Week 5 - Regulation of business and the environment

Question 1
a. Explain the two different views of Government (public interest versus private interest). In
reality, it is believed that both the two different types of government regulation co-exist.
Public Interest
 This view believes that the role of government should address areas of market failure.
 The government corrects any inequitable and inefficient market outcomes.
 It increases public welfare as a whole and address areas of market failure to increase economic
efficiency. This is done by reducing rent-seeking behaviours of individuals and monopolists.
Private Interest
 This view believes that rent-seeking individuals or groups influences government regulations, so
that they can obtain rents for themselves at the expense of the public in their entirety.
 These rents are usually concentrated amongst a few individuals.
 Examples are manufacturers who seek import controls to maintain profits or small businesses
seeking to limit trading hours of bigger stores to maintain profits.

b. Read the article http://thenewdaily.com.au/money/finance-news/2015/09/04/government-

caves-big-business-threatens-war/
Which view of Government does this article support? Why?
(Note that the ‘effects test’ was later introduced from the 6 th November 2017 – the above is a very good
illustration of how private interests try to prevent or at least, delay changes.)
The New Daily has published an article describing the concerns of small and medium sized businesses
with regards to the ‘bullying’ tactics of larger corporations. The author of the article has explained that
companies like Woolworths/Wesfarmers were threatening to launch an anti-government campaign
against the proposed reform.
If the reform went ahead it would allow the ACC to intervene when a big business uses its market power
to damage or decrease competition, it was noted that the BCA has said to cabinet ‘If you don’t drop
this, we’re going to be putting together an anti-government campaign’. The New Daily also tried to
interview the BCA to see if they had threatened to campaign against the government if it went through
with the reform. It refused to confirm or deny the claim.
It is quite evident that the author of this article is supporting a more public interest view of government,
in wanting the government to correct inequitable and inefficient market outcomes whist exposing the
larger corporations as greedy and wanting to throw their weight around. This article has certainly put a
negative spin on the larger corporations.
Question 2
a. Explain the criteria for a good emissions reduction policy.
There are ways to address climate change, the following are three possible methods:
1. Cost-effectiveness – this policy is taking the effect of costs to society and the effects it has on
jobs, incomes and consumption, the compliance and regulatory cost and the burdens it has on
the Australian society.
2. Environmental effectiveness – this policy addresses how efficient these policy measures can
help Australia meet the objectives to reduce these greenhouse emissions.
3. Equity considerations – as climate change is a global problem and affects everyone including
(businesses, industries and households) so this policy needs to ensure the impact it has on all
groups.

b. Please see http://www.abc.net.au/news/rural/2017-04-09/explainer-what-is-carbon-farming-

and-emissions-reduction-fund/8416960 .
Please use the information contained in this article to evaluate the Emissions Reduction Fund –
which is Australia’s key policy – against the criteria for a good emissions reduction policy.
Emissions Reduction Fund: is a voluntary scheme that provides incentives for industry, businesses, land
owners, state and local governments, and other organisations to adopt new practices and technologies
to reduce emissions.

In accordance to the Emissions Reduction Fund, Australia's policy can be measured for effectiveness
against the following criteria:

 Cost effectiveness – Environment Minister did not provide any indication as to whether more
money was in the budget against climate change however $2.55 billion of Federal Government
money has already been awarded to pay for carbon abatement projects. The Emissions
Reduction Fund has also delivered income for farmers and landholders, generating $239 million
in annual revenue. The downside however is a flaw in the system, with environmental
economist, Dr Paul Burke saying that the price for carbon has been pushed downwards that
some contracts have not been worthwhile with some seeking contracts overseas.
 Environmental effectiveness - Australia's system of awarding carbon offsets for carbon farming
is considered one of the highest quality and best regulated, in the world. Some of the benefits
include revegetation with avoided deforestation, pig methane offsets, savannah burning and soil
carbon. This enhances biodiversity and the ecosystem and it protects threatened flora and
fauna. In terms of how effective Australia's policy meets it objectives it is still falling short of the
Paris commitment. Australia is aiming to halve their emissions per capita to reduce the energy
intensity by two-thirds.
 Equity considerations – as it’s a global problem and affects everyone, the downside is that the
government is the only buyer and the energy sector is not able to participate in the scheme.
Australia is committed to the Paris climate change agreement with the hope of reducing greenhouse gas
emissions by 28% by 2030, however according to current government figures (based in 2016), Australia's
emissions will grow by 10% by 2030 to 592 million tonnes a year, however government's climate policy
was still under review.

Australia is a country that is fortunate enough to deal with climate change as it can provide the funds
and resources to reduce emissions of greenhouse gases. It has spent a significant amount of money to
combat greenhouse emissions. According the Climate Institute, Australia’s ‘system of awarding carbon
offsets for carbon farming is considered one of the highest quality, best regulated, and with the
strongest legal backing of any carbon offsets in the world’, however I believe whilst Australia has done
considerably well, I do believe there is still room for improvement.