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Federal

Sep 28, 2010

Climate committee is better without the Coalition

The Climate Committee announced by the Government yesterday will benefit from the absence of a disruptive and untrustworthy Opposition.

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Since climate change kicked its way out of the policy morgue to which both major parties had consigned it, there’s been more progress toward effective action on climate change from Parliament than at any time since the end of 2009 and, really, since 2008 when the Rudd Government started pre-emptively caving in to the demands of industry to neuter its CPRS.

Until the election delivered a minority government, we were on course for complete inaction on climate change for this term, a policy silence broken only by the insistence of the major parties that risible policies like a citizens’ assembly, or soil carbon (more correctly titled “soil magic” by Lenore Taylor) amounted to effective action on commencing the restructuring of our carbon-addicted economy.

Now, courtesy of Labor being reluctantly dragged back to the idea of being serious about climate change rather than treating it as a political wedge, there is a process that conceivably leads to a carbon price mechanism with support from at least one independent — Tony Windsor, who is on the committee — and the Greens, and one developed with input from business via an advisory group, that could be legislated after the Greens take the balance of power in the Senate on 1 July.

The process may fail to produce a consensus; business representatives, for example, may continue to argue that we need a carbon price, but not one that might actually do anything or affect their costs. It’s fair to say there’s quite a bit of scepticism on the part of some Cabinet ministers about the utility of the committee. Nonetheless, it provides a path to a carbon price where, until 21 August, none existed for the foreseeable future.

The only recalcitrants are the Coalition, and as more high-profile businesses join the calls for a carbon price, that recalcitrance means the Coalition will lock itself out of a role in shaping what should be the most significant economic reform of this decade. The committee is being attacked as some sort of infernal innovation, a “repugnant”, “secret” thing that breaches, in the words of Greg Hunt yesterday, “110 years of parliamentary practice” and a breach of Julia Gillard’s pre-election commitment that there will be no carbon price in this Parliamentary term.

Conventional wisdom is that politicians breach such promises at their peril, and clearly the Coalition thinks that it is on a winner by pointing out what is an obvious case of not honouring a commitment by the Government. But the last nine months suggests that every time Labor took a step away from a carbon price — convinced that it was being politically savvy and minimising the risk of being damaged on the issue — it shed support. It shed it mainly to the Left, giving a huge boost to the Greens, and it shed a little support to the Right, from people convinced Labor stood for nothing.

As yesterday’s Essential Report showed, there remains very strong support for “quick action” on climate change among Labor and Greens voters, and 37% of voters overall see it as very important, versus 27% who regard it as less important (a quarter think it is “somewhat important”). Even 20% of Liberal voters see quick action as very important.

On that basis, if only in terms of what will now be a years-long struggle against the Greens, Labor may be quite happy for Tony Abbott to persistently point out that Labor is moving ahead with a carbon price. That clearly is what voters want to see.

The Coalition are also putting on some confected outrage that the committee is only open to members who believe in man-made climate change and support a carbon price. Reduced to basics, that means you have to be rational and economically-literate to participate, and if Tony Abbott wants to declare his MPs are neither, that’s his lookout.

In truth, though, there’s no point in involving the Coalition. It’s not really about the fact that Tony Abbott believes in global cooling. We saw last year the extent to which the Opposition can be trusted on climate change action, and we’ve had continual demonstrations that Tony Abbott will walk away from any agreement, verbal or written, that becomes inconvenient for him. Even if an Abbott-led Coalition somehow agreed to a carbon price mechanism, there’s no evidence that such an agreement would be adhered to and the Government would be foolish indeed to take Abbott’s oft-broken word on such an issue.

The Opposition is, however, very sensitive to the line that it doesn’t support a market-based solution. Its “direct action” policy of billions of dollars of handouts to polluters is, it insists, a “market-based approach”, although Hunt yesterday described it, confusingly, as a “third way” and compared it to the water market, perhaps forgetting that lots of other purchasers than governments buy water. What the Coalition proposes on electricity is indeed a market, a market in which there is one buyer, the Government, and only one seller.

Only International Power can sell “abatement” from Hazelwood. Only TRUenergy can sell abatement from Yallourn (TRUenergy’s parent, China Light and Power, is looking to get out of Australia anyway). There can’t be a “market” in soil magic because it’s barely at carbon capture and storage-level viability, you can’t measure what you’re “buying” and independent experts say the Coalition’s proposed price of $8-10 per tonne of sequestered emissions (necessary for the Coalition policy to add up to anything approach a 5% reduction by 2020) is a quarter or a fifth of what would be needed to make it viable for farmers.

The only other card in the Coalition deck is its argument that a carbon price will drive up electricity prices, which are going up anyway due to the uncertainty engendered by the failure of Labor and the Liberals to establish one. The Coalition skips over that increasing electricity prices is the entire point of a carbon price, given the goal of changing behaviour and driving investment into lower-emissions technology. Under the CPRS, most households would have been fully or even over-compensated for the increase in electricity and other prices, so they would not have been net worse off, but the effect of a higher price signal would have been felt by households and industry – demand for electricity is moderately elastic in response to price increases, though seemingly more elastic at certain times of year than others.

Given the untrustworthiness of an Abbott-led Coalition, and the fact that it has wandered into a policy dead-end of fanciful solutions and endlessly-repeated rhetoric, its non-participation in the work of moving toward a carbon price isn’t really a problem. Everyone else — the independents, the Greens, Labor, the business community, NGOs, welfare groups and economists — have serious work to do on the issue.

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