Why the carbon price scheme should protect exports: Gottliebsen

Julia Gillard and Greg Combet are in danger of falling into the same carbon trap that caught Kevin Rudd and Penny Wong – they do not realise that the Canberra bureaucracy does not have the skills to organise either a carbon tax or an emissions trading scheme.

And, as we all know, if the Canberra bureaucracy fails again it will be the second time Gillard has been caught. In the last government, when she was the Education Minister, the education construction bungles were caused by the same deficiency, as were the insulation rackets that left poor old Peter Garrett stranded.

So while much of the debate over the carbon tax is concentrated on the Prime Minister’s change of mind, it obscures this much deeper problem.

Canberra was able to administer the GST essentially by following models in other countries. But even then there were hiccups.

When the previous Rudd Government tried to introduce the emissions trading scheme, even though they checked it with the Liberals, it was a total shambles. They never faced up to the two biggest problems – the La Trobe Valley brown coal power issues and the fact that imports are made cheaper and many exports penalised.

At the last minute Penny Wong tried to cover the La Trobe Valley problem by inserting a $5 billion guarantee for the bank loans to brown coal stations, but it still would have caused the owners of the power stations to lose all their equity, which would have made it very difficult to find funds for replacement power stations.

Unfortunately, I don’t think Canberra has learned from the last debacle.

Both the carbon tax and the emissions trading scheme work on the basis that Australian carbon exports will be taxed, but those export companies that make a lot of noise will be looked after with subsidies (that’s why BlueScope was jumping around). This is about as stupid as it gets from Canberra. Exports should have their tax rebated, as they are under the GST.

Because we aren’t planning to tax carbon imports, every Australian company competing with imports is also disadvantaged. If it’s possible, this is even sillier than Canberra’s export policy – but don’t try telling the bureaucrats that.

Again, we should carbon tax imports the same way we tax imports with the GST. It looks hard but most of the problems can be solved pretty quickly.

I am currently spending some time in Queensland where there is clear reader confusion in the popular press. The farmers are very angry over miners’ plans for their farms, which they fear will really ramp up Australia’s carbon production. Then, at the same time, we plan to increase the cost of all our goods, which will have almost no effect on world carbon emissions but will make our lives miserable.

I am not in the business of arguing that case because it has gaps, but that’s how it looks to many Queenslanders.

To make matters worse, this time around Tony Abbott is promising to reverse the tax so investment decisions based on the price of carbon would be simply deferred until the next election.

Until the US and China start taxing carbon, if our tax is to work then it must be confined to Australia. Exports should be free of tax and imports should be taxed.

But that would be too logical for Canberra.

This article first appeared on Business Spectator.