Oct 19, 2009

The Rudd government's biggest mistake

THE first and most important thing to note about Kevin Rudd's emissions trading scheme is that it is a tax.

It's not called a tax, but if it waddles like one, quacks like one, and most pointedly raises money like one, it's a tax. And not just any old tax -- it's a huge and continually growing tax.

I am convinced that the Rudd government's plan to introduce an ETS, using its current CPRS legislation, is an enormous mistake. Much worse than anything it has done so far, or is ever likely to do in the future.

The government is determined to introduce a massively complicated scheme to make emitters of CO2 pay extra for the right to emit, compensate some parties at different rates for different lengths of time, and increase the costs of many industries in our economy. And it's going to leave the price of CO2 emissions to commodity traders and merchant banks to decide. It's going to cost our economy a fortune - budget papers estimate that it will bring in the same amount, in 2012, as a 25% increase in the GST.

And, the government is intent on introducing its scheme as quickly as possible. It's in a rush for two reasons. First, because people haven't really caught on to the full ramifications of the policy yet, and second, because Kevin Rudd really really wants to be able to show up at the Copenhagen conference with the CPRS feather in his cap.

People haven't really caught on to the full ramifications of the policy yet, because it has such a clever name. It's called a Carbon Pollution Reduction Scheme. It sure sounds like a reasonable enough idea. The only problem is that the title is a lie - both in terms of the words it includes and the words it excludes. The most problematic inclusion in title is "Pollution" - because it's just not true. Carbon Dioxide (we'll assume that "Carbon" is just an innocent abbreviation for Carbon Dioxide) is not a pollutant. Check it out for yourself. Click here to go to the official list of pollutants in Australia, as produced by the government. You'll find CO2's cousin - Carbon Monoxide on the list. But CO2 doesn't make the list. Because it's not a pollutant. It's a gas that's essential for all plant life. Calling CO2 pollution would be like calling Oxygen pollution. But the Rudd government likes to use the word pollution, no matter how misleading.

The thing the title leaves out is the word "tax". The scheme is effectively a tax. If it was actually called a tax, people would be a lot more concerned about it. They would ask questions like - "how much more expensive are my groceries going to be when the scheme comes into effect in a few years?" These are questions the Rudd government doesn't want to answer, and can't really answer - because they are going to leave the pricing of Carbon Dioxide to the market to determine. That means they actually don't know how much more expensive they will be making things. It's kind of convenient too, because when things do become a lot more expensive they can simply blame the very market they empowered to decide the price.

The Carbon Pollution Reduction Scheme is effectively a sociopathic GST on steroids with a personality disorder. But of course the government is very happy to rush it through as a "Carbon Pollution Reduction Scheme". That way Kevin Rudd can show up at Copenhagen and impress all the world leaders with his quick action and visionary plans.

Result: world leaders impressed, Australian people shafted.

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