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The Logic of Collective Action and Australia's Climate Policy

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  • Jotzo, Frank
  • Mazouz, Salim
  • Pezzey, John C.V.

Abstract

We analyse the long-term efficiency of the emissions target and of the provisions to reduce carbon leakage in the Australian Government's Carbon Pollution Reduction Scheme, as proposed in March 2009, and the nature and likely cause of changes to these features in the previous year. The target range of 5-15% cuts in national emission entitlements during 2000-2020 was weak, in that on balance it is too low to minimise Australia's long-term mitigation costs. The free allocation of outputlinked, tradable emission permits to Emissions-Intensive, Trade-Exposed (EITE) sectors was much higher than proposed earlier, or shown to be needed to deal with carbon leakage. It plausibly means that EITE emissions can rise by 13% during 2010-2020, while non-EITE sectors must cut emissions by 34-51% (or make equivalent permit imports) to meet the national targets proposed, far from a cost-effective outcome. The weak targets and excessive EITE assistance illustrate the efficiencydamaging power of collective action by the 'carbon lobby'. Resisting this requires new national or international institutions to assess lobby claims impartially, and more government publicity about the true economic importance of carbon-intensive sectors. Published in the Australian Journal of Agricultural and Resource Economics, volume 54, pages 185-202.

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Bibliographic Info

Paper provided by Regulation2point0 in its series Working paper with number 601.

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Date of creation: Jan 2010
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Handle: RePEc:reg:wpaper:601

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  1. John C.V. Pezzey & Frank Jotzo & John Quiggin, 2006. "Fiddling while carbon burns: why climate policy needs pervasive emission pricing as well as technology promotion," Climate Change Working Papers WPC06_1, Risk and Sustainable Management Group, University of Queensland.
  2. Weber, Christopher L. & Peters, Glen P., 2009. "Climate change policy and international trade: Policy considerations in the US," Energy Policy, Elsevier, vol. 37(2), pages 432-440, February.
  3. Oikonomou, Vlasis & Patel, Martin & Worrell, Ernst, 2006. "Climate policy: Bucket or drainer?," Energy Policy, Elsevier, vol. 34(18), pages 3656-3668, December.
  4. Babiker, Mustafa H., 2005. "Climate change policy, market structure, and carbon leakage," Journal of International Economics, Elsevier, vol. 65(2), pages 421-445, March.
  5. repec:cup:cbooks:9780521744447 is not listed on IDEAS
  6. Carolyn Fischer & Alan K. Fox, 2007. "Output-Based Allocation of Emissions Permits for Mitigating Tax and Trade Interactions," Land Economics, University of Wisconsin Press, vol. 83(4), pages 575-599.
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Cited by:
  1. Pezzey, John C.V. & Jotzo, Frank, 2010. "Tax-Versus-Trading and Free Emission Shares as Issues for Climate Policy Design," Research Reports 95049, Australian National University, Environmental Economics Research Hub.
  2. Wood, Peter John & Jotzo, Frank, 2009. "Price Floors for Emissions Trading," Research Reports 94885, Australian National University, Environmental Economics Research Hub.
  3. Andrés J. Drew, 2010. "New rules, new politics, same actors – explaining policy change in the EU ETS," Grantham Research Institute on Climate Change and the Environment Working Papers 29, Grantham Research Institute on Climate Change and the Environment.

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