Call for a carbon RBA
The Clean Energy Council is advocating the creation of an independent carbon bank that will help provide funds to kick-start the technologies that will lead to a low-carbon economy.
In a position paper to be released on Monday at CEC’s annual conference in Melbourne, the council suggests that an independent carbon bank could borrow against future revenue earned through a tax or an emissions trading scheme and thus avoid a deadlock that is expected over levels of compensation to industry and households.
The idea of an independent carbon bank is not new – it has been proposed by both Ross Garnaut and RBA board member and economist Warwick McKibbin. The CEC, however, has decided to try and flesh out the idea, work out what functions it could perform, and whether a single institution or more could do the job. “It’s not a discussion that this country has been having,” says CEC CEO Matthew Warren.
The CEC suggests various functions are needed to be extracted from the day-to-day political cycle that is making decision-making such a precarious act. These include the ability to set and modify emissions targets or stabilise emissions prices, administer the scheme, allocate and distribue revenues raised by selling permits, and issue debt to fund clean investment.
The key benefits of such an institution would, of course, be political independence. In the same way that interest rate decisions are taken out of the day-to-day political cycle by vesting their administration with the RBA, the day-to-day administration of carbon targets and revenue allocations could also be taken out of the political cycle.
However, the CEC is also keen to find mechanisms and institutions that allow for increased and early spending on new technologies, and is keen to counter the arguments that so called “complementary measures” be ditched once a carbon price is introduced.
“There is an opportunity for governments or agencies to increase transitional spending in the early years of the scheme when this type of investment is most effective, by borrowing against future receipts when compensation and other investments are less effective,” the CEC argues.
This echoes the findings of both Garnaut’s original Climate Change Review, and its recent updates, as well as the conclusions of the International Energy Agency. Both found that a start-up price for carbon would likely be too low to encourage investment in new technologies without complementary measures.
The IEA,in March, said a carbon price alone was insufficient to drive the investments that would deliver the sort of abatement required to meet targets suggested by scientists. But it said the initial short-term costs of complementary measures would be more than made up by the lower cost of abatement delivered in the future.
“The true cost of the deployment policy for ratepayers is not the simple sum of the incentives,” the IEA research paper said. (This is something that appears lost in the current debate around solar incentives. Notwithstanding the absurdly generous nature of the NSW feed-in tariff, it has brought around such a decrease in technology costs that abatement costs from the future deployment of the technology will be minimal – a situation that few would have predicted just a few years ago. It's a similar story in the global market.)
The IEA went on: “Even if the early deployment of some renewables now has higher costs of immediate emission reductions than other options, this deployment must be undertaken if the cost reductions it drives are key to future large-scale deployment. The early deployment of renewable technologies is a cost-effective measure for long-term climate change mitigation, even if it looks too costly when only short-term reductions are considered.”
Garnaut came to a similar conclusion in his update, saying the cost of effective global and Australian mitigation would be materially lower if opportunities for innovation in low emissions technologies were utilised early. He said the impact of the various green stimulus packages in US, Europe and Asia had clearly delivered a “big bang for our buck”.
Garnaut argues that the government should spend between $2 billion and $3 billion each year from the revenues it will collect from a carbon price. Given the claims from industry and unions, and the government commitment to allocate at least half the revenues to assist households, and stay budget neutral, this could be tricky, in political terms at least. Hence the calls for an independent institution.
The CEC proposal offers a solution that could satisfy all parties. Given that transitional assistance is, as it’s name suggest, transitional, and will wind down after a certain period, the unaccounted carbon revenues from the future could be brought forward to when they are likely to be most effective.
The CEC, in its position paper, says “it is attractive” to have a single agency assessing the value of spending on different emerging technologies compared to compensation for low income households, emission intense trade exposed sectors and stranded assets.
“An independent institution would be well placed to coordinate the range of complementary measures required. It would encourage competition between companies, technologies and programs, reward success and optimise scarce resources. It could also play a crucial role in bridging financing gaps outside of the scope of private capital.
“There is an opportunity for governments or agencies to increase transitional spending in the early years of the scheme when this type of investment is most effective, by borrowing against future receipts when compensation and other investments are less effective.
“The decarbonisation of the domestic and global economies will require a major transformation of the world economy. It will invariably require both technical and policy innovation. New effective and transparent systems, laws and procedures will be as important as smart grids, clean technologies and energy saving devices."
Comments on this article
Carbon BANK - Scam
I propose my own Carbon Bank.
I will create a bunch of Accounts in my Bank with Your name on them and when your company wants Carbon Credits, I will TYPE credit digits into your Account and charge you real CASH as payment , with interest of course.
Fractional reserve carbon credit Lending is going to be another FRAUD.
Why would the Government need to issue Bonds to raise cash when it could just print cash and not be charged interest.
International Carbon credit purchasing would be a request to foreigner Agencies for Permission for Australian Companies to emit CO2 within Australia.
Australia should print loads of Cash and buy up Europes Carbon Certificates and deny them access to produce anything.
