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reducing the political costs of reform « Previous | |Next »
July 23, 2008

The dust is settling on the Rudd/Wong Green paper on emissions trading and Big Business continues its campaign to ensure that the approach is softly softly with bundles of compensation. We can see more clearly no that the whole Rudd/Wong exercise has been primarily aimed to reduce the political cost of reform on greenhouse emissions. However, I cannot for the life of me see the economic reason why the coal-fired power generating companies need compensation, when they knew all along what was coming since Kyoto in 1997.

Neither can Peter Martin. He says:

Never once on the countless occasions that Australian governments have restricted the sale of tobacco have they felt compelled to compensate the manufacturers for ''significant reductions in their profitability''.Why would they? The cigarette manufacturers knew what was coming (and had decided to invest anyway) and were blessed with rusted-on customers.

As Ross Garnaut had observed there there is no tradition in Australia for compensating capital for losses associated with economic reforms. Australian businesses have not been compensated were the floating of the dollar, the introduction of the goods and services tax and the massive tariff cuts in the 1980s.

In the case of emissions trading, businesses had been aware of the risks of carbon pricing for many years and many had sought to re-engineer their production processes to reduce their reliance on emissions.

So Rudd and Wong's softly softly is about buying off the political opposition to emissions trading. It's about politics not economics.

| Posted by Gary Sauer-Thompson at 9:06 AM | | Comments (2)


We have Australia's worst polluting industries, who have aggressively lobbied against action on climate change for over a decade, being rewarded with free permits and subsidies while the very sectors we need to encourage -- e.g. public transport, renewables and energy efficiency are penalised.

How does that work in favour of the public interest, which is what emissions trading is all about.

"So Rudd and Wong's softly softly is about buying off the political opposition to emissions trading"

What's the point of that though? If it doesn't lower emissions, are you saying that emissions are just a new commodity for trading?