Carbon Tax - a Clayton's tax?

Discussion Leader's Argument:

Disclaimer

Rather than talk about new taxes what we ought to be talking about is reining in government

expenditure. Like the wrong-headed Rudd Government, the Gillard Government also seems to think that

they can spend their way to prosperity. All governments are guilty of hare-brained schemes to fix

one problem or another, and the Rudd Government was exceptional in this regard, but now we have

Gillard trying to drive home a carbon tax, which she said in the election campaign would never be

considered.

The tax is supposedly to address the issue of climate change. Even if one were foolish enough to

believe that carbon dioxide had anything other than a minor impact on climate, and given the fact

that Australia is responsible for ~ 1.5% of total anthropogenic carbon dioxide, out of a global

total of 3%, how does one expect to have any impact whatsoever on climate? It just doesn't pass the

smell test because there can't be any impact whatsoever.

Yet the Gillard Government, and their wrong-headed advisors, such as the so-called climate expert

Ross Garnaut, who is an economist with no technical background at all, wants to raise billions in

taxes to address a non-addressable issue so they can presumably have even more money to hand out to

their special interests, so as to stay in power. There is no other explanation which makes any

sense.

What Australia really needs is a thorough analysis of all big-ticket government expenditures by

outside parties, such as KPMG, Deloitte's or McKinsey, so that all lousy returns on expenditure can

be highlighted for their waste and inefficiencies and, as a result, taxes can be reduced for both

individuals and corporates. We are always ill-served by governments but this one is particularly on

the nose.

1. Do you agree with Peter's views on climate change?

2. Do we need a carbon tax?

3. Should all big-ticket government expenditures be analysed by outside parties?

4. Please rate the Gillard government's performance so far on a scale of 1 to 10 (where 1 is very

poor - 10 is excellent)

Relevant Articles:

Client Page Member Comments

Equity Sales (Investment Banking Client Page Member)

1. No I do not. I believe climate change is happening but I don\'t believe a tax is the right way to go 2. No... Like the author, I agree that new or increased taxes are not the way to go 3. Absolutely, yes. 4. 2 Jim Love RBS Equities Execution & Trading

Executive Director (Investment Banking Client Page Member)

1. Who knows whether this is the \"greatest moral and economic challenge of our time\" or just another Y2K scare? The one thing we do know is that a carbon tax (more correctly a wealth re-distribution tax) in Australia won\'t make one bit of difference to the climate. 2. No - in any case, what is proposed is a wealth redistribution tax and not a carbon tax. 3. No - just get competent and good government in the first place and there won\'t be a need for highly paid consultants - there are enough of those in government already. 4. 2.5

Research Analyst (Investment Banking Client Page Member)

