Entries by Keith Kendall

Regular readers of the Forum may have noted I have contributed a number of pieces dealing with the legal aspects of a carbon tax and emissions trading schemes (ETS). One aspect that I have written on has been the legality (under the World Trade Organisation) of a border tax adjustment (BTA) under a carbon tax.

This is one means of dealing with the loss of international competitiveness when a country decides to unilaterally impose a price for carbon emissions. Other alternatives include issuing free permits to especially affected entities under an ETS (as is proposed under Australia's mooted ETS - the Carbon Pollution Reduction Scheme. See http://www.climatechange.gov.au/emissionstrading/index.html).

A topical question is whether such measures are protectionist in nature (which would violate the WTO) and/or are efforts by the relevant country to impose its environmental policies on its trading partners. Such comments have been made to me privately in respect of a carbon tax BTA as a reason why such measures are unlikely to happen (but for political rather than legal reasons).

An interesting article appeared in the Wall Street Journal this week on this matter. President Obama's Energy Secretary, Steven Chu, reportedly commented during a House hearing that if countries like China and India do not impose a carbon charge on its own products after the US goes down this path (as is on President Obama's agenda), then the US could impose a carbon tariff on imports from these countries.

While such a measure would almost certainly violate the WTO, leading to all manner of legal and political consequences, it does demonstrate that these matters are front and centre in the ongoing move towards charging for carbon emissions.

Read the full article at:

http://online.wsj.com/article/SB123837276242467853.html#mod=djemEditorialPage

Minister for Climate Change, Penny Wong, recently accused the Opposition and its supporters of diversionary tactics in raising the option of a carbon tax as Australia’s means of addressing carbon emissions (The Australian, 23 February 2009). The Minister’s dismissive approach is premised on the assertion that this debate has come and gone and that “It is time now to stop talking and start doing.”

With all due respect, this debate certainly has not been held properly, at least in the public domain. It is not hard to see the political reasons behind avoiding the awkward questions posed by a superior alternative to the one that suits the present political agenda, but these issues can be dealt with another time. Suffice to say that most of Minister Wong’s assertions regarding the benefits of an ETS and the disadvantages of a carbon tax are either misleading or just plain wrong.

The one aspect that I will deal with here is that around the treatment of trade-exposed industries. The Minister claims that “the hard policy questions regarding the treatment of emissions intensive trade exposed industries … remain” under a carbon tax. This is incorrect.

Welcome back for 2009!

For those of you returning to La Trobe Law, we hope you had a refreshing and relaxing break and are ready for another year. Those of you joining La Trobe Law welcome to the La Trobe Law Forum, where we hope you can spend some of your (hopefully little) idle time this year.

As always, we welcome contributions in the form of comments on any of the pieces that appear on the Forum. Make sure you have a look at some of the pieces from last year - many of the topics discussed are of ongoing relevance, so continued feedback is always welcome.

Those of you who would like to contribute a stand alone piece, email Keith Kendall at k.kendall@latrobe.edu.au.

Looking forward to a fantastic 2009.

Welcome back for 2009!

For those of you returning to La Trobe Law, we hope you had a refreshing and relaxing break and are ready for another year. Those of you joining La Trobe Law welcome to the La Trobe Law Forum, where we hope you can spend some of your (hopefully little) idle time this year.

As always, we welcome contributions in the form of comments on any of the pieces that appear on the Forum. Make sure you have a look at some of the pieces from last year - many of the topics discussed are of ongoing relevance, so continued feedback is always welcome.

Those of you who would like to contribute a stand alone piece, email Keith Kendall at k.kendall@latrobe.edu.au.

Looking forward to a fantastic 2009.

The present global financial situation has seen a plethora of calls for greater government involvement in the functioning of economies and, more specifically, being used as evidence that markets just plain don’t work. An example of such thinking appeared in La Trobe Opinions last month (see Christopher Scanlon, “The Market Delusion”, 13 October 2008). Apparently the events of the last two months have destroyed the “delusions” that markets are simple affairs, markets are natural and function best without government interference and that markets are free of ideology.

As one of the apparently delusional free-marketeers, I’m not entirely sure anyone has actually argued that markets are simple matters. What is more to the point is that markets facilitate an intricate system of exchanges utilising a relatively simple mechanism. This is not to say that the mechanism itself is simple, though. Anyone who doubts that ought to go the nearest university library and look at any book on price theory. It is interesting to note that no suggestions are forthcoming as to what ought to replace markets to determine the allocation of goods and services (including financial services).

The current fluctuations in the sharemarket might lead some to suggest that compulsory superannuation is an unfair imposition on Australian workers (e.g. Bagaric, When forced super gets cruel, Herald-Sun 2 October 2008). The basic point of this argument is that the public does not benefit from this forced saving scheme, since the sharemarket is inherently volatile and there are other more worthwhile investments (such as paying down the home mortgage). Forced saving represents an assault on the intelligence of Australians and is an impingement on personal freedom (encompassing personal responsibility for retirement savings).

While I would normally be the last person to advocate government interference in the operation of free markets (especially where this would indeed run counter to notions of personal responsibility), compulsory superannuation is not one such area. In a perfect world, all individuals would have both the time and the inclination to understand the financial implications of their decisions, would recognise that small amounts put away early on (whether in the sharemarket, on the mortgage, or some other investment) result in large payoffs later on and would be in a position to take charge of their own financial affairs.

The election of Malcolm Turnbull this week to the leadership of the Federal Coalition represents a potentially significant milestone in the development of the republican movement in Australia. This comes about since both parliamentary leaders, Mr Rudd (as Prime minister) and Mr Turnbull (as Leader of the Opposition) are on the record as supporting Australia becoming a republic. More on that in a moment.

This turn of events is particularly significant with respect to the Coalition, since the former leader (ignoring Brendan Nelson’s brief stint as Coalition Leader) John Howard was an avowed monarchist. This is compared with Mr Turnbull’s position as de facto leader of the republican movement during the 1999 referendum campaign on this issue. Consequently, this week’s events represent a significant watershed in the direction of Coalition leadership on the republic issue.

The recent release of the draft Garnaut Report has focused attention on how an emissions trading scheme (ETS) should be implemented in Australia in order to curb our carbon emissions. In serving this purpose, the draft Report glosses over a number of considerations and makes several assumptions that appear designed to make an ETS a fait accompli as far as the best response to climate change goes. This is unfortunate, since an ETS suffers from a number of problems that do not arise under a carbon tax.

As with many official pronouncements regarding climate change, the draft Report starts from a position that carbon emissions must be reduced. While this may be the case, it mischaracterises the problem of carbon pollution by setting up the issue as one of quantity control. The correct approach, which would lead to a more appropriate regulatory response, is to recognise that the problem is really one of undercharging (or, as here, not charging at all) for the use of a particular resource, specifically, emitting carbon into the atmosphere.