By Chris Wallace
Now is the time for the Rudd Government and Turnbull Opposition to take a cool, considered look at their political and policy strategies on climate change.
Why? Because the government’s carbon pollution reduction scheme (CPRS) is a dog. Because Labor and the coalition are both bent on wedging the other side with it with unpredictable net effects. And because Australia will get stuck with either a dud policy (CPRS) or a policy vacuum in the wash up. Climate change policy is too important to suffer this fate.
There are strong political reasons – on both sides – to neutralise the issue too.
The Courier-Mail’s Dennis Atkins says the government intends making the Senate’s likely rejection of the CPRS a double dissolution trigger for an early election at the beginning of 2010.
While trigger bills are often not the campaign focus by the time an election is called, why take the chance given what will by then be higher, and still rising, unemployment?
The CPRS is just not job friendly to export and export-exposed industries. The AWU and others will be happy to point that out in the 2010 campaign the way the CFMEU made a few pertinent points in the 2004 campaign about forest policy. Is this a lesson Labor really needs to relearn?
On the other side of the chamber, what coalition MP in their right mind wants to face the electorate looking like a climate change troglodyte?
It’s true that climate change will slide in voter priorities as the economy worsens, as it already has in the US where the slump has bitten quickly. But it will remain a big issue and the coalition can’t credibly fight an election campaign without a serious climate change policy.
During an election campaign you get to communicate one, maybe two big ideas. With the economy sliding, unemployment rising and climate anxiety continuing but not front of mind, the big parties need to ask themselves: Is this what we want to differentiate ourselves on?
Frankly, there are better bets. There’s a lot to be said for quietly – very quietly – cutting a quality, compromise deal in the background. It can be better than the highly flawed CPRS the government is proposing, get the issue off the agenda and both sides can move onto more prospective battleground.
Labor’s difficulty is how to disengage from a policy in which it has invested so much political ego.
The CPRS has to go into the “seemed like a good idea at the time” basket.
As outlined by Ross Garnaut, it had its attractions. But the government has compensated away any actual likely impact through compensation to big polluters. The Australia Institute’s Richard Denniss has a point when he calls the CPRS as modifed by Rudd the carbon pollution reward scheme.
The CPRS was always second best to a simple carbon tax. Unlike the CPRS, a carbon tax is applied to consumption (like the GST), not production. It doesn’t punish employment in export and export-exposed industries. It doesn’t lead to their exodus offshore to produce the carbon emissions previously created here in less regulated economies. That displacement effect is an intrinsic design flaw in the CPRS. (Economist Geoff Carmody has a good piece in today’s AFR on the issue.)
Climate Change Minister Penny Wong’s CPRS defence, that unlike a carbon tax it actually limits the amount of carbon produced, misses the general economic proposition that higher prices dampen consumption – or at least consumption growth. It could be introduced at a low level, elasticities of demand could be tested in practice, and the carbon tax rate could be adjusted accordingly.
The other CPRS defence, that we need it to seamlessly integrate into world emissions trading markets, no longer holds. Existing emissions markets (see Europe) are tanking. Given the economic climate, no new ones are likely to emerge soon.
Simple, understandable, addressed to consumption not production, free from government decision about who gets what compensation (a discretion always fraught with danger) – a carbon tax is a powerfully better proposal than the government’s complicated, knackered, rent-ridden, nightmare CPRS.
How to make the policy switch?
Fortunately, there is a gigantic diplomatic cover available to both sides of politics on this – the global financial crisis.
The context has changed. Action still has to be taken but given the drastic change of circumstances, the right path forward has had to be rethought. That’s just common sense, right? The GFC is the perfect fig leaf for the switch.
Someone has to think of a catchy new term for carbon tax, since no-one likes being responsible for a new tax. But John Howard managed it with the GST and went on to win elections. Rudd can manage it with a retagged carbon tax, too.
Finally, someone has to put together the deal. Someone needs to be a neutral go-between shuttling between Rudd and Turnbull to put this together. The likely candidates already know the PM’s office number. They should call it and volunteer to do the job.
Impossible? No. Unlikely? Perhaps. But politicians are better at recognising dogs than most people. Let’s hope this is a situation where both sides recognise their mutual interest in stopping this one barking.
Chris Wallace is publisher of Breakfast Politics.
email@example.com 24 February, 2009