WHEN IT COMES TO ENERGY AND CO2, MOST ARE SIMPLE MINDED Energy morons #1: “Speed bumps to get new role as a source of green energy” (Guardian UK 1-Feb-09). At the UN Copenhagen conference, where, supposedly the smartest minds on global warming and energy matters were gathered, time was set aside to consider the potential for free power courtesy of motorists running over mechanical speed humps that then generate electricity to power street lights. That this idea wasn’t shot down immediately, is astounding. This will singlehandedly lower the fuel efficiency of all the cars on the road. The energy for the lights has to come from somewhere. This is like putting windmills on an airplane. Energy morons #2: People will buy big houses far away from their place of work, buy a big car, buy air conditioners, eat too much and make themselves fat. Then they complain about the price of electricity, petrol, and food. These are all forms of energy and if everyone around you is similar to you, then the price of energy will likely rise. (On the other hand, being efficient and frugal pays you many times over. If everybody else stays inefficient your relative savings increase and if others do improve, your overall energy costs go down.) Energy morons #3: One of the fastest growing new soft drinks in North America is Xenergy by Xyience. It sells, wait for it, a “zero-calorie energy drink”. No free energy The first thing that everyone needs to know is that there is no free energy (refer The First Law of Thermodynamics). English is loose on the word “free” but here it usefully takes both senses – it is both confined and costly. Confined means that the amount is a known quantity and to do any useful work will always take a minimum amount of energy. There are efficiency gains that we can make but only to a limit. To illustrate, to move a 1t car for 1km will theoretically take the same amount of energy if a horse pulls it, the driver gets out and pushes, the engine turns a shaft, or a battery turns the wheels. The problem with natural systems that they are only about 10% efficient, with the other 90% going toward growing, eating, and breeding. Mechanical systems are up to 60% efficient. They can improve incrementally but will never approach 100%. Our civilisation is built on extracting ever more energy to put to our own devices and generally we have become cleverer and cleverer at both extracting and using it so that more work can be done with less energy. However, we use ever more energy in total and we have reached a point where the costs to the environment have become noticeable and so worthy of preventing. Carbon is an endgame That humans emit a lot of CO2 is a fact. That CO2 absorbs infrared radiation is a fact. That we can do anything to change those facts is going to be very difficult. Without global mandates and enforcement, declines in demand for fossil fuels in one jurisdiction will mean lower prices and therefore increased usage in other jurisdictions. Taken to the extreme, offshore manufacturing will take on a literal meaning. There are already floating power stations in Asia and Africa. The Australian government wants to now impose a carbon tax. The intention is to change behaviour and lower fossil fuel burning and increase wind and solar (but definitely NOT nuclear) generation. At the same time it will compensate consumers/polluters for higher costs. It is difficult to see how compensation is going to encourage a change in behaviour. There is no doubt that society can and will adjust. It is, however, unlikely that the impost will be at a high enough level to make a measurable difference to emissions – only measurable to the reduction in lifestyle. The public doesn’t want to pay for the adjustment. The public at large will apparently not even invest to insulate their homes despite what one would think is the easy calculus of $1 invested in insulation today will save many times that amount over the life of the insulation (the words thermodynamics and calculus were just used and many would have stopped reading...). Then, governments try to bribe us with our own money and are shocked to see people sprinting after the free goods by fair means and foul. It’s beautiful doublespeak when programmes have to be cut because they are “too” successful. CO2 is tough because it is bound closely to almost all we do. Meanwhile the mechanisms at our disposal are very weak. Taxes, Credit Trading, Offsets are all artificial products that will depend on politics that are not durable. Emission reductions require a totality of geography and time that, simply, is almost impossible to implement let alone enforce. Totality means: The whole planet. Forever. No exceptions. The other difficulty is that CO2 reductions are an anti-good. Technological and geopolitical disruptions will come and go but people will still demand goods and services. How do you guarantee that people will continue to demand an anti-good? Take for example the planting of a forest to “capture carbon” (put aside the fact that CH4 is 25 times more potent than CO2 over 100 years and that the planting of a tree today creates a much bigger global warming liability when it rots than it saves while it grows). A society 100 years hence may have no respect for the captured carbon when there is demand for goods like firewood and furniture but no demand for the anti-good like CO2 (despite the protestations of the local remnant cult that the forest was created for a purpose). Or take carbon sequestration. Nobody can guarantee the ongoing monitoring and maintenance of a full reservoir of CO2 forever. It is no good for just 100 years, or 500 years. It needs to be emphasised that forever is not a strawman, it is the necessity of the global warming problem. There is no point in paying someone to not-emit or capture CO2 today that will be emitted or released tomorrow. One can replace today and tomorrow with here and there. Unintended consequences Because politicians live in a magic pudding world, consuming much, producing little, and handing out other people’s money, the concept of conservation of energy is especially hard to swallow. Switching to higher cost energy sources will have a cost (it needs to be stated explicitly for the politicians). It will also have unintended costs. Taking the economy to wind and solar has its attractions, chiefly zero fuel cost, but what looks attractive at small scale will look much less “clean” if they are a much bigger proportion of the generation mix. The large scale manufacture and installation will have its own pollution drawbacks but the key concern is that back-up fossil plants will be required for periods when the wind and sun are insufficient, meaning that the cost of infrastructure has doubled compared to just having the fossil plants alone. Yet, it is amazing that politicians, who know something of human psychology, constantly fail to understand unintended consequences. Surely, if we build more roads, congestion will decrease. Surely, if we tax alcohol, consumption will decrease. It is very likely that carbon is going to be like alcohol - highly inelastic and society will bear the added cost without the reduction in consumption. The only justification for a Carbon Tax is if it is used to fund an Adjustment Trust that is spent on preparing for rising sea levels. One final note on unintended consequences: CO2 used to make up less than 0.028% by volume of the atmosphere before the Industrial Revolution. It is now 0.038% of the atmosphere, a 35% increase. That a change in such a tiny constituent of the atmosphere can potentially cause the melting of all the ice caps is incredible. Now, if we never burnt anything ever again and depended solely on wind and sun, it is similarly likely that there will be some impact on some natural system that is inconceivable today and it could have similar potential danger to our civilisation. Andrew Harrington Resources Analyst, Coal and Specialty Metals Patersons Securities

Managing Director (Investment Banking Client Page Member)

1. No, I don\'t agree with Peter\'s views on climate change. I am sure there simply has to be some consequence to the planet of the human race coming along and deciding to burn fossil fuels for energy. In the process of doing this we send huge volumes of carbon dioxide into the atmosphere. Now, history books and chemistry books tell me that the fossil fuels took something like \"millions of years to make\". Whereas mankind has been burning them in huge quantities in power stations for how long, what, since the industrial revolution, the era of Edison, a whopping 200 years ago? Don\'t people see a mismatch here? There simply has to be a consequence from something we have only been doing for 200 years that must be causing an imbalance to the earth, or the atmosphere, and it would seem relatively plausible to believe scientists theories that the globe is warming because our protective layer from the sun is getting damaged. We aren\'t getting closer to the sun, but has anyone considered what it is that actually protects the earth from the sun\'s heat? Atmosphere perhaps? So if the earth has been happily enjoying its own \"equilibrium\" for millions of years, it will only change with the introduction of a catalyst. What\'s the catalyst for the protective layer of the earth changing do you think? Given the earths protective layer is gaseous - then, what does mankind do now, that is different to what mankind has done since the caveman, that involves the production of large volumes of gas? We burn carbon, that\'s what. I reckon climate is changing yes. I reckon the earth’s air temperature is rising yes. 2. No I don\'t think we need a carbon tax at the moment. Yes the world which is dominated by capitalist societies all need to introduce a carbon tax to drive capital decisions to push capital away from harmful carbon dioxide polluting activities. Else, no one will change their behaviour. But Australia taxing itself, on carbon, achieves what exactly? Makes our goods and services more expensive and prices us out of jobs. Dumb. It also won\'t make any difference. China and the USA are the big polluters, and by definition they are also our biggest trade competitors. So unless all three nations, and maybe say some of the European Union tax carbon as well, we should not do anything alone. Do we think the world will thank us for the avoided carbon, and compensate us and pay our mortgages off for us when we all lose our jobs because our exports are not competitive anymore? Gee, I doubt it. So a carbon tax - yes. A carbon tax in Australia only - that would be dumb! Good way to put the country out of work right there. Why would the country that is blessed with natural and incumbent energy supplies, choose to tax itself? Jesus how daft is that. Now, if China and the USA tax themselves on carbon too, now you\'re talking Australia. 3. No 4. 1 out of 10

