With its carbon tax, Australia is buying the ability to feel good about itself.
The tax is way too little to significantly change emissions in Australia simply
because green alternatives such as solar are still three to five times more expensive
than fossil fuels, not even counting the expensive need for energy storage and
new transmission infrastructure.
To the extent that the carbon tax will have any impact it will mainly shift
production to areas with fewer restrictions (say, China) and where production
is less efficient, likely leading to larger emissions. We have seen this happen
in the EU, which has reduced its emissions slightly, but just the increase in
implicit emissions in the imports from China since then has more than made up for
To live up to emission reduction targets, Australia is likely to need to buy
emission offsets from the likes of China, with actual impacts close to zero. We
have seen extensive evidence that many emissions offsets purchased by the EU
were bogus. The real problem with the carbon tax is not that can't be
academically justified but that it is not a significant part of the solution to
climate change. It creates a feeling of doing good while achieving very little,
and has led to a political polarisation on the issue, obscuring the real
problem, and solution.
The real problem is that green energy is way too expensive and not ready to
replace fossil fuels. Any realistic carbon tax right now won't be sufficient to
change that. To reach the much-vaunted 2C target would require a worldwide tax
on carbon of about $4000/tonne, or more than $9/litre of petrol towards the end
of the century, which is obviously not politically feasible in Australia, let
alone in emerging nations such as China.
Moreover, such a tax would lead to costs many times more than the problem it
was meant to fix. There is another way. The problem is that green energy is too
expensive. Fixing that by making fossil fuels so expensive no one will want
them is never going to work. Instead we should be focusing on making green
energy so cheap everyone will want it.
As a group of Nobel laureate economists concluded when convened by the
Copenhagen Consensus Centre to identify the smartest solutions to this
challenge, we should devote just 0.2 per cent of global GDP, roughly $100bn a
year, to green energy research and development. This would have a much higher
likelihood than our present approach of creating the framework for the kind of
game-changing breakthroughs needed to fuel a carbon-free future.
If we could create alternatives such as solar panels that are cheaper than
fossil fuels in the next two to four decades, everyone would switch and global
warming would be fixed. Not only would such a solution be much less expensive
than trying to cut carbon emissions, it would also reduce global warming far
more quickly. And, unlike carbon cuts, this is a solution developing countries
would be likely to embrace.
Australia is seen as a leader on climate change. It should aim to be a real
leader in solving the problem. It could do so by focusing on spending a lot
less than the burden of the present carbon tax, but spending it much more
smartly on funding green research. Spending less but spending it smarter could
bridge the gap between the government and opposition, and Australians would
save money with a cheaper climate policy that could actually work.
Bjorn Lomborg is head of the Copenhagen
Consensus Centre and adjunct professor at Copenhagen Business School.
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