Clean Coal on Four Corners

Four Corners tonight is on progress with "clean coal" (also known as carbon capture and storage, CCS): coal-fired power stations that capture the greenhouse gases emitted from burning the coal and store them underground.

The bottom line: coal is a large and growing contributor to greenhouse gas emissions and clean coal technology is a long way from being a commercial reality.

Should be worth watching.

Nitpick of the day

OK, I'm being a bit trivial but indulge me. Sweeping generalisations and grand rhetorical statements bug me at the best of times, but particularly when they're quite obviously wrong.

Ziggy Switkowski who, as former CEO of Australia's first and biggest telecommunications company, should know better, opens an otherwise interesting Online Opinion piece about the march of technology with this:

Our forebears 100 years ago could not have dreamt of the emergence of television, computers, satellites...

Really? No-one in 1909 could have even dreamt that those things might emerge?

Could our forebears have imagined 100 years ago that advancements in technology would allow you to check big statements like Ziggy's in about a minute?

According to Wikipedia:

The first electromechanical television system was patented in 1884 in Germany. Before that, the concept of electrically-powered transmission of television images in motion, was first sketched in 1878 as the telephonoscope, shortly after the invention of the telephone.

Punch's Almanack for 1879 imagines a 100-inch wall-mounted interactive LCD TVwith surround sound

The first fictional depiction of a satellite being launched into orbit is a short story by Edward Everett Hale, The Brick Moon. The story is serialized in The Atlantic Monthly, starting in 1869. The idea surfaces again in Jules Verne's The Begum's Fortune (1879). In 1903 Konstantin Tsiolkovsky (1857–1935) published The Exploration of Cosmic Space by Means of Reaction Devices, which is the first academic treatise on the use of rocketry to launch spacecraft. He calculated the orbital speed required for a minimal orbit around the Earth at 8 km/s, and that a multi-stage rocket fueled by liquid propellants could be used to achieve this.

The "castle clock", an astronomical clock invented by Al-Jazari in 1206, is considered to be the earliest programmable analog computer. But it was the fusion of automatic calculation with programmability that produced the first recognizable computers. In 1837, Charles Babbage was the first to conceptualize and design a fully programmable mechanical computer, his analytical engine. From the end of the 19th century onwards, the word computer began to be used to describe a machine that carries out computations.

People have more ambitious dreams than Ziggy gives them credit for.

The great give-away: Allocating permits under an emissions trading scheme

One of the bigger areas of debate in emissions trading is how to allocate permits. The purists (eg, Garnaut) suggest they should all be auctioned while political realities suggest a large chunk will be given away to compensate the industries that will suffer most under the scheme (Garnaut suggested that you should give cash compensation so it's transparent).

An important thing to keep in mind is that this aspect of the debate doesn't change the total emissions - it's not an environmental debate; it's about fairness and economics. You get the same emissions whether you auction all the permits or give them all away. What changes is who pays and who gets the revenue. Under auctioning, the government gets the revenue and hopefully uses it to reduce other taxes. If you give permits away, the emitting industries get the money.

A new study has examined the economics of auctioning versus freely allocating permits under the US emissions trading scheme, with some possibly surprising results. They point very much to auctioning a vast majority of permits as a better way.

First, the unsurprising result: the more permits that you auction, if you use the revenue to reduce other taxes, the lower the economic cost of the trading scheme.

Second, the possibly surprising result: you only need to give away 15% of permits to completely compensate the industries most affected by the scheme. I think the proportion the government and opposition are debating freely allocating for the Australian scheme are substantially larger than that*, so think about what that means: these industries will actually profit from the introduction of the ETS. The study suggests that giving away 100% of permits leads to a doubling of profits for many industries.

*Our scheme and industries are slightly different so the numbers from the US won't directly translate, but they should be in the same ball park. Does anyone know if anyone's run the numbers here? Maybe in the Treasury modelling...

Carbon offsets: Oils ain't oils

If you wanted to offset the carbon emissions of a flight, you can buy carbon offsets from any number of providers. But the price for offsets done in different ways or certified under different standards can vary greatly.

Why? A new paper investigates.

Among the findings, providers located in Europe sell offsets at prices that are approximately 30 percent higher than providers located in either North America or Australasia. And, not surprisingly, offsets that qualify for emission reductions under the Kyoto Protocol, sell at a premium of more than 30 percent.

