Working Papers

The Australian Dollar’s Carbon Footprint

As the Australian dollar makes new 18-year highs against the greenback, Terry McCrann suggests we ponder the relationship between the currency, the terms of trade and carbon emissions:

The core driver of our rising dollar—and pretty much everything else in and around our economy—is the explosive growth in China’s demand for, and consumption of, commodities.

Principally, so far as we are concerned, iron ore to make steel and coal to generate power. Along with pretty much everything else—globally importantly, oil and copper.

In short, not to put too fine a point on it: our dollar is pivoting on a truly momentous eruption of greenhouse gases. Yet we and the world are—at least hypothetically—committed to not just capping that eruption, but reversing it.

Let me spell that out a little more specifically. We have a dollar challenging conventional currency gravity; on the promise of pumping more and more commodities into the Chinese “greenhouse gas factory”. Yet we want to in effect burn that factory down.

Add on the certainty that even on the assumption that the factory keeps on belching, our dollar will overshoot; what happens if we actually “succeed” in persuading China to please let us leave all the stuff in the ground?

posted on 24 July 2007 by skirchner in Economics, Financial Markets

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Yes, Australia is profiting from the destruction of the biosphere.  Makes me feel all warm in gooey inside.

Putting aside arguments about whether mad-made climate change is happening or not (because lets face it, only the lunatic right still thinks its up for debate) one thing I can’t understand is why the right would be against carbon taxes.

Let me explain…

Most neoliberal, right-wing, economic rationalist types would prefer to tax consumption rather than income.  Pretty much everything we consume has a significant energy component, so in reality there’s not that much difference between a consumption tax (like the GST) and an energy tax (like a carbon tax).

It would seem to me a big tax switch from income to carbon would be something many on the right would (or should) applaud.  Of course, for lefties there is the problem of equity, and the fact that a carbon tax would hit the poor hardest, but that’s not going to concern the likes of McCrann, Wood et al.

So how about it Stephen?  Lets get behind an income-to-carbon tax switch, reduce your taxes and do some good for the environment as well?

Posted by .(JavaScript must be enabled to view this email address)  on  07/27  at  10:49 AM

I think all McCrann is saying is that Australian living standards stand to lose disproportionately from a reduction in world energy use. That is pretty much an exogenous variable from Australia’s point of view.

Posted by .(JavaScript must be enabled to view this email address)  on  07/29  at  10:47 AM

Carbon taxes are probably preferable to carbon trading regimes.

Posted by skirchner  on  07/30  at  09:35 AM

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