned.” I fully agree that the permits should be auctioned. Unfortunately this is not what Garnaut advocates, he advocates that Trade Exposed Emission Intensive Industries (TEEII) be issued with free permits or compensated with cash as a transitional arrangement (p40 and elsewhere). Admittedly this is not a huge difference, but I feel it would be better if these industries were compensated with cash and then forced to compete like everyone else for permits.

4. “I Remain seriously concerned … (about) … unlimited banking and hoarding of emissions permits.” I fully agree with this concern, if you know that you can “buy your way out” in the future then it acts as a considerable barrier against taking action now. I believe that emission permits should be valid for 12 or perhaps 18 months on a use it or lose it basis, and should be non transferable (but may be surrendered for a small financial loss).

5. “I also have related concerns with Professor Garnaut’s recommendation that we should start on the most lax emissions trajectory and take up to ten years to move to the strongest.” This is a valid concern, but at least the most lax emission trajectory is a start. I must say I was more concerned about the 5 year delay between announcement of moving to a new trajectory and doing so, and at the method he proposes for bridging this 5 year gap, than I was about any starting trajectory. The movement between trajectories should happen several times, whereas the starting point happens only once.

6. “I certainly hope that Minister Wong will not sweep this paper aside as ‘an input’ as she did to the last.” No, I think this contribution should be treated as just an input, the Garnaut ETS has (in my view) many shortcomings, for example the NZ ETS (p85) appears to have a superior arrangement for the banking and borrowing of emissions than what the Garnaut ETS advocates (p80 and elsewhere).