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Trading problems

17 July 2013

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Professor Warwick McKibbin is an ANU Public Policy Fellow at Crawford School. Professor McKibbin was a member of the Board of the Reserve Bank of Australia from 2001- 2011. He teaches Modelling the World Economy: techniques and policy implications (IDEC8127).

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An early move to an emissions trading scheme will not fix underlying problems with the design of the Government’s program, according to Crawford School Chair in Public Policy Professor Warwick McKibbin.

Prime Minister Kevin Rudd this week announced that the government will move to introduce emissions trading one year earlier than expected. But speaking to ABC’s 7.30, McKibbin said that the plan wouldn’t fix the scheme’s problems, including that it is linked to the Europe’s carbon price.

“It’s a political fix, but it’s the worst type of political fix because it’s actually dishonest,” he said.

“The problem is the design of the whole program, not just the fact that the trading system comes in a year earlier than proposed. It’s really trying to win votes and smooth over a problem that deserves long-term, serious thinking.”

McKibbin said that the government couldn’t guarantee that the European price – currently $6 per tonne – would stay the same.

“Moving to an emissions trading scheme means that the price will be set by the market. If the European price turns to out to be $40 a tonne next year, the Australian price will be $40 a tonne. The forecast should not be the basis of policy. They got it wrong the first time by doing that, and they’re potentially going to get it wrong again.”

He added that neither the government nor the opposition’s current policies to tackle emissions would put Australia on the right path.

“[The opposition’s] direct action is still somewhat unclear. It’s also a very short-term fix.

“What we ultimately need is a bipartisan approach. Both approaches can be fixed and moved together, but as it stands neither is going to solve the longer-term issues that we face on climate policy in this country.”

Watch the interview here:

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