Emissions taxes and trades

This is a guest post from kiashu

Here in Australia Garnaut, an economist, is undertaking a study on what to do about Australia's greenhouse gas emissions. He has a website about it, and has released a draft report on it. He is in favour of strong action, though what he calls "strong action" and what you and I call "strong action" may be rather different things.

There are two basic ways people think of for dealing with emissions of unpleasant substances, aside from banning them entirely - tax them, and trade them. In taxing them we say, "emit as much as you like, but you have to pay for it." The theory is that people will reduce spending on things with that cost attached to them, thus reducing emissions of it, and that the revenue raised can be spent on dealing with the problems from it. In trading them we say, "you can only emit this much, and you must pay for it." So the government sets a target amount for emissions, creates permits for that much, and lets companies buy and sell these permits as they wish.

The government and Garnaut are in favour of an emissions trading scheme (ETS). I'm not. Remember the point of our schemes is to stop carbon emissions. We did not abolish outright slavery by setting up a slave market. That only encourages it. (Of course it's still not entirely abolished even today, but fewer people as a proportion of the world population are enslaved than ever before, and not because someone established a cap and trade system for slaves.)

The first thing is that in any scheme, you want to cover as much of the emissions as possible - especially if we’re talking about an 85% reduction by 2050 (to avoid more than 2C warming), obviously we have to deal with more than 85% of the emissions. Which covers more of the emissions, trading or taxing?

Because of arguments about how much this or that emits, and because of the temptation to exclude certain favoured industries or products (like petrol), a trading scheme is likely to cover less of the emissions than taxing would.

If you look at a picture of the different contributors to global emissions



then you see that, rounded to the nearest percent, the contributors are,

  • Burning fossil fuels, 57%
  • Deforestation, 17%
  • Livestock & rice-growing (methane), 14%
  • Excess fertiliser (nitrous oxide), 8%
  • Cement-making and chemicals (”other CO2″), 3%
  • Fluorine gases, 1%

The ETS aims only at the fossil fuel burning, only 57% of the problem.


The auction system also gives the government a financial incentive to not lower emissions in total. We’ve already seen in Australia how with taxes on gambling and commodities governments have been able to reduce income and company taxes, and are thus reluctant to reduce gambling or the extraction of mineral resources. There’s a danger of that with an ETS. They may be unwilling to reduce the total permits traded, and indeed will have an incentive to increase the traded permits to increase revenue. "Let them emit just a little bit more, we can reduce income taxes and get more votes..."

Further, since they’re auctioned in a free market even if willing the governmments may be unable to reduce them. They’d have to buy them back, higher demand means the price rises, so in a buyback the price rises; this limits financially how much the government can buy back, thus preventing a great decline in emissions.

And again, the ETS covers only fossil fuels, thus only 57% of the problem - and may not even cover petrol (politically untenable to make the price go up at the bowser), so less than half the problem is being dealt with.

If we had a carbon tax, it could cover a larger part of the problem. We could simply tax all fossil fuels or fossil fuel derviatives (artificial fertilisers, etc) the moment they come into contact with the economy (are dug up, imported, etc).

This would hit the 57% from burning fossil fuels, hit the 1% fluorine gases (they use hydrocarbon inputs), and about 4% or half of the nitrous oxide emissions (since they come from artificial fertiliser), bringing us up to 62%.

This would have flow-on effects to the methane from livestock, since holding so much livestock is only possible with fertiliser-boosted grain, pasture and oilseed crops; pessimistically the 7% from livestock might only halve to 4%. Thus, 66%.

By having a carbon tax on timber and wood products, we could also hit the 17% deforestation, bringing us to 83% of the problem dealt with.

That would leave us with 3% from cement-making and other industrial chemical processes, and 14% from land use issues, still a bit short of dealing with 85% of the problem. Nonetheless it would take us much closer than an ETS.

If emissions declined, the government could simply raise the carbon tax on the remaining emissions to get the same revenue; thus avoids the incentive to encourage emissions inherent in the ETS. If emissions rose despite the tax, again the government could increase the tax, and in any case it could spend the extra revenue on renewables, afforestation and so on.

