Carbon tax ‘stage act’ could well collapse

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At times, I mentally compare the rules governing economics with certain laws of physics. As a physicist, I can see parallels, but I also know that one cannot push these analogies too far.
At times, economics can be compared with some laws of thermodynamics: heat flows where it ‘wants’ to flow, and it will move from hotter to colder – one cannot force heat from a colder object to a hotter object.
One cannot force economic equations that will just not work.

Some economic factors are so artificial that pursuing them is really asking for trouble. At some stage, the reality, or, perhaps, ‘unreality’ bubble will burst. A state of affairs that falls squarely into this domain is the carbon trading game, which is now so much part of the international climate change stage show. Under the carbon trading scheme, people do things like renting out clean air above a piece of ground in South Africa to somebody in Germany so that a German company can emit more carbon dioxide (CO2) gas into their air.

The underlying logic is that, if CO2 is taken out of the air in South Africa, then Germans can put an equal amount back into the air in Germany, and it sort of balances out on a global scale. This is known as carbon trading. The crazy economics of carbon trading now brings Australian camels into the picture. The Australian government seems to be falling over itself to be very green so that it can shine with a bright political glow.

The Australians have a scheme for a raft of legislation which they have been vigorously debating for some time now, which they call the Rent scheme, the acronym derived from the Renewable Energy Targets Bill.

Under this Bill, power companies would be forced to produce 20% of their electricity from ‘renewable’ sources. Generally speaking, in economics, this type of statement means: ‘forcing power companies to produce electricity at a higher price’. If supplying bulk electricity from dilute intermittent sources, such as wind or solar, was really profitable, power companies would have done it without a law instructing them to do so.

I have visited Holland and, in my tourist mode, have visited the famous windmills of that interesting country. Those windmills were a mainstay of Dutch energy supply for many years during the days of wooden sailing ships. Now some traditional Dutch windmills are kept operational for reasons of nostalgia and tourist income.

The tour guides tell visitors that, these days, the Dutch use efficient electric motors, on line to a power station, to pump water out of their low-lying lands. One imagines that, with a couple of centuries of wind power experience behind them, the Dutch know what they are doing.

The Australians have another potential piece of ‘carbon’ legislation under fierce debate, the neatly named RAT scheme, which is the Ration-n-Tax scheme. In essence the RAT scheme will tax companies for emitting CO2.

Under the RAT scheme, there are various taxation rates defined in dollars for each ton of CO2 emitted.

Taxing CO2 emission really worries me because it just feels so artificial and contrived. Do you add an export tax to a highly populated country because its citizens breathe out more CO2 for each square kilometre than some sparsely populated country?

Now, back to Australia – Prime Minister Rudd apparently wants to spend A$19-million to shoot one-million wild camels. This sounds like a cross between the historic Red Indian buffalo hunts of the American Wild West and Lawrence of Arabia.

Australian organisations, such as the Carbon Sense Coalition, now ask what is to be done with the meat from the one-million dead camels, because, if the meat rots where it falls, then, under the RAT scheme, at a carbon emission tax rate of A$40/t, the carbon tax on one-million rotting camels would be A$28-million.

Then one has to add the carbon emissions payable on the helicopter exhaust gas, as the choppers fly around shooting camels, like Red Indians on horseback at a buffalo hunt. The actual cost of the helicopter operation is apparently budgeted at A$19-million. So the whole camel cull comes out at A$50-million, if one is honest about it and adds in the carbon tax.

Why should power stations be taxed for CO2 emissions but not the camel cullers or, for that matter, beer brewers, who induce CO2 production in the beer fermentation process? The whole carbon tax stage act seems such a contrived act that I have the feeling that it could well collapse. Let us see what happens at the carbon tax bunfight scheduled for Copenhagen, in December.

By: Kelvin Kemm

Edited by: Martin Zhuwakinyu

Tagged as: carbon emmissions, Carbon Tax, Carbon Trading

Posted on September 13, 2009 · in Global