There they go again

From The Australian [HT: Tim Dunlop], opposition environmentalist Greg Hunt:

We are willing to champion real emissions reductions but we do not support pain without gain.

In economic terms, petrol is largely inelastic, which means that as price rises there is only a small change in driving behaviour but a large effect on low-income families.

And what is the evidence to support his claim that petrol is largely inelastic? As I have mentioned before, there is none because it is wrong. Andrew Leigh links to some actual estimates. What is more that same study concludes that “[t]he demand for owning cars is heavily dependent on income.” One possibility the Opposition might entertain is that low-income families are less dependent on cars and petrol prices.

To deal with this type of stuff, let me introduce a new term “Climate Change Policy Denialist.” Hunt doesn’t deny climate change or the need to do something about it. But he does deny that incentives can work to change behaviour and mitigate emissions. To see this further …

That is why, if petrol is to be included in emissions trading, we believe any new carbon tax should be offset by an equal decrease in the excise tax.

Again, if total tax on petrol remains the same, you don’t have a climate change policy. You have “re-labelling.” That said, later in the article he seems to put more faith in price signals (for electricity and hybrid cars) but let’s face it by this point it is very confusing what he wants. And the call for innovation reads like a back-door industry assistance program. Actually, if you ask me, the Opposition wants to be “re-labelled” as environmentally friendly; hence the title ‘Let’s go Green.’ He may have well just said kombya.

3 thoughts on “There they go again”

  1. It’s not quite “re-labelling”. Once petrol is locked into the emissions trading mechanism the tax will vary in line with the cost of carbon emissions, which is what we want.
    Reducing the excise to match the initial carbon tax is a non-inflationary way to make the transition.
    Personally, I think it’s overblown. One litre of petrol emits about 3kg of CO2. The Europeans are trading carbon at around $30/tonne. So we’re looking at a tax of only 9c/litre.


  2. Every time that Hunt opens his mouth, I hear the Paul Keating term ‘useless vandal’ in my head.


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