Thursday, April 22, 2010

Grattan Institute CPRS Report

The Grattan Institute has a report on the CPRS out today. The CPRS is in hibernation or maybe dead but the report argues as most of us did that the compensation proposed by the government was not economically justified. Here is their blurb:

"Like much of the world, Australia has debated putting a price on carbon emissions (a “carbon price”) with an emissions trading scheme or tax. A carbon price aims to induce structural change in the economy that will reduce emissions and consequently the risks of global warming.

The Australian debate has been dominated by concerns that Australia might lose industry and jobs offshore if it has a carbon price when competitor countries do not. If Australian production moves to countries with higher emissions, this would defeat the purpose of carbon pricing. To avoid this possibility, and protect industry from such an event, government plans to provide some industries with free carbon permits. The report is a detailed industry by industry analysis of the impact of carbon pricing.

We find that much of the protection proposed for the major emissions-intensive industries is unnecessary or poorly targeted. It would delay the structural adjustment required to move to a lower carbon economy.

Using industry data, the report finds that many of the recipient companies will be internationally competitive even if they receive no free permits. Many of the industries that would not be competitive would emit less carbon if they moved offshore, which is the purpose of carbon pricing. The proposed free permits will mute the incentives to reduce carbon emissions. They are also very expensive for other Australian taxpayers."

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