NICHOLAS Stern, the economist whose work kick-started the international climate change debate, has backed Australia’s carbon tax regime and predicts the package could open up opportunities for business.
In a letter to independent MP Rob Oakeshott, Lord Stern said Australia was not acting too far ahead of the rest of the world, citing a cap-and-trade scheme to start next year in California, the EU’s emissions trading scheme, New Zealand and China.
He said there was evidence the Australian carbon price – $23 a tonne from July 1 – was not excessive compared with prices in Norway, Britain and Switzerland.
Lord Stern argued free permits for Australian emissions intensive, trade exposed industries meant they would face an initial price of as little as $1.
“This policy matters,” he said. “The world is watching and particularly some of the biggest emitters, including China, the US and India. The power of example is key to greater action across the world. Australia’s leadership is important.”
Lord Stern’s 700-page report for the British government in 2006 argued the costs of inaction on climate change were greater than doing nothing to reduce the carbon emissions that produced global warming. He cited carbon emissions as a massive market failure and recommended environmental taxes to cut emissions.
His letter came as International Monetary Fund managing director Christine Lagarde, ahead of the Rio +20 UN summit later this month, said that policies such as carbon taxes on airlines and shipping and emissions trading were central to containing a worsening economic, environmental and social crisis.
Ms Lagarde said she would call for a global strategy for economic stability that achieved “green” and “inclusive” growth.
Speaking at the Washington-based Centre for Global Development, she said the IMF would play an active role in giving countries technical support to design carbon taxes and similar instruments that reflected the price of pollution.
“Getting the prices right means using fiscal policy to make sure that the harm we do is also reflected in the prices we pay,” Ms Lagarde said.
“I am thinking about environmental taxes or emissions trading systems under which governments issue and preferably sell the pollution rights. It is basically a variation of the old mantra: you break it, you buy it.”
Launching a guide for policymakers on using fiscal policies to combat climate change, Ms Lagarde said that in difficult budgetary times carbon taxes and revenue from permit auctions could help boost economies.