In theory, a project that avoids the emission of a tonne of greenhouse gas should give the same benefit (and have the same price) as the same as any other project that avoids the emission of a tonne of greenhouse gas. But of course you need to have confidence that this is actually what will happen and I'd guess that this is the difference: you're prepared to pay more if you're more confident that the advertised benefits are really being delivered.

Tax cigarettes, aclohol and junk food til no-one buys them?

The National Preventative Health Taskforce has just publicly released its strategy "Australia: The Healthiest Country by 2020".

For probably the first time ever, life expectancy in Australia is getting shorter. Three of the biggest and most preventable killers are tobacco, alcohol and obesity. And high on the list of strategies for discouraging them are "economic policies and taxation systems", which I read (and newspapers are reporting) as "make them more expensive". Not very imaginative, but will it be effective?

For cigarettes, they suggest increasing taxes soon so a pack costs at least $20 and for alcohol, interestingly, creating a 'floor price' - not necessarily increasing the price of all alcohol, but ensuring there's no very cheap stuff. For junk food, they just talk about exploring taxation, incentives, subsidies etc to promote consumption of healthier foods.

Will this help much? Is there a better approach? Has the government reached the extent of what it can reasonably do in terms of banning, taxing, subsidising, promoting, and is the rest up to the community?

Pricing is clearly a factor but it seems to me that changing a culture of smoking and drinking is the big thing - is that something that the government can or should really do?

Renewable energy target expected to pass today

Some good news following last week's defeat in the Senate of the Australian emissions trading scheme. The Senate is voting today on the big increase in the mandatory renewable energy target (MRET), and it's expected to pass after the government and opposition reportedly reached a compromise yesterday.

The target - 20% of electricity from renewable sources by 2020 - wasn't in doubt, but there was debate over the assistance to be given to electricity-intensive induestries.

The MRET was originally included as part of the CPRS (emissions trading) legislation, but the government agreed to split it as it was clear that the MRET could be passed and there was no use condemning it to defeat by insisting on it being a joblot with the CPRS.

This is good news. The new target is a big increase from the previous one and this gives some certainty to investors in renewable energy at a time where there's still considerable uncertainty about the timing and form of the emissions trading scheme. (And depending on what happens with the CPRS, it's possible that MRET, not emissions trading, will be the real driver of emissions reductions for Australia over the next decade).

Photo credit: davidnikonvscanon via flickr.

Update: The scheme has indeed now passed. Also, Sam Wylie at Core Econ has a nice summary of the scheme.

Sustainable House Day - 13 September

13 September is Sustainable House Day. Greenies around Australia open their homes and share their stories and tips for making your home greener. Learn and be inspired.

HT: Greenfoot

Game theory and Kyoto negotiations

I'm not a huge fan of simple game theory analyses of international climate change negotiations (even though I've been guilty of using them myself) because they tend to model each country as being an individual acting in its own interests, when the political reality is rather more complicated.

For example, simple prisoner's dilemma game theory would predict that no countries would take unilateral action on climate because it's not in their national self-interest - the only action would come in the form of a comprehensive international treaty. But domestic politics - for better or worse - often produces results that don't accord with national self-interest.

Anyway, Peter Wood has taken a neat look at the US position in international climate negotiations through a game theory lens. He incorporates domestic politics and looks at it as a 2-stage game where the need to get agreement in the Senate once negotiators get home will have a big impact on what those negotiators will want to get at Copenhagen. It's common sense really but interesting all the same.

Australia's Kyoto negotiation team prepares for Copenhagen (Dilbert - Scott Adams)

Wind power: plus ca change

Some common sense observations about wind power's potential in the UK from The Times: it deserves attention as fossil fuels diminish, it has low capital costs, it's plentiful, it's intermittent and there are challenges with power storage, but this is only a problem if it's intended as baseload supply.

In view of our diminishing returns of coal and petroleum, the utilization of wind-power deserves careful attention. The available water power in this country is very limited, and the development of it generally requires so great a capital outlay that the standing charges more than equal the cost of the coal required to produce the same results by means of gas or steam...

Wind-power, on the other hand, is almost unlimited, and the capital outlay for its development compares favourably with that required for gas or steam. The intermittent and varying results obtained from wind-mills, however, confine their usefulness to industries in which the storage of power can be simply effected, and this feature is always met with in some form or other...

It is only when windmills become are used for providing a constant supply of electric current that storage becomes costly and troublesome, and conditions must be favourable to enable wind to compete successfully with other sources of power in this case.