Executive (Investment Banking Client Page Member)

1. Yes in part 2. No 3. No. 4. Two

Equity Sales (Investment Banking Client Page Member)

1. No I do not agree with Peter\'s views 2. Yes we need a carbon tax 3. No we should not have big ticket govt expenditure analysed by outside parties 4. Gillard Govt performance 7/10

CFO (Corporate Client Page Member)

1. Yes 2. No 3. Yes 4. 1

Chairman (Corporate Client Page Member)

1. Yes, I agree with Peter Farrell\'s view on climate change. His comments are correct, however I have little hope the government will take heed and change direction. They will continue to do what they want (and ignore what she promised before the election). The more revenue they can raise means the more money they can spend. The more money they spend, the more influence they have, thus they gain political advantage as they effectively \'buy votes\'. 2. No a \'carbon tax\' is definitely not needed in Australia as it will have zero impact on global climate, negative impact on the competitiveness of Australia\'s productive companies, thus a negative impact on Australian employment and positively increase the reach of Australia\'s government into the lives of Australian citizen\'s further slowing our economy. Government does not do anything efficiently, so why increase it\'s size further? 3. An independent review of all big-ticket expenditures would be a very healthy process. The NBN is the perfect candidate to begin this effort. We might get some facts and a real cost/benefit analysis. Many government programmes would fail this most basic analysis. We do not need more and more government in our lives in Australia, we are already becoming a Nanny State. The more revenue we place in their hands, the more they will continue to insert themselves into our lives. 4. Gov\'t Perf - 2 (Although I guess the \'Portfolio Manager\' is correct, the public gets the government they deserve, for being so foolhardy to believe Julia\'s promise that \'there would be no Carbon Tax before the next election\'. Hopefully Australian Voters will not be fooled at the next election when she makes more promises!!!

Managing Director (Corporate Client Page Member)

It seems to me that the Gillard government have relied upon the advice of Ross Garnaut. Admirable as this may be Ross, as Chairman of Lihir Gold, presided over the genesis of a company which pumped 21 million cubic metres/annum of toxic waste into the ocean off Lihir Island so I expect he is the last person to advise a government on climate change,

General Manager (Corporate Client Page Member)

1. Yes 2. No but I don\'t have to worry as only the 1000 \"big polluters\" will pay on our behalf and the rest of us will receive the compensation isn\'t that how it will work?! 3. Not if we have governments with integrity 4. Yet to perform nothing to score

Non Executive Chairman (Corporate Client Page Member)

Dr PC appears to believe that anything that affects his hip pocket is wrong ie tax, attempts to reduce CO2. I believe he is wrong about climate change but even if he is not can we afford to ignore it given the likely consequences. As for whether the Gillard plan is the best option I dont know but we have to start somewhere and the argument that Australia is irrelevant does not hold water. On that basis noone is going to start because noone can turn it around on their own. Lets put something in place and see if we can get the big emitting countries on board. We dont have a lot of credibility when we are one of the few countries to have survived the GFC unscathed and we are unwilling to commit. Some very basic thoughts. Mick Caratti Non Executive Chairman Lycopodium Limited

CEO (Corporate Client Page Member)

