After weeks of escalating complaints about its emissions trading scheme, the Rudd Government has agreed to work with the major polluting industries to find a fairer way of distributing compensation in the early years of the scheme. The Government had been warned that its proposed formula might seriously harm the economy.

The Kyoto model is fundamentally flawed, as it focuses on the production of carbon emissions rather than their consumption. It should be easier to get global agreement on a consumption-based emissions trading deal because it involves no regrets in terms of trade competitiveness.