The punchline? It was written 100 years ago - 1909.

From FT Energy Source blog via Knowledge Problem.

Making cycling safer: The Idaho Stop Law

One area where I think public policy could really help sustainability in Australian cities is by making cycling an easier transport choice. Sydney strikes me as crying out for measures to encourage cycling. Cycling could really be a big part of the trasport mix here - yes some of the city is hilly but you've got probably 3 million people living within very easy cycling distance of the CBD. But it's just not a cycling friendly city.

One very simple measure I've just heard about is the Idaho Stop Law, in place in Idaho since 1982. Quite simply, cyclists can treat stop signs as give way signs (they must give way but needn't come to a complete stop) and red lights as stop signs (they must stop but can then proceed if nothing's coming).

In the first year it was introduced in Idaho, cycling injuries apparently dropped 14.5%. Michael Giberson at Knowledge Problem suggests part of the reason this law improves safety is that it reflects what many cyclists do anyway and so it aligns the expectations of cyclists and drivers.

Photo credit: Infidelic Flickr stream (creative commons licence)

The oppostion's rival carbon plan: greener, cheaper, smarter?

Malcolm Turnbull yesterday released an alternative carbon plan: "greener, cheaper, smarter". Sounds great. And finally some opposition policy on climate change. Well, not quite. The plan is a report by economic consultants 'Frontier Economics' commissioned by the oppostion and independent Senator Nic Xenophon. And it seems that it's largely a rehash of previous submissions that Frontier made both to the Garnaut review and government's green paper, on behalf of electricity generators.

So in terms of opposition policy announcements, this one's a whimper rather than a bang. They could have pretty much randomly selected any submission made to the Garnaut review or green paper and said "Here's a great idea, why doesn't the government negotiate with us and listen to alternative views like this? Not that it's Coalition policy. We haven't decided what we think of this yet".

But it promises really big things: twice the emissions reduction of the government's proposed carbon pollution reduction scheme at less than two-thirds the cost. Wow, the CPRS must have left some whopping great low-hanging fruit unpicked for those numbers to stack up.

Anyway, I spent last night reading it - badly, badly written as it is. There's 3 hours of my life I won't get back. At least some of the graphs were nice.

When people that really understand the economic modelling of emissions trading costs (not me) get to the bottom of this report I expect it to be thoroughly discredited or else I will learn some useful economic lessons - because I could not for the life of me see how the savings can be achieved. Because this scheme is not radically different to the CPRS; it's a minor tweak.

Very briefly, the idea is for special treatment of the electricity sector - because that's the sector affected most intensely by emissions trading. So instead of requiring electricity generators to have credits for all their emissions, they'd only require them for emissions above a 'best practice' baseline. That baseline would be progressively tightened, so rather than an immediate big electricity price rise, you get a gradual rise. As a result you get less revenue from auctioning permits but you also spend less compensating households and businesses for higher electricity prices. You also reduce the incentive for consumers to save electricity, but the report reckons this won't make much difference because consumers can only respond slowly to electricity price rises anyway: people won't go out and buy LED downlights and turn applicances off standby overnight.

All this is fine as far as it goes, but where do the massively higher emissions reductions at a massively lower cost come from? And the report's 86 pages are pretty hazy on this.

It's not because these tweaks makes it cheaper for firms and households to reduce emissions - rather, according to the report, it's "mostly due to a reduction in the economic distortions arising from the Government's revenue churning" when the CPRS means higher electricity prices, compensated for by other measures (eg, lower income tax). If you reduce the impact on electricity prices, much of that compensation isn't needed.

Well colour me sceptical. Nowhere could I see in the report an explanation of how collecting revenue from permits and using that revenue to reduce other taxes and increase welfare payments costs 1.5 times as much as keeping electricity prices low and collecting the revenue from existing sources instead. Why exactly is taxing electricity so wildly inefficient but taxing incomes just fine?

And how does shielding electricity from the full effects of the scheme allow us to double our target? Well, again, the report hints at this without really explaining it. What the report says is that international carbon trading means that the carbon price in Australia is the same regardless of our domestic target. We're a small country - we don't affect the international carbon price. Fair enough.

So, just to pick a round number out of the air, assume we emit a billion tonnes of carbon a year and the government wants to reduce that by 5% (down to 950 million tonnes). Assume also that the international carbon price is $20 a tonne and we can trade internationally.

