The author is quite right to suggest that carbon trading schemes will do very little to limit emissions, particuarly in the form suggested by the Rudd government. Whether there is any real interest in his drastic alternatives remains to be seen, particularly as there are flaws in the suggestions. One of these is the proposal that we should switch over totally to hybrids.
There have been serious suggestions of late that hybrids are actually less efficient that the most efficient petrol and diesel driven cars. In any case, such a move would simply make drivers hold on to older, more convenient petrol cars for much longer. It would create an industry in reconditioning older cars.
As for the business about using fibre optics for high voltage transmission rather than telecommunications, is anyone actually doing this at present? Transmission lines get replaced and changed all the time, and one would think that if fibre optics were more efficient it would have happened by now. Curious on that point.
Localised power networks: oh wow! This writer is really ambitious. Some sort of neghbourhood battery storage is about the only way renewables will ever ofset any signficant amounts of emissions, incidentally, but the expense would be collosal. the proposal is worth a whole extra article - not that it will ever happen but it would be fun to kick the idea around.

My biggest problem with the proposed ETS is that with all its measurements, rebates, caps and trading, the paper work and monitoring is going to need an army of beaurocrats.

Energy consumption is not price elastic (consumption changes with price) in the short term as people are take time to replace fixed assets such as cars and production equipment, but in the long term, this has been shown to be so.

The simplest solution would be to introduce a smaller tax on carbon across the board at a level that has a lower effect on the economy, with an indicated time line for the tax to increase.

This would lower the immediate impact, but give businesses and consumers fore warning that things will change and they need to plan ahead.

The revenue can then be use to subsidise non GHG producing technologies at X cents per kWhr in such a fashion that they can also plan for the future.

Under an emissions trading scheme, the market doesn’t determine the socially optimal level of emissions, the government does. It may guess wrong, but any form of abatement policy is vulnerable to the same problem.

Under the CPRS the role of the market is to ensure that the desired level of emissions is reached at the least possible economic cost.

The article doesn’t address this principle at all – throwing tired slogans like “economic rationalism” and “trickle down” at the CPRS hardly constitutes a sensible argument against it.

The problem with Ken’s solutions are that they will impose even greater costs on the community than the CPRS, distribute those costs less fairly, and fail to achieve the deep cuts in emissions needed to prevent dangerous climate change.

For example, it is debatable whether a switch to ethanol has much net benefit in greenhouse gas emissions. If Australia reduces its coal exports China will not stop burning coal, it will buy it from somewhere else. Improved energy storage could indeed be the magic bullet that allows us to reduce emissions. But then again, it may not, in which case investing billions in this technology would be as dumb as investing billions in CCS. The benefit of price signals is that it provides the private sector with the incentive to explore all the possible ways of reducing emissions, including these and others. Government has neither the skills or the resources to do this.

Shadow Minister
I agree that a carbon tax might have been a simpler way to set a carbon price. However, in the long run, I suspect the best structure for achieving global emissions reductions will be an international emissions trading scheme, and the CPRS is a step in that direction.

A few points to allay panic:

Crop rotation
Is an almost outdated farming method of naturally fixing nitrogen in the soil.

Economise beef production.
The modern feed lot method of beef production is hugely wasteful. By-pass animal feed lots to feed humans directly with grain. Eat less beef generally.

Improve the use of natural fertilisers.
Encourage more local intensive farming methods mixed with alternative lifestyle aspirations.

Develop engineering systems to produce more economical extraction of nitrogen from the air.

Abandon cropping for ethanol production immediately.

Et al…

rhian,

your blind faith in the economic rationalist religion is touching. you say that the market delivers the result with least cost to the community is interesting. where is the empirical evidence. it is the same argument the friedmanites and the chicago school use for welfare reform, health reform, that the invisible hand magically weaves a spell through our community to deliver the best result. The argument against direct regulation is that it will result in a "misallocation" of resources.

this was not the case with the abolition of lead in petrol, nor in the abolition of cfcs. Your energy arguments bely the fact that our national grid was designed by economist, huge centralised power stations to reduce unit cost/production no comparative on lost power during transmission. dc, fibre optics reduce power loss. thus unit cost of production not the whole answer but i will not try and explain physics to someone hooked on the religious fervour of the power of the market, as there is no invisible hand in physics.

@slasher- I'm not sure you understand the basic principles of the cap and trade. The cap is a regulation. It sets a limit, just like the standards for lead in petrol, and the type of regulations we see every day. The trading, simply allows those who can reduce their emissions more easily to sell their permits to others. The net result is that the cap is met with least disruption. It is similar to fishing permits on the reef, water permits, and many other current schemes.

@Rhian - Very good explanations and ideas there.

@shadow minister - there are of course major problems with measurement that are present no matter how you try and tackle the problem. Hopefully there are some good minds working on that part.

cam, i am sure you do not understand the cap and trade regime. It means that that some polluters are allowed to pollute and can then pass on the cost to consumers, unless there is a contestable market then the trading has no impact ie the cost of the product is merely passed on to the consumer. This is a regressive distribution of wealth.
You assume the price signal that failed to take into account the original social cost of the externality can function for the public benefit.It is the neoclassical delusion that has led to the recent worldwide financial crisis. I would have thought the conservation/green movement would have had the sophistication not to suffer from the same delusions that exist in the world of merchant bankers, alas I am wrong.