Did Peter Farrell really write the Discussion Leader piece? Not his usual considered writing. The Aust \"1.5% ...out of a global 3%\" will be opaque to all but those very familiar with the numbers. What do you think it means? The very necessary debate about a carbon tax risks being lost by introducing the concept of analysing all \'big ticket\' items. The name calling and branding a significant number of people \'foolish\' if they believe CO2 has other than a minor impact on climate reads like the mirror language of the pro lobby. A bit like the behaviour of Gillard and Abbott - both lose. Peter is usually better than that. Worse it distracts from the main (in my view) issue - which is: The timing is wrong in that the facts are that: 1. Australia could reduce to zero CO2 and it would have a barely detectable impact on global concentrations (clearer than the muddled 1.5% of 3%?). 2. Despite selective quotes to the contrary by the pro lobby, the two largest emitters, US and China have not adopted a nation-wide carbon tax or any other economics based emission target. 3. Europe (and the US and some other countries) are much more influenced in their take up of alternative energies as a result of wanting to reduce energy dependency than climate change. Though their politicians are quick to take points on both scores and why wouldn\'t they. 4. Australia is one of very very few countries that is both a net exporter of both energy and food. Other than for petrol and diesel fuel we do not import energy, we export it. And the carbon tax will have negligible impact on the domestic use of transport fuels. Electric vehicles will and they are more affordable at low electricity costs, not higher alternative generated costs. 5. All the above facts support Australia delaying further action until it is clear that real CO2 reductions are being implemented in China and the US and that the real motivation is a reduction of CO2 not energy self-sufficiency. 6. None of this means that there should be any backing away from having 20% electricity generated from alternatives by 2020, and some general, in the scheme of things, relatively minor support of alternative energy development. This is not economically disruptive (probably supportive), is in tune with all major world economies, and \'keeps our hand in\' in case greater action is needed as per point 5 above. Not surprisingly, this legislation was supported by all parties as one of the last pieces of legislation passed by the Parliament immediately prior to being prorogued for the last election.

CEO (Corporate Client Page Member)

1. Yes, remmember the issue is not climate change (as climate is always changing) but the extent to which the change is driven man made carbon dioxide emissions. The data supporting an hypothesis of anthropogenic global warming (AGW)are very weak. 2 No - even if you did believe in AGW, Australia implementing a carbon tax at this time is irrational in that it will not have any impact on global climate without major emiiters (eg China, USA) implemeneted something. Also, I am amazed at how Ross Garnaut has turned this into his version of wealth redistribution 3 Nothing wrong with some transparency 4, 1. Julia Gillard\'s fundamental intellectual dishonesty has been evident for years. One recent example: telling the elecorate in the lead up to the election that she would not introduce a carbon tax, then post election trying to implement a carbon tax. Why don\'t we expect more integrity from out leaders? Where is the vision?

Sustainability Manager (Corporate Client Page Member)

For question 1) I am really surprised that a chairman of an ASX listed company could espouse such ignorant views on climate change. It seems to me that his views are blinded by his ideological slant. As an institutional investor in his company this makes me question the soundness of his judgement altogether. So no I don\'t agree with Peter\'s views on climate change. Lets leave the science to the professionals, including NASA, CSIRO, British Academy of Sciences, The MET Office, IPCC etc whom have repeatedly come to the conclusion that climate change is real, it is caused by increases in greenhosues gases and humans, through their burning of fossil fuels, are the cause of this bout of global warming. Accepting the science means that the right question to then ask is how to address the problem of climate change. Question 2) What we need is a mechanism to price the externality of green house gasses. Using a market based price mechanism is the best way to do that (if you believe in using markets)and it is in Australia\'s interests that the mechanism connect to other schemes in time to access least cost abatement. Emissions trading schemes are best to achieve that outcome. There should be additonal schemes for specific exposed industries and there should be compensation for EITE industries as well as poorer members of society. 3) No - not if the government is effective and functional well. But that is a big IF. External parties answerable to no one to govern over the government sounds like the worst Orwellian nightmare. 4) 2. Gillard gets maximum points for actually committing to introduce the carbon price but loses all the rest for shoddy selling and education and seemingly going back on what she said in the heat of the election. But why not be asking a score for the Abbott led opposition here?? For me they get 0 (can I give negatives??). They have shown themselves to be incredibly ignorant and denialist here and have not done one thing to improve their understanding on this issue of great national importance. Rather they have taken the politically expedient route of pandering to right wing extremists. Their own Direct Action policy is a farce - throwing all their eggs into the far fetched hope that soil will be able to capture all the excess carbon dioxide as well as paying large polluters billions and billions of dollars in compensation with no strings attached. Where will the funds come from - cuts to health, education, roads??!! No they will not come from anywhere because the Liberals do not want to believe the science of climate change and imperative to act on reducing it.

Chairman (Corporate Client Page Member)

The sustainability manager cannot be taken seriously just like anyone who makes ad hominem attacks. And he is the one who displays ignorance. Deal with data not with opinions and certainly not with 3rd party commentary from organisations whose spokesmen rarely reflect the views of the learned society for which they speak. I will just make 3 comments; 1. the guy who wonders about my judgment is talking about a Company which has had 64 consecutive quarters of record year over year growth and whose sales are about $1.3 billion with a market cap of nearly $5 billion and highly profitable. 2. to invoke scientific consensus is to invoke an oxymoron; science is not about consensus but about one person being correct. Consensus says you don\'t know. Does he believe that Einstein thought about taking a vote when he opined that E=MC*2 and that Faraday thought about taking a vote when he discovered the laws of electrolysis? 3. there are no quantitative data to connect CO2 to climate change; it is based upon models loaded with assumptions and models are not data. And doesn\'t the person realise that none of GCMs have come close to modelling the last 15 years of cooling since they only go one way as CO2 rises. And CO2 rose by 6% in the last 15 years and yet temperatures went South. So how good are models if they don\'t reflect reality? That is why believers in the role of CO2 in climate change are part of a religious movement because there are no data to confirm their views.

