Journalist Terry McCrann poses some serious questions about Australian Treasury’s modelling of the economic impact of the emissions trading scheme.
OH DEAR. Two weeks ago, I wrote that Treasury had shredded its credibility. It appears I was being too generous.
And one of his key right-hand men, David Gruen, revealed that the complex economic modelling, which has backed the Rudd Government’s aggressive greenhouse gas reduction strategy, was based on assumptions so simplistic — and arguably just wrong — that they would be embarrassing coming from a first-year undergraduate in economics.
McCrann goes on to question the ‘first mover’ principal so often touted by Treasury and the Rudd government.
The bigger worry in the “quality” of such fundamentally important treasury advice is Gruen’s contention — and therefore a core assumption in the modelling — is of a first-mover advantage.
“Economies that defer action face higher long-term costs. This is because more emission-intensive infrastructure is locked in place in the meantime,” he said.
I doubt that I’ve read a more naive unknowing sentence in years. It’s as if Gruen has travelled through the last three decades with his eyes and mind shut.
In a world of such rapid technological change, you are far more likely to see the exact opposite. Early movers locking-in inefficient early-stage infrastructure. Think the “new energy” version of IBM main-frame computers for example.
Hasn’t Gruen heard of the “free-rider principle”? Let others spend the billions of dollars developing the “new energy” — assuming the necessary can-opener can be found.
For a very contextual example look at those useless and inefficient wind farms. Does Gruen really believe his has seen the future in their lazy rotations?
The Emissions Trading scheme will give Australia ‘first mover’ advantage straight into the world of tariffs & import quotas.
He claims that the energy switch is analogous to the tariff experience. He’s right, but he gets it exactly wrong. Placing artificial restrictions on carbon energy is like quotas on imports. Artificially boosting the price of carbon energy is like a tariff on imports.
In effect, we have Treasury mindlessly proposing that we go back to the energy equivalent of our tariff and import quota past. And doesn’t even have a clue what it’s doing.
We, and I do mean we, should be worried, seriously worried.
Have Your say!
Yes we are worried, seriously worried. BUT where are the small to medium buisness people in the city and why won’t they speak out against the ridiculous carbon trading scheme. Are they too busy, too indoctrinated and brain-washed with the governments version of ‘globalism’ to speak out.
Rudd appears programmed to bring it in and demolish our economy even more.