The political hubris towards the carbon tax is making a mockery of its opportunities.

WHO could imagine anything worse than a carbon tax? I think I just did – not having one. That the alternative is indeed worse is shown by electricity prices.

One reason they’re climbing is the government’s demand that 20 per cent of power come from renewable sources – solar or wind, for example – by 2020.

Sounds harmless enough, except this has postponed investment in cleaner gas-fired power stations for expensive, energy-inefficient windmills all over the countryside. With a carbon price we’d have cleaner emissions sooner because there’d be an incentive to invest.

And get this.

The federal opposition is happy to go along with such inefficiency while adding its own. Also, I’m blowed if I know where it gets the $300 a year rise in electricity bills on a $26 a tonne carbon price.

This supposedly comes from a report by the Australian Industry Group, only that’s not what it says. The closest is a footnote saying a typical Sydney household power bill would rise $307 over three years.

Somehow that’s morphed into it rising $300 a year. Scare campaign aside, in truth the carbon tax bogeyman is more your wimp.

Consider how it might work, struggle though that is seeing as the government doesn’t know itself yet.

But here goes. The government will initially set a price on carbon, which is the cost to buy permits to pollute. As it’s the only seller, that’s a tax. Polluters have to buy enough permits at, let’s say $26 a tonne, a price indexed each year, to cover their carbon dioxide emissions.

After three to five years, the emissions trading scheme kicks in so the price of carbon fluctuates according to how much pollution is emitted.

Strange as it seems, the fact that a carbon price will raise revenue for the government – I suspect a lot – is its saving grace.

Not only is there a price for carbon that will encourage investment in less-polluting technologies (and perhaps eventually put a stop to spiralling electricity prices) but it will have a kitty to spend as it pleases.

That’s where Opposition Leader Tony Abbott, instead of denying the inevitability of a carbon price, could make himself useful by demanding across-the-board income tax cuts and pension increases to compensate for the price increases.

Just think higher power and petrol prices in return for tax cuts. Bet you could live with that and you’d be helping the environment as well.

Instead, he’s offering Band-Aid schemes at great cost that will achieve little by not getting to the nub of the problem.

As the respected OECD says, no price on carbon ‘‘increases climate-change risks and prevents low-emission technology being developed’’. But wouldn’t we be shooting ourselves in the foot with a new tax that none of our competitors have?

Too right. That’s why a rebate for the carbon tax for exporters must be integral to the scheme.

And how’s this? The rebate could be paid from a tax on imports that aren’t up to carbon scratch.

Anyway, getting in early has its benefits, too. We’d have a far more efficient electricity-generating industry based on modern equipment for one.

And, even better, Australian developers of leading-edge renewable-energy technology would have a ready market right on their doorstep.

http://www.theage.com.au/money/scare-tactics-in-silly-shoes-20110312-1bs0h.html