Australia's carbon plan

After all the drama and sniping and disorder, Australia actually came out with a pretty decent plan for pricing carbon emissions yesterday.

A fairly good initial price of A$23/ton; a price floor starting at A$15 to prevent collapses and give certainty to renewables investments; and linkages to international systems to help create a global market for this stuff. There's even some failsafes in there to make it difficult for future governments to repudiate the whole thing.

But of course I'm a critic by nature, so here's three things that I think tell you most about the political settlement in Australia these days.

1. Households end up, on average, 20c a week worse off under the initial stage of the plan (fine; we can well afford it); and government revenues end up A$4.9 billion worse off. Econ 101: if households and government end up worse off under a policy, who ends up better off (assuming deficits and debt are constant)? That's right, the private sector. You wouldn't know it from the howls of pain we're hearing from every business lobby in Australia, but this is a net transfer of wealth to private companies on the back of households.

2. Of the A$9.6 billion of compensation adjustments being given to private industry, A$1.3 billion goes to the coal sector. Coal mines at present are mostly sitting on profit margins well over 60%, and about 90% of them are owned by major multinationals or conglomerates such as BHP, Rio Tinto, Xstrata, Peabody, Anglo American, Yanzhou Coal, Idemitsu, Wesfarmers. Barring Wesfarmers, which is unlucky enough to be hitched to a retailing empire, these guys are doing so well right now that they literally don't know what to do with the money. Poor little rich kids.

3. If Australia really wanted to make a difference to climate change, raise revenues, please domestic industry hard-hit by the strong dollar's effect on exports, and limit carbon pollution in emerging countries, it would have a very simple solution: attach a per-ton carbon price to its energy exports. We are the world's biggest coal exporter and the ninth-biggest energy exporter all told. We are well on the way to overtaking Qatar as world's biggest LNG exporter. Most energy products are priced ultimately on their carbon content, because it's almost directly proportional to their energy content; such a measure would be quite legitimate under WTO rules, especially in combination with a domestic carbon price. And it would send a price signal to encourage greener policies not just within Australia's rather piddling economy, but worldwide.

I've asked several senior politicians over the past year why this has never been mooted, and the answer has always been, essentially, "That's not how we're doing it." Which is a fancy way of saying "no comment". I suspect the reason is that, the EU having gone with domestic carbon trading (it's a net energy importer, after all), politicians feel no desire to pick a fight with the resources sector over something no one is pressing them over. So, Australians should start pressing them about it.