Garnaut favoured ETS because he is an economist, and economists always favour solutions which give us more things to buy and sell. That is because the GDP, the "gross domestic product" is a measure not of the total production of the country, but of the money value of all buying and selling. So if you spill oil and have to pay $50 million to clean it up, the economy "grew" by $50 million, just as it would if you spent $50 million on a school, or hospital, or prison, or security for a visit by the Pope. So putting in place an emissions trading scheme allows us to say that the economy is growing. "Look, they bought $50 million of emissions permits, we are all $50 million richer!"

My prediction is that if an ETS comes into place, over the next decade Australia's emissions may rise, they will at best stay static, and they certainly won’t reduce even a bit.


Cross posted from GWAG.

I've been following the debate about Garnaut and ETS in the Australian newspapers. A lot of trees died for that report which is a pity. The precision assigned to numbers out to 2100 is just ludicrous - 4.8% growth impact not 4.7% or 4.9%, 9500 catching dengue fever not 9000 or 10,000. I dismiss it as a piece of clever nonsense just as I did the Stern report. These guys can't tell us what GDP will be in 3 months let alone in 92 years time. Stand by for the backlash.

I've got a job for you, Garnaut, valuing sub-prime mortgage backed securities.

I'm sure Garnaut has said he will try to cover CO2 equivalents as much as possible at upstream sources. For example Burrup Ammonia would have to pay carbon charges on their natural gas input and presumably again on the N2O emission potential of nitrogen fertiliser before it gets shipped to farm suppliers. Coal or oil used in cement manufacture can be covered by the ETS at the mine/refinery gate before it even gets to the cement works. Garnaut said forestry and farming would be excluded I'd guess because the NZ scheme looks like it might turn into rural pork barrelling. The full report is 600 pages long so finding the exact paragraphs could be tricky.

As to tax vs trade I prefer trade. A carbon tax will overshoot or undershoot and require constant adjustment. A stringent cap hits the physical target 1st time and the spot CO2 price will reduce in a recession unlike a fixed tax. Carbon tax is clearly regressive as the rich can afford to pay it more easily though some would argue trade is little better. Another moot point is that the dodgy offsets which bedevil trade schemes will re-emerge as deductions in carbon tax. Remember that while the European ETS is weak as a result of free permits and clean development offsets other schemes for global CFCs and US sulphur dioxide have been quite successful.

I've not heard that the "end carbon dioxide equivalents" will be the basis of the trading. That'd lead to endless whinging from the farm lobby (nothing new, but still). For example, you only get a lot of nitrous oxide emissions if you overapply the nitrogen fertiliser - which almost everyone does, so that about half of it is just wasted. But every farmer will pop up to say, "but I don't waste it, I'm totally a wonderful husbandman to the land, not like all those other buggers." So how do you count the emissions? Of the natural gas going to make the ammonia? Of the fertiliser properly applied? Of the fertiliser with ordinary bad application?

For cement manufacture, coal or oil used in it isn't the issue. Cement is made by roasting limestone in an oven which drives off carbon dioxide - so even if you had some humungous solar oven, you'd still get CO2 coming from it, it's a chemical process.That 3% or so comes from that chemical process, the energy for heating the ovens comes in under other categories like "burning fossil fuels".

Whatever we do, tax or trade, it'll require constant adjustment. What happens if they don't emit as much as they bought permits for? Or more? What if it turns out after ten years that our total emissions are unchanged because we excluded so many things? What about when Alan Jones gets on the radio to say that so-and-so is "doing it hard" and the government doesn't care? I mean, that's just the way government works, there's constant fiddling with details. So we can't really have that as a particular objection to a tax or trade.

A tax would need constant adjustment, specifically raising. That's because people react to higher or lower taxes or prices by adjusting their spending; but after the change has been around for a bit, they've adjusted. See for example the GST - it depressed consumer spending for the better part of a year, but then it all bounced back and up. It'd be the same with a carbon tax. To get continuing reductions in emissions you'd have to be raising the tax year to year.