The basic point made by Mr McKay is that CO2 reduction can not be achieved by the market without regulatory intervention by government. Suggestion made include the need for:
• R&D into technology for the transmission and use of energy, so as to promote greater efficiency.
• Restrictions on the registration of vehicles after 2020 - in order to promote use of hybrid vehicles.
• Restrictions on the export of coal so as to limit the level of CO2 emissions by user countries importing our coal.

The first of these proposals is obviously desirable, however since many smaller vehicles are much more efficient than hybrids, the second suggestion is not. However, the suggestion that vehicle registration be used to promote use of the most efficient type of vehicles - those producing the least emissions - is a good idea, though we should not wait until 2020 for its implementation.

The alternative to vehicle propulsion using fossil fuels, is propulsion using electric motors. The use of electricity is not only far cheaper and more efficient than fossil fuels but, importantly, is CO2 emission free. It is true that this would increase demand for electricity which at present is largely generated from coal but in the future will increasingly be produced from renewable sources. Vehicle registration should be used now to promote use of efficient vehicles.

Licensing coal export, then reducing the volume licensed for export would not be practical since other countries would simply fill any Australian shortfall and there would be no reduction of CO2 emissions. Rather than restricting coal exports by licensing, a more beneficial approach would be to remove government subsidies paid to assist coal mining and increase taxation of exports, applying those monies to assist fund R&D into improving battery and PVC efficiency and production of electricity from renewable sources.

As for an ETS, there is nothing wrong with the principals embodies in the recommendations put forward by Professor Garnaut – but rejected by Rudd in favour of a watered-down CPRS. The latter is an unacceptable approach to reducing CO2 emissions and assisting development of renewable energy

I am surprised that anyone would want to put CO2 permits
into a trading market. There are already companies setup to start
trading and they can hardly wait. I wonder what sort of bonuses they
will pay.

In any case trading will imply that financing will be part of the mix
in any trading, but the whole possibility of interest will be thrown
into disarray with energy depletion.

Beware making assumptions about the large scale manufacture of
electric cars, it is by no means certain that we will be able to
change more than a small percentage of the car fleet to electric.

Only a madman would advocate using food for fuel.

Mr Mackay's scheme seems to be a typical politicians solution.
Politicians are determined to ignore oil depletion so that any
solution proposed by the political arena is incomplete and will by
definition be unworkable.

So we can be assured that the government's system will not work
because it assumes business as usual.
No scheme that does not take into account a depleting energy regime
is doomed from the start.

bazz, policies were designed for oil depletion, use of electric cars (my terminiology hybrids), use of ethanol and coal to diesel
jonjay, if we abandon coal exports other countries such as china and india will not invest in coal powered energy solutions because of the strategic risk of being captured by one supplier, the usa

Slasher,
The ETS policies are not designed for oil & gas, let alone coal depletion.
Just ask them,"There is no supply risk" they will tell you.
Everything they say and do is on the premise of continued growth.
The only reason they want to cut back on fossil fuel use is CO2 emissions.

They do not accept that somewhere down the track, and not all that far,
there will be a supply crunch. The IEA suggests 2010 might see some
difficulties.
The ETS is planned for the next 50 years, what does that tell you ?
Anyone who thinks we have 50 years of business as usual is either
a madman, an economist or a politician.

Sorry IEA = International Energy Authority an OECD body.

bazz, you are missing my point that using electric cars whilst reducing co2 emmission (primary goal) and investing in infrastructure to support its use including service centres/station utilising localised solar power directly recognises oil depletion. Before the lunatics come out of the woodwork I am not suggesting localised solar power will be able to provide all power needs for electrical cars but provide some with the rest coming from power grids.
Further the use of thermal coal for coal to diesel projects directly recognises oil depletion. my direct action solutions to reduce co2 emmissions also have a look to the policy responses we need to consider for peak oil issues.again this can only be a short term policy due to the emmissions from coal to diesel projects

Slasher,
I have seen nothing that indicates that the government wants
to encourage coal to oil processes, indeed the reverse seems likely.
Without very large storage solar power will not be effective for
charging electric cars. Many will be used for commuting so they will
arrive home late afternoon.

The size of the solar bank to charge an electric car would be very large
indeed. The CO2 saved by an electric car is worthwhile simply because
of the efficiency of large coal fired power stations.

Wind farms of course can work all night, but as we all know generally
the wind dies down considerably at night.

Anyway to get back to the thread, I think a simple tax is the way to
go. It can easily be adjusted in the light of changing circumstances.
That is the problem with any trading scheme, people will have funds
tied up in the system and if the government wants to make a significant
change there will be great resistance to change.

However sooner or later the government will be forced to make changes
to the ETS scheme to cope with oil and gas depletion.

bazz, you are correct there is no govt policy to encourage coal to diesel projects, a cap on thermal coal exports with a policy to encourage coal to diesel projects is needed, we need to stop coal being used for electricity generation not only in Australia but worldwide. this is to reduce greenhouse emmissions but secondly we need to recognise that as oil is depleted we need to use coal for transport fuel (diesel) not for creating steam to generate electricity.

Slasher,
Not being an expert in power generation or coal to oil
processes, I suspect that the power station is the most efficient way
to produce energy. By electrifying the railways and forcing freight
off the roads much less coal to diesel will be required.

If an efficient electrical storage system could be built then virtually
all our worries would be over. Sure there are systems available now
but it is the scale of storage that is problem.
Ultra capacitors perhaps ?
The only real hope I see is geothermal. If they can ramp that up we
will be saved as they say.

bazz, the problem with geothermal is transmission. whilst we use copper wires with ac current we will have significant transmission lost, geothermal sources are away from our population centres. unless we reform our infrastructure we lock out these energy resources