The debate has been returned to its starting point of more than a decade ago -- a trading scheme versus a carbon tax, writes Giles Parkinson.
So, the minister for climate change in the new Labor minority government is who, exactly? The official listing nominates Greg Combet, the Coalition would have us believe it is Christine Milne, and for a fleeting moment last week it seemed to have been Marius Kloppers.
But the person seeking to exercise the greatest influence over the climate debate in the first two weeks of the new government has been Martin Ferguson. No doubt the Minister for Energy and Resources (and Tourism) thinks this is as it should be, given the nature of his portfolio and his desire to do the best by both industries.
Ferguson, in an interview with The Australian Financial Review
, gave his assent to an emissions trading scheme, pulled up the drawbridge, and fired a shot across the bow of banking types who would dare imperil the destiny of other economic sectors in the pursuit of an easy-traded dollar.
The weight of his comments offer a valuable insight into the battles ahead for a government that will rely on the support of the Greens and the independents -- given the Coalition has effectively dealt itself out of the debate -- and that has now decided that it doesn’t want climate change to be a festering sore at the next election.
Kloppers’ intervention gave the signal for the debate to resume, but Ferguson was clearly keen to make sure it didn’t get out of hand. Yes, a traded carbon price for the energy sector is a necessity -- he has heard that message loud and clear from an industry that has tens of billions of dollar of investments to make and no signal to do so. But that is as far as Ferguson the progressive is prepared to travel.
Beyond energy, we return to Ferguson the inherent conservative, keen to restrict the ambitions of a carbon pricing scheme and to protect the remainder of his portfolio.
And most major business lobby groups are happy to play along, taking a safety-first approach when, if they analysed the nature of Kloppers’ remarks, it should be clear that early and broad action is by far the cheapest and most efficient measure.
Given the science that these policies are responding to, half measures make as much sense as being half pregnant. Nevertheless, the debate has been returned to its starting point of more than a decade ago -- a trading scheme versus a carbon tax. Can’t decide? Hey, let’s have both, but in very small portions.
This is, of course, a well travelled path. One of the first documents the Labor government received upon its election in 2007 was the National Emissions Trading Taskforce conducted by the states and territories. This had started out as a study into a scheme affecting the energy sector only, but the overwhelming response from industry was that it needed to be extended to other sectors. Since then, of course, we've had the Garnaut review, a green paper and a white paper that all came to the same conclusion.
But it’s interesting to revisit what was said in 2007: "Emissions trading will be the central pillar in Australia’s strategy to reduce greenhouse gas emissions. However, emissions pricing alone will not be enough. The problem is too large, too widespread and too complex -- other policy measures will be required to complement the emissions trading scheme.
"Australia faces a unique opportunity for co-operation among all levels of government to deliver a comprehensive, coherent and streamlined national climate change strategy. Action on stabilising and then reducing Australia’s greenhouse gas emissions should not be postponed. Leaving the emissions reduction task too late risks being forced to make abrupt, disruptive adjustments at a later date. A smoother adjustment path will be more manageable and less costly."
Nothing much has changed. Yet here we are, back with the original premise of an energy sector only scheme.
The Climate Institute noted last week that putting a direct price tag on emissions in the stationary energy sector alone would require the sector to reduce emissions by 30% by 2020, just to meet the 5% reductions target. To meet a 25% target would require emissions to be slashed by more than two thirds. To offset this would require either direct regulation of emissions or a carbon tax, which all the models suggest is good at setting a price but bad at hitting a target. It’s seen as a blunt instrument that would end up costing more.
Europe has been down a similar path. When industry understood that a carbon price was inevitable and they were faced with regulation and a carbon tax, they were quick to push for an ETS. The difference in Europe was that the framework was relatively simple compared to the complexities of the CPRS, and Australia should be able to avoid the disastrous over-allocation of permits because it already has an effective measuring system.
Greg Combet, of course, is aware of this, and next week the real climate change minister will be able to put his own stamp of authority on the portfolio. Crucial to this, of course, will be the make-up and the intent of the climate change committee. One only hopes that there are enough members whose names fill in the alphabet between Ferguson and Milne to ensure an appropriate separation at the boardroom table. A name such as Malcolm could have been rather useful.
This story first appeared on Climte Spectator.