University of Melbourne Economics Professor Stephen King questions whether the carbon tax is in the national interest and essentially concludes it is based on wishful thinking that our actions alone will influence the world to act:

The objectives of the carbon tax

Also, in today’s Australian (Picking winners hits the budget), Access Economics co-founder Geoff Carmody questions the logic of the current design of the carbon tax, the Emissions Trading Scheme it morphs into after 2015, and complementary measures such as the renewable energy target and Clean Energy Finance Corporation:

This highly regulated ETS market is subject to large internal contradictions. For example, the government needs revenue from the carbon tax or permit sales to help finance household and industry compensation. But the more the policy reduces emissions, the less revenue it raises, and revenue is also lost if permits are purchased overseas. And if the offshore permit price is lower than in Australia, arbitrage may lower revenue from local sales of permits as well…

…Measures such as renewable energy targets magnify threats of “carbon leakage” and job losses offshore from Australian trade-exposed sectors. They thereby magnify the global cost-ineffectiveness of the Greens-government policy. It would be ironic if the government’s policy, ostensibly promoting a sustainable climate, proves financially unsustainable, just like the raft of existing state-based household rooftop “feed-in tariff” incentives, now being wound back.

For example, the “commercially oriented” Clean Energy Finance Corporation has funding of $10 billion spread evenly across five years from 2013-14. But if it is really commercial, why is the taxpayer involved? The whole point of governments setting an emissions price is to give the private sector an incentive to deliver emissions-reducing innovations.

The current Clean Energy Future policy package is far from first best and may not be in the national interest. The unpopularity of the carbon tax suggests that deep down many Australians understand this, even if they cannot articulate the problems with the package as clearly as King or Carmody.