The concept of irony just doesn’t do justice to the twists, turns, deceit and rank hypocrisy that has accompanied the long, slow road to the introduction of a price on carbon in Australia. It will be the end of the mining industry, we are told on page one of our newspapers, while the business pages are full of the expansion plans and record profits of the same companies doing the whingeing.
It will drive manufacturing jobs offshore, cry the pro-pollution lobby, but don’t worry if the mining boom is far more effective at causing exactly the same problem. Any modest restructuring of the Australian economy associated with tackling a global problem is, it seems, to be avoided at all costs. But any major restructuring associated with a short-term boom in commodity prices is simply the price we must pay for progress, or the progress of those who own billions of dollars worth of mining shares at least.
And now the big fuel users, including the airlines, are desperate to be included in the emissions trading scheme. How is anyone supposed to keep up?
The problem is that what is said about the carbon pricing scheme and how it actually works have got virtually nothing to do with each other. Most of the big polluters are well informed about the scheme but are being deliberately disingenuous about its likely costs. Most of the big environment groups are being naively optimistic about the likely benefits. And the government’s strategy now appears to be to hope that once the scheme comes in that it will be so underwhelming that most people won’t even notice their major reform.
The complexity of emissions trading helps to conceal the real winners and losers. Those who have the money and resources to hire experts to fully understand and exploit all the loopholes are going to be the real winners from the scheme.
So why are the airlines and big transport fuel users desperate to be included in the emissions trading scheme? In this “through the looking glass” world of carbon trading, the reason that the airlines are so keen to be included in the pricing scheme is so that they don’t really have to pay.
The trick is that transport fuel is to be treated differently to coal and gas when the carbon price moves from the fixed price to a flexible price in three years. Under the draft legislation, big users of transport fuel would have to pay the carbon price direct to the government while big users of coal and gas will be able to buy “offsets” instead. Given the likelihood that it will be much cheaper to pay an Indonesian logging firm to certify that it has stopped logging than it would be to actually pay the carbon price to the government, you can see why the big transport fuel users are so keen on emissions trading.
But just because the complexity of emissions trading helps to conceal the real winners and losers doesn’t mean that changes such as those now being proposed by the government are costless. Put simply, if the transport companies can buy cheap offsets rather than pay the full carbon price to the government, there will be a loss in government revenue. This could then reduce the funds available for other government programs to reduce emissions.
The joys of minority government mean that if the government has privately promised a better deal to the transport users then it is going to have to publicly negotiate with the Greens and independents to pass any amendments through the Parliament. It will be interesting to see what price, if any, the crossbenches extract for the government’s generosity.