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Carbon compromise

08 July 2014

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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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Former RBA Board member and Crawford School economist Professor Warwick McKibbin says Australia could have a credible carbon reduction policy if politicians are prepared to compromise.

Speaking to Andrew Robertson from ABC’s The Business, McKibbin said in order to develop a successful climate change policy, compromise is essential.

“It’s a good time to sit back and say, how should we do climate policy that gets all sides together. Because in the end you have to have a lot of political support behind any policy,” said McKibbin.

He added that the core to a future climate policy will be to get a clear long term carbon price signal but low short term costs.

“You want to have a low carbon price in the short run that really is setting up a market for the long term carbon price. It is the long term carbon price- what people expect the price of carbon will be in 30 or 40 years that will drive innovation,” he said.
McKibbin outlined a three-step process for the implementation of a successful climate change policy.

“The first thing is not to slug industry too much in the short term,” he said.

“The second is to make sure there is compensation, particularly building the balance sheets of the companies that’ll do the innovation and that’s where I think the Al Gore/Clive Palmer moment is important. It’s vested interest that’s making them do what they do and you can create vested interest in the design of the climate policy.

“The third thing you need to make sure is the price is very stable in the short run and that’s why switching between systems, domestic and foreign is a mistake.”

Are you interested in studying with Warwick McKibbin? He teaches Modelling the Global Economy: techniques and policy implications (IDEC8127).

You can watch the full interview at

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