Comparing carbon policies made easy

Wednesday, 10 February, 2010

Major debate now envelops Federal Parliament on climate change and how Australia will respond to the threat. This is a complex debate with numerous implications for the Australian environment, businesses and individuals. It could also be the ‘trigger’ for new federal elections in 2010.

A Charles Sturt University (CSU) expert on climate change policy, Professor Kevin Parton, has developed a simple comparison between the two policies, both of which aim to reduce greenhouse gases by encouraging new non-polluting technology or sequestrating, or ‘storing’, carbon dioxide.


Federal Government

Federal Opposition
Policy mechanism Increase the price of carbon by charging polluters Subsidy to those producers who volunteer to introduce non-polluting or carbon-sequestering technology
What is the encouragement for sustainable new technology? Disadvantages old carbon polluting technology and hence encourages all new sustainable technology Guesses what sustainable technology will work and encourages just a few technologies, such as soil carbon storage and tree planting.
Carbon price Sets the carbon price and allows market to determine the best type of future technology Avoids setting carbon price and tries to induce adoption of new technology directly
Paid for by Polluters (but eventually price increases for consumers. Also features compensation for less-well-off) Taxpayers
Impact on greenhouse gases (effectiveness)
Slight at outset, but much scope to reduce greenhouse gases by decreasing the amount of carbon that can be emitted. Impact slight. Possible large cost to government if the scheme is extended
Complexity Complex, but most individuals do not need to know about the detail  Simple
Explanation given to date Poor (eg, few people realise that fewer than 1000 firms are involved and that they collectively produce 75% of greenhouse gases) Good
Economic efficiency In theory the most efficient policy (but it becomes less efficient the more exemptions - eg, free permits - that are allowed) Less efficient
Impact on social equity If compensation is paid to consumers, equity effect is close to neutral Neutral
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