Editor’s Note: Following the release of the draft report of the Garnaut Climate Change Review in Australia, Warwick McKibbin was interviewed by Alan Kohler of ABC’s “Inside Business,” and discussed his views on the report and his own proposals for international climate change policies. Instead of Garnaut’s proposed emissions trading system, McKibbin advocates for a framework that includes clear, transparent, long-term goals with less uncertainty.
ALAN KOHLER, PRESENTER: The day before Garnaut delivered his report, another ANU economics professor, and climate change expert, Warwick McKibbin, gazumped it with his own report which proposes a different solution. Professor McKibbin has been studying emissions trading for 16 years and he points out that both the Kyoto Protocols and cap and trade schemes introduced so far have all failed. And by the way, he’s also member of the Reserve Bank board and a Fellow at the Lowy Institute. I spoke to Warwick McKibbin in Canberra.
ALAN KOHLER: Well Warwick McKibbin, what sort of shock to the Australian economy would the Garnaut prescription actually cause?
PROFESSOR WARWICK MCKIBBIN, ANU ECONOMICS: We don’t know because so many things are happening at each point in the future that it’s very hard to predict. So that’s why it’s very important that we put into place something that no matter what shock comes along, the system itself evolves gradually over time.
ALAN KOHLER: He’s prescribing 100 per cent auctioning of permits which presumably would cause a major product shock at that time.
PROFESSOR WARWICK MCKIBBIN: Well again it depends on how you redistribute the revenue. In my view, you would actually give out the permits to a whole variety of people, the emitters and also consumers in the economy, so that the revenue doesn’t go from the economy to the Government and then have to be recycled, because that can take some time and that revenue is out of the economy during the recycling process.
Indian Railways’ business model is based on passengers underpaying and freight overpaying. Already, in financial year 2016-17, coal’s extra freight charge increased the cost of power by about 10 paise per kilowatt on average. For power plants in distant states, which inherently rely on Railways for coal, this number can be three times higher.
Gujarat, Punjab, Tamil Nadu that are far from coal mines, and therefore pay more than others, will contribute proportionately more to recover the coaching loss — the passenger subsidy. This overpayment by coal-based power applies to all coal generation in States like Punjab as all their coal comes via Railways.