Backfire: Australia’s coming cap-and-trade system could INCREASE emissions

Gotta love the wonders of central planning!

Malcolm Malden writes in the Sydney Morning Herald:

Prime Minister Kevin Rudd’s proposed early move to a carbon trading system linked to European prices does nothing to change the long-term trajectory of energy prices if lawmakers remain determined to force carbon dioxide emissions down.

Australia would begin trading permits in July next year, one year earlier than originally planned, and tie in to a European system that prices carbon much more cheaply than Australia’s carbon tax does. The tax would price carbon dioxide at $24.15 a tonne in 2014-15. Carbon dioxide prices peaked in Europe at more than €30 in 2008, slumped as Europe’s sovereign debt crisis undermined economic growth and energy demand, went as low as €2.75 in April this year after an initial attempt to rig the market failed, and are now around €4, or $5.70, a tonne.

Europe’s system is broken in policy terms, because it isn’t forcing the price of carbon dioxide emission higher. European lawmakers aim to fix that by rigging the market, and they are likely to succeed: the European Parliament earlier this month voted in favour of tightening the supply of trading permits by postponing until 2018-20 the planned resale of 900 million surplus permits.

European prices are unlikely to be much higher in July next year, however. Europe’s economy is only slowly mending, and it will take a couple of years to negotiate bureaucratic hurdles and get the carbon price fix in place. The Australian price may also start below the European price as big energy-hungry projects including LNG processing plants in Queensland and Western Australia are delayed, reducing total demand for energy.

If Australia links to Europe’s system while it is broken and dysfunctional, permit prices will therefore probably be about a quarter of the carbon tax price. Energy prices will fall, and some of the political damage that Labor incurred when it introduced the carbon tax will be repaired…

So if energy prices fall, more fossil fuels will be burned and…

Read more at the SMH…

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