Investment Analyst (Institutional Client Page Member)

I am very sceptical about it. What evidence does he have to support his position? Every national Acadamy of Science in the world has issued statements saying that climate change/global warming is real and the human contribution to it is very significant. It is a global issue. Cutting the globe into bits along national boundaries and saying each is responsible for only a bit so it doesn\'t need to do anything is an excuse to try to justify doing nothing. The world IS moving to reduce carbon emissions. Europe emitted less last year than the year before. China is building about 180 nuclear power stations, cutting down enormously on future carbon emissions. Look at it from a risk management perspective. What would be the result if he were wrong? What would be the result if mainstream science were wrong? Carbon pricing needs to reflect its resource cost. As the impact of carbon emissions becomes more significant the resource cost rises. So the price should be higher to reduce its consumption relative to other goods (ie a \"carbon tax\"). That is, set the price and the market will determine the quantity. Or, with an ETS set the quantity and let the market determine the price. There is already an enormous trade in carbon credits. 12% of those booking Qantas tickets online opt to pay extra for a carbon credit so that their flight is carbon neutral. Many corporates have a carbon neutral policy which affects their operations and choice of suppliers. The shock jocks and their fellow travelers remind me of the Flat Earth Society.

Principal (Institutional Client Page Member)

1. To quote “Yes Minister’s”, Sir Humphrey Appleby, Dr Farrell is “courageous” to suggest that we have better things to do than try to control the climate with a carbon tax. Courageous he maybe, but I also think he is correct. It used to be politically correct to say we humans are causing \"global warming\". Within a few short decades we were told, glaciers would melt, the seas rise and we’d all be doomed. However the mantra morphed into \"climate change\" after the frigid European winter of 2009-10 - one of the coldest in the last 100 years. Oops. Whilst I abhor pollution, I don’t believe human activity is having a material impact on the weather. But both meteorological data and other scientific work shows the climate warmed in recent years. All of us yearn for the climate to return to “normal”. For most of us, the definition of “normal” is something that equates with our youth. Ahhh, the sixties, and seventies; maybe even the eighties! Looking back, they seem like a golden age, with nary a care in the world. It is only human to want to re-create that world, the world of our youth. But how “normal” was the climate of those decades. Turns out, a “normal” climate doesn’t exist. Climate has always been and remains, as varied as the four seasons. Ice Age First some perspective. About 10,000 years ago a massive ice sheet covered most of Europe, half the British Isles and a fair part of North America. The Sahara desert was a savannah teeming with animals and rivers. Sydney Harbour was but a river valley. It stretched a further 25-30 kilometers beyond the present Heads, into what is now the Pacific Ocean. In New York, the Hudson River was a glacier over 300 metres thick. None of these scientifically proven land forms had anything to do with human endeavour. The melting ice sheet (again without human assistance), gave rise to an epic flood which entered the Christian Judeo tradition as the story of Noah. The flood also became part of the aboriginal dream time and was remembered by almost all ancient civilizations. Science has since confirmed there was indeed a global flood at this time. This sudden warmth (geologically speaking), the retreat of the ice sheet and subsequent “flood”, changed a lot of things. And two of the most spectacular were the creation of the greatest harbours on earth – New York and Sydney. Gazing across those harbours today, few can imagine what the world looked like before this thaw, let alone the flood that led to the creation of such magnificent spectacles. Nor was this Ice Age and flood a unique event. Scientists believe there have been 6 major glacial periods on earth over the last 650,000 years. Each was about 60-100,000 years in duration. Ice core data shows that over the last 400,000 years the interglacial periods (which we are experiencing now) were generally 10-30,000 years in length and of similar or greater warmth than what we have come to believe today is “normal”. Officially we are still in the Quaternary Ice Age – just experiencing a spot of sunny weather if you like. Science has also discovered at least three major ice ages on earth over the last 500m years. 65m years ago when dinosaurs roamed the planet global temperatures were 6-14°C warmer than present and sea levels over 300 metres higher than current levels. Man was not even a twinkle in the eye of our forebear apes at that time so clearly we had nothing to do with those high temperatures. The “dark ages” It was long thought historians named the “Dark Ages” (from the fall of the western Roman Empire in 476, to Hastings in 1066) because it represented a period when civilization broke down and barbarians ran rampant. We now know that for a decade after 535 the world was in fact “darker”; literally. Harvests failed, plague followed and various barbarian tribes migrated in search of food. Sometimes/often, they just took what food they found; slave girls were a bonus. Tough times. Scientific evidence including ice cores, show there was a major volcanic eruptions of a size equal to the 1883 Krakatoa eruption around 535. It is speculated the 535 eruption was in either Indonesia or Rabaul. 70,000 years ago a massive volcanic eruption in Sumatra Indonesia (Toba) produced about 800 cubic kilometers of ash fall. This spread across SE Asia, Arabia and southern China. The Indian sub continent was covered by at least 6 inches of ash. This eruption led to a “volcanic winter” thought to have lowered global temperatures by 3-5 degrees for up to 1000 years. Some scientists believe it triggered a new ice age. DNA evidence shows that almost all humans today are related to the 5-10,000 sturdy individuals that actually survived that eruption and subsequent “volcanic winter”. Geologists have calculated that Toba was at least 40 times greater than the legendary Krakatoa eruption of 1883; an eruption heard 5000 kilometres away. Toba was over 5 times larger than the 1815 Tambora eruption in Indonesia. Tambora led to a measured drop in global temperatures of almost 1 degree, resulting in massive global crop failures and the worst famine of the 19th century. The 1810’s remain the coldest decade recorded by humanity. Volcanoes like Toba are known as “super volcanoes”. There are at least 6 of them including one under the Yellowstone National Park and another under Lake Taupo in NZ. If (sorry when), one of these goes off, you wont have to worry about global warming, as very few of us will survive the subsequent deep freeze. Fortunately they erupt rarely with only two known eruptions in the last 70,000 years. As beautiful as nature is, it is sometimes terrifying and quite capable all on its own of inflicting carnage on an industrial scale. In the last several years we witnessed just a hint of its destructive capabilities as tsunamis swept first Asia, and more recently Japan. Historically mega tsunamis up to 1000 metres high !!! have occurred. In 1958 a mega tsunami was initiated by a landslide in a remote Alaskan bay. Based on the destruction of the surrounding forest we know this reached over 500 metres high. Man is not always the problem. Sometimes “shit just happens”. The human hold on life on this planet is much more precarious than most of us dare believe. Human Folly Proponents of the need for a carbon tax claim to have scientific backing. In fact their scientific backing is highly selective. They fail to mention the long history of climate change on earth going back to the dawn of time itself. Nor do they mention the chilling effect a sudden volcanic eruption can have on earth’s climate nor the fact that we are technically still in an Ice Age, albeit an interglacial period. Given the geologic record in my view attempting to stop climate change is as silly as trying to stop tectonic plate movements, tsunamis or for that matter, the tides. King Canute demonstrated the folly of the latter. As hard as it is to understand, there are some things beyond human ingenuity. Commanding tides, stopping tectonic plate movements and tsunamis and changing the climate are in my opinion, beyond us. As St Francis of Assisi once said: “Lord, give me the strength to change what I can, give me the strength to resist what I cannot change and give me the wisdom to understand the difference between the two” 2. All the scientific evidence from the geologic record shows that since the dawn of time, the climate has changed. Taxing carbon to forestall “climate change” is just silly. Climate change will occur with or without us. Inevitably such a tax will be mostly borne by those least able to afford it - already struggling families. It is telling that electricity utilities are lining up to support a carbon tax. They can smell a dollar or two in it – for them. But to impose a carbon tax in the absence of anything similar in other countries is simply dumb. It doubles up the error. It will drive CO2 production offshore and in the process run the risk of destroying industries such as our steel industry, and the jobs that go with it. One Steel and Bluescope Steel are two companies in the cross hairs if a carbon tax is introduced. Whilst details are yet to be released, it would be surprising if a tax was not levied on one of the largest contributors to CO2 emissions – coal mining. And that wouldn’t do much good for either coal miners or those who transport their product like QR National. 3. Probably. 4. The Gillard government was never elected with a mandate to impose a new carbon tax. In fact the PM specifically ruled it out 6 days before the election. From all accounts their industry consultation is mere theatre. Similar industry complaints were made in 2010 about the Rudd government’s “consultations” over the Resources Super Profits Tax. Seems Labor learn’t nothing from that experience. Overall rating out of 10 – somewhere between 3 and 4. If the Gillard government persists on its current course in my opinion it risks going the same way as Prime Minister Rudd, the NSW Keneally government and the Woolly Mammoth. The latter of course - an earlier victim of climate change.

