Yesterday the Australian Industry Group (AIG) called for “all sides of politics to support the immediate removal of the fixed price carbon tax and move directly to an internationally linked emissions trading scheme”.
A transition to an emissions trading scheme (ETS) is currently scheduled for 2015. AIG CEO Innes Willox wants Labor to make the transition in this year’s budget, only two months from now. He argues the Liberals should also support it as a reinterpretation of their promise to axe the carbon tax or as a “bridge” while they design their Direct Action Plan through consultation with business.
AIG echoes similar calls made by other business lobby groups. I am surer than ever that the business lobby’s true objective is to turn back the clock to 2009, when the two major parties agreed to lock in for years meaninglessly weak emissions targets with unlimited international offsets. That’s what AIG means when it says it seeks “certainty”. Moving immediately to an ETS would effectively achieve that, because it would reverse the main concession the Greens secured through climate policy negotiations in 2011: a Caps and Targets Review by an independent Climate Change Authority (CCA) to recommend emissions caps. CCA is not due to report until February 2014, and even if the review were to be accelerated I can’t see it concluding before the budget, so forcing a transition before then would mean bypassing CCA.
Furthermore, as currently designed, Australia’s ETS will be flooded with cheap and dodgy international permits. International offsets are not a serious way to tackle Australia’s contribution to climate change: they are a breeding ground for creative accounting while preventing structural decarbonization of the Australian economy. On current international carbon prices, all these imported permits will cause the Australian carbon price to crash. Some argue the EU will fix its scheme and the price will recover, but that is counting our chickens before they have hatched. It looks to me like Poland is doing a very good job of blocking any progress.
Willox has made it clear AIG supports the present meaningless 5%-by-2020 target and wants it to be met by international offsets. AIG has repeated an incorrect criticism of the Liberals’ Direct Action Plan which I have debunked: that its exclusion of international offsets makes it expensive. In reality, international offsets only appear cheap because they allow Australian companies to go on polluting. (Don’t get me wrong: the Direct Action Plan is a joke for other reasons, including that it relies on the same problematic baseline-and-credit mechanism as international offset schemes.)
Willox explicitly says AIG’s aim is to reduce costs for business, not to reduce emissions. AIG enthuses that moving to an internationally linked ETS would cause the Australian carbon price to plummet to current international prices of $1-7/tonne, claiming the present fixed price of $23/tonne is “way too high”, another argument I have debunked. In reality, the higher carbon price the better, because it means a more stringent penalty for pollution and a stronger incentive for investment in zero-carbon technology and energy efficiency. International carbon markets have collapsed because they are badly designed, which is no reason for Australia to follow their example.
Under current policies we are starting to see changes in Australia’s electricity market and emissions are beginning to decrease. The carbon price doesn’t appear to be directly causing this, but it certainly isn’t doing any harm. In contrast, rushing to an ETS would lock in weak targets, unlimited offsets, and low prices, stopping this emissions reduction in its tracks.
Instead of trying to bring forward this potential disaster, true advocates of climate action must persuade the CCA and/or the government of the need for deep emissions targets without international linking and offsets (as I will expand on over the weekend in the forthcoming installments of my series on the Caps and Targets Review).
Willox told ABC Radio’s AM that AIG’s proposal “doesn’t take away from either party putting forward their points about which sort of overall strategy is best, who’s right. You know, all the political argy-bargy will occur in any case. This is a sensible policy approach which gives both parties the out and it also gives some business some certainty.”
Note the pointed distinction he makes between politics – the too often superficial disagreements decided democratically at elections – and policy – the important matters too often undemocratically determined by business lobby groups accustomed to having both political parties under their thumb. Willox seems to be suggesting that Labor and Liberal lie to the electorate about their intentions then proceed to adopt AIG’s policy, betraying an antipathy to democracy, accountability, and transparency.
An early transition to emissions trading would require passing legislation, but that would be possible if the two major parties collude like they did in 2009.
I was very pleased to see the AIG proposal met with tripartisan categorical rejection. Labor Climate Change Minister Greg Combet says Labor remains committed to its current policy.
Liberal climate spokesperson Greg Hunt says: “we are not going to be imposing, as in the Ai Group note, a massive tax on Australian firms and whether it’s the full carbon tax or a reduced version, we won’t be supporting either form of that. […] Even under the ETS version, there’s a multi-billion-dollar cost to Australian jobs and to Australian firms and to Australian families – that’s not an approach we’re taking.”
And Greens leader Christine Milne says: “If the Ai Group supports emissions trading, then they should support what we have got because we’ve legislated an emissions trading scheme starting with a fixed price and going to flexible pricing after the Climate Change Authority brings down appropriate targets.”
Nevertheless, I remain vigilant, even pessimistic.
Independent MPs Rob Oakeshott and Tony Windsor have backed the AIG’s proposal and say they will put pressure on Labor to adopt it. Ominously, Oakeshott’s opposition was all it took to kill the floor price last year. Two other people who have previously hinted they might attempt an early move to an ETS are former Labor leader Kevin Rudd and former Liberal leader Malcolm Turnbull, both of whom may be candidates for reinstatement. It has even crossed my mind that Rudd and Turnbull may be plotting together to try and replicate the deal they made in 2009 – exactly as the business lobby wants.
So to my fellow voters, bear this in mind for future reference: Any Australian politician who attempts an early move to an ETS will be absolutely destroying their credibility on climate change.