Kevin Rudd may not look like he’s following John Howard on climate change, but he may well be. The strategy and rhetoric are more polished, but the confusion between polluter interests and the national interest seems much the same.

Howard saw a political advantage in playing defensively with a siege mentality — on Kyoto ratification, developing country involvement, emissions trading, and renewables targets. Rudd wants to be seen to be on the front foot. Strip away the rhetoric and perceptions, however, and the two approaches may generate similar outcomes. That will become much clearer once we have emissions targets, Treasury’s modelling and more fine print.

Until then, there is little to support Penny Wong’s claims that emissions trading will transform Australia’s economy. Indeed, the Green Paper puts lots of obstacles in the path of the transformation that should happen.

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Most obviously, the government has caved in to polluter lobbying for handouts to coal fired electricity generators — against the advice of Ross Garnaut. This compensates investors for dirty investment decisions made in the past knowing a carbon price was inevitable, not to mention fattening up coal fired power assets for lease in New South Wales.

The government’s excise offset proposal to remove the impact of a carbon price from petrol and diesel is another costly and counterproductive step — also taken against the advice of Garnaut. With CSIRO warning of $8 a litre petrol inside a decade, billions of dollars annually in public funds will be used to send motorists the wrong signal about the urgency of changing behaviour.

This money could be spent on public transport, on incentives for more efficient vehicles, and to green the electricity grid in preparation for the inevitable shift from petrol and diesel to electric vehicles. Instead we have a procrastination subsidy — five years for motorists to think about it, and good luck trying to take the excise offset back from truck drivers. The emission cuts that would otherwise occur in transport will have to be made elsewhere, at higher cost to householders and “non-assisted” (i.e. cleaner) industries.

The compensation arrangements announced yesterday for so-called emission intensive trade exposed sectors are another obstacle to transformation. Howard would have been even more accommodating but our worst polluting sectors will get 60-90% of their emissions for free — eliminating much of the incentive to clean up.

The freebies are likely to continue until at least 2025, and the same companies receiving them here on the basis that their competitors face no similar carbon cost will be lobbying developing countries against adopting such a cost.

Far from preventing carbon from leaking out, it will encourage carbon intensive industry to leak into Australia. And should these sheltered industries grow rapidly, the burden on the rest of the economy will increase even further. Especially egregious is the implication that black coal mining will be eligible for 60% of its permits for free.

It already creates 5% of our emissions and rising, it’s responsible for more greenhouse emissions abroad than Australia in total, and production is projected to more than double. Given these exports will never be used cleanly on any scale that matters, this is not an industry where we should be digging ourselves deeper.

The intention of the concessions in the green paper is to shift the emission reduction burden off the worst polluting sectors and onto cleaner businesses and householders — which is ironic given all the hand-on-heart talk about protecting householders to the greatest possible extent. A carbon price ceiling, the petrol excise offset, limits on permit exports, and various other restrictions in the short term are designed to get Labor past the next election without “scaring the horses.”

However, a big part of the longer term agenda to shift the burden offshore to the greatest extent possible. While it has ruled out counting “avoided deforestation” credits and various other outsourcing options before 2012, the government has said it intends to push hard for such provisions in the post Kyoto negotiations.

The long term plan may well be to pay others to store our emissions in rainforests we would pay them not to log. This is not what Australians expected when they elected Kevin Rudd.


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Peter Fray
Peter Fray
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