Leave the ETS on the shelf

The government’s ETS was a tax on small business to pay for the carbon dioxide emissions of big business

Small businesses should be hoping prime minister Julia Gillard, if re-elected in August, leaves the government’s scheme for trading emissions of carbon dioxide on the shelf where her predecessor, Kevin Rudd, put it.

The scheme that opposition parties thwarted in the senate last year was laden with carve-outs and hand-outs for big emitters. Households got some compensation, but small businesses got almost zilch.

As a result, the government’s ETS was a tax on small business to pay for the carbon dioxide emissions of big business.

Some argue the ETS was good policy distorted by concessions for big emitters added to the legislation in an ultimately futile effort to win over enough coalition senators to pass it.

This is naive. An ETS is a lobbyists’ charter. Only government bureaucrats and those with a financial interest in emissions trading – such as big companies, “green” consultancies, investment bankers, and the like – can understand it.

In other words, with ordinary people and many journalists in the dark, the lobbyists can get to work winning concessions for their clients. And, in a lobbying war, small businesses inevitably lose out to big businesses.

To its credit, the coalition, should it win government, intends to toss the whole idea of an ETS into the bin of failed policies. Unfortunately, it plans to lavish $3.2 billion in subsidies, aimed at reducing emissions by 5 per cent by 2020 based on 1990 levels, instead.

For example, businesses that reduce their emissions below their historic average will be able to “sell” this reduction to a proposed $2.6 billion emissions reduction fund.

Again, the coalition will be raising taxes from small businesses in order to subsidise big emitters.

A straightforward tax on carbon dioxide emissions, as many now advocate, is less likely to be captured by big business-lobbyists and so would be in the interests of small business-operators.

However, as Australian Chamber of Commerce and Industry economics director Greg Evans says, an international agreement should precede any increases in the local carbon price, which he notes Australia already has in the shape of a renewable energy target.

Indeed, one estimate, by Alan Moran of the Institute of Public Affairs, puts the carbon price equivalent of the 20 per cent RET at more than $13 per tonne of carbon dioxide.

In other words, any explicit carbon tax would be on top of this existing $13-a-tonne de facto levy.

Both the government and the opposition are on the track with climate change policy. Small businesses should be on high alert during the election campaign over further half-baked proposals that would land them with the bill for the emissions of others.

BRW

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