If a business pays too much for each permit or buys too many they can resell them provided the 'use by' date hasn't expired. That should drive down the spot price. Conversely if they are caught short they can offer to buy any unused permits from the guvmint or from other businesses. That would be a sign that the economy is coping. As always some industries would do it easier than others.

Garnaut talked about non-CO2 ghg's in his Press Club speech.

To get continuing reductions in emissions you'd have to be raising the tax year to year.

Doesn't work. Unless you abolish representative democracy, no government is going to give itself the responsibility of increasing a tax every year. It's the fundamental reason why the Reserve Bank is charged with independently setting interest rates. The politicians can avoid direct responsibility.

With carbon emissions it is a completely different dynamic. There is no social benefit dividend from less emissions. There is only a vague and somewhat faith based belief that lower emissions are necessary for the continuation of life on Planet Earth.

I don't believe that either a carbon tax or an ETS will do much to reduce emissions. But of the two options the ETS can at least be programmed to sell fewer permits each year. I presume that an emitter will need to purchase permits for an arbitrary amount of CO2 or other gases eg 1 tonne and once they have emitted that amoutn they will then have to buy another permit. It is the government presumably that will have control over the total amount of emissions permits available on the market each year and they will simply release them on the market.

The problem with this system is that it is open to fiddling by the government and the emittters. The coal fired power stations may simply run out of permits and test the system by deciding to shut down rather than buying overpriced marketabel CO2 permits. The state governments would be go apeshit if this situation occurred and then the feds would be pressured to release "special emergency carbon permits" over and above the allocation. I can just see a big mess happening within months of the start of an ETS.

The TERMOIL solution is to restrict the total amount of coal gas and oil that is available for any use. Let the market decide what the value of a restricted supply is and don't let speculators corner any futures/options etc. The only people making money from FF will be those who produce it. And the governemtn can tax the shit out of them and redirect that into renewables. The market will also have bigger incentives to bring renewables on line knowing that cheap FF are a thing of the past. The government can then legisltate once and decide now the total volumes of FF in each of the next 50 years which gives the market certainty, will increase the value of our remaining FF, and will reduce emissions to achieve the targets. After that we just get on with it and make the adjustments happen.

I think a carbon tax would be more politically acceptable than most as it's indirect in terms of everyday life. Few people buy bulk amounts of crude oil, raw coal, and natural gas. All of them are processed in some way before everyday consumers use them.

So that raising the tax on them would have an effect on prices, but it'd be indirect and the government would be a step removed from it, like payroll taxes, import tariffs and so on.

You're right that it's not easy to raise any tax, but it'd be easier to raise a carbon tax than an income tax or GST. It's all in how you present the thing. For example, when Canada introduced a GST, you'd buy something and there'd be the price - and only at the counter would they calculate the state and federal sales tax on it. So every time you bought something you were aware of just how many dollars of tax you were paying, which really pissed people off. Thus their federal government went from something like 157 seats to 3 in the next election. Our own federal government in Australia learned from that, and made it law that all prices must include GST.

I'm sure there would be similar lessons to be learned with a carbon tax, that there'd be ways to present it that annoy people, and ways that they don't really notice it.

The annoyance would also be balanced out if they made sure there were sufficient options for people. For example, currently the rate for coal is something like 15.5c/kWh, and for wind it's 21.0c/kWh. If there were a carbon tax of 10c/kWh, then people would say, "oh well, I can change to wind and it'll be cheaper." Likewise if there's substantial investment in public transport. "Hmmm, petrol is $3/lt, but the bus is only 400m away and there's one every five minutes."

A carbon tax though would raise the price sure, but would it raise it enough for people to really change their behaviour significantly enough to actually reduce emissions. Did the GST stop people from buying stuff? No. And the way pricing was deliberatley designed to conceal the tax was a bit sneaky but the GST was never designed to act as a brake on people consuming. Thats why they didn't call it a consumption tax.

