The Grattan Institute has let fly a further salvo in its protestations of belief in capitalism and the free market. Its accusation that Tim Wilson and the IPA were grossly inconsistent in rejecting the cap and trade system of carbon emission rights (the ETS) was smartly dealt with by Tim, and utterly demolished by Terry McCrann.
Its energy spokesman, Tony Wood has said that rejecting the ETS is only logical if one rejects the story of human induced global warming. As an Al Gore trained climate alarmist Mr Wood clearly doesn’t support that position.
The Grattan Institute’s faith in markets is massively inconsistent.
Their reports on energy are laced with proposals to use some forms of market incentives or taxes interspersed with finger-wagging about market failure. In, “No easy choices: which way to Australia’s energy future?”, they pontificate “Thus there is “market failure” whenever a private actor does not take on socially desirable costs because they won’t result in commercial returns”.
This ideology leads them to supplement their depicted market approach with a host of other policies. Thus they argue, “The carbon pricing scheme, while a good start, is not enough.” You see those pesky financiers seem to want premium returns for risky ventures even though the deities involved in policy advice know that the returns are in the bag. And “first movers” may not be sufficiently rewarded. So, among other actions, “government should support demonstration plants of any technology sufficiently developed that commercial application is within sight”. But to the leftist institute, this seems to square with notion of market mechanisms in spite of some right wing libertarians unkindly suggesting they are winner-picking measures.
In some areas, like solar energy, the costs are amplified, according the Grattan Institute, by a lack of network connections and low skills in designing large scale solar facilities within Australia. So the answer is for the government to provide these – again a subsidy disguised as some measure of levelling the playing field.
And they also forcefully argue against market solutions, with the statement.
“A long-standing body of research literature shows that consumers and businesses systemically make poor decisions about energy efficiency and miss opportunities to save money.”
So market mechanisms must be supplemented by other regulations that replace the ignorance of consumers about what comprise their best interest with the wisdom of bureaucrats better able to gauge that interest!
This is supposedly compounded by occasions when the purchaser is not buying on her own behalf, as is said to be the case with a tenant and landlord. Unfortunately the Institute fails to mention other multitudinous cases when a seller or renter is taking decisions on behalf of the user. If the energy saving breaks down with a landlord-tenant situation, it surely also fails where car hiring is concerned and it is problematic in all purchase from bread to houses where suppliers are taking the vast bulk of decisions on composition for the consumer.
The Grattan Institute does not seem to realise that in supplementing the market solutions they are distorting them and wrecking the efficiency that market based measures like a single price or a tradeable right allow to evolve. If an ETS is in place for emissions but one means of fulfilling the demand is through wind power which already receives a 200 per cent subsidy, we have a massive distortion. We have another distortion if the government also decides to subsidise the transmission of wind generated power with lines that the generators don’t pay for. And further distortions are in place if governments give additional subsidies for long life light bulbs, or force (rather than encourage through the universal price) energy savings standards on new housing.
The legion of exclusions to the Grattan Institute’s preference to market solutions would lead a cynic to believe that they see no merits in market solutions, only in promoting them selectively to support their pre-determined policy preferences!
Above all, the Grattan Institute’s market based approach concerns Australia’s carbon emission policies. Of course, if carbon emissions impose costs this is a problem for the world. The solution cannot be left to a single country, still less one that contributes just 1.4 per cent of the total emissions.
It might be said, and doubtless this has featured in the Grattan team’s rhetoric, that if one country takes the lead all will follow. Such hollowman dictums never had any credibility when the Grattan’s financier, the Rudd and Brumby Governments were first espousing them. History has undermined their credibility empirically. Only one rather sick jurisdiction, the EU, continues to persist with anything but token abatement measures, and as we have seen the EU “market” price is less than a quarter that which the present government imposed on Australia.
The Grattan Institute has purloined $30 million from the taxpayer to promote its wolf-in-sheep’s-clothing of increased regulation posing as less. The money has clear negative value-added and it should be handed back.