Tony Abbott's direct action climate policy bizarre: Ken Henry
FORMER Treasury secretary Ken Henry has described Tony Abbott's direct action scheme for tackling climate change as "bizarre" and predicted the Coalition will wind up implementing an emissions trading scheme.
Dr Henry said the public service had been advising Australian governments for the past decade that an emissions trading scheme was the least economically damaging way to satisfy their emissions reduction commitments.
Although a carbon tax achieved a similar outcome, the policy direction taken after the election was “bizarre”, with the government's strategy now being to purchase abatement with direct payments from government to industry.
“We've been reminded that buying abatement is like buying licences from irrigators in the Murray-Darling Basin for environmental flows,” he told a conference at the Australian National University.
But if the government was going to buy carbon abatement, it first had to create a licence or permit to emit and the government would then buy those permits.
“How would that be different to the Murray-Darling Basin? You're saying the only purchaser of emissions can be the government. You're ruling out the equivalent of water trading.”
“Why would you do that when (allowing private firms to trade their rights to emit) is where all the productivity enhancement comes from?”
Dr Henry said another example of the folly of making the government the monopoly purchaser of rights to emit could be found in the labour market.
Labour market deregulation does not raise productivity by reducing the supply of labour. It does so by making it easier for labour to move to where it is the most productive.
“Even if you don't want to reduce labour supply, you'd be in favour of labour market deregulation to increase productivity.
“By the time the government's scheme is legislated, it's going to look like an emissions trading scheme,” he said.
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