History will remember the Rudd/Gillard government’s first term in office for two things: its commendable management of the global financial crisis and its shambolic mismanagement of climate policy. Gillard’s challenge now is to erase the memories of the past and demonstrate that Labor has learnt from its mistakes.
The centrepiece of Labor’s first term climate agenda was the promise to introduce an emissions trading scheme — the Carbon Pollution Reduction Scheme (CPRS) — by 2010. In addition to this, it undertook to create several complementary programs on energy efficiency, renewable energy and energy innovation. Despite having a reasonable initial framework, almost all of these programs floundered.
The CPRS was a spectacular screw-up from a policy and political perspective. The first version of the CPRS had a modicum of policy credibility but, by the time it got to version four in late 2009, it was farcical. The mitigation targets were weak and the government caved in to every half-baked plea for special assistance from industry, thereby stripping the scheme of economic credibility.
Coal generators were offered $9 billion-$12.5 billion worth of free permits over 10 years, coal miners would receive $1.7 billion-$2.2 billion over five years, emissions-intensive trade-exposed industries would get $48 billion-$83 billion over 10 years, medium and large business enterprises would get $1.1 billion over two years — the list of handouts was never-ending.
To make matters worse, the government proved incapable of explaining the scheme to the public and fumbled the politics. Labor’s unnecessary attempt to push the scheme through Parliament in late 2009 was a great example of a government sacrificing principle and long-term strategic goals for short-term political advantage. As we now know, the ploy backfired and hardened the Coalition’s resolve to oppose the scheme. And then, when things got tough, the Government shelved the CPRS, making a mockery of its rhetoric about the moral imperative of tackling climate change.
While the CPRS was unravelling, so too were the complementary initiatives, particularly the energy efficiency programs. The home insulation program cost the lives of four young insulation workers and, to date, has been implicated in more than 174 house fires. The total cost of the program, including the clean up, is projected to be $2.3 billion and the environmental return on this investment is likely to be a reduction in emissions of about 1.5 MtCO2-e/yr, at something like $60/tCO2-e.
On top of the insulation catastrophe came the green loans program, which in many ways, encountered more serious administrative problems. Two external reviews of the program in 2010 were scathing of the way it was designed and managed, finding “repeated and systematic” breaches of probity requirements, a lack of program oversight, budget mismanagement and cost overruns, and “comprehensive failures of risk management”. Like the insulation program, the loans scheme cost taxpayers an enormous amount and produced very little in the way of measurable environmental improvements.
The renewable energy and energy innovation programs ran into similar difficulties. The renewable energy target scheme underwent two major restructures in the space of 12 months. The solar homes and communities plan was prematurely terminated after a massive cost overrun of about $900 million. The innovation programs were plagued by underspending and repeated restructures.
It is difficult to envisage things having gone much worse than they did. Labor promised an ambitious and principled approach to climate policy shaped around the early introduction of a carbon price. It delivered the opposite — a compromised approach formed around its short-term political interests.
If inroads are going to be made, Labor needs to show some backbone on carbon pricing and mitigation objectives. Some types of carbon pricing are better than others but, more than anything, what is offered up next must be capable of being sold to the public. That means a scheme with environmental and economic credibility that is comprehensible to the average person, at least at a conceptual level.
Labor also needs to steer climate policy away from pork-barrel spending programs. The lesson to draw from programs such as pink batts and green loans is that buckets of money solve nothing. They look good on paper but produce little in the way of emission reductions. Programs to complement a carbon pricing scheme are critical, however, they must be properly targeted and tightly administered.
Andrew Macintosh is the associate director of the ANU Centre for Climate Law and Policy