Warwick McKibbin is Professor of International Economics at the Australian National University and a member of the Board of the Reserve Bank of Australia. He has been a consultant for many international agencies and governments on issues of economic policy, trade and greenhouse policy issues. Professor McKibbin co-wrote the popular book Climate Change Policy after Kyoto: A Blueprint for a Realistic Approach with Professor Peter Wilcoxen of Syracuse University, New York.

Professor Warwick McKibbin’s 6 point plan

• There needs to be a comprehensive approach with a portfolio of policies in place that both encourage the technological solution to energy generation but also encourages technological and behavioural changes in how energy is used.
• It is critical to create a clear long term goal for carbon reduction over at least one hundred years. Then create long term property rights over carbon emissions based on the long term carbon constraint. These rights should be tradable in a market for long term carbon emissions so as to generate a price for carbon emissions in future years out past the 2050 target. These rights should be given to fossil fuel intensive industry to compensate for capital losses in their carbon assets and to households to compensate for higher future energy prices.
• There needs to be flexibility in the emissions that are achieved in any given year by targeting the price of carbon in the short run (over a decade) while moving gradually towards the long run carbon constraint. This acknowledges that the path of emissions needs to be achieved at the lowest possible cost. The emissions in any given year do not matter for the climate – what matters is the cumulative emissions over many years. It is also important to have this “safety valve” in short run economic costs so that the rate of approaching the long term target can be adjusted as more information on the climate, climate science and the ability to remove carbon from the economy is made available. Ignoring costs leaves the policy vulnerable to collapse.
• There needs to be substantial investment in research and development into carbon saving technologies where the direction of investment is guided by the long term carbon price generated in the long term carbon market. Most likely this will be alternative energy generation technologies as well as carbon sequestration technologies but this will likely evolve over time.
• There needs to be increased awareness, through education, in how changes in consumption of energy can impact on the emissions outcome. The widespread ownership of carbon rights will enhance this campaign especially as these rights become increasingly part of superannuation accounts of many people.
• There needs to be bipartisan political support of the emissions reduction strategy since it will require a commitment by current and future governments to the policy in order to encourage the long term private sector investment that will be required. The existence of the long term carbon market and the widespread holding of these rights across the voting public will help short sighted politicians to adhere to the policy.