Well, it fails completely. As I set out yesterday, the Rudd/Turnbull ETS is about redistributing wealth rather than erecting new plants. You can see this by following the money.
Rudd and Turnbull estimate that on the basis of a $26 per tonne carbon price (it could be closer to $35) the government will raise around $114 billion between 2011 and 2020. That’s money that Rudd and Turnbull plan to extract from the business community which will give businesses less cash flow to erect carbon reduction plants.
Rudd and Turnbull will give about 47 per cent of that $114 million or $54 billion, to 4.3 million Australian households who are on low or middle incomes. This huge proportion of the population will therefore have no incentive to reduce carbon because they are fully protected. Indeed 2.6 million of the households will receive assistance equal to around 120 per cent of their overall cost increases so they are better off. In other words Rudd and Turnbull are using the ETS legislation as a massive income redistribution exercise to boost the income of lower income people. Many in the community would say that boosting lower income levels is a good thing and that’s fair enough. But to make that a central part of the carbon legislation is just plain stupid.
The rest of the money is sprayed around industry in accordance with their lobbying influence over Rudd and Turnbull. Clearly the amount to be distributed is less than that which has been raised, so we have lots of losers. Exporters must buy permits, so making their products less competitive. Importers do not have to buy permits so it makes sense to make goods in countries that have no ETS laws.