The carbon trading myth.

Most people are concerned about the disasters predicted because of global warming and many want action to reduce the amount of carbon dioxide produced by manufacturing industry - and it seems that public opinion and the coming Federal election are pushing this country into adopting a carbon trading scheme.
It sounds good ! But let us have a thoughtful look at the nuts and bolts of how it works ?
Presumably, all polluters will be given a target - which will be less than their present level of Co2 output - and a period of time to achieve a reduction to that level.
Reducing Co2 will mean changes to production methods - probably including installing scrubbers and sequestration equipment - and that will cost money. Increased production costs affect the bottom line - and there will be a huge incentive to hike prices to restore profitability and keep the shareholders happy.
At the end of the period of grace some industries will have been successful in reducing their carbon emissions - and many will not. Those who fail will then be required to buy credits from those who have achieved reductions. For those selling credits the cash will be a windfall to offset whatever costs were involved in achieving a reduction. For those that failed, the impost of buying credits will further increase manufacturing costs - and lead to further price hikes.
By the law of probabilities, the number of manufacturers achieving carbon reductions will be less than those who fail. As a consequence, the demand for credits will be greater than the availability. In that case, the law of supply and demand cuts in and the price of credits rises sharply. The cost of manufacturing for those needing to buy credits increases sharply - and more price hikes enter the system.
Obviously, for a carbon credit scheme to have any effect there must be a penalty for those who fail to decrease emissions - and who also fail to cover that shortfall by buying credits. The obvious penalty will be a fine imposed by the government - and once again this will affect the bottom line. No manufacturer can trade at a loss for long and hope to survive - hence there is only a simple choice of options open to management. Close the doors and shut down - or hike prices to again become profitable.
The purists will applaud this outcome. The world will be rid of the worst polluters because they are unable to reduce emissions or buy enough credits to survive, and if they hike prices to uneconomic levels nobody will buy their product.
There is a flaw in that argument. The worst polluters are those generating the electricity we need for our standard of living. It is impossible to envisage the power stations closing down, commerce ceasing - and the life as we know it coming to an end. There would be no option other than embracing relentless electricity price rises for decades as plans were put in place and work started on alternative energy sources such as wind, solar and wave - and of course - nuclear energy production.
Carbon trading can play a part in Co2 reduction, provided the targets set for industry are realistic - but consumers should be aware that there are no easy answers to the problem - and that if we set a course down that road then we can expect to pay more and receive less to achieve a healthy planet !