So the government issues a 950 million permits. Let's say the government gives half of them away to industry and auctions or sells the other half at the international carbon price of $20. Each firm will reduce emissions where that will cost them less than $20 a tonne and will buy permits at $20 for emissions that it would cost them more than $20 a tonne to reduce. The government gets nothing for the half it gives away and gets $9.5 billion from the half it sells / auctions (475 million @ $20). Industry pays $9.5 billion plus the costs of reducing emissions that are cheaper than $20 a tonne to reduce.

Now, suggests Frontier, assume we double the target for reducing emissions from 5% to 10%. So instead of issuing 950 million permits, the government issues only 900 million. But the international carbon price stays the same, since Australia's decisions don't affect it. Now, each firm will still reduce emissions where that will cost them less than $20 a tonne and will buy permits at $20 for emissions that it would cost them more than $20 a tonne to reduce. So the cost to each firm is still the same. But now since the Australian government has issues fewer permits, it gets less revenue and indsutry buys them instead, at the same price, from overseas. The government now gives half away and sells the other half for $9 billion. Industry pays $9 billion to the government, $500 million for overseas permits and still pays the same to reduce emissions.

In effect, Australia's decision to lower its target is just the decision of a small supplier on a world market to supply less of a commodity - the world price doesn't change, the supplier just makes less money and other suppliers make more.

All this is fine, but the result is that the government gets $500 million less in revenue and that money instead goes overseas. That's $500 million less that the government has to cushion the financial impact of the CPRS on households and businesses. Frontier's report accepts that but says it doesn't matter: "This effectively represents a transfer from the Government to international markets, though in practice the magnitude of this transfer will be relatively small (see discussion later)". Unfortunately, there's no discussion later that I could find and I don't see why this should be small at all. In fact the transfer represents the total of any shift in the target multiplied by the carbon price. In other words, the government pays 100% of the cost of meeting any additional target by buying foreign permits.

Frontier does not explain the following, and to me it just doesn't seem explainable: Why does a reduction in emissions of 5%, spread over a range of industries, sectors, government and households, and with each of these groups making adjustments to the way they do things that reduce the costs they face, impose a huge burden on the economy - while reductions of a further 5% paid for completely by government buying permit, impose costs of a "relatively small" magnitude. It just doesn't make sense.

Now maybe I've missed something here but I've read the report and I'm still very unsure of how Frontier's proposed tweaks to the CPRS save money or allow for increased targets.

For the opposition to present this as an alternative to the CPRS strikes me as another big non-contribution by the opposition toe the climate debate.

Elsewhere: Joshua Gans (and more from Joshua), Peter Wood, Harry Clarke, Robert Merkel, Ben Eltham.

Idle thoughts

An article in the August issue of Energy Policy suggests that people idling their cars (leaving the motor running when stopped) accounts for a surprising and mostly unnecessary 1.6% of US greenhouse gas emissions.

Drivers who were surveyed on average thought that a car could be idle for almost 4 minutes before it was better to turn the engine off (in fact, it's more like 10 seconds).

There are lots of resources out there on how to reduce your fuel consumption (in the US they call it 'hypermiling') - and turning your engine off when stopped for a while has to be one of the easiest.

The NRMA reckons that if you're stopped in traffic for any length of time you should turn the key to the 'accessory' position (not completely off) and shift automatic transmission to park or neutral. This way, when the traffic starts moving again, the engine starts straight away. Vehicles fitted with this feature as standard typically reduce fuel consumption in urban areas by up to 15% (see its PDF petrol saving tips).

What I've been up to...

Hi all,

Well Oikos is back. Welcome readers old and new!

Oikos is a blog I started in November 2005, while enrolled in a Masters in environmental economics and not long after moving from an environment NGO to a government environmental agency.

The blog's focus is at the intersection of the environment and economics. Both ecology and economics derive from the Greek oikos, meaning household.

I'll mostly be looking at environmental policy on Oikos for now, with environmental economics, environmental markets and climate change a major focus. I'll also talk a bit about related topics I'm interested in (eg, prediction markets and behavioural economics).

2009's been a busy year so far. Work has certainly had an environmental markets focus, with involvement in establishing a market for biodiversity offsets. I've finished my last coursework subject at uni (evaluating impacts of policies using econometric and experimental methods) and my thesis (relating to carbon trading and prediction markets) while kind of stalled right now, is almost finished. And I've been busy organising my wedding too (the big day's next Jan)!

