Page 2212 - Week 07 - Thursday, 7 August 2014
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export capacity on the east coast of Australia. The Prime Minister, Tony Abbott, talks about making Australia a low-cost energy superpower, and he openly advances and advocates the expansion of our gas markets for international export.
What he fails to tell the Australian community, though, is that exposing the domestic gas price to the international export price means higher gas prices for domestic consumers, both in the manufacturing sector and for households. This trend, therefore, is expected to continue and it will put significant pressure on retail gas prices paid by households. Canberra is particularly exposed to this emerging trend of exposing the domestic gas price to the international export price.
With a high level of penetration of gas for domestic household heating, we will see significant pressure on retail gas prices because of decisions taken by the national government to support an expansion in international gas exports. Before the repeal of the carbon price, retail gas prices were expected to increase by over 18 per cent. We know that over the long term, gas prices are expected to continue to increase.
It is saddening to reflect on the long history of carbon pricing policy in Australia. It was first proposed by an alliance of Australian state and territory governments under the banner of the national emissions trading scheme and it was then adopted by the Howard Liberal government as government policy. Both major parties took emissions trading to the federal election in 2007. Since that time pricing carbon has remained Labor Party policy at both state and federal levels.
During that period the ACT joined New South Wales in implementing one of the world’s first emission trading schemes, the greenhouse gas abatement program, or the GGAP scheme as it was known, which showed that pricing carbon could be very effective. The government retired the scheme as the national carbon pricing scheme was implemented in July 2012.
The reason for this and federal Labor governments’ ongoing commitment to carbon pricing is that pricing carbon is the most economically efficient way of reducing emissions across the economy. It is a policy that facilitates the greatest national prosperity and that has any chance of being effective and sustainable over the long term.
Historically, and now once again with the commonwealth’s repeal, it is free for large firms like mining companies and coal powered generators to emit carbon. They are free to pollute. This means emissions are unrestrained and not subject to any market pressures. Economists call this notion a negative externality, which means polluters externalise the cost of their pollution onto the community and ultimately onto the public purse.
They free-ride on the community, endlessly increasing pollution at the expense of current and future generations. Ultimately, this translates into inefficient investment decisions that provide a drag on the economy and the achievement of environmental objectives. A price on carbon internalises the cost of carbon pollution into business investment decisions. It is the only way to effectively address this problem over the long term.
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