Kevin Rudd has used his trip to Japan to do a little shopping. For $35m, he has picked up a handy multi-purpose commitment from Toyota to manufacture hybrids at Altona.

Multi-purpose because this can be invoked for all sorts of purposes. It demonstrates the Government’s commitment to running an Australia that makes things – regardless of the business welfare or protectionism required. But it also ensures the Government looks like it is Doing Something about climate change, while waiting for Garnaut.

Not to mention Rudd can now point to the vehicle as another “at the margins” means to address the now era-defining issue of high oil prices.

The Opposition will have no choice but to applaud. Three times yesterday on Insiders (doing its best to balance the ABC’s left-wing reputation by spending nearly the entire hour bagging the Government), Julie Bishop was asked if the Coalition would support lowering tariffs. Three times she ducked the question and talked about listening to the Productivity Commission. It’s a peculiar look. The party of rugged individualism, of decisive action and dislike of bureaucracy, insisting that a bunch of public servants should be paid homage.

But on recent form there’s next to no chance the Coalition will urge reductions in the level of protection supporting our cosseted car industry. Older hands will still remember Keating’s “Captain Zero” taunt at Hewson.

Then again, the Prime Minister has switched back to populist mode himself on oil, demanding the “blowtorch” be applied to OPEC. It’s not clear what blowtorch Rudd actually means, but if there is one at the moment, it’s entirely in the control of people who sell oil, and it’s aimed at those of us who buy the stuff. OPEC, naturally, has done what every producer historically has done at times of huge price increases, and blamed “speculators”, although it’s good to see even OPEC is now too PC to come out and say it’s the fault of the Jews.

Rudd is back in Japan in early July for the G8 outreach meeting. Instead of using it to bitch about OPEC, Rudd should swap notes with the 15 others leaders there as to how to deal with the political problem of rocketing fuel prices. They’re all in the same boat. Japanese Prime Minister Fukuda may not be particularly fussed about being forced out of office between now and then.

Back home, the pressure to omit petrol from the emissions trading scheme will ratchet up with every oil price spike. Energy-intensive industries are probably watching with alarm. They are already campaigning to be excluded from the trading scheme, or to be given free permits, and the removal of an entire sector like transport would significantly reduce the chances of other sectors being exempted.

Either way for consumers, this is a zero-sum game, because the cost of carbon abatement has to be met one way or another. Guy Pearse has noticed that ABARE – not exactly known for its environmental credentials – stated that the removal of energy-intensive industries from a trading scheme would double the eventual carbon price which would be paid by other sectors and households.

In developing the GST, Peter Costello correctly resisted pressure for exemptions or special treatment under the new tax system, sought by dozens of mendicant sectors or industries pleading how they were “special”. He understood that once you handed out one exemption, the pressure would build for more, and that each step would undermine the effectiveness of the GST.

The Prime Minister needs to display similar strength and commitment to policy purity – not for its own sake, but to maximise its economic and carbon abatement efficiency. It will be hard in the face of populist stunts from the Liberals, but the Government has to point out that, regardless of who gets exempted, we’ll still have to pay up the same.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey