Australia should delay a carbon tax until the rest of the world acts

The big question about the carbon tax is not whether it's a good or a bad idea in theory. The major issue is whether it makes sense for Australia to implement it at a time of great uncertainty, both in terms of economic outlook and the extent and nature of international action. To my mind a carbon tax is not desirable. Australia's prosperity is based on a resource endowment that is carbon intensive, both in terms of our mineral and our agricultural sector. Moreover, much of that carbon intensity is not amenable to technological quick-fixes. For instance, there is little that can be done to reduce fugitive emissions in mining. Global warming is a global problem. Unless major emitting countries engage in abatement efforts, action by Australia is pointless. As well as being pointless, that action would be highly costly. Economic analysis shows - and experience confirms - that the world's mineral supply responds quickly to relative prices. If we tax our mineral exports, and competing sources of supply do not, world supply will shift to the untaxed sources, reducing our export volumes compared to the levels they would otherwise have attained.