Carbon taxes have an entirely differnet purpose. Their primary goal should be to get the market to change its behaviour, not necessarily raise revenue. In order to do that you have to take the revenue raised by the carbon tax and effectively destroy it. You can't pump it back into the economy as compensation to the poor consumers and industry who paid it in the first place. The same goes for any money raised by an ETS. Compensation to the miscreants that are the beneficiaries of the pollution is not going to encourage them to change their ways.

Turning off the power or gas after 28 days in the month becasue they have used up their ration, would get their attention a lot faster. But alas we are not the elected PTB so the Termoil plan must remain consigned to an internet footnote here on TOD.

(BTW I think that your personal plan of reducing your own carbon footprint, driven primarily on the morality rather than the economics is is where the greatest impact is to be had.)

The GST wasn't designed to reduce consumption, nonetheless it had that effect for the first several months. This is the pattern with all taxes whatever the ostensible purpose: when you introduce or raise the tax, people drop their spending, when you remove or lower the tax, people raise their spending.

Logically, then, you'd have to bring a carbon tax in and increase it year by year until you'd reached your overall carbon emissions target.

With the revenue you should invest in options to the things which emit carbon. Obviously it's no use making petrol or coal more expensive if people have no public transport and can't change to renewables. Not only is this reasonable and logical, it would also make raising the tax more politically palatable. "Yes, you have to pay another 5 cents a litre now, but the extra $500 million we expect to raise from this is going to be invested in railways - so you don't have to drive. And yes, coal-sourced electricity now costs 22c/kWh, but wind is 21c/kWh, you can always change to that just call up your retailer, and whatever you buy they have to invest in more turbines." Etc.

A ration has the appeal of firmness, but simply isn't going to happen. We Aussies already have a sense of entitlement matched only by Americans, turning the tap off would just make it worse.

As well as reducing my carbon footprint from a sense of morality - some things are right to do whether they do any good for the world or not - I do it to slowly spread the idea that (a) it's a good thing and (b) it's possible to do without living in a cave. Having such ideas spread makes it politically easier to bring in measures like carbon taxes at government level. Ideas are powerful things. Things seem impossible, but people just keep talking about them as though they're possible, then others decide they're possible, and then they happen.

Change is like a cup with a tap dripping into it in the dark. We never know when, but eventually a single drop will cause the cup to overflow. Things like this

Home

are just single drops, utterly insignificant in themselves, but helping to contribute towards overflowing the cup of change.

Thanks for that post Kiashu.It only reinforces my views about carbon trading.These views are intuitive I readily admit.I'm not so sure that a carbon tax is any better.
This sort of stuff is really relying on private industry to tackle the big issues.As private industry is mainly about profit,and short term at that,I can't realistically see most of the controllers taking a long term view let alone one that considers the nation as a whole.
Even if carbon trading/tax is effective it is going to take far too long to show those effects.We just don't have the time to stuff around like this.The global situation is that we have already overshot the risk point of dangerous climate change.We already have a transport fuel crisis.
There is no use taking the Bush approach of trying to get other countries to move in harness.Somebody has to lead.Australia has a moral(and practical) obligation to solve it's own problems regardless of what anybody else is doing.
We need to identify the areas where we can take effective action now.This is a science and engineering task and a lot of it has been done.It is the task of government to facilitate and expedite,using private industry,where appropriate.Conservatives might call this a command economy with all the negative connotations.I would prefer to call it mobilization against a grave threat to the nation.
Unfortunately,the cave dwellers who are running government,opposition,business and unions in Australia just don't get it.
Note some of the characteristics of caves - very limited view of the outside world(read reality)- a tendency to develop a toxic atmosphere when crowded and even worse if a fire is lit.

