Newly reinstated Australian Labor Party leader and Prime Minister Kevin Rudd has today demonstrated yet again that he is the worst type of climate change denier: a skilled greenwasher.
Climate change is the great moral challenge of our generation. Climate change is not just an environmental challenge. Climate change is an economic challenge, a social challenge, and actually represents a big challenge on the overall question of national security. Because the dimensions of this challenge are so great, and they reach so far, and they extend over such a wide period of time, and across so many of the traditional portfolio delineations within government and between governments, that we should be at a stage now in this country where climate change is beyond politics.
I could quibble that “beyond politics” is a pretty meaningless phrase, but let’s be charitable and assume Rudd meant governments should not subordinate strong climate change policy to pressure from industry lobbyists or electoral opportunism. Fast-forward to today, and Rudd has announced details of his new plan to weaken the climate policy which his predecessor Julia Gillard negotiated with the Greens, by irresponsibly rushing from the present fixed carbon price to the planned emissions trading scheme (ETS). According to the Australian Financial Review, Labor will attempt to legislate this change if they win the election. It’s pretty obvious Rudd is attempting to neutralize the anti-carbon-tax campaign (in particular the anti-fixed-carbon-price campaign) run by the Liberal Party and the business lobby.
Today’s announcement was a far cry from Rudd’s grandiose rhetoric of 2007. He now frames the issue as primarily about the cost-of-living (a tactic which cannot succeed in neutralizing the Liberals’ campaign because it buys into their frame that it is about short-term economic costs, not mitigation of long-term climate change impacts and costs). But when Rudd did get around to talking about the environment, he carried on the greenwash tradition. Today is, he claims:
a good day for the environment, as we continue our efforts nationally, in partnership with the international community, to bring about a sustainable reduction in greenhouse gas emissions so that we can have a liveable planet for the future.
Rudd also said:
When we are here right on the doorstep of the Great Barrier Reef, I’m certain we’re taking the correct action. We want our kids and our grandkids, and I’ve got one now, to be able to enjoy one of Australia’s greatest natural assets. We don’t want them to be able to just read about the Great Barrier Reef in some history book in the future. We want them to experience the Great Barrier Reef in the future.
Of course, climate change is not only a threat to the Great Barrier Reef – it also threatens our economy, society, national security, and many traditional portfolios. Nevertheless, Rudd’s choice of rhetoric is darkly ironic considering the true impact of his early ETS plan is likely to be disastrous.
There’s been a lot of debate in recent days over whether an ETS is or isn’t a “carbon tax”: Labor says it is “terminating the carbon tax”, while the Liberals call that a “con”. This is an insignificant point of semantics; what matters is not what the policy is called but what it does.
As I explained in detail on Sunday, whereas the fixed carbon price appears to be helping cut emissions and complementing other climate policies like the Renewable Energy Target, the planned ETS contains fatal flaws which would actively prevent climate action in Australia. Those flaws are policy time-bombs set to go off when the carbon price becomes an ETS. The main time-bombs are lock-in of meaninglessly weak emissions targets, international offsets which will displace domestic emissions cuts, a toothlessly low carbon price, and trading of non-equivalent types of emissions. Unless the time-bombs are defused before the ETS begins, they will stop the present emissions reduction in its tracks and allow domestic emissions to rise instead. That would arguably be an even worse outcome than Tony Abbott simply repealing the policy.
The most notable thing about the details of the changes Rudd announced today is what hasn’t changed: the time-bombs remain intact. In fact, new Treasurer Chris Bowen boasts about one of the time-bombs I identified, that the price is expected to fall from $24.15/tonne to the European carbon price of about $6/tonne. This would completely undermine the effectiveness of the carbon price as a penalty for greenhouse gas pollution and incentive to invest in zero-carbon technology and energy efficiency. For example, Deutsche Bank’s Tim Jordan told The Age the reduced carbon price would probably reverse the reductions in coal-fired generation that have occurred since the carbon tax was introduced, while the Australian Farm Institute says $6/tonne will be too low to make carbon farming profitable.
New Climate Change Minister Mark Butler is selling the early ETS as environmental progress on the basis that it will set a cap on greenhouse gas emissions. This is all very well in theory, but we still don’t know what cap Labor will choose to set. Fortunately the Climate Change Authority’s Caps and Targets Review will be allowed to continue, but at the moment the default is Labor’s existing policy to cut emissions a mere 5% below 2000 by 2020 (and allow that target to be met with international offsets). Labor’s justification for this target is that it is supposedly Australia’s fair contribution in the absence of global action to limit atmospheric greenhouse gas concentrations to 550 ppm Co2e (an argument I strongly dispute, but that’s another story). Yet even 450 ppm CO2 would (among other things) virtually destroy coral reefs. Furthermore, even if Australia were to cut its domestic emissions to zero, the effect would be outweighed by emissions from the burning of Australia’s fossil fuel exports, which depend on global demand for fossil fuels following a business-as-usual pathway which leads to ~1000 ppm.
