Australia Financially Supports Pacific Islands On Climate Change

Australia – Australian Foreign Minister Stephen Smith said today that the nation would support its Pacific Island neighbors on global warming and climate change issue, and helped financially for the cause.
In the meeting in Vanuata, representations of Pacific Islands asked for quick measures on climate change and lamented it as a biggest threat to the world and Pacific. Pacific Islands have some of the desolated as well as tiny nations.

Mr. Smith instead Australian Prime Minister Julian Gillard, who was unable to join the four day summit due to elections in the country, said the country would support the climate change issue with Pacific countries.

"Australia's been very conscious in its work on climate change that we represent very much of the views and concerns of the small island states," Mr Smith said on Thursday.

It has been reported that the small island country Kiribati is already devastated by rising sea levels. The forthcoming Cancum summit will be an imperative for the country as the main concern will be for those countries, which are vulnerable to the impact of climate change.

Other important points were discussed in the summit including new legal framework for fisheries, aviation safety, disable people security, trade and judicious use of renewable energy.

Australia said it would support the cause child maternal health with $A85 million over four years.

Taxing questions

The EU's new Taxation Commissioner Algirdas Semeta has announced that he is planning to revive previously shelved plans for an EU-wide carbon tax, aiming to set a minimum levy of €10/tonne of CO2 emitted (although the exact level is a bit unclear) from energy sources such as petrol, coal, and natural gas when they are used as motor and heating fuel, or to produce electricity.

Based on the Commission's previous proposal we've calculated that such a tax would cost the UK economy at least £3.2bn a year. This cost will hit poorer consumers and small businesses disproportionately hard.

Is the cost worth it? Well, a carbon tax can, and has worked in some member states - Sweden being the most conspicous example (the country has cut carbon emissions by 9% since introducing a carbon tax in 1991, while the economy has grown by 48% during the same time period). Unlike the EU's flawed Emissions Trading Scheme, a carbon tax would create a firm price on carbon (although still largely arbitrary) and ensure that polluters have to pay rather than being rewarded. This, in turn, would provide a strong incentive to switch to, and invest in, green energy. If replacing other, poorly targeted, CO2 policies a carbon tax could be the right way to go.

But apart from this discussion, the proposed tax raises two further important issues.

Firstly, why an EU-wide harmonised tax? We must remember that the EU already has all manner of climate change policy instruments playing different tunes. It has an extensive cap-and-trade system for large emitters of CO2, such as power generators and heavy industry. It has heavily prescriptive renewable energy targets and biofuel targets (the latter of which even the Commission now admits might be a mistake). It also has various other environmental regulations restricting emissions such as the Large Combustion Plant Directive, which will force the closure of nine of the UK's power plants by 2015.

Those in favour of an EU-wide tax say that it must be harmonised across Europe in order to avoid 'distortions to the Single market'. However other countries, Sweden for instance, have successfully implemented a domestic carbon tax without any detrimental impact on their economies.

But more importantly, if the stated end goal is not EU tax harmonisation in and of itself but emissions reduction, all that really needs to be decided at an EU level is the extent of the emissions reduction targets. As for the means, who cares? The job of meeting these targets should be left up to member states, who are best equipped to devise a policy mix tailored to their individual circumstances - and when it comes to energy, these are often very diverse.

A carbon tax may be a cost-effective option, or it may not. But it should not be the European Commission's job to decide.

This leads us to the second issue. There are understandable concerns that the Commission has an ulterior motive for its carbon tax. While the current proposal would see member states collecting the revenues from any tax, such "eco taxes" have long been seen by many within the Commission as a way of directly financing the EU budget - a view shared by EU President Herman Van Rompuy.

If such a carbon tax were established, it would clearly create an obvious focal point for those calling for an EU funding stream that bypasses member states' treasuries, with the ultimate aim being a direct tax.

All the more reason to follow a pragmatic approach that concentrates on the stated aim of cutting emissions at the lowest cost to businesses and consumers, rather than creating yet more centralised and complex EU rules that limit member states' ability to tailor climate change policies to their own needs.

Turn the air con down

The Department of Energy and Climate Change has produced an Impact Assessment for the Government's 'Renewable Energy Strategy' - in other words, its plans for meeting EU targets for renewable energy. It it rather serious stuff. The plans will cost £4.2bn a year ,with annual benefits of £0.3bn a year. The cumulative cost is estimated at £60bn over 20 years, while the value of carbon saved is estimated at £5bn.

While these large figures might seem pretty abstract to many, the following will not. A significant proportion of the cost will be passed on to consumers, with the Government estimating that domestic electricity prices will increase by 15 percent and gas prices by 23 percent by 2020. This equates to average increases of £75 and £172 to electricity and gas bills.

Besides the cost, the UK’s share of the EU target of producing 20 percent of energy from renewables by 2020, a national target of 15 percent, is widely regarded as 'ambitious' and by others as 'unrealistic'.

Those in the latter camp include the UK's Chief Scientific Advisor at the time the agreement was made (Tony Blair was in the hotseat for us). Sir David King said:

"I think there was some degree of confusion at the heads of states meeting dealing with this. If they had said 20% renewables on the electricity grids across the European Union by 2020, we would have had a realistic target but by saying 20% of all energy, I actually wonder whether that wasn't a mistake."

In a report last year we estimated that the EU's entire climate and energy package, of which the renewables target is only a part, will cost the UK £9bn a year and push an extra 1 million people into fuel poverty.

We're not arguing against an EU role in fighting climate change - a global challenge which the EU can contribute to solving with regional cooperation. We are, however, objecting to the EU's desire to micro-manage and continually centralise policy.

An EU-wide binding renewables target removes the UK’s flexibility to find the cheapest way of reducing emissions, which should be the overall aim. The cost is so high because the Government is now forced to 'pick winners' by subsidising the renewable technologies it thinks can achieve reduced emissions at the cheapest cost.

State bureaucrats do not have the ability to predict new advances in renewable technologies and their relative costs, which are at different stages of development and also depend on the fluctuating price of fossil fuels.