Anyway, I feel it's time to get Oikos back up and running and continue the environmental policy debate. Please join me!

David

Oikos returning soon...

Stay tuned!

Congestion tolls in Sydney

One interesting announcement in yesterday's NSW state mini-budget was the introduction of "congestion tolls" on the Sydney Harbour Bridge and Tunnel: the toll will vary depending on the time of day. Tolls will increase from $3 to $4 during peak travel times, stay the same during a shoulder period and drop to $2.50 at night.

Time of day tolls can be a sensible measure to reduce congestion: they encourage motorists to avoid driving at peak hour. The demand for road space varies throughout the day so a price that also varies to reflect that changing demand is likely to improve efficiency. Commuters accept variable time-of-day charges for rail in Sydney, so why not roads?

A few thoughts on the new tolls:

• The government should closely monitor traffic densities and speeds at different times of day now and after the toll comes in to see what impact the toll has.


• Time of day tolling should also be applied to other Sydney toll roads such as the M4 and M5 (the government has flagged this) - at least if the Sydney Harbour tolls are effective in reducing in congestion.


• The public is cynical about this change and sees it as a revenue grab (which it probably is). If the government genuinely sees this as a congestion measure and wants it to be embraced, they should consider making it revenue-neutral or, more simply, reducing the night toll by the same amount as the peak toll increases. Alternatively, the additional revenue could be clearly earmarked for additional peak hour public transport so that people have a decent alternative to just paying the toll and continuing to drive.


• Isn't there an issue because the toll is only collected from southbound traffic? So there's no new incentive to avoid the peak hour when you're travelling north...

What do you think of the tolls?

Conflicts of interest in environmental planning

Andrew Norton has an interesting article on some unintended consequences of proposed reforms to Victoria's local government legislation. Reforms desgined to reduce the potential for conflicts of interest could undermine, rather than strengthen, the rights of residents to partcipate in the planning process:

In the future, local councillors may be prevented from voting on the very motions before council they may have been elected to support or oppose.

For example, they will be held to have become an ‘interested party’ if they have lodged an appeal in relation to a council decision, or have made an objection or submission. Say the Council wants to cut down the trees in your street, or redirect its traffic, or let someone build a house that overshadows your garden. You go through the normal proceses to protect your interests, by making an objection. This fails.

So you run for election on one of these issues, win a mandate to act on them, and then because of your earlier steps to protect your interests you cannot vote on the matter. Not only are you deprived of your right to vote, but the democratic will of the people who supported you is also frustrated.

Defensive investments

I'm back from a very enjoyable trip to Ireland and Scotland - and two fantstic weddings. Being on holidays, I was only generally aware that there was a financial meltdown going on and that everything was costing more each day as the Aussie dollar sunk about 30% against the Euro and pound over the course of the trip!

I developed a bit of a taste for whisky in Ireland and (especially) Scotland, which is timely as it appears that fine whisky is one asset that has been appreciating in these tough times:

Roughly 11 months after the launch of a Dutch online trade platform for exclusive single malt whiskies, mostly from Scotland, the World Whisky Index has seen an average return of 26.2 percent, compared to a more than 40 percent decline in the MSCI World stock index.

I'd have some doubts about whether that will continue but there is this upside to whisky as an investment class:

But even if the 80-proof alcoholic drink turns out not to be recession-proof, there is still a reassuring side to this type of investment.

"While shares and obligations can become completely worthless, if bottles turn out to be not very valuable, you always still have the bottle to drink," the spokesman said.

Blogging break

There's been a lot going on in my life lately (in a good way) and unfortunately Oikos has been the victim of that. Ironically I've been spending more time on climate change issues than ever before but my energy in that sphere has been channeled into my environmental economics thesis which has kept me busy indeed.

I'm heading off on a trip tonight and don't intend to blog while I'm away. I need a bit of a break.

Hopefully I'll come back refreshed in a few weeks and it might be time to overhaul Oikos as the site's looking a bit tired (why does it say Oikos twice in the sidebar??).

There's a lot going on in climate change and environmental policy right now and I'd like to get Oikos back up and running as a forum for policy ideas and debate.

See you in October!

David

Why do we pay people to waste our most precious resource?

It's one year today since the contract to build Sydney's desalination plant was signed and ANU environmental economists Quentin Grafton and Michael Ward have run the numbers on whether it was a good deal.  Their conclusion: the net benefit to Sydney households of the plant is negative one billion dollars.  Ouch.  The decision to build it will cost each Sydney household on average more than $700.

