The Australian government has just released its clean energy future legislation, a long awaited climate change policy framework.
In line with other jurisdictions the focus is emission reduction by putting a price on carbon to change behaviours away from dirty, fossil fuel based energy and industry to a cleaner, more efficient economic system. Clean energy futures is an elaborate, and in many ways clever, market based system for the commercial exchange of what amount to licenses to pollute, is transitioned in through a tax on the 500 heaviest emitters.
Hit commercial entities with a cost and, on the assumption that the hit hurts, they will do their upmost to avoid it. They are expected to be rational after all. Some will cop the cost and simply pass it on to their customers. But this will benefit their competitors who choose to become more efficient and change to less carbon intensive activities. So the market will sift the options and favour the cleaner ones. Exactly what is wanted.
In this case $25 billion over 5 years is the hit – evened out it is $1 million a year per entity – and that sounds like it should hurt enough to prompt a change. Some entities will become more efficient, trade to get the best price for what they must pay for and, eventually, transition to clean practices.
So we have a system to change the behaviour of… the 500 heaviest emitters.
Only why do these companies emit? For the majority it is because they supply energy or goods to the market at a profit. In other words they have customers, ultimately us.
In the formulation of the clean energy future policy, the $25 billion raised from emitters will go back to consumers through raising the tax threshold at a cost $15 billion and another $10 billion to support exposed jobs. This is so that should the emitters pass the cost of their permits on to the consumer or cut costs in the form of jobs, it is not too painful for those on the receiving end. Us again.
No collective hurt there. And so no change in behaviour.
Propping up the consumer also eases the pain on the emitters and reduces the incentive to change.
At some point it will be necessary to try and change our behaviours too; or even the most intricate of policy formulations will be a waste of effort and opportunity.