Investment Analyst (Institutional Client Page Member)

1. No 2. No, we need a price on carbon to make polluters pay, be it a tax or an ETS. 3. Yes. McKinsey has done some excellent work on reducing emissions. 4. A 5 from me for not being strong enough to back their own policies, and not selling the long term benefits of their policies be it the mining tax, education reform, carbon tax, or 12% super. This issue makes me embarrassed to be Australian. Dr Farrell\'s remarks really highlight the insular, short term thinking that we get to to see from the \'shock jocks\' and tabloid journalists. To see it from our business leaders and politicians really is pathetic. Dr Farrell would probably be surprised to know that globally there was more investment in renewables than fossil generation in both 2008 and 2009. The switch to a low carbon economy is probably one of the greatest economic opportunities of the next fifty years and this will pass Australia by unless we catch up with the legislation introduced in Europe and China. Yes, we are only 1.5% of emissions, but we are also the world\'s highest polluting developed nation per capita. Can I ask Dr Farrell, does he not recycle his refuse because his is such a minuscule percentage of the total refuse? We study this all day long. There is massive growth overseas in this sector. Out of 23 companies in our portfolio none is Australian. What we need is TLC-transparency, Longevity and Certainty. A price on carbon is one piece of the puzzle. If we don\'t price carbon we will continue to be reliant mainly coal which in 10 years time will be similar to exporting typewriters when people are demanding Ipads. Geoff Evison Managing Director + Portfolio Manager Arkx Investment Management Pty Ltd

Fund Manager (Institutional Client Page Member)

Peter, stick to making medical equipment and leave policy to someone who knows what they are talking about.

