An interesting piece that debunks all the hysteria around Tax Or Direct Action by someone who knows about it rather than those with a political agenda to push.
Direct action may succeed where tax fails
TWO years ago, in my book Clean Energy, Climate and Carbon, I posed the question: "Will putting a price on carbon drive deployment of clean energy technologies?
My answer then was: "Probably no, unless the price is much higher than that proposed by Australia or by most other countries."
Two years on, the experience in Australia, Europe and North America has reinforced that view.In Europe, the emissions trading scheme provided some companies with the opportunity to use their allocation of free carbon credits to profit by carbon gaming and might have resulted in a modest level of uptake of gas in lieu of coal, but there is no evidence that it has produced any significant decrease in emissions.
In Australia, any decrease in emissions because of wind and solar has had nothing whatsoever to do with a carbon tax and everything to do with the renewable energy target scheme.
Although the National Greenhouse and Energy Report for 2012-13 has yet to be released, recent statements suggest that any decrease in emissions attributable to the carbon tax is minute, but it will be interesting to see the actual data.
In the US, there has been a significant drop in emissions, not because of a price on carbon, for there is no nationwide price on carbon (there are some state schemes), but because of a decrease in manufacturing activity and particularly because of the widespread switch from coal to cleaner and cheaper shale gas: a good example of how a new technology can decrease emissions.
Those with an unshakeable faith in the market will still claim that a price on carbon is the most effective way of developing and deploying clean energy technologies.
The flaw in that philosophy is that for a market to work, there has to be real choice and a clear basis for making that choice now.
But there is no level playing field for determining the real cost of many existing, let alone future, technologies, for many quoted costs are distorted by subsidies, regulations or mandated targets focused on particular technologies.
The excellent 2011 report of the Productivity Commission on Carbon Emission Policies in Key Economies is one of the few studies that does attempt to get at the real cost of a range of technologies.
The costs of some quite widely deployed technologies, such as solar, are staggeringly high and certainly far more than any carbon price.
The future cost of clean energy technologies still under development but crucial to decreasing emissions is, of course, even more uncertain, which is why research is needed.
But a price on carbon, whether a carbon tax or an ETS, does not encourage the long-term R&D needed to take forward some of the critical large-scale mitigation options, such as geothermal or solar thermal or carbon capture and storage.
A price on carbon or a carbon tax could be used to directly support the research needed to develop and deploy emission-reducing technologies, and that would perhaps provide a stronger case for a carbon price. But the reality is that no such linkage was established under Labor's carbon pollution reduction scheme, which was targeted at broader budgetary issues and at social engineering rather than what its target should have been, namely clean energy engineering.
Without a clear and strong policy linking a carbon price to clean energy technology development, there is no meaningful emission-reduction policy, just another speculative market in the case of an ETS or just another tax.
It could be argued that an ETS could, of course, provide scope for purchasing cheap overseas carbon credits.
Many of the players who brought you the global financial crisis would be happy to assist, no doubt using ever more exotic and complex financial instruments, this time based not on real estate but on carbon.
A price on carbon does not and will not reduce emissions until some of the key technologies are further advanced and fully costed, and until the carbon price is much higher than any government is willing to contemplate at present.
That leads us to the alternative of direct action.
Critics will argue that there is no clear definition of what direct action involves, and that may be so. But there is a different view, namely that this present lack of definition provides the opportunity to help to define what it should be. In fact direct action has been in place for several years in Australia and other countries.
For example, having a renewable energy target clearly constitutes direct action that has directly encouraged (and, in effect, subsidised) the uptake of particular technologies, primarily wind and solar.
So what would be needed to make a success of direct action?
In summary, getting rid of the carbon tax is the right thing to do at this time.
It has proved ineffective as a mechanism for decreasing emissions.
Direct action may well be more effective.
Peter J. Cook is a professorial fellow at the University of Melbourne. He is a former chief executive of the Co-operative Research Centre for Greenhouse Gas Technologies and an Intergovernmental Panel on Climate Change co-ordinating lead author.
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