Care needed with Garnaut report



The report by Professor Ross Garnaut on a response to global warming has led to a frenzied debate in Australia about how an Emissions Trading System should work.


Sanity has gone out the window as spruikers and activists of all persuasions push their points of view. Garnaut cautions about the risks if Australia’s market economy gets ahead of the pack. But in the next breath he talks about a 2010 start, and a ‘short and transitional’ adjustment period.


Whoa! How an ETS plays out on the international stage has certain parallels to the industry protection debate. There we had Australia, Canada, New Zealand and the Nordics taking lead positions in winding back protection and restructuring their economies. The recent 10-12 years of economic sunshine helped cushion the falls in manufacturing job losses.


However those nations leading on greenhouse gas emissions will incur the wrath of a lot more people. Why? First, virtually all mum and dad investors via their superannuation funds (at least in Australia) have big exposure to energy-intensive industry. Secondly, Japan, France, Russia, China and USA will surely drag their heels on ETS arrangements (they have the track record).


The risk here is that the Australian Government’s policy response will be unconsciously shaped by the extreme elements within the environmental lobby. The result could be a huge political stoush in the lead-up to the next election, as the industry heavyweights side with the Opposition. The process has already started.


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