Hi Kiashu,
Thanks for your views. I think you are wrong on two points;1)Garnaut is proposing a carbon cap(CO2) that will be reduced over time, not a reduction in energy use. Industry will be buying permits every year, not a right to emit CO2 for ever.If the economy can meet those targets by switching fuels or conservation the cost can be very low. A carbon tax could result in an increase in CO2.
2)Australia's problem is not using too much energy it is generating most electricity from coal, thus causing Australia to have the highest per capita release of CO2. This is only because coal is so cheap that it is used for base-load power. Renewable energy especially wind, has to compete with base load prices. The governments mandate of 20% renewable energy and a declining number of CO2 permits will work together to replace a significant amount of coal burnt. We may still have the same number of coal fired power generators , but being used a lot less( and hence releasing less CO2) or being able to use either coal or NG.
Taxing coal exports doesn't make any sense, as it will just make coal available for burning in Australia cheaper. Most coal fired power plants have long term contracts set a much lower prices than coal exports and as they expire new prices will be much higher reflecting high world prices, unless exports are taxed. If China and India refuse to contribute to reductions after the three worst per capita emitters( Australia, US and Canada)reduce emission then may need to consider a world tax on carbon traded.

Where did I say Garnaut was proposing reducing energy use?

Whether they buy the permits year to year or forever makes little difference to this analysis. The government will have a revenue incentive to issue a lot of permits. They've already as much as said that the extra expense of the carbon permits will be balanced by tax reductions and subsidy increases elsewhere - it is, as I said, much like the state governments putting in a tax on gambling revenue but reducing other taxes, now they don't want to reduce the amount of gambling because they'd have to reintroduce the other taxes. So if the federal government brings in the ETS and makes money from selling the permits, and then reduces other taxes or increases subsidies, in the future they'll find themselves unable to reduce the number of permits.

How could a carbon tax result in an increase of CO2 as distinct from permits giving us an increase?

A carbon tax on coal exports would not make coal cheaper to burn here, the tax would be the same on coal whether exported or used domestically. The relative difference in domestically-used and exported coal prices due to contracts long-term or short would remain the same.

Your point about permits as a source of revenue, the least number of permits will raise the most revenue, if for example an excess of permits are sold the price will decline to almost zero( just like oil prices in 1986)because there will be no competition. If permits for only 50%of current CO2 were issued, prices would be very high much more than x2 if 100% of current CO2 permits issued, high enough for some coal burning power generators to stop using coal. So if the government wants to raise maximum revenue, we will get a good outcome for reducing CO2, but prices for everything will rise. If the government uses some of that revenue for example to off-set petrol excise, still a good outcome because we will be producing only 50% of CO2, and lets be sensible,even a 38cent reduction in petrol excise(the maximum possible) to compensate for a very high carbon tax of about $200 a tonne, would leave petrol at present high prices. We already have incentives to reduce petrol consumption, but no incentives to stop generating electricity with coal.

As for taxing coal are you suggesting domestic coal is taxed twice, once when produced and again when burnt in Australia? If not, for example if we stopped all exports by say $200 a tonne export tax, the local price for thermal coal would go back to marginal costs( about $20-30 a tonne) rather than the present $140 a tonne) so even with a carbon cost of $200 a tonne, local coal would be cheaper to burn($20+200) than what is proposed with no export tax( $140 +$200).

Garnaut supports a carbon permit price cap. (Read his draft report.) This rather torpedoes hopes for lowering permits and getting the same revenue from a higher price each. Whether the government will follow his recommendations we don't know. But that's what they are.

If you can with accuracy predict the price of things based on their particular supply levels, I suggest to you a career in the stockmarket. Those guys would love it if these things could be easily and accurately predicted.

I would propose carbon taxes by amount of carbon in the thing on all fossil fuels, timber and wood products the moment they come into contact with the Australian economy; whether dug up, imported, or whatever. Again, I don't see why that would change the relative position of domestic and export coal prices.

