While Garnaut’s draft report won’t make life any easier for Kevin Rudd, Garnaut himself today provided the Government with plenty of ammunition to fire back at the Coalition’s emerging scare campaign on an ETS.

In demolishing the case for further delay, Garnaut laid down a challenge to critics to demonstrate how the ETS would be improved by waiting two years, which the Coalition has yet to articulate (Malcolm Turnbull earlier today was saying it was all about Kevin Rudd’s vanity). The report also squarely addresses the issue of jobs leakage, suggesting export-exposed industries be compensated from revenue – although, as he sarcastically noted, in his consultations he had discovered that virtually every industry in the country claimed to be “trade-exposed.”

He also rejected the suggestion that regions relying on carbon-intensive industries like coal-mining would necessarily suffer under an ETS, saying there were opportunities for for such areas, particularly if emissions-abatement technologies such as geosequestration proved viable (Crikey will host a debate next week on qeosequestration).

But while he presented a deeply-worrying picture of climate change even if we manage to curb our carbon emission significantly, one senses for Garnaut this is simply a more complex, but equally do-able, policy challenge of the type Australia has encountered before. He repeatedly cited his experience working on trade liberalisation in the 1980s, when, he said, there was far less public support than there is for emissions trading, and pointedly referred to the benefits of bipartisanship in the economic reform achievements of the 1980s.

It’s not all good news for the Government. In articulating the case for exempting – temporarily – only agriculture, forestry and waste, Garnaut has removed any wriggle room for the Government to flexibly play the politics of the scheme’s introduction – although economic hardheads like Lindsay Tanner will welcome the rigour Garnaut is demanding. The proposal to direct up to $3b pa into low emissions technology research sits uneasily with the Government’s preference for mandatory renewable energy targets, particularly as Garnaut stresses that an ETS is sufficient to curb emissions unless there is a market failure. Garnaut was also critical in his speech today of “small steps that create the impression of action”, declaring this the worst possible response.

Most problematically for a government that is rumoured to have already decided to reduce fuel excise to offset a carbon price, Garnaut declared himself opposed to that, saying it would send perverse signals and undermine our own efforts to encourage other countries to end fuel subsidisation, and in any event the future price of oil could not be predicted in a scheme intended to operate for decades. His own preference was to compensate households – mainly lower-income households – with revenue from the scheme, particularly if the revenue could replace other revenue from less efficiency taxes.

While this has considerable appeal on the basis of economic efficiency, it is less sellable politically. For whatever reason – possibly because they’re stupid? – many voters will fail to see a link between an increased fuel price and the tax cuts designed to offset that increase. It’s only a couple of months since pensioners were declaring that they “got nothing in the Budget” despite getting $900 extra. As the Howard Government found with the GST, voters don’t value additional income as highly as they value the income lost on new taxes. And yet, as Garnaut notes, there’s no point simply swapping excise for a carbon price, if the point of the ETS is to change behaviour.

But perhaps the biggest benefit of the report will be that in solidly – perhaps even stolidly – arguing the case from anthropogenic climate change through its massive impacts on Australia to the best means to address it and the most efficient means of implementing that, Garnaut will re-focus attention on the Coalition’s retreat into delay and obscurantism. It might even crystallise the growing mood that politicians should stop talking and simply get on with addressing climate change. The Coalition has nothing like the Garnaut Review to back up its case for continuing the inaction that characterised its time in office. And the Government no longer has any excuses, either.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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