• Penalising resource industries (and Australia’s comparative advantage).

• Compensating road transport, thereby discriminating against less-polluting rail transport.

• Replacing highly productive cropping farmland in high-rainfall zones with tree plantations, reducing cropping agriculture and confining it to the less fertile lower-rainfall areas at a time of global food shortages and rising food prices.

• Discriminating against animal industries which comprise one of the most successful Australian export industries.

• Discriminating between farmers based on soil type.

• Discriminating against consumers, who will bear the brunt of the costs through higher energy and food costs.

Mr Williams says the likely outcome of these economic distortions will be:

• Increasing export uncompetitiveness at a time of record global shipping freight rates.

• A worsening trade deficit which will necessitate persistent high interest rates to attract balancing foreign capital inflows.

• Reduced investment in energy and rail industries.

• Coal demand decreasing, which will lower prices and provide signals to buyers that the resource boom may be over;

• Depressing rural communities even further, as long-term tree investment cannot replace short-term crop revenue cash-flows; and

• Increasing cost pressures boosting prices and inflation for consumers already encountering economic difficulties.

He says shifting animals from pasture to higher protein feeds will exacerbate food shortages and higher prices.

“As more than 80pc of Australian exports are price-taking commodities, any carbon emissions cost is going to be borne by the domestic producer and exporter, and require large compensation under any carbon trading scheme,” Mr Williams said.

“This compensation will be seen as a producer subsidy under WTO guidelines at a time when Australia is supposed to be leading by good example in freer trade for the rest of the world.”

He said governments worldwide had spent $50 billion on global warming research since 1990, with no evidence that carbon emissions caused global warming.

“All this cost is borne by taxpayers yet where exactly are the benefits beyond normal pollution control regulations?”

He also questioned what incentive there was for farmers to increase organic carbon in the soil, only to sell it off as carbon credits and become managers of it for someone else.

And he asked what would happen if soil carbon levels dropped due to drought, fire, flood or crop rotations.

“Farmers could be forced into bankruptcy by having to refund money they do not have.”

He said increased rural land values caused by demand from industries seeking carbon credits through forestation programs was only going to distract farmers from producing food, cause uncertainty in investment decisions and entice them to seek short-term property sale benefits.

Rural towns would also struggle from a lack of money (from reduced production revenues) and decreased investment at a time when farms are being replaced by long-term forests.

“To introduce a new high-cost system based on fear and feeding off superstition does not make good fiscal governance when there are serious economic distortions, measurement difficulties, investment disincentives, potential carbon market liquidity problems and a low probability of achieving any benefits in energy reduction or environment improvement,” Mr Williams said.

“Without a similar cost scheme for Australia’s major export competitors, the outcome could be economic suicide for exporters in terms of loss of international competitiveness.”