Senator JOYCE—In your modelling of the emissions trading scheme, are you modelling in compensatory payments to the holders of carbon, such as rural property owners?

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Mr Banks—Sorry, Senator?

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Senator JOYCE—In your involvement in the modelling of emissions trading schemes, do you envisage, have you seen or have you been part of any process in that modelling scheme that brings about compensatory payments to caveats that will be placed on rural land by reason of their holding the carbon that formerly was their private asset which they could have done with as they wished?

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Mr Banks—No. In fact, the commission has not done modelling of trading systems as such; that is not something that we have done ourselves. So we have not obviously done the further work that you are suggesting.

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Senator JOYCE—A final question: what is the depth of your involvement in emissions trading schemes? Does it go to the actual extent of what products you envisage will become more expensive in the economy and what products you envisage will become cheaper, and what the productivity effect of that will be on the economy?

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Mr Banks—As I said, we have not actually done the detailed work in that area. We have made a submission to the Garnaut review looking at some of the supplementary policies that might be important in the context of an emissions trading scheme being developed, and in an earlier submission we also talked about some of the desirable characteristics in the broad of a scheme of that kind. We have not been asked to do the detailed work that would help us to understand the answer to the questions you have raised.

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Senator JOYCE—I will keep on stepping back until I think I get to a level where I can stop. Do you believe that, in a model of a scheme, it would best work to the least detriment of the productivity of the nation if it were revenue neutral; that is, the benefactors in the economy equalled the people who pay the charge? I will break it down to a simpler question. If there will be products that have a charge put on them by reason of a carbon charge, should there be the equivalence of other products that have a subsidy placed on them to make it more likely that you would buy them, so that we do not just have a net cost put on the whole economy by an emissions trading scheme?

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Mr Banks—If I understand your question correctly, the problem with subsequent payments that might be motivated by equity or distribution or other reasons is that you do not want to offset the signals that are being provided by the tax on carbon emissions in the first place. So, ultimately, carbon emissions will have to be priced and they will have to be more expensive if we are to reduce emissions. So that is taken as a given. It may be that the way in which that flows through into energy prices and other things and impacts on people at the lower end of the income distribution or particular regions is an issue that would need to be addressed by government, and could be, but that would be something that would need to be considered at that time.

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Senator JOYCE—For instance, if you were putting a charge on petrol, you might subsidise, let us say, solar panels for families earning over $100,000?

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Senator Sherry—It is becoming very speculative here.

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CHAIR—Yes, I think that is a difficult question.

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Senator JOYCE—That would be good public policy, but I do not want to hold you up.