Investment Analyst (Institutional Client Page Member)

1) 2) agreed current carbon tax in the brown/gillard form is essentially a redistribution of wealth and without uniform support from other large polluting economies it will only disadvantage australians. 3) i think this is a little utopian and would only add another layer of bureaucracy however i certainly would like something done about said waste and inefficiencies 4) labor under kevin was an absolute disgrace and nothing has changed under gillard. 0.5/10

Portfolio Manager (Institutional Client Page Member)

1. No 2. No... well not in the form discussed 3. No... outside parties are no better at getting good answers (look at subprime and credit ratings) 4. I think the public gets the government they deserve. Here I rate the Australian public at 0/10 Peter is a smart fellow and clearly feels the priorities are wrong. He is entitled to think different priorities might help. However, I think he is dead wrong on the climate science. Having said that, I think the economics fraternity are dead wrong on carbon pricing. The issue I have is with a poor reasoning framework implicit in standard economic ways of thinking. In my view, the present fracas is tragic but blameless. It seems to me that it is the economic theories which need updating. This is essentially the view of Stern. Eventually economists will get there, but it is taking too damn long, so let this rant serve as a real hard swift kick up the collective backside of the present approach to analysing the real problem. Specifically, let me outline my own controversial gang-of-four remarks: 1) We will not achieve more output for less CO2 without changing the mix of capital plant. That is physics - nature has her way here - she does not read polls and really does not give a hoot what joe public thinks. Sorry, joe public. You can have an efficient market or an inefficient market and trade all the paper you want. With no chnage in plant, no change in carbon emissions. 2) When commodity prices are rising replacing energy inefficient old plant with new is often net negative cost due to the fact that the new capex is more than offset by the opex savings (real problem: a LT new capex/opex tradeoff). People are not modelling this well - hence my gibe about the private sector analysis. Moody\'s are a prime example. Did a bunch of private sector paid analysts have a clue about the credit crisis ahead of time when it\'s actually their job? This issue is complicated... but analysts do know how to do opex vs capex tradeoffs. So start doing them. And make sure you get your commodity price assumptions right along with learning curve effects. 3) The mooted carbon price signal to change behaviour is screwy logic since it assumes there is one price level to change all behaviour. That is silly. In each case involving emissions, you need to find some way to reduce it, but the incentive prices are actually different. So there is something clearly wrong with the \"law-of-one-price\" reasoning. Figuring out a better way to think about that is a separate discussion... However, I think people need to realise carbon is not a \"product\". Using a naive carryover of 19thC marginal cost of production theory is a mistake in a marginal cost of substitution problem. In short, the current economic theories are bad... so it is no surprise people find progress difficult. It is not their fault. The theory is bad. Practically, you need a better theory. Pragmatically, go back to tin tacks and do the obvious math. How do I pay for 1 unit of extra green electricity that is $100/unit more than brown in an example where there are 100 existing brown units? Hmmm... Ask a 3 year old who never did economics! I need $100 extra. I have 100 guys to tax (trade with... whatever.. who cares). What is the answer? $100/100 = $1/unit. Why with all the genius investment bankers and economic theorists do we not give airtime to a 3yr old who can divide 100 by 100 and get $1/unit as the required tax on each existing polluting unit? Purpose of rant... this whole thing is very easy to finance and very lucrative to any banker who tries. There are learning curve effects embedded in there as well... but, hey, this is not very hard math. Napkin stuff. 4) The public are all very nice people, but they are having a lot of trouble understanding that carbon is about plant. People who know: about engineering; about banking and about corporate capex vs opex tradeoffs need to remember 1) and help joe public understand that new investment is actually required using 3). With that will go growth opportunities. Handing out dollars to buy votes without doing any capex is a national collective failure of social intelligence. It is a great way to lose the economic game in the 21stC. So I rate the public at 0. We are part of the public. We need to *really* lift our game.

Fund Manager (Institutional Client Page Member)

1) Whether climate change is real or not doesn\'t matter - Professor Tim Flannery said it best when he said it might take 500 or 1,000 years for anthropogenic CO2 to leave the environment if we stopped emitting tomorrow. Whether the change is man-made or not doesn\'t matter - if Australia ceased all its emissions tomorrow, the situation would actually get WORSE, because less efficient manufacturers and miners would step in to fill their place, and total CO2 production would INCREASE. Parts of Europe has cut their domestic production of CO2 by about 25% in the last decade, but increased their consumption of goods that generate CO2 when manufactured by 40%, because they have moved so much of the production off shore - it hasn\'t gone away, just gone out of sight and out of mind. This is nuts. Perhaps the greatest contribution we can make to reducing global CO2 emissions is to dig up and export as much black coal as we can - so that China can close down less efficient brown coal plants faster. 2) There is no way Australia shouod embrace a carbon tax until the US, China, India, the UK and Europe do the same. The tax regimes need to be similar otherwise we will fall victim to the same green-washing that Germany has, where the Government has spent $75 billion on subsidising solar power to little effect (Germany is one of the cloudiest countries on Earth). Even now, the federal Treasury is urging a re-think of the 20% renewables commitment by 2020 because of the large price distortions it generates. A lot of renewable energy is totally unsuitable for base load power generation (i.e. it doesn\'t work first time all the time, which is what you need for the lights to work, trains to work, etc), so the usable capacity of solar, wind, etc is much lower than for coal, hydro, nuclear etc. The best way to reduce CO2 emissions is energy conservation - simply be more efficient with our consumption of energy and we also save money. But as has been pointed out above, most people wouldn\'t insulate their houses despite the compelling economics of the deal. 3) This is nothing to do with Carbox Dioxide Taxation, but we do have too much Government of a number of varieties - more than we can afford in the long run. Having an outside party isn\'t going to stop the waste - look at Brad Orgill\'s review of the BER for example, or the ongoing torture that is the Collins Class submarine disaster. Less government - of all persuasions - is the answer. Trust peole to make decisions for themselves about their own money and more often than not you iwll get a better outcome. 4) It\'s got to be a 1 at best - Climate Change went from the Greatest Moral Challenge Of Our Time to a politically expedient waste disposal item in the space of six months. Don\'t worry about whether Gillard lied or didn\'t lie before the election - all policitians lie (Tony Abbott said so and we believe him). The point is that the Government has no plan, has no justification, has no moral authority, has laid down with a dog in the Greens and come up with fleas. Now we have 3 Prime Ministers trying to run the country, and when the Seante is over-run by Watermelons on 1 July things will get even worse.