Quartering the carbon price will result in $3.8 billion in lost revenue in FY2014-15, which Labor intends to pay for with $3.9 billion of savings in the same year. These include $718 million in cuts and deferrals to climate change programs:
- $162m of unallocated funds cut from the Clean Technology Program plus $200m deferred
- $213m of unallocated funds cut from the Biodiversity Fund
- $143m of unallocated funds cut from the Carbon Farming Futures Program
Why these funds were never allocated is unexplained.
$2.98 billion comes from cutting or re-phasing various fossil fuel subsidies:
- $1.8b from abolishing the “statutory formula for fringe benefits tax on cars”, which allowed employees to fraudulently claim tax concessions for employer-provided cars (however, this change will not affect most employees claiming concessions for work-related travel expenses)
- $770m from bringing forward free permits for coal-fired power plants from FY2015-16 to FY2014-15 and discontinuing the program after that, accounting for the windfall to the industry of the lower carbon price (Bowen says the industry has already been consulted about this)
- $24m cut from “carbon capture and storage” (CCS) funding plus $200m deferred
- $186m from adjusting the coal mining jobs package to the lower carbon price
Another $248m will be saved by cutting 800 senior executive jobs across the public service.
There will be no change to household compensation (doesn’t that mean households are now way overcompensated?).
Although the fossil fuel subsidy cuts are a mildly pleasant surprise, they are piecemeal and insufficient to outweigh the lost revenue from quartering the carbon price. Almost $10 billion of annual fossil fuel subsidies remain, compared to a carbon price that will now raise only around $2 billion annual revenue. The main polluter compensation program, free carbon permits for industries which the government defines as emissions intensive trade-exposed (EITE), remains untouched (although quartering the carbon price means those free permits are technically now worth a quarter of their original value). A $6/tonne carbon price means the highest-polluting EITEs (including steel, cement, and aluminium), who get free permits for 94.5% of their emissions, will now pay just 33c/tonne in FY2014-15; while medium-polluting EITEs (including oil refining, LNG, and coal mining), who get 66% free permits, will now pay just $2/tonne in FY2014-15. (Correction 17 July 2013: the numbers in the original version of this paragraph were incorrect, and have now been replaced with rough estimates.)
Although Labor has “guaranteed” the EITE compensation until 2017-18 with three years’ notice required for any changes, Neil Perry today pointed out at The Conversation:
[T]he Australian public were also promised a fixed price until 2015, a price floor of $15 for three years thereafter, $946 million allocated to the Biodiversity Fund and $1.2 billion allocated to the Clean Technology Program. These important provisions have been changed or scrapped and the industry assistance could also be changed given the political will.
Despite the cuts and deferrals to CCS funding (which follow others made that were made in May’s budget), Rudd insists that the coal industry has a future and CCS will eventually emerge, just later than anticipated. In reality, CCS is a pie-in-the-sky technology which will not be deployed at scale in time to prevent dangerous climate change, and most of the world’s fossil fuel reserves cannot be burned if we are to avoid dangerous climate change.
Instead of weakening Australia’s climate policy, the government should strengthen it to ensure it drives decarbonization in the long term. In this context, that means either of the following two options:
- Fix the ETS time bombs:
- Set much deeper emissions targets, unconditional on international action.
- Allow zero international offsets.
- Reinstate the carbon floor price.
- If possible, compartmentalize the ETS by sector and/or greenhouse gas and prioritize fossil fuel CO2 emissions cuts.
- Alternately, indefinitely extend the fixed carbon price beyond 2015. Observing the ongoing failure of the EU ETS, there is an increasingly strong argument that Australia should abandon emissions trading altogether and instead focus on the fixed carbon price and other more direct measures. An imperfect fixed price is preferable to a disastrous ETS.
The ETS time-bombs are like a genie in a bottle: once the lid is off, it will be extremely difficult if not impossible to put the genie back in the bottle. Meaningless targets will have been locked in for years and dodgy carbon permits will have flooded the Australian market. We should be considering very carefully whether we want to open that bottle and how to prevent the genie wreaking havoc. Instead Rudd is rushing to take the lid off the bottle, apparently convinced emissions trading is a magic bullet that will cut emissions at the lowest possible cost.
Either that, or he now believes the greatest moral challenge of our generation is to appease the business lobby, no matter how destructive their demands.