Former oil chief calls for autonomous regulator to set policy

Opinion may divide over this Tuesday's interest rate decision by the Reserve Bank but few will challenge the central bank's authority to set monetary policy.

If only tackling contentious - and deteriorating - energy and environmental challenges could generate such equanimity.

That is the call of John Hofmeister, a former president of Shell Oil in the US and now an advocate for a shift to a carbon-free energy system over the next half century. "We are building ourselves a heck of trouble and we don't have the systems that can accommodate for it," he said.

He proposes an independent "Energy Reserve Authority" with as many as 10 governors drawn from a range of fields. Each would serve a 10-year term after winning federal parliamentary approval, enabling them to act with "total autonomy".

Such a body was needed in Australia and other democracies because they were subject to "flavour of the day" policies unsuited to developing and implementing the long-term decisions needed to transition away from fossil fuels, he said.

Mr Hofmeister, who will address the All-Energy Australia 2013 conference in Melbourne on October, dubbed Australia's handling of the carbon tax a debacle because it had been ditched barely a year into its existence.

"Who knows what the outcome will be post elections?"

Rich nations would not be able to resolve the threats to land, sea and air from carbon dioxide and other pollutants without new tools, such as an ERA, he said. "We can't get there from here."

Separately, the head of California's carbon emissions trading scheme said the dismantling of Australia's carbon price mechanism should the federal Coalition win office "would be of real concern" across the Pacific.

Mary Nichols, chairman of the California Air Resources Board, told a Carbon Market Institute breakfast in Sydney on Friday that such a move would be seen in the US as a "retreat" by a fellow well-developed democratic country. "We also are concerned that you have a long target and you keep to it," she said.

She said California's market - potentially the world's third largest when it expands in 2015 - could be linked up with Australia's. The Rudd government last month proposed beginning the Australian emissions market a year early, starting next July, if it retains office.

"All of these programs are going to end up linking with each other," Ms Nichols said, adding that the possibility exists for at least a partial link, as proposed between Australia and the European Union. "I think the steps we are taking are on the way to a formal linkage" between California and Australia.

Issues, though, include the price differential, which has hampered the integration of California's market with the one operated by nine north-eastern US states. The latter's price per tonne of carbon is roughly a quarter of California's $US13.70 ($15.30).

The Rudd government expects the Australian carbon price to drop from the current fixed rate of $24.15 per tonne to about $6 next July if a trading market is created.