All in, or carbon trading too costly

A SYSTEM of carbon trading to give energy users an incentive to reduce greenhouse gas emissions could be introduced in Australia at little cost to the economy.
However, any global attempt to stabilise the world climate would be prohibitive unless every single nation joined in.
Carbon trading works by issuing energy users with permits to emit carbon into the atmosphere. Each year, the amount of carbon that can be emitted is reduced by a fixed amount. If a company cannot meet its target, it can buy from someone with spare permits.
The Australian Bureau of Agricultural and Resource Economics calculates that the Australian economy would be 2.5 per cent smaller in 2050 if a system of carbon trading were introduced worldwide by 2010.
ABARE's modelling assumes that the target is to stabilise the world's climate by 2100. The cost of emitting carbon into the atmosphere would rise from $US1 a tonne in 2010 to $US17 by 2020 and $US75 by 2050.
By 2050, a carbon trading system would result in renewable power sources in Australia generating 60 per cent more electricity than coal.
ABARE former chief executive Brian Fisher said the cost depended on what the target was, how binding it was, and when it had to be achieved.
"The price varies dramatically depending upon whether you have everybody in, or only some people," Dr Fisher said.
A global trading system that included the biggest sources of greenhouse gas, China and India, along with eastern Europe and all the developed countries, but left other developing nations outside, would carry a punitive cost.
To stabilise the world climate, the cost of carbon would have to rise to $US400 a tonne. World economic growth would be 4.3 per cent lower by 2050, while Australia's economy would be 8.3per cent smaller.
Dr Fisher said the Stern report advocated stabilising the climate by 2050 rather than 2100, the base for most international studies, and the earlier date would carry vastly higher costs.
Europe has the only functioning system of carbon trading in the world, which started last year. Permits covering 362 million tonnes of carbon were traded in the first year for E7.2 billion ($12billion).
Anxious to protect Australia's fossil fuel dependent industry, the Howard Government has rejected calls for a carbon tax or carbon trading. Instead it is promoting clean coal technology, including proposals for burying emission deep underground.
Victoria and NSW, however, are pushing for the creation of a carbon trading system that would embrace all the states. The booming resource states of Queensland and Western Australia have been somewhat less enthusiastic, concerned that it would hit hard mining and other industry.
NSW already operates a carbon credits system, and Victoria has introduced mandatory targets for power companies to source 10 per cent of their power from renewable energy by 2010, a response to the federal government refusal to extend its own Mandatory Renewable Energy Targets.