Kiashu,
Thank you for responding to my comments, the report is very long reading and takes a while to absorb, and it is easy to miss some of the finer points.
For example I note your comment;
"Garnaut supports a carbon permit price cap. (Read his draft report.) This rather torpedoes hopes for lowering permits and getting the same revenue from a higher price each".
In the interim report, page360( Table 15.1) it states at the bottom of table, under price controls;"not supported except during transition period to end 2012"

Your proposal for taxes, for example on wood, surely the issue would be if its used to build a permanent structure for example a house, or if its burnt as firewood. I can see the value of taxing say petrol at the refinery because we don't store this for 100 years.
The report appears to be in favor of forestry CO2 offsets,but I suppose once harvested would have to have a mechanism for buying back CO2 that is released.

As for oil or coal we need a consistent once only tax or permit, if we include imported oil that is burnt in Australia in our CO2 emissions, then the oil exporter shouldn't also count it. Same for our coal exports.

If we are heading for a dramatic climate train wreck due to CO2 emissions then there is value giving credits for any reasonable CO2 delays even 20-25 years for saw-log timber plantations, especially as the timber is unlikely to be burnt for at least another 20years.

Yes, as I said - Garnaut thinks a price cap is a good idea for the next four years. And as I said below, once a price cap is introduced it'll be politically difficult to remove it.

For housing timber, no it isn't carbon zero. That's because too often timber is not harvested sustainably, and the stumpy burned-out mess left behind is a source of further emissions, methane from rotting material, CO2 from the burnoff, etc, even if the timber you take out sits in a building for centuries.

Secondly, around half of all waste going to landfills is construction waste. Buildings nowadays last less than a generation, then are scrapped and most of their material sent to landfill - where the timber part of it will rot and emit methane.

Certainly just as we have taxes on emitting we ought to have rebates on absorbing. Those rebates should be less than the taxes; this encourages people to plant more than they harvest, and to care for it. The current greenpower standard is that the planting must be maintained, or if lost replaced, for seventy years. That seems a fair standard to port across to a tax or trade system.

Last night on Insight the Assistant Treasurer refused to give any details; this says to me they're still muddling through and aren't sure of the details themselves.

Garnaut's draft:

"Gases: Six greenhouse gases as defined by the Kyoto Protocol. Sectors: Stationary energy, industrial processes, fugitives and transport from scheme outset. Waste and forestry to be included as soon as practicable. The inclusion of agriculture to be subject to progress on measurement and administration." [p.370 of pdf]

That is, basically just burning fossil fuels: waste, forestry and agriculture "maybe later" and things like the fluorine gases ignored (as Kyoto did). In other words, only half the problem.

"Permits released according to emissions reduction trajectory. All permits auctioned at regular intervals. (Note: Some permits may be used in lieu of cash in providing assistance to eligible firms that are in trade-exposed, emissions-intensive industries.)" [p.370]

Translation: free emissions permits for coal for export and mining.

"Price Controls: Not supported, except during transition period to end 2012." [p370]

Permit prices capped to begin with. Previous experience tells us that if you begin with capping the price, it'll stay capped... or everyone will howl.

Well, does he at least think we should spend the money on renewables and stuff? Nope.

"Auctioning of all permits would provide a substantial amount of government revenue. All revenue to be returned to households or businesses after administrative costs of system." [p371]

Exactly as I described about the gambling taxes replacing others.

We can also look at the EU ETS's results. Overall, EU emissions have not decreased, but increased at about 1% annually since the ETS started [source]
They might have increased more without one, but nature doesn't care whether our emissions could have been higher, all that matters is what actually goes into the system. And that's increasing for the EU.

Nevertheless, what happened in Europe does not necessarily have to do with their ETS, such as it is. A lot of their reductions or slowdown of growth of emissions have been simply in shutting down old extraordinarily inefficient machinery in the former Communist bloc EU countries, combined with a push for renewables. That would have happened regardless of any ETS.

The EU ETS is largely not an auction but a free allocation by country, and does not include nitrous oxides or fluorine gases, nor does it include the airline industry (about 5% of global emissions). The EU ETS covers about 40% of their total greenhouse emissions. As the BBC tells us,

"Nations have issued more permits to pollute than required in the first phase, which runs until the end of 2007.

"This has resulted in carbon prices falling as low as eight euros (£5) per tonne. This means that it has been cheaper for firms to buy spare permits than pay the 40-euro fine, or take steps to reduce their emissions."

