Robert Gottliebsen ... time to review the arguments for a carbon tax?

A decade ago, when the accountants were debating a new set of accounting rules, business was too busy to be active in the discussions. The result is an international mess. We could never have imagined our accountants would get it so wrong. Similarly with sub-prime, who could have imagined American bankers being so stupid?

When it comes to carbon trading, we are once again too busy running our businesses to realise what is happening. I fear that the greatest legacy of the 'ute-gate' affair will soon be a that it did not give Malcolm Turnbull and the coalition the breathing space to step back from the carbon trading issues and devise a better way to achieve the government’s objective, rather than simply raising questions.

And there is a much better way to achieve the government’s carbon reduction objective. The best place to start such an examination process is the Conversation section of Business Spectator where we have been deluged with some wonderful commentaries – including commentaries from people who question whether carbon is the issue. I urge all my readers and all politicians to be updated on how much the carbon facts have moved since the Coalition government first proposed carbon trading.

When I initially raised the issue I was tentative because I knew that I was probably too late to have an impact on the debate, but the Conversation contributions have convinced me of the virtues of a carbon tax. And two private emails have added a new dimension: one from Clunies Ross award winner and Cosmos magazine founder Alan Finkel; and a second from a Sydney merchant banker who knows just how much money his sector will make from carbon trading. This merchant banker, who has asked that his name be withheld, gives a new perspective on a carbon tax.

Finkel in the June issue of Cosmos says that of the $23 billion expected to be raised via carbon permits in the first two years in Australia, ”every dollar will be returned in handouts, with not a cent allocated to technology research or investment in building infrastructure capacity”.

“Cunning traders” will exploit the scheme’s complexity as they did with the complexity of mortgages and derivatives created over the past 10 years, wreaking havoc on the global financial system.

Finkel says: “Do we really need to create a whole new market employing hundreds of highly paid lawyers, traders, brokers, analysts, bookkeepers and others just to buy and sell permits – or hoard, speculate or profiteer from them?”

A carbon tax can raise money “simply and fairly” because governments already have agencies that collect taxes efficiently. “No matter how small the price impact, it would stimulate more behavioural change than if there were no price increase at all.

“At a modest $10 per tonne, the annual revenue in Australia would be $6 billion. This would help pay for measures such as phasing out coal-fired electricity – replacing it with lower emissions sources such as gas-fired power, or near-zero emission options such as wind, solar and nuclear.

“It could pay for research into new technologies to improve energy efficiency and behavioural change, and mitigate the coming impacts of climate change”.

But the merchant baker has a different way of using a carbon tax.

“We could ‘do something’ about reducing Australia’s greenhouse gas emissions by taxing them fairly heavily, encouraging pass-through of the costs to consumers and using the tax proceeds to compensate consumers by cutting income taxes and raising social benefits, with the net effect being revenue neutral", he says.

”This would increase the costs of energy, transport and other CO2 intensive goods and services enough to stimulate and accelerate research, development and introduction of non-polluting alternatives (by the private sector).

“It would give consumers the ability to pay the new higher prices and would reward everyone who, in the past or future, did or does something to lower their greenhouse gas emissions.

“Finally, it would relieve governments of the challenge of picking winners and distributing subsidies – something they have not been good at in the past – and it would remove the associated risks of bias and corruption on the one hand and excessive bureaucratic controls and delay on the other.

“If, as the sceptics think, time and progress proved this pollution tax to be unnecessary, it could be replaced by another tax if that was considered a better idea at the time.

”Sadly, our politicians and most media are obsessed with who is ahead this week in the never ending game of politics. None of them seems to care about what might be best for the future of the country”.