A long time ago — last year, I think — I suggested that because the government’s ETS was going to be a dud, the policy challenge was to identify the next-best option for moving to a low-carbon economy. In my view, a carbon tax was the next-best option, but one that would end up being subject to the same emasculation by industry that has turned a flawed but potentially workable Carbon Pollution Reduction Scheme into a rent-seekers’ paradise. And anyway, a political problem with an ETS and a carbon tax was that they gave politicians, who are very hands-on sort of people, nothing to do.
Meantime the “debate” over how we deal with climate change has been reduced to highly coloured commentary on the game of chicken being played out between Malcolm Turnbull and his shadow Cabinet, and the Liberal backbench. The issue is now whether the amendments developed by the Coalition leadership will be ticked off by Liberal MPs (they will be), not what the amendments will actually do, which will primarily be to remove whatever faint trace of incentive there is left in the CPRS for anyone to do anything except keep churning the paperwork.
Once the amendments are approved, the “debate” will then shift to a different game of chicken, in which Turnbull will facing off against a slightly more difficult opponent than Wilson Tuckey, in the form of the Prime Minister.
But whoever wins, there won’t be an emissions trading scheme worth a damn, so the issue is — what do we do?
There’s a growing view among many climate-change campaigners that direct action is now necessary, given the manifest failure of the political system. Clive Hamilton articulated the sentiment well recently in Crikey. I think that call is premature, and puts climate change campaigners on difficult ground in the event those opposed to action decide to break the law, too. There are other public policy options for addressing climate change. They won’t be as efficient or effective as an emissions trading scheme, but they will work, albeit more slowly and with greater economic costs. They’ll also give politicians something to do.
The next-best option is a significant ramping-up of investment in renewable energy and energy efficiency technology — preferably by the private sector, but by the public sector if necessary. And this is, partly, what the government has done with its Renewable Energy Target — as flawed and inefficient as it is in its final, politically debauched form. Ross Garnaut strongly argued that a RET was superfluous if you had a functional ETS — an argument now voided by the likely ineffectuality of the CPRS — but one of the advantages was that an RET provided a pull on renewable investment that would have complemented the push provided by the carbon price in an ETS. Instead, we’ve just got the pull, but it’s better than nothing. It’s not even the most efficient kind of pull, since it is regulation-based, rather than based on price signals. The Environment Protection Authority in the United States appears to be adopting a similar approach with its threat to regulate emissions from power plants and large industrial plants.
And despite the remorseless criticism over solar power, Peter Garrett has overseen a massive injection of public money into solar systems and insulation at a domestic and business level. Whether the investment in solar baseload power — a last-minute Budget-eve initiative cobbled together by ministers as the “Solar Flagships” program — amounts to anything serious remains to be seen.
This is the direction the climate-change debate needs to turn in: securing an accelerated investment program in renewables and efficiency technology via — preferably — incentives for the private sector, but, if worst comes to worst, by direct public investment.
This is, given the state of the budget, necessarily, a zero-sum game. The debate needs to be about how to reallocate existing resources toward the desired investment. The first issue that needs to be addressed is convincing the government to put less directly into carbon capture and storage research and more into renewables and energy efficiency — although CCS does deserve some support, particularly given the coal industry is fronting up with its own contribution.
The second issue is ending or significantly amending the absurdly pro-car Fringe Benefits Tax motor vehicle concession.
Direct government spending on renewables and efficiency, or handouts or concessions to the private sector for the same, is winner-picking and encourages rent-seeking, industry dependence on taxpayers and economic inefficiency. But so does the CPRS, and that won’t even achieve anything.