What's the alternative though?  Well how about just letting people pay the actual cost of water so that they have an incentive to economise?

When most things get scarce, their price goes up.  This sends a signal to consumers to economise and find alternatives and a signal to producers to find new sources and ways to produce them.  We don't do this with water though.  Instead we subsidise one of our most precious resources - massively.  We encourage industrial water users to recycle their water or else use recycled water rather than water we've spent millions making fit for drinking.  But why would they when it's so cheap?  Cheap because it's subsidised by every taxpayer.

So why don't we do this?  According to NSW's Water Minister Nathan Rees, that system "would result in gross inequalities and be a nightmare for business":

Any form of sound business planning would be impossible if water prices fluctuated from month to month and season to season.

The current system isn't too equitable either.  Is it equitable that low income earning taxpayers who do their best to save water subsidise big water users to fill their pools and keep their lawns looking lush?  In any case the extra revenue from actually charging wealthy water users for the water they use can be used to provide assistance to low income households.

As for the business certainty argument, businesses deal with price fluctuations all the time.  I'm sure the cafe downstairs from my work would be happier if coffee bean prices didn't fluctuate, but they don't ask the government to nationalise the coffee trade to deal with it.  The prices of rent, employees, petrol, commodities, food and every other business input fluctuate weekly or daily.  And if it's critical for a particular business to know the price of water in advance, I'm sure purchasers and suppliers could negotiate to lock in a price in advance for a set period.  That's what futures markets do with commodities around the world.

The federal government is putting a price on carbon emissions - a challenging and complicated task that involves working out the emissions from a huge range of business activities and creating new and untested markets.  So why can't we allow a realistic price to be placed on one of our most precious resources?  The alternative is pouring an extra billion dollars into an environmentally questionable desal plant that we don't really need.

Thoughts on the green paper - Part 1: petrol

The government’s green paper on emissions trading is now available. The government’s new phrase for its emissions trading scheme is “carbon pollution reduction scheme”.

The first thing that’s captured everyone’s attention – not surprisingly – is petrol. With all the hoo-ha about petrol prices recently, the government’s proposal is to include petrol in the ETS / CPRS but to reduce the petrol excise by an equivalent amount for at least the first 3 years of the scheme. This is not very different from leaving petrol out of the scheme. And this has the Greens and others up in arms.

There are two ways to look at this – from a practical perspective or from a principle perspective. Either way, my view is that cutting the petrol excise isn’t good but isn’t really all that bad either.

The practical implication of cutting excise and therefore neutralising the impact that the scheme has on the petrol price is that – to meet the target – the price of everything else in the scheme has to go up by more. Then again, the price of petrol has gone up so much recently that that’s done a lot of the work that the scheme will do anyway. But power bills will go up by more than they otherwise would to pay for the cut in petrol excise. Which of these would cause more pain? Who knows. The opposition, motorists and the media seem to be clamouring loudly for lower (or at least not higher) petrol prices but electricity prices haven’t gone up yet – presumably there’ll be some clamouring when that happens too.

Looking at the ‘principle’ of cutting the excise – well this really depends on whether the excise now is too low, too high, or just right (I don’t know which it is). Roughly speaking, the excise on petrol should be enough to cover the costs that it places on the community: motorists shouldn’t be expected to be subsidised by other taxpayers and so the excise should cover the cost of building roads, dealing with car accidents, dealing with air pollution, etc. There’s also GST on petrol as there is on everything else. Anything much more than that is seeing petrol as a revenue raising tool. Seeing as the ETS is going to raise plenty of revenue anyway, there’s a case for easing other taxes. So if excise currently goes beyond the social cost of petrol plus 10%, I reckon there’s a case for cutting it if you’re going to include petrol in the ETS. If the excise doesn’t go beyond that, then there’s no principled case for cutting it. I’d be interested in any comments as to which side of that line fuel excise currently falls.

One other comment I’d make is that I’m not sure about the idea of cutting it for 3 years then reviewing the situation. I’d prefer the government to say that they’re cutting it for 3 years only. Seeing we’re apparently talking about a cut of about 5c a litre and petrol prices fluctuate by that amount weekly, I don’t think people could complain too much if the government said “Petrol excise is going up by 5c in 2011: you’ve got 3 years to get ready”. That seems like a more than generous concession to me and better than just deferring the issue and the uncertainty around it by 3 years.

What do you think?