Dr. David Adamson, Senior Research fellow at The Centre for Global Food and Resources, shares his private submission to the ‘Review of Australia’s climate change policies’. The discussion paper can be found here and Dr. Adamson’s submission is shown below.
By David Adamson
The document is highly disappointing. Rather than critically analysing existing policies and providing leadership in institutional design and economic instruments to enable reform, the review document reads as a thought bubble begging for help. Climate change is essentially a negative externality derived from production. Australia has extensive policy experience in dealing with negative externalities via market based solutions, regulatory action, and command and control responses. Within this area, we know how property rights generate wealth, we know the consequences from initially giving rights to polluters or to those adversely affected by the pollution; and we know that while markets are not a panacea they offer the best solution.
By constraining the discussion by avoiding the effectiveness of past carbon pricing policy and/or the benefits from returning to a market based solutions (with the exception of purchasing international offset units) and rather be indebted to command and control solutions, it then limits how thoughtful debate can help in adding to the discussion. This limitation in scope then prevents the excellent policy design and implementation that has been the hallmark of the Australian public service.
The use of public funds to deal with the externality rather than making the polluter pays places downward pressure on economic growth. The opportunity costs associated with directing public funding at production issues subsidises allows private companies to gain, while limiting the quantity of public funding to be allocated to other areas. This opportunity cost in terms of economic activity, jobs, and social and cultural services, is not accounted for, within this document or the current strategy.
The on-going use of subsidies (e.g. mining subsidies and fuel scheme rebates) that encourage large carbon polluters (either energy export or transformative) to operate and expand operations is also avoided within this document. If we are encouraging the development of resources that generate negative externalities anywhere in the world, then the opportunity costs for reallocating additional funding towards mitigation and adaption in Australia, must also be accounted for. If policy sends the world along a new higher carbon emission path, than what would have occurred without the development of those resources, then we are adding to the domestic costs of climate change adaption and mitigation.
The current economic instruments and policy design has placed Australia on a higher cost path than is necessary to deal with an externality. The failure to create a discussion that acknowledges this choice, is unfortunate.
 Dr David Adamson is a senior researcher at the Centre for Global Food and Resources, The University of Adelaide. However, this is a private submission and the views expressed within, should not be assumed to represent the views of the University of Adelaide.
This post was orginally published on Dr Adamson’s blog, where you can read more about his research.