Emissions trading schemes are an imperfect means for reducing emissions because they allow large carbon emitters to purchase credits to continue polluting. However, it appears to be the best we can get and we’re stuck with them as the best solution.
The best aspect of the scheme is that it endeavours to change the behaviour of companies whose behaviour needs changing. But this only deals with the supply side of the equation. It does nothing on the consumption side.
Here, the problem is compensating low income earners for the impacts of emissions trading schemes when the price of electricity goes up. This is because the compensation is targeting the wrong group. The assumption that the compensation should be allocated on the basis of need rather than behavioural change, is fundamentally flawed.
If low income groups are compensated for increases in the price of electricity then there is no incentive for that group of the population to change its behaviour either by moving to renewable energy generators or by using less electricity.
The people who should be compensated are those who move to renewable energy generators and who reduce their electricity consumption.
This is why subsidies to people who install solar panels is such a good idea. It’s a quick and very efficient way of moving people away from large coal-fired electricity companies and towards self-sufficiency in the electricity generation.