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Carbon taxes and the ghosts of politicians past

Cast your mind back two years and you’ll recall that the government and opposition were in another, albeit very different, debate over carbon policy. Back then, Kevin Rudd was prime minister, Malcolm Turnbull was opposition leader, and the balance of power in the Senate was split across the ideological spectrum. The debate was about what would be “in” and what would be “out” of the Carbon Pollution Reduction Scheme, who would be compensated and by how much, and what the targets and caps would be. There were party-room spats and leadership spills and vitriolic slanging matches in the Senate.

Compared with that high political drama and detailed policy wrangling, the introduction of the current carbon pricing package into federal parliament was a remarkably routine affair. The only differences between the new bills and the draft legislation released in late July were minor technical changes to improve the administrative workability of the scheme. Likewise, the draft legislation mirrored almost precisely the policy package released by the government a few weeks earlier.

Part of the reason for this new-found policy stability lies in the fact that Tony Abbott has no interest in having a policy debate; he simply wants to destroy the scheme. But there are plenty of industries (and unions) with the ear of government who are interested in the policy’s content and are calling for it to be weakened. It is the political reality of the minority government — the need to maintain the support of all members of the multiparty committee if the bills are to pass through parliament — that explains why these calls have fallen on deaf ears. This process has shielded the current scheme against political erosion.

But many of the elements that have found their way into the Gillard package are products of murky backroom deals done by her predecessors during negotiations over the previous scheme, when no such shield existed. It’s timely to trace some of these more odious elements back through the Rudd government’s carbon pollution adventures, as we give thanks for the fact that the multiparty process prevents the government from diving yet deeper into the pit of compromise.

The most egregious examples of backsliding relate to the compensation given to energy- and emissions-intensive industries that would (so they claim) be specially affected by the imposition of a carbon price. The first type of industry compensation covers those entities that are exposed to international competition. In the government’s 2008 green paper, this type of assistance was proposed on the ostensible grounds of avoiding “carbon leakage” — the movement of production overseas without any reduction in carbon emissions — resulting from the carbon price. Entities would be eligible for free permits to the extent that they conducted specified activities (aluminium smelting, for instance) and passed certain thresholds.

A handful of activities were proposed for compensation and these were grouped into two categories: the highly emissions-intensive and the moderately emissions-intensive. In the first year of the scheme (which was then proposed to start in 2010) those in the former category were to be compensated for 90% of their annual direct and indirect exposure to carbon pricing, and those in the latter compensated 60%, with both figures declining at a rate of 3-5% each year.

Intense industry lobbying after the release of the green paper ensured that every aspect of this regime was weakened immensely. The white paper, released within five months, proposed substantially broader eligibility thresholds, ensuring the LNG industry and all steel manufacturers would now receive assistance, while industries that didn’t make the cut would receive cash grants — of $750 million in the case of the coal miners. The duration of assistance was extended and its rate of decline curbed.

Then, as the storm clouds of the global financial crisis gathered in early 2009, Rudd announced that the previously proposed assistance rates were to be boosted with a five-year “global recession buffer”, meaning that the highly exposed industries would now receive a whopping 94.5% of their permits for free, and the moderately exposed industries 66%. (Rudd also announced a one-year delay in the start of the scheme, among other industry-friendly changes.)

*Read the rest of the post at Inside Story. Fergus Green is a climate change lawyer and policy analyst.

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  • 1
    Michael
    Posted Tuesday, 4 October 2011 at 7:03 pm | Permalink

    Was Nero simply morphing Nostradamus? Cause it seems to me that our Carbon killing addicts are fiddling away our nation whilst Australia’s middle class burns. How else does one explain away the morons running our nation to the ground on a false pretext?

  • 2
    nicolino
    Posted Tuesday, 4 October 2011 at 11:21 pm | Permalink

    Rudd as PM! You’ve got to be joking. He’s as spineless as the incumbent we’re stuck with now.
    The tragedy for Australia is we have no choice but a bunch of throw-away pollies who are shortly to be rewarded for their mediocre performances with huge salary increases and, you can bet, even more generous perks courtesy of the “independent” Remuneration Tribunal”

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