Alex Robson from Concept Economics has not bothered to read the Australia Institute paper into the CPRS emissions floor (pdf link). Amazingly, his uninformed and un-researched tirade against environmentalists was published in The Australian today.
Mr Robson writes:
Clearly, if the number of permits in circulation could never fall, then the Australia Institute view would be correct: if a business or individual were to reduce their emissions then the demand for permits would be lower than it otherwise would be, and commensurate number of permits would be freed up in the system for useelsewhere.
Hence the conclusion follows that there would be nothing that any individual or business could do to reduce aggregate emissions.
The logical flaw here is the assumption that the number of permits in circulation must be fixed and could not fall. This assumption is incorrect.
Under an ETS there is always another option for citizens who are concerned about climate change: the “buy and hoard” method of emissions reductions.
If individuals, families, businesses, or lobby groups such as the Australia Institute want aggregate emissions to fall below the Rudd Government’s target, they can contribute to this goal very easily: go into the market, buy permits, and permanently remove them from circulation by either hoarding them or destroying them.
Remember, cap and trade makes it illegal for a business to emit without a permit. By permanently removing permits from circulation, the buy-and-hoard method reduces the ability of businesses to emit: no ifs, ands or buts. Aggregate emissions would be lowered by the number of permits hoarded or destroyed, full stop.
In other words, as a simple matter of fact and logic, the argument that an ETS puts a lower bound on emissions cannot be sustained.
Robson’s diatribe heats up towards the end of his article:
Instead of going into the political marketplace and spending endless hours lobbying, why don’t green lobby groups form permit superfunds and buy permits from our largest emitters?
And therein lies the rub: deep down, climate zealots have always preferred government action and regulation to market-based alternatives and the voluntary exchange of permits for cash.
Many activists cannot accept the proposition that instead of lobbying and using political influence to get what they want, they might actually have to cough up the dough and put themselves at the mercy of market forces to achieve their aims.
They would rather compel the community as a whole to bear all the costs than to reduce their own lobbying output. The last thing they want to do is to go out into the market and try to persuade business to reduce emissions by paying them to do so, even though that is the logical and most straightforward way of reducing emissions under an ETS.
Of course, if he had bothered to read the Australian Institute paper, he would see that the scenario he presents as manifestly logical and foolishly overlooked by TAI, is, infact, presented by the Australia Institute (page 2)
Buy carbon permits directly and then rip them up. Because it is illegal for the top 1000 polluters to emit more greenhouse gases than the permits they have purchased allow, the only way to reduce Australiaâ€™s overall greenhouse gas emissions is to remove carbon permits from the system. There will then be fewer permits available to polluters, who will need to pay a higher price for the right to pollute. Carbon emissions will experience a net decline as a result.
Alex Robson is a senior economist for Concept Economics, but clearly the concept of actually reading the article you are criticising is a novel one.
As a side note, Alex Robson does not appear on the Concept Economics website as a senior economist.
Larvatus Prodeo on Alex Robson‘s previous forays into the climate change debate.