Yesterday’s White Paper lock-up was something of an eye-opener. For a start, it was a lock-up because of the $3.9b handout to coal-fired power generators. The revelation that the Government was going to be even more generous to our biggest polluters than it had already indicated would, apparently, prompt the assembled journalists to bolt out and buy shares in coal mines and power companies.

As I leafed through the vast folder looking for information on what the Government’s targets would be, how they were justified and what changes had been made to the design of the scheme, I became aware that a number of journalists around me had skipped straight to Chapter 17, where household assistance measures were discussed.

“Singles get screwed again,” said one, contemplating the tables of assistance that spell out the impact of the scheme and its compensation measures on every conceivable family structure except Catholic gay unemployed pensioners with ten kids. The singles issue came up at the Press Club Q&A, too.

And it’s all over the press this morning. “Bottom line: what it’ll cost you” in the Tele. “Families won’t be hurt by carbon scheme” says the Hun, although “retailers will pay more”. “The big grab, then the great giveaway,” declared The Age. And “poorer households will benefit” in The SMH.

Still, at least they’re not talking about sportsmen, eh?

Making the facile point that the mainstream media blithely ignores a burning planet while focussing on how much your average Telegraph or Herald-Sun reader stands to gain or lose from the ETS doesn’t help anyone. It does pay to analyse it a bit more closely, however.

There’s a feedback loop at work here, a self-reinforcing system between media and government. Each is culpable. The debate over major reform — and this extends beyond climate change to economic reform more generally — is all about who wins and loses. Losers must be compensated, even for the removal of benefits they shouldn’t have in the first place. Winners don’t include the long-term benefits to households and businesses of reform, only those who directly gain from assistance packages. The impact on households is paramount, and particularly on pensioners, even if, as in this case, it is exactly the behaviour of consumers that the government is ostensibly seeking to modify.

The White Paper takes this thinking to absurd extremes. Four out of five low-income families will be given 120% compensation for cost-of-living increases associated with the scheme. Apparently full compensation for reform is now insufficient. Even the majority of middle-income families will be fully-compensated. It’s only the highest income earners who will suffer increased costs, unless they take action to reduce their emissions.

Ah, and yes, there’s the problem, because while there’s a notional incentive to reduce emissions on the part of households paying more for energy costs while receiving more in family benefit payments, quite how that will translate into altered patterns of consumption in the real world isn’t clear. Your electricity bill goes up, but there’s also been a nice generous increases in family payments. Life goes on. Turn up the air-con will you luv it’s stinking hot.

The same logic applies to compensation arrangements for polluting industries. You now have to pay for your carbon emissions, but here’s a bunch of permits to take care of that. The biggest polluters have to pay virtually nothing except the admin costs of a giant paper chase.

The point of an ETS is to create incentives for changed consumption, production and investment by households and businesses. Handing out compensation to everyone significantly reduces the incentive — especially for Australia’s corporate sector, much of which relies on acquisition, stifling competition and rent-seeking rather than innovation to grow. The Government is so terrified of households being forced to save money, or some businesses closing while others open in lower-emission industries, that its ETS will preserve our carbon-based economy, rather than change it.

Experienced political commentators play a different version of the same game, acknowledging Kevin Rudd’s political smarts in depriving the Opposition of grounds on which to criticise the package. This is normally known as pre-emptively caving in, but in this case it has been applauded.

The Opposition, in its first smart move on climate change for a long time, has briefly retreated from the fray, using the Rudd tactic of having a review. The Coalition’s review, by David Pearce and the Centre for International Economics, might actually produce something interesting, given Pearce and co have already said plenty of sensible things on how an ETS should work. Moreover, Malcolm Turnbull can sit tight on the issue until February, and let the Government take the heat. It’s a smart call by Turnbull, Robb and Greg Hunt.

But you can’t help but think we’re all missing the point.

Peter Fray

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