The removal of Penny Wong from the climate change portfolio in favour of Greg Combet provides an opportunity to take stock of where we’re at on climate change and what should be the Government’s priority.
Opinion is undoubtedly swinging away from an emissions trading scheme toward a carbon tax, and it’s been happening both among progressive economists like John Quiggin and right-wing commentators like Michael Stutchbury. A similar change is going on within Cabinet, although the conversion isn’t yet complete. A carbon tax isn’t as elegant and economically pure as an emissions trading scheme, and not as efficient, but the original debate omitted the simple reality that politicians — or certainly the politicians we now have — can’t be relied upon to develop a complex policy without allowing every rentseeker in the country to defile it.
In short, a relatively simple carbon tax is superior to a badly designed ETS (exhibit #1, the CPRS), particularly if it applies to imports but not to exports, at a stroke removing much of the potential for whingeing from trade-exposed industries.
But where does a carbon tax — or even a revised CPRS stripped of its decades of handouts to polluters — fit within overall climate change policy?
The Rudd Government’s climate change policy was two-fold: implement its election commitment to establish an ETS (and increase the mandatory renewable energy target) and use climate change in the same way that Labor had used it before the 2007 election, to wedge the Coalition.
Its implementation of the ETS commitment was, initially, excellent — Ross Garnaut was engaged to prepare a comprehensive report on climate change, identify appropriate emissions targets and how best to achieve them. There was a Green Paper and White Paper process conducted by the Government to develop its ETS model. Wong’s technocratic air seemed to suit the process. But at that point, the interests of climate change action would have best been served by Kevin Rudd and Wayne Swan being mysteriously replaced by John Howard and Peter Costello — specifically, the second-term versions of both.
It was Howard and Costello’s skill and patience in resisting demands from rentseekers and special interests in relation to the GST that was needed in the face of demands from whingeing industries like the miners. Instead, Rudd and his Cabinet caved in — pre-emptively caved in on some issues, then caved in again later as the rentseekers sniffed blood and came to Canberra for a killing.
The relentless use of climate change as a political weapon also went well, with Brendan Nelson and then Malcolm Turnbull having to deal with a hopelessly divided party on the issue. But that, too, ended up going poorly. Tony Abbott may be a global cooling advocate who can barely maintain the fiction of “giving the planet the benefit of the doubt” for more than five seconds, but there was great justice in how he turned climate change back on Kevin Rudd. Penny Wong’s complete lack of political touch and robotic adherence to the Government line and talking points didn’t help the Government’s apparent helplessness in the face of the bad man yelling “great big new tax.”
Now there’s no commitment to an ETS, just a vague, years-long commitment to a carbon price, with the hung Parliament having delivered, via Christine Milne, an intra-Parliamentary mechanism for developing a model, with external “expert” input, including potentially from business.
That mechanism could progress things by developing a wide-ranging consensus on a model across parts of the political spectrum, economists, business representatives and unions, which Greg Combet is well-credentialled to facilitate. But it may not deliver anything of the sort, and more to the point it won’t obviate the need, at some point, for a political leader to demonstrate something approaching courage.
It thus might serve to take a step back and understand exactly what it is Australia should do on climate change.
Much of the debate around climate change is still skewed by the assumption that what we do matters; that, faced with say the slow drying up of the Murray-Darling Basin, we can control our fate by cutting our own emissions.
As the recalcitrants like to note, we only account for a tiny part of the world’s emissions. In climate change terms, we are a mendicant state. Our future is heavily dependent on the actions of the world’s biggest economies. As a country that will be more exposed, and more quickly exposed, to the impacts of climate change the highest priority is any sort of effective international regime that will reduce the growth in emissions, with the aim of stabilising carbon levels.
Ideally they would be stabilised at a level that will minimise the ensuing global temperature rise but from a national interest point of view any reduction or slowing of growth is better than none for the purposes of reducing the impact on Australia.
The second priority, from a risk management point of view, is to accept that strong international action to curb emissions is unlikely and that, as a consequence, Australia will have no choice but to adapt to the consequences of a significant temperature rise over coming decades. A coherent adaptation policy, with prioritisation for those communities most exposed or with least capacity to adapt, needs greater attention than it received under Wong, although adaptation does feature as an element in Labor’s overall climate change strategy.
But given the certainty of higher temperatures and resultant economic and environmental impacts, intergenerational equity should be an element of adaptation policy. Climate change in effect imposes a tax on our children and generations unborn to subsidise our carbon intensive lifestyle: they will face higher tax rates, higher food prices, higher health costs and higher insurance premiums as a consequence of our refusal to curb our carbon emissions.
The most straightforward adaptation measure would be a form of intergenerational fund, such as a sovereign wealth fund, locked away from politicians for the next two decades, to give future policymakers additional funding which they can decide how to employ in dealing with the impacts of climate change.
Australia also needs to develop a stronger position on assisting communities overseas, or at the very least in its Pacific backyard, that have limited resources for dealing with the immediate and future impacts of climate change. Both Labor and the Coalition have buried their heads in the sand on this issue; Wong and Stephen Smith announced some limited climate change funding for Pacific nations in 2008 but it is far too little.
Only then do we reach the point of needing to discuss a carbon price. The two drivers of the need for a carbon price are the need to be taken seriously as we plead the international case for strong action to limit emissions and the extent to which we are starting behind other developed countries in the long reform of decarbonising the Australian economy.
The first driver is self-explanatory. As a climate change mendicant that needs to convince big global polluters of the need to curb emissions, our own failure to act – indeed, the fact that we are now further away from effective climate change action than in 2006, and unlikely at this point to address that seriously before the middle of this decade, severely curtails our capacity to act with influence internationally.
Indeed, Australia is most sensibly viewed internationally as one of the planet’s biggest carbon pushers, with its heavily carbon-reliant energy system and its increasing reliance on mineral exports, and particularly coal. Australia has much work to do simply to get on level pegging with where many other developed economies, and all developing countries are, in terms of the carbon intensity of its economy. As Government ministers have frequently pointed out, delaying action on that challenge for another three years increases the costs of taking action and the dislocation caused by taking action.
That should be Greg Combet’s policy framework. Concentrating on a carbon price, for the moment, gets things backward.