Politics v market forces

So here is an argument in The Conversation:

A recent agreement between Australia and China to cooperate on climate change could be a tipping point that makes the Coalition’s pledge to repeal the Carbon Pollution Reduction Scheme unachievable.

Under the agreement, Australia and China will establish a carbon trading experts group and conduct joint research as China moves towards its own national emissions trading scheme after 2015.

Given the Chinese commitment to carbon pricing and the role of Australian exports in their carbon market, it would be stupid for Australia to turn its back on the useful discussions enabled by the bilateral arrangement on carbon. The Chinese arrangement will be mirrored over time with our other trading partners. No rational government would undermine these arrangements.

I think they’re dreaming – but let’s assume for argument sake, that they are right. What is the proposed level of the Chinese carbon tax?

But the mooted starting carbon price of $1.55 (10 yuan) from the world’s biggest carbon-emitting economy has reignited business concern that Australia’s $23-a-tonne starting price from July 1 is too high and will damage business competitiveness.

It’s not just the Chinese who think carbon shouldn’t be expensive – the European markets think so too.

The European Union carbon market collapsed overnight after its parliament narrowly rejected a plan to prop it up by withholding permits, putting Australia’s emissions scheme under a cloud.

The price of carbon plunged by around 50 per cent to $3.23 and is predicted to fall even further to as low as $1.25 after the European Parliament rejected a proposal – by 334 votes to 315 – to postpone the sale of 900 million permits.

Markets are sending very clear signals – the politicians and dreamers are on route for a mugging by reality.

This entry was posted in Economics and economy, Global warming and climate change policy. Bookmark the permalink.

26 Responses to Politics v market forces

  1. Infidel Tiger

    Swanny’s budget projections should be fun. The $29 per tonne is looking about as likely as a surplus.

  2. Leigh Lowe

    Should “Chain” read “China”
    It mite be the prescriptive tuxt on the i-pud agin.

  3. Sinclair Davidson

    Heh – that typo is in the original but I’ve corrected it in the cut and paste that I did.

  4. Milton Von Smith

    And don’t forget: our carbon tax is scheduled to increase by a further 5 per cent ($1.15) on July 1 2013.

    So our tax *increase* will almost be equal to the *level* of the future EU and Chinese prices.

    What a complete joke.

  5. Kingsley

    Given what Euros and Chinese are pricing carbon at is it not more accurate to say that they have dismantled the system before Abbott even gets a chance too?
    So really it was Combet and Gillards decision to link to these other markets that killed the system, what Abbott may do in the future is now largely academic.
    Strikes me they have saved him the bother, he’ll still have to deal with the now absurdly generous compo package which he may have to solve simply by saying sorry pensioners but you have effectively received some years worth of CPI uplift in one go you’ll have to make do with current levels for some time

  6. Lazlo

    Combet:

    He said the carbon revenue slump “is another way the global financial crisis has hit the budget”.

    10/10 for chutzpah as well as bullshit artistry

  7. Jim Rose

    Good to see that the left now thinks trade agreements are sacrosanct and cannot be undone by future governments

  8. Harold

    As if China give a stuff about climate change; China wants to reduce pollution because they’re choking on it in their cities. Sure they’ll still wear whatever medal our useful idiots throw at them.

  9. Gab

    A recent agreement between Australia and China to cooperate on climate change [.]

    What, no mention of a recent $2.5 billion deal between China and Russia for coal? That would spoil the narrative.

  10. Walter Plinge

    Reader Mudcrab over at Tim Blair:

    This is what happens when you try and artificially create a market for something that in practical terms doesn’t exist.

  11. H B Bear

    “Treasury Tales and Other Stories” by Maxwell Goose.

  12. Bruce of Newcastle

    Gillard was hyping this up when she had her pic taken with Mr Xi this week. Last week it was John Kerry.

    I got a distinct feeling both times that Mr Xi was patting them on the shoulder kindly, smiling and saying ‘yes, yes we’d be happy to sell you solar panels and wind turbines and everything else you need to send your economies into the toilet’.

    If, unlikely as it seems, the Chinese do bring in a carbon tax, I expect word will go out quietly from the Central Committee that they won’t bother to check to see if anyone actually remembers to pay it. Chinese people are not stupid, even if Aussies and Americans are.

  13. Bill

    Following that overnight EU fiasco there is now a very real chance that no carbon market will exist anywhere in three or four years time. Carbons have been enslaved too long.

  14. Rabz

    Carbons have been enslaved too long.

    Carbon Dioxide has certainly been unfairly demonised for too long, I tells ya!

  15. Pedro

    “Dreaming” I think the word you’re looking for is wanking.

    What is amazing is the parallel universe of the tax spruikers and supporters who can’t seem to see or admit the farce we have. You can’t expect anything else from the greens and ALP, but for other commentators it is sheer dishonesty.

  16. Fleeced

    The dollar loaves are pretty good value… don’t stay fresh as long as Wonder White, but the latter is $4 a loaf!

    I don’t eat as much bread these days, but it’s amazing we get this stuff so cheaply without a government run Universal FoodCare Program.

  17. Norma

    Pickering has excelled himself with a cartoon on the carbon price. $4 knickers around her ankles.

  18. WhaleHunt Fun

    No rational government would

    When will these dribbling cretins passing off as journalists understand that I do not give a Greens Party member’s internal organs about rational. Rational is so far above this government that it is out of sight. Right now what I want is for the LIES to stop. I want a government that says it will root the tax to actually bloody root the tax, irrespective of smart alec know nothing lowlife journos. I want honesty first and when the Liars are deleted, then we can think about rational.

  19. big dumb fu

    Slugging our economy with a carbon tax many times above the global carbon price can only be considered an enemy action. An act of pure treason. A trial is required and the perpetrators to be brought to justice.

  20. brc

    Carbon markets are just the latest in a longline of attempts to create money out of thin air. Just print up some certificates and you can sell them – money to burn!

    Unfortunately for those that get involved, they fail to realize that politicians set both the demand and the supply. It’s like a third world unpacked currency that you can only spend on tinned durian or something. A worthless piece of paper printed to buy something with zero real world demand.

  21. Markets are sending very clear signals – the politicians and dreamers are on route for a mugging by reality.

    I find this a very strange comment and is this suggesting the markets are the Chinese and European governments? Especially strange considering the comments I get about taxis being an artificial market created by government. OK if the post is about being ironic but should make it totally obvious to those who are a bit slow like me.

  22. I don’t eat as much bread these days, but it’s amazing we get this stuff so cheaply without a government run Universal FoodCare Program.

    The US is working on this problem and once they have solved it we may copy it. It has great bipartisan support in the US. To quote some American the policy is seen as “we feed the people”.

  23. brc

    I find this a very strange comment and is this suggesting the markets are the Chinese and European governments? Especially strange considering the comments I get about taxis being an artificial market created by government. OK if the post is about being ironic but should make it totally obvious to those who are a bit slow like me.

    It means those who try and conjure up a synthetic market from thin air are always disappointed when reality re-asserts itself. A market where both the demand and the supply were created by government dictat is completely doomed. The European govnemrnts have found this out.

  24. NoFixedAddress

    if we are so hunky dory with China as the Right Honorable Prime Minister of Australia, the Right Honorable Ms. Julia Gillard tells us!

    then we will tie our Carbon Pricing with theirs.

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