Renewable Energy Target Review:
David Arthur Submission
This submission makes two arguments:
1) From the perspective of avoiding adverse climate change, a 5% decrease
in CO2 emissions by 2020 is too little, too late. From a perspective of
seeking to sustainably maintain Australian living conditions, the only
acceptable goal has to be total cessation of fossil fuel use as rapidly as is
economically and technologically feasible. It is therefore not possible to
accept that the present Renewable Energy Target be decreased.
2) Irrespective of whether there is an Emissions Reduction Fund or not, a
“carbon price” imposed through a revenue-neutral consumption tax on
fossil fuel provides the necessary price signal to guide and inform
emission-reducing activities with minimal regulatory intervention, minimal
administrative effort, yet achieve maximum emission reduction with
optimal economic efficiency.
The submission concludes with reference to a paper from the peer-reviewed
literature, that encapsulates many of the arguments put forward here.
1. A 5% decrease in carbon dioxide (CO2) emissions by 2020 is insufficient:
total cessation of fossil fuel use as rapidly as is economically and
technologically feasible is required.
Over the 5 million years before industrial civilisation developed (that is, since the
start of the Pliocene Epoch), earth’s climate gradually cooled from a relatively
warm state, with sea levels perhaps 25 m higher than present, largely due to
ice-free Greenland and much less ice on the Antarctic Peninsula, to the excessive
frigidity of the Pleistocene “Ice Ages”, with sea levels perhaps 120 m lower than
present and ice-sheets across northern Eurasia and North America, interspersed
with relatively benign conditions similar to the Holocene Epoch of the last 10 or
11 millennia within which all recorded human history has occurred.
Each of these climate conditions has been associated with and is due to the
atmospheric concentration of CO2 which prevailed at the time: ~400 ppm in the
case of the early Pliocene, ~200 ppm during Pleistocene Ice Ages, and ~300
ppm during Pleistocene interglacial, ‘warm’ periods and also during the most
recent Holocene Epoch, which saw the advent of human civilisation.
This climate history is indicated by the history of global average temperature
shown in Figure 1, below.
2
( http://en.wikipedia.org/wiki/File:Five_Myr_Climate_Change.png)
Figure 1: A global average temperature record from multiple overlapping sediment cores for the Pliocene, Pleistocene and Holocene Epochs (ie last
~five million years of earth history Ref: Lisiecki, L. E., and M. E. Raymo (2005), A Pliocene-Pleistocene stack of 57 globally distributed benthic d18O
records, Paleoceanography, 20, PA1003, doi:10.1029/2004PA001071., as rendered in Wikipedia.
Note that reference temperature (0 degrees) for Equivalent Vostok T is ~16th century global average temperature.
To avoid dangerous climate change, we needed to have totally ceased using
coal, oil and gas by 1988, because that's when industrial CO2 emissions caused
atmospheric CO2 to exceed 350 ppm for the first time in >3 million years.
In fact, with atmospheric CO2 close to 400 ppm, atmospheric composition is
closer to that of the early Pliocene Epoch, ~4-5 million years ago. At that time1,
the Arctic Ocean was ice-free during the summer months, Greenland was all but
ice-free, and there was substantially less ice cover on the Antarctic Peninsula
and West Antarctica. Pliocene sea levels are understood to have been 10-20 m
higher than present.
To forestall the world’s climate and sea levels reverting to a Pliocene-like state,
it is necessary to return atmospheric CO2 to less than 350 ppm2 as rapidly as
can be achieved. The first step towards achieving this goal is to cease using all
coal, oil and gas as quickly as we can, and I applaud the Federal Government in
taking at least an initial step toward that goal.
However, as the above argument suggests, and as the supporting
documentation from the peer-reviewed scientific literature demonstrates, the
goal of the present Direct Action plan is insufficient.
2. A “carbon price” is best imposed through a revenue-neutral consumption
tax on fossil fuel
Such a price would provide the necessary price signal to guide and inform
emission-reducing activities with
1
Attachments explaining this include “Significantly warmer Arctic surface temperatures during the Pliocene
indicated by multiple independent proxies”, Ballantyne et al, Geology 2010;38;603-606 doi: 10.1130/G30815.1
(pdf accompanying to this submission as Attachment 1), and Fedorov et al, “Patterns and mechanisms of
early Pliocene warmth”, doi:10.1038/nature12003 (pdf accompanying to this submission as Attachment 2).
2 Hansen et al (2008), “Target Atmospheric CO2: Where Should Humanity Aim?” (pdf accompanying to this
submission as Attachment 3).
 minimal regulatory intervention,
 minimal administrative effort, yet achieve
 maximum emission reduction with optimal economic efficiency3
A major issue in pricing CO2 emissions is that putting a direct charge on
production of CO2 emissions is that this cannot be done on imported goods. If
any jurisdiction imposes a charge on activity that produces CO2 emissions, it has
effectively imposed an incentive for productive activities (such as manufacturing)
to relocate to another jurisdiction where there is no charge on CO2 emissions,
and satisfy market demand for its products in the CO2 emission-pricing
jurisdiction by imports.