Martin Luther Where are You ?
Those in the various trading markets such as commodities are well aware of the opertunities of a carbon trading market.
Hence all the fraud difficulties with the European ETS.
It started with the Russian oligharcs closing the obsolete Soviet era factories and claiming the carbon credits for doing so. That was how they got the money to take over Russian industry.
It is just like buying indulgences from the Catholic Church.
We badly need Martin Luther to nail his denounciation to the door or parliament house.
Imagine Prof Bob Carter in a cassock nailing his paper to parliament house !
Government Business Enterprise
Climate change is very much a technological issue, so requires scientific, technical, and social measures of targets and performance. Money can be no more than a measure of value for seeking the best compromises.
That said, a government business enterprise (GBE, effectively a trading bank) to coordinate and amplify investments in clean/waste reduction technologies - also coordinated with industry and general government policy, would support many worthy schemes that the profit-seeking sector will either never fund, or fund at extortionate cost.
Left to itself, technological change occurs much too slowly - early stage adopters seriously benefit 10-20 years after introduction.
Much of the climate change debate is on greener electricity generation and alternative transport fuels. Little attention is given to any issue other than the introduction of growth-positive low-carbon technologies.
Australian economic history offers no support for the "crowding out" hypothesis. Through the nineteenth century public investment provided the people with urban and rural infrastructure at a remarkable rate: the years from 1860 to 1890 when public investment was highest as a proportion of all investment were the years when Australian income per head was among the highest in the world.
GBEs have historically suffered much more from chronic underfunding by hostile governments, and other forms of administrative and political sabotage, than from poor management. They typically do a better job that the profit-seekers, and do it more cheaply. They are there to do the job. Profit-seekers are there to make a profit. There is a difference.
An RBA for CO2? You've go to be kidding!
What is the point an RBA for CO2 since we can't measure CO2 emissions sufficently accurately for trade?
The RBA manages gold and money. You can measure them. You can't measure CO2 emisisons.
Follow the problems with the USA EPA's emissions measurement and reporting requirements for US electricity generators. Or the issues with the Irish Grid's estimates of their emisisons and you'll realise it is impossible to measure or estimate the emissions accurately enough for trade.
Just a Glimmer of Common Sense Appearing?
The preceeding comments are heartening. How refreshing. Well said one & all.
In the absence of empirical evidence Giles that proves without doubt that carbon dioxide is a pollutant & the primary driver of global warming there's little to justify your "Call for a Carbon RBA" !
Re the " Call for carbon RBA "
HERE WE GO (AGAIN ) !!
THIS IS WHAT IT HAS ALL BEEN ABOUT !!!
JOBS & SINECURES FOR THE PROMOTORS OF THE
"SKY IS FALLING" (ON OUR HEADS ) BRIGADE !!
In this day & age of computers , internet , video-conferencing & all the other technologies we have available to us to maximise our work output & supervision of financial matters WE SHOULD NOW SEE A DIMINISHING NUMBER OF BUREAUCRATS OF ALL TYPES. Canberra should be discharging unwanted staff in huge numbers everyday !!!!!! Instead we now see ANOTHER PROPOSAL to create yet another group of bureacrats ,independent of government & therefore,unaccountable to the public & untouchable if they get things wrong. ALL PAID FOR FROM AN UNNECESSARY TAXATION IMPOST ON CARBON DIOXIDE, straight out of everyones hip-pocket or by diminished welfare in some form .
We MUST NOT ALLOW THIS GREED TO FESTER.
CONTACT YOUR LOCAL POLITICIAN NOW & THWART THIS "JOBS FOR THE BOYS" SCHEME.
Business model from the Middle Ages still works in 2011!
Here we go again! During the Middle Ages and before the reformation, people could deal in “absolution”. If you were able to pay enough money, you were able to get an absolution for all your sins and you were able to enter heaven. It was very good business model for the churches at the time. They could sell something, which nobody did own, and its existence nobody could proof or disproof. If somebody did question the merits of trading in absolution was called a “Heretic” and was kindly rewarded with a key posting to burning stake.
In 2011, we have also very clever people finding a new business model, which also allows trading in something nobody owns. We can no longer buy absolution from churches, but we will be able to buy and sell “carbon”. There is no better business then being able to buy and sell something which we never ever can count, measure and own. Mind you, if anybody dares to question any aspects of the “science of global warming” is also a “Heretic”, but will be called a “Climate Sceptic”. Due to local council bi-laws, burning of these people at a stake is no longer possible.
Special industries also want big bureaucracy!
It is an interesting but poor idea from a possibly vest interest group.
Why do we need more bureaucracy for carbon tax?
Why can't we have the ATO collect the tax and then have the revenue simply distributed to residents on an equally basis to compensate for their rights to the climate environment?
Transitional?
Given that income tax and restricted licensing hours were introduced in World War I as a temporary or transitional measure and noting that every new arrangement gains a lobby group one wonders how long and hence expensive the proposed transitional measures will be.