Managing Director (Institutional Client Page Member)

1. Do you agree with Peter\'s views on climate change? No. I definitely believe that carbon dioxide and other greenhouse gases are impacting our climate. One only has to travel to parts of China to see first hand the impact of man\'s impact on the environment. I think someone has their head in the sand. 2. Do we need a carbon tax? There seems to be almost a consensus that setting a price on carbon will fix the problem. Whilst I believe the world needs to reduce carbon pollution, I am not convinced that either a carbon tax or a carbon emissions trading scheme is the complete solution. The problem with reducing carbon intensity is that it generally requires long term investments. The world and Australia need to make massive investments in low carbon intensity electricity generation, and in energy efficient equipment and buildings. No country can significantly reduce their carbon production in the short term other than by going into a significant recession. Because energy consumption is relatively inelastic in the short term, placing a small price on carbon will have a relatively small impact on carbon production. What we really need to do is put in place long term incentives for companies and households to invest in carbon/energy efficient equipment and buildings. Rather than simply putting a price on carbon, why doesn\'t the government look to put real incentives in place to encourage individuals and companies to invest in energy efficiency. Take the car as an example. The largest cost of a car is the capital cost. The energy cost (petrol, diesel or gas) is relatively low relative to the capital cost of the vehicle. Why not levy taxes on cars based on both the value of the car and its energy efficiency. Small energy efficient cars would be taxed at a low rate reflecting their energy efficiency. Large inefficient vehicles would be taxed at a higher rate. This would provide strong incentives to reduce fuel consumption. 3. Should all big-ticket government expenditures be analysed by outside parties? The ridiculously shallow justification for the NBN provides the answer to this - YES! As an investment analyst the numbers simply do not justify the massive investment in a technology which could be outdated before it is even completed. If I could invest in the NBN, I would have it as my number one short investment. 4. Please rate the Gillard government\'s performance so far on a scale of 1 to 10 (where 1 is very poor - 10 is excellent) 2

Director (Investment Banking Client Page Member)

1. Yes 2. No 3. Most definitely 4. 2

Analyst (Investment Banking Client Page Member)

1. Yes, 1.5% of 3% is the same as a proverbial <expletive deleted> of <expletive deleted>-all. Any carbon tax will have no impact on this perceived problem whatsoever. 2. No, we need Governments to employ fiscal prudence and we need Governments to manage expenditure efficiently, unlike what we have seen with the BER and the pink batts scandal. 3. No, this role is for Governments and Government departments, who should be doing a decent job of it themselves and not being nurse-maided by a bunch of self serving consultants. 4. 1. History will remember this is one of the worst Governments in our history.

Strategy & Business Development (Corporate Client Page Member)

1. Yes 2. No I am keen to be convinced by the \'science\' behind human-induced climate change as it would make watching the television less frustrating. However to date I have not seen evidence to convince me of it. As such I agree with Peter\'s views on climate change and I think it is very premature to introduce a carbon tax. 3. No I think it would be an interesting exercise to have big-ticket government expenditures analysed by outside parties, but it would all be gamed in a yes minister fashion. To demonstrate the value of such a scheme to the voting public a state government would need to demonstrate the benefits first. As things are a federal government (of any persuasion) would alter the terms of engagement to make the exercise pointless. 4. 3

Portfolio Manager (Institutional Client Page Member)

1. No. Hysterical Argument with no facts. 2. We need something. It will provide certainty to industry and generate jobs in other fields. 3. Good idea in theory but in practice, self-interest groups will look after themselves. You can\'t have the Carbon Tax Analysed by the Steel Industry for instance. 4. 7. Abbott is negative and would be a terrible alternative. Has provided no alternative and have their head in the sand on the carbon issue. This Govt has to work with other parties and is doing so.

Portfolio Manager (Institutional Client Page Member)

1. No 2. No 3. Could be valuable, but isn\'t this Treasury\'s job? 4. 2/10

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