I argue that Australia’s economic competitiveness would best be safeguarded by a regime that guaranteed the neutrality of global emissions controls. This regime should be in the form of a contract among governments,preferably outside the UN, that extends to control of existing and future regional and national emissions markets. It should set caps on emissions rather than implement a global ‘target’; it should prescribe minimum rules for efficient markets but it should leave substantive controls in the hands of national or regional authorities. Although competitive neutrality requires that the marginal price of emissions should be the same everywhere, entitlements should be priced by local markets.
In my view these characteristics could be pursued in a framework agreement that implemented the McKibbin-Wilcoxen proposals for emissions trading.
A copy of my submission is available here