Buying out brown coal
Today’s Fin (paywalled) leads with a story that the foreign owners of brown coal power plants are demanding that, instead of receiving compensation over time for the effects of the ETS, they should be paid a lump sum, in the billions of dollars, to shut down the plants. Given that compensation is to be paid, it is impossible for me to disagree with this. The whole point of the ETS is to reduce pollution, and that can’t be done effectively if major polluters receive payments that are conditional on continuing polluting activities.
But should they receive compensation. These plants were all in public ownership in 1992, when the Australian government first committed to reducing CO2 emissions (subject to the findings of the then-new IPCC). When Jeff Kennett sold them, the original buyers ought to have known they were taking a commercial risk regarding possible limits on emissions. Most of the current owners bought even later, after Australia had participated in the negotiation of the Kyoto Protocol.
The people who should be getting compensation are not investors who made bad bets, but the workers and communities who pay the price for their bad decisions. More on this in this paper with Flavio Menezes and Liam Wagner.