It is wrong to say that the CPRS has no cost because all of the receipts are handed back. The funds to be collected from the energy distributors are achieved through higher electricity prices which have been scheduled by IPART. But the price increases are higher than that which would cover the CPRS. They are higher by the amount that IPART estimates that the energy companies are going to nwed to spend in order to operate within the dwindling emission permits. That other amount is significwntly larger than the CPRS collections themselves. And then there is the issue that it is only households under $160,000 annual income who are refunded. General business is not refunded. They have to absorb the CPRS increase and recover that through sales. Those price increases eventually fall on households. So whereas the the increase in electricity prices is (in theory anyway) compensated for with the refund, the general increases in prices is not refundable. So the public pays the bill eventually.

So the real jssue is which system is the most efficient.;

The whole CPRS thing was a rhetorical meaningless mess until IPART announced its direction to the electricity industry in NSW for pricing to accommodate the requirements of the CPRS. This is stage 1 of a 4 stage process of price increases to 2013 when the CPRS is proposed to come into effect

http://www.tta.com.au/energybusiness/electricity/ipart-increases-electricity-prices-by-20/

If you study the information you will see that the price increase has 2 parts. One part is an amount to cover the cost ofbuying permits, the other is to provide the funds to the industry to invest in the alternative electricity infrastructure (be it CCS in the governments mind or nuclear in some other minds or CSP/wind/geothermal/wave in everybody elses mind…stop press…tidal in the LNP mind), in order to meet the requirements of a declining availability of permits.

This is what Garnaut is refering to when he says

“The cost to the economy is the expenditure on substitutes net of existing higher costs imposed through mandatory schemes”

,”expenditure on substitutes” is the “other” part of the IPART price increase. This is the cost to the economy. The CPRS is collected and handed back to the average individual as a sort of progressive revenue distribution exercise, and it covers both parts of the IPART increase for them. Business on the other hand, SME’s largely, get no compensation and must pay all of the increase in electricity prices. As they are covering the cost this way for both their own electricity responsibility and the funding the entire CPRS emission permit cash flow, they will have no choice but to increase prices.

So where you say

“I do claim that these costs are different to (and probably much less than) the amount of permit revenue”

I have to point out that you are still caught in the misconception that the government has been happy for everyone to be immersed in, and that is that the money for the industry invest in alternatives will somehow magically appear via some economical miracle that people should not try to understand. Not so. The money to reshape the industry will come out of the consumers pocket via price increases, plus interest, plus profit^2.

Industry and agriculture are both much more difficult emissions problems to solve. But solve them we must, it will just take a lot more thought and research.

David, I agree about Greg Hunt. But surely the Coalition wouldn’t engage in political propaganda/lies/spin?

On top of that, when govt hands out money, it runs the risk of:
- poor setup of rules meaning that money is squandered via loopholes on dodgy enterprises
- poor setup of rules means that loopholes are minimised, but it becomes very onerous and bureaucratic to actually apply for funds.
- pork-barrelling (lets fund project A but not B because A is in a marginal, and B is in a safe seat). This will be inefficient.
- susceptibility to lobbying/ideology (lets fund project A and not project B, because A is clean coal which we have been told we should like, while B is wind power, which we have been told we should not like)
- susceptibility to corruption (lets fund project A because they gave us something)
- encouragement of the white shoe brigade (govt is handing out billions, lets all start a treeplanting / solar business and do the bare minimum to be eligible for a handout!)

IMO, handing out money as the coalition proposes is likely to be more of a “money-go-round” than the ETS, with potential for wastage, red-tape, and misdirected efforts. We have had 15 years of experience with such schemes, because the Howard Govt was so fond of them. Look at the litter of big-grant funding schemes they left behind that cost billions but didn’t actually reduce emissions by much, nor significantly advance a new technology.

It is wrong to say that the CPRS has no cost because all of the receipts are handed back. The funds to be collected from the energy distributors are achieved through higher electricity prices which have been scheduled by IPART. But the price increases are higher than that which would cover the CPRS. They are higher by the amount that IPART estimates that the energy companies are going to need to spend in order to operate within the dwindling emission permits. That other amount is significantly larger than the CPRS collections themselves. And then there is the issue that it is only households under $160,000 annual income who are refunded. General business is not refunded. They have to absorb the CPRS increase and recover that through sales. Those price increases eventually fall on households. So whereas the the increase in electricity prices is (in theory anyway) compensated for with the refund, the general increases in prices is not refundable. So the public pays the bill eventually.

So the real issue is which system is the most efficient.