“A number of economists have climbed onto the global warming bandwagon in order to promote so-called market mechanisms to reduce carbon emissions. Emissions trading is a popular proposal. All of these schemes are variants on the market for taxi-cab licences. Every major city in Australia has a regime of taxi licensing in which the number of taxis allowed to operate is limited by State regulation. This creates a scarcity factor which increases the value of the taxi licence, and these licences are traded for sums in the order of $250,000. If the regulation requiring taxi drivers to have a licence for their taxi was abolished (as happened in New Zealand) the value of the licence would be zero.
These licences constitute a tax which has to be paid by taxi users. Emission licences for power stations or petrol refineries would operate in the same way. What is not known is how great the tax on carbon emissions would have to be to ensure that electricity users would reduce their consumption by the desired amount. In the first instance, large electricity users such as aluminium smelters and fertilizer plants would relocate to other countries. The Australian motor car industry, already under threat from international competition, would close. And the ripple effect would spread out through the Australian economy causing unemployment first in one industry and then in another. The impact of such price increases and consequent economic dislocation would have political consequences. No [Australian] government which introduced such a regime of carbon taxation would survive an election, but the damage that would be wrought in the meantime would be long-lasting.”
Of course the European Union has introduced a system of emissions trading and at least some European governments have survived. I don’t know how many, or how many industries have moved to other countries?
In September last year a glass factory in Valencia, Spain, was closed at least temporarily, because it did not have a valid permit to emit greenhouse gases. Spain is apparently not doing so well in terms of meeting its emissions targets under Kyoto with emissions about 50 percent above levels in 1990.
There was an interesting article in yesterday’s Financial Times explaining that in Britain, under the mandatory emission’s trading scheme, companies are issued with allowances for each tonne of carbon dioxide they may emit. But that Britain hasn’t determined its overall plan for the 2008-2012 period, so I guess glass factories in Britain won’t yet be able to plan for the period 2008-2012.
The European Union Commission is apparently already in dispute with the British government over its attempt to raise the amount of carbon dioxide British businesses can emit under the first phase of the scheme which runs from 2005-2008.
Would this be equivalent to Tony Blair wanting to increasing the number of taxi licences?