This is doubly ineffective, because not only have overall CO2 emissions not been
decreased, they have increased due to the added CO2 emissions of shipping
goods from nation of production to nation of consumption. EU carbon pricing,
for example, has seen much manufacturing activity outsourced to China, to the
detriment of European manufacturing and with increased CO2 emissions due to
additional shipping.
Mr Rudd’s Carbon Pollution Reduction Scheme had exactly this flaw, and hence
would have driven precisely this de-industrialisation in Australia had it not,
prudently, been rejected in the Senate. Geoff Carmody’s essay “Consumptionbased emissions policy: A vaccine for the CPRS ‘trade-flu’?”4 sets out this
argument in more detail.
Michael Porter’s contribution “Reforms in the greenhouse era: Who pays, and
3
Demonstrated by Martin Weitzman in the seminal 1974 paper on economic pollution control, “Prices vs.
Quantities” (pdf accompanying to this submission as Attachment 4); The relative merits of acting to
minimise damaging pollution by either price-setting (effectively, consumption taxation) or emissioncapping (effectively, a ‘market mechanism’ as apparently preferred by the ALP) were compared by
Weitzman, concluding that price-setting to guide and inform individual pollution-limiting action is optimally
efficient.
contained in CEDA’s June 2011 publication “A Taxing Debate: The forgotten issues of climate policy” (pdf
accompanying to this submission as Attachment 5).
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2
how?” to the same CEDA publication makes the case that driving CO2 emissions
reduction by trading in derivatives of CO2 emissions is not conducive to
economic stability, as demonstrated by the role of derivative trading in creating
the conditions for the Global Financial Crisis (GFC).
For further discussion of why the existing Kyoto / EU emphasis on CO 2 emission
production is flawed, Glen Peters's 'The Conversation' piece, "Carbon as a
commodity: a trade in pollution could help clean up dirty economies"5 helps
explain why an emphasis on fossil fuel consumption is of greater value than
schemes based on CO2 emissions production.
Indeed, it was the trade implications of the carbon-pricing mechanism proposed
under the Kyoto Protocol that lead the Howard government to rightly conclude
that joining the Kyoto Protocol was not in Australia’s best interests, and it is the
same trade implications that have kept the USA from agreeing to the Protocol
under both Bush and Obama presidencies.
There's an easier way to provide a steady price on CO2 emissions that will guide
and inform emission-reducing choices by businesses and individuals, and that's
to make pro rata cuts to existing taxes to make way for a consumption tax on
fossil fuel6. Transferring the "burden of taxation" onto fossil fuel consumption in
this way provides an incentive for taxpayers to find alternative energy sources
for their activities, and also provides them with a price guide on what their
optimal (least overall tax) fossil fuel use might be from year to year.
To get further reductions in fossil fuel consumption in subsequent years, simply
raise the rate of the tax, with corresponding adjustments to all other tax rates,
until fossil fuel consumption has decreased to the extent required.
5
6
(pdf accompanying to this submission as Attachment 6)
Explained by Oxford Energy Policy Professor Dieter Helm in his book "The Carbon Crunch", also in his 8
Nov 2012 online opinion piece “Forget Kyoto: Putting a Tax on Carbon Consumption” (pdf accompanying to
this submission as Attachment 7).
3
To ensure a ‘level playing field’, consumption taxes are imposed on imports to a
tax jurisdiction through WTO-compliant
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“border adjustment” charges. This
has the benefit of maintaining competitiveness of domestic industries against
imported rivals through a WTO-compliant mechanism.
Concluding Remarks
This submission
1. summarises and refers to peer-reviewed evidence that the goal climate
policy must be the complete cessation of all coal, oil and natural gas use
as soon as economically feasible, and
2. because this cessation can and will be achieved by technological
transformation, this submission then summarises and refers to some
expert writing that describes the economically optimal pricing mechanism
to guide and inform this technological transformation.
As it happens, a paper in the peer-reviewed literature makes similar arguments;
Hansen J, Kharecha P, Sato M, Masson-Delmotte V, Ackerman F, et al. (2013)
Assessing ‘‘Dangerous Climate Change’’: Required Reduction of Carbon
Emissions to Protect Young People, Future Generations and Nature. PLoS ONE
8(12): e81648. doi:10.1371/journal.pone.0081648 8, also accompanying this
submission as Attachment 10.
7
Veel, “Carbon Tariffs And The WTO: An Evaluation Of Feasible Policies” Journal of International
Economic Law 12(3), 749–800 doi:10.1093/jiel/jgp031 (pdf accompanying to this submission as
Attachment 8), Pauwelyn (2012), “Carbon Leakage Measures and Border Tax Adjustments Under WTO
Law”, Graduate Institute of International and Development Studies (IHEID), Switzerland (pdf accompanying
to this submission as Attachment 9)
8 (pdf accompanying to this submission as Attachment 10)
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