Labor is again proposing a price on carbon as the centrepiece of its climate policy. The unpopularity of the carbon tax experiment means they now advocate an Emissions Trading Scheme (ETS) instead. This is essentially the same thing.
An ETS works by releasing a capped amount of pollution “permits”, and letting the capitalist controlled “market in carbon” set the price. By slowly reducing the available permits, the theory goes, the price will rise and pollution will reduce because the carbon permits to pollute will get more expensive.
But this is not how an ETS works in practice. Banks and companies influence the carbon price by creating their own permit market, speculating on future prices.
Around the world, where carbon prices do exist, the cost remains well below what would be required to actually force a transition to renewable energy. Europe has had the longest and largest scheme, and the price of carbon there has proved incredibly volatile—crashing to below €1 per tonne at points. The irony is that as emissions themselves fell due to recession in the Global Financial Crisis, the price of permits fell so dramatically that it undermined the scheme: polluting companies were able to buy up permits on the cheap, while banks trading in carbon permits cut jobs and scaled back these programs.
Last time Labor designed an ETS—Rudd’s “Carbon Pollution Reduction Scheme”—it included billions of dollars of “compensation” to assist the biggest polluting companies to transition away from emissions-intensive industry, even though it would ultimately be consumers that paid the price through power bills. In the worst instances, “compensation” for the scheme generated windfall profits, for instance for the ageing brown coal-fired power stations in Victoria.
An ETS won’t deliver renewables. Beyond Zero Emissions warned that a modest carbon price would more likely encourage a transition to more gas power than to wind or solar. Letting the market rip is what caused the climate crisis; more of the same medicine is not the answer.
By Erima Dall