CHARLES Sturt University professor Kevin Parton says the federal government’s decision to join the European carbon trading scheme in 2015 makes good economic sense.
Professor Parton, from CSU’s business faculty, believes an emissions trading scheme, where permits can be traded like shares in a stock exchange, is better than a carbon tax with a fixed price.
“Businesses producing carbon have the appropriate incentive to limit their production of carbon,” Professor Parton said.
“The carbon tax is less efficient or more costly than an emissions trading scheme (ETS), and the free-market ETS is more efficient and less costly than an ETS with a floor price, which was the original proposal by the federal government that was due to start in 2015,” he said.
Professor Parton said the floor price, or minimum price set by the government, was an unnecessary encumbrance in a scheme that could have led to gross inefficiencies.
“The abolition of the floor price will get us more quickly to where we should be by setting a price incentive to reduce greenhouse gas emissions for the least cost,” he said.
Professor Parton said the current fixed price of $23 per tonne came from what was the average European price at the planning stage for the carbon tax policy.
“Prices move up and down and the current EU price is around $10 per tonne.
“It could be higher or lower when the Australian ETS commences in 2015.”
Professor Parton said it made no sense for the Australian carbon price to be different from the established international price.
“Now we are fully engaged in the long-run international carbon market, industry is encouraged to develop new carbon-efficient technologies with the appropriate carbon pricing in place,” he said.