As I noted a few days ago, the only way a carbon price can have any affect on CO2 output is by reducing the use of fossil fuels.

It does this by making the use of those fuels more expensive. This increases the cost of electricity, of water (especially if that water come from a desalination plant), of manufacturing and mining, production of agricultural goods, transport and travel. A carbon tax increases the cost of everything, because everything in our economy depends on fossil fuels.

When the cost of production goes up, the price of the items produced goes up. People buy less, production goes down.

This is what the Prime Minister said would happen:

“It has price impacts. It’s meant to, that’s the whole point,” Ms Gillard said. “If you put a price on something, then people will use less of it.”

But now Simon Crean says money taken from CO2 emitting companies (ie, any company that produces anything) will be fed back into the economy in the form of compensation to consumers:

“The cost to the families will be compensated,” Mr Crean told ABC radio this morning.

“We have made that clear. We will ensure that the compensation is totally adequate. We will return all of the monies raised to people through the tax mechanism.”

So there won’t be price impacts, so people won’t be using less of anything, so there will be no reduction in CO2 output.

So what is the point? What is the Gillard government trying to achieve?

Ms Gillard also warned that Australia would miss out on new green jobs and be left behind the rest of the world if it did not create a “low carbon economy”.

But a paper released a few days ago by Verso Research confirms what other studies have shown – that every ‘green’ job created costs four jobs somewhere else.

The Verso study finds that after the annual diversion of some 330 million British pounds from the rest of the U.K. economy, the result has been the destruction of 3.7 jobs for every “green” job created.

The study concludes that the “policy to promote renewable energy in the U.K. has an opportunity cost of 10,000 direct jobs in 2009-10 and 1,200 jobs in Scotland.” So British taxpayers, as is the case here in the U.S., are being forced to subsidize a net loss of jobs in a struggling economy.

This is the grand plan: a huge bureaucracy to manage a tax to reduce carbon output that won’t reduce carbon output, and a green job scheme that will cause higher unemployment.