Major parties are polluting the climate change message  

Kenneth Davidson at the SMH has a dim view of the proposed emissions trading scheme - Major parties are polluting the climate change message.

Australia's carbon pollution reduction scheme is a Luddite's delight. The CPRS is structured so that the coal industry, including Victoria's brown coal, can expand, providing it can expand its export markets.

All the coal industry and other heavy polluters have to do to meet their carbon reduction obligations is to purchase carbon credits from unlogged rainforests or some other equally dubious ''emissions reduction'' offset scam from developing countries such as Papua New Guinea or Indonesia. (The credits are similar in nature to the ''indulgences'' that were sold by the Catholic Church in the Middle Ages so the rich could continue sinning without fear of going to hell.)

Treasury modelling of CPRS from 2005 to 2050 shows that Australian emissions will still be above the 1990 baseline until after 2035.

Unless global emissions peak in the next five years, it becomes nearly impossible to avoid 2 degrees of warming. Containing global warming to 2 degrees is no longer acceptable. The latest science suggests that a 2-degree rise means there will be no Arctic sea ice, Greenland and the Himalayas will be past their melting tipping points, and in Australia the probable destruction of the Murray-Goulburn basin as our most important agricultural production zone and the death of the Great Barrier Reef.

The risk of destruction of Australian economic assets, even with 2 degrees of warming, is in the order of tens of billions of dollars. Incremental politics won't do. While the Greens' amendments to the CPRS are a mile ahead of the major parties, they are still well short of what needs to be done for a safe climate.

When the Government sells the emissions permits to big polluters such as power stations, this means the value of the price increases suffered by consumers (and intended to discourage them from using so much electricity) is transferred to consolidated revenue, as with any other tax.

But when the Government gives emissions permits to the polluters, in effect it allows them to keep the proceeds of its tax. And the budget balance is worse off to that extent.

What the generators want you to think is that if they don't have to pay for their permits, they won't have to put up their prices. Don't believe it.

The Europeans fell for that when they set up their emissions trading scheme and were amazed and appalled when the power companies whacked up their prices anyway.

Since Rudd must know this, I'm all the more fearful that he is weak-kneed when it comes to protecting the Government's coffers against raids by marauding businessmen.

And when the day comes that the retail price of electricity rises anyway, don't imagine the Opposition's complicity in procuring more compensation for the generators will in any way inhibit it from proclaiming from the rooftops this further example of Labor's economic incompetence.

The power generators' basic claim is that the instigation of an emissions trading scheme will, at a stroke, slash the capital value of their business. Unless they are compensated for this loss, no one will want to lend to them and they may be forced to cut their losses and walk away, leaving households and businesses without power.

But the Garnaut report exposed the weakness of this argument - a case of deception and special pleading if ever there was.

For a start, they'll be able to pass on to customers most, if not all, of their increased costs, which will preserve their profitability.

But to the extent that the capital value of their asset is reduced by the scheme, they have no moral, legal or economic argument to demand that taxpayers compensate them for their loss.

There's no insurance against loss for capitalists in a capitalist economy. Market-caused change raises or lowers the capital value of businesses every day. No one suggests losers should be compensated by the taxpayer.

Similarly, businesses gain or lose from changes in government policy all the time. No one suggests the losers should be compensated, nor that windfall gains be confiscated. To wish otherwise would be to put elected governments in an intolerable straitjacket, greatly constraining their ability to act in the public interest.

No one compensated the tobacco companies when governments took to discouraging smoking, nor James Hardie when governments acted against asbestos. No one has compensated the smash repair industry for all the things governments have done to reduce road accidents and deaths.

In any case, any investor in power stations who didn't see restrictions on carbon emissions coming was a fool.

If the private owners paid too much for their power stations the capitalist solution is clear: cop the loss and sell to new operators at a more realistic price without the station losing an hour's production.