So that the EU experience matches what I've said, that governments will issue an excess of permits to raise revenue and give a free lunch to high-emissions industries, and that the best we can hope is that emissions stay level rather than increasing; the EU emissions have increased by 1% annually.

Of course we may decide to learn from the EU experience and avoid their mistakes; but that would be unusual for Australia.

The EU scheme made two big mistakes, free permits (grandfathering) and no-questions-asked on CDM offsets, the subject of many articles in Gristmill. The EU won't accept carbon sink type offsets such as tree planting. Another foible for all schemes is a trivial annual reduction in the total cap, a bit like gym membership where you don't have to exercise.

I must admit exports of coal and to a lesser extent LNG make a mockery of the whole intent of global carbon reduction. In a sense including the 50% of fuel from imported oil in the domestic cap is a 'tax' on other countries oil exports. Perhaps to mirror that we should export cap coal to other countries until they get their own schemes up and running, if ever. Thus if Macarthur Coal want to send local coal to India they'd have to buy permits.

Boof,
As you say EU ETS does not allow forest sinks.
Likewise Canada’s draft climate change regulations [Government of Canada (2008). Turning the Corner] also disallow forest sinks when using CDMs as tradable credits and within their domestic system projects must achieve emission reductions or removal and provide net environmental benefit within Canada.
Why don't EU and Canada allow this as an offset? Does anyone know?
Do you favour allowing credit for tree planting overseas or only in Oz?
Japan plants trees in Oz, very good for Oz, but how does this benefit Japan other than allowing them to 'cheat' on their own emissions reductions? Unless they intend to chop them down and take them back to Japan later that is.

Why they don't allow carbon sinks...

There's some uncertainty over exactly how much carbon gets absorbed by new plantations, and over what time period; for example they may absorb a lot in the first few years, and then after fifty years actually emit a small amount (lots of rotting organic material). How then do we credit it? If we credit the "estimated lifetime net emissions" then what about if it burns down or some joker cuts it down for newspaper later?

If we credit it year-by-year based on how it's going, then there have to be a lot of people running around inspecting things, and we've seen what a headache that is with nuclear stuff.

It's also open to a lot of abuse with people doing things like taking some timber plantation and getting paid carbon credits for it and then cutting it down tomorrow and planting again and getting paid again, etc.

It all seemed like too much of a headache so they excluded it.

Boof,
If you tax or have a cap on oil and gas at source, that lets US,EU and China off the hook, just let Iran, Indonesia, Australia, KSA, Russia be responsible for global warming. Do you expect KSA to promote conservation, and assist US in switching to renewable energy?

The system we have that most countries have ratified (except US) is for developed countries( highest CO2 per capita emitters) to commit to CO2 reductions WHERE THEY ARE RELEASED and others to follow.

It is certainly the intention of the Garnaut Report to avoid the errors of the EU system. Its up to the government and us to ensure that this occurs and to derail the Liberals delaying ( or avoiding) tactics.

To use an analogy, the war on drugs will fail if you do not have programs to stop the users. Destroying poppy and coca fields just puts up the price and increases the drug traffickers profits.

I think the war on drugs analogy is valid.. the seller must take some responsibility for the buyer who may have impaired judgement. On a lesser scale we prohibit the sale of alcohol and cigarettes to minors. Telling India and China 'not so much coal' could be doing them a favour if other factors are present.

On carbon sinks I was just in a pine plantation cutting up dead acacias and eucalypts that had been bulldozed to one side. Reason being the chipper at the local paper mill is set to softwood. If I burn that wood some of the ash will be buried in soil. What happens to the pine chips that become paper? Incineration, landfill methane? These are some of the uncertainties of biosequestration which I think should rule it out of carbon schemes. Being both cheap and hard to measure it is tempting to exaggerate both the timing and the amounts. On the other hand a tonne of export coal is more certain .. it will create 2-3 tonnes of CO2 in the next 12 months. We should go for hard targets not soft targets.