The new Government’s first few months have been marked by an unexpected political adroitness. They’ve made the Opposition look like mugs, or wrong-footed them with offers of bipartisanship and consultation. But the Garnaut review and the Government’s response come with altogether higher political stakes than we’ve seen so far – not to mention the rather acute real-world consequences. The Prime Minister and Penny Wong will need all the fancy political footwork they can manage.

Garnaut was a handy means to delay staking out a Labor position before the election, and before Bali if they won. Now the Government can no longer avoid indicating exactly how seriously it takes global warming. “Australia must now put in place effective policies to achieve major reductions in emissions,” Garnaut declares. There need to be targets for both 2020 and 2050, and bigger ones than hitherto anticipated.

Worse, despite the peculiarly optimistic tone of the accompanying press release, it is clear from the interim report that the Government has the odds stacked against it. We’re high per capita carbon emitters, but there’s too few of us to make a global difference. The greenhouse effect is worse than predicted. We live in a fragile land, environmentally and economically exposed to climate change. And the prospects for an effective international climate change regime any time soon are virtually zero.

But the Government also has the political problem that no one is quite sure how committed Australians are to addressing global warming. Opinion polls suggest most of us are very worried about it. But how deep that goes isn’t clear. The occasional pedal to work, or using those terrible fluoro bulbs, is one thing. Paying significantly more for basic services like power, and seeing jobs lost and industries shift offshore, is quite another.

Any truly effective emissions trading scheme must have a significant impact – and an unpleasant one – on households. The public may not see too big an increase in their power bills, or watch too many smelters close before the 2010 election, but it will come at some point, and it will hurt. And what might feel like a virtuous sacrifice when the economy is at full capacity might look altogether different in the middle of a recession, especially in the absence of an effective international regime that requires other countries to make similar sacrifices.

In designing not merely the emissions trading scheme Garnaut wants but ways to address “market failure” in areas he identifies such as research, innovation and infrastructure, the Government will also need to be aware that industry will try absolutely everything possible to game the system it puts in place.

This will range from farmers demanding recognition of the role of land clearing to lawyers and finance specialists trying to find lucrative loopholes in the administration of the arrangements. The likes of Macquarie Bank will have teams of specialists ready to swarm over the Government’s legislation when it is unveiled at the end of the year, to determine how it can best be exploited.

Garnaut wants a robust, independent authority to oversee things, but unless Martin Parkinson’s team at the Department of Climate Change experts get the framework absolutely right, a repeat of the Keating Government’s disastrous Infrastructure Bonds (disastrous, that is, for infrastructure – they were great for tax avoiders) is a distinct possibility.

Despite the report’s call for as broad coverage as possible for a trading scheme, there’ll also be plenty of political pressure for exemptions or assistance for certain “strategic” industries. The Iemma Government has already handed Bluescope Steel an exemption from carbon taxes to secure investment and jobs at Port Kembla. It looks decidedly dodgy, but that’s democracy. Politicians will have to answer to communities that might lose jobs to countries with less of a focus on reducing their carbon footprint.

This all makes for a big policy and political ask for Rudd and Wong. Trying the bipartisan trick yet again might be seem a stunt too far for the Government which is already looking a bit clever-clever. And Federal Coalition MPs – admittedly dullards like Paul Neville and Don Randall – are already predicting doom and gloom about Garnaut. But a Parliamentary consensus on how much we need to curb our carbon emissions, and the basic means of doing so, would be enormously valuable not merely in sharing the political pain around, but also strengthening our capacity to seriously address global warming. Kevin should send Brendan a copy of the report with a little note “Your thoughts welcome.”

Peter Fray

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