Hot debate demands cool heads  

Posted by Big Gav in

Ross Gittins has an article in the SMH on the myriad of phony arguments being made against putting a price on carbon emissions - Hot debate demands cool heads.

The Rudd Government's emissions trading scheme, over which the Liberals have torn themselves apart, is very similar to the scheme John Howard, Tony Abbott and Nick Minchin took to the last election and would now be implementing had they won. It was fine then; it's anathema now.

It's pathetically easy to frighten people about the consequences of complicated economic changes. Labor did this to the Liberals over the introduction of the goods and services tax, now the Libs are returning the compliment with the trading scheme.

The main difference is that Howard worked tirelessly to explain and defend the GST against critics, whereas Kevin Rudd hasn't bothered to explain or defend his scheme, preferring to keep public attention on the brawling Libs.

If you recall, the opponents of the GST encouraged us to have a grossly exaggerated view of the extent to which it would raise the cost of living. There were people running round with ''modelling'' showing it would cause tens of thousands to lose their jobs.

If anything, the scaremongering is worse this time. Barnaby Joyce, Alan Jones and others have claimed the cost to households and the damage to the economy would have been horrendous. And a host of industry lobby groups sought to extract handouts from the Government by producing ''modelling'' showing the destruction of many jobs in their industry and putting the wind up their employees.

The scaremongers claimed the scheme would be a form of disguised taxation. That's true. It would force up the prices of electricity and gas (though not petrol for at least the first three years) because the use of fossil fuels causes large emissions of carbon dioxide. Making fossil fuels more expensive is intended to encourage us to use them less wastefully, insulate our homes, switch to solar power and so forth. It intended to encourage electricity generators and others to switch to low-emission sources of energy.

The increase in electricity prices would be large but, unlike with the GST, spread over many years (at the rate of about 5 per cent a year). Remember, however, that electricity and gas account for less than 5 per cent of household spending, so a big increase in a small component ends up being a small increase overall.

It's said the cost of electricity is built into the cost of everything we buy, so all prices would go up. That's true, but exaggerated. For most things, electricity is a small proportion of retail price, so this effect would be a lot smaller than the scaremongers lead you to believe.

Would a lot of jobs be lost and a big hole knocked in economic growth? No. The changes would be gradual and mainly take the form of some emissions-intensive industries growing weakly or stagnating while other, low-emissions industries expanded more strongly.

If implemented, the scheme could cause jobs to be lost in emissions-intensive export industries - such as coalmining, aluminium smelting, steel and cement production - if required to pay for emissions while competitors in other countries weren't. But the scheme was designed to protect them from this risk. Much of their scaremongering was aimed at extracting more protection from the Government and last week, thanks to Malcolm Turnbull, they got more - more than many economists consider necessary.


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