Here is an interesting example of environmental policy coming into conflict with short run macroeconomic priorities. The Financial Times reports that “In an effort to ease the strain on an economy now on the edge of recession, Prime Minister Kevin Rudd said the government would delay the start of the world’s most sweeping cap and trade scheme outside of Europe until mid-2011, but still aimed to push the emissions trading laws through parliament this year.” The government has come under huge pressure from organised business who have argued that in a recession, imposing extra costs through a carbon allowance scheme could damage profits, jobs and investment in the short run.

And given the volatility of carbon prices within the EU emissions trading scheme, it worth noting that Mr Rudd has said there would be a fixed carbon price within the embryonic Australian scheme for 1 year to July 2012. According to this BBC report, “Australia has the highest per capita emissions in the developed world and coal is its biggest export.”

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