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Jun 14 2013

What if the Liberals keep the carbon price?

As I have discussed previously, the Liberal Party of Australia have promised in certain terms to repeal the carbon tax. I still find it difficult to believe there is any way they can wiggle out of their extremely strong pronouncements on the matter, at least as long as Tony Abbott remains their leader. It seems to me that Abbott’s “blood pledge” is the political equivalent of an Unbreakable Vow: if he breaks it, he will be politically dead. If he reinterprets or backs down from it, he will be politically dead. I cannot see how Abbott could possibly survive if he committed the exact same “lie” for which he politically killed incumbent Labor Prime Minister Julia Gillard. He would lose any credibility he ever had. All but his most hardcore supporters could not fail to see the hypocrisy. Abbott’s pre-election lie would be replayed ad nauseam (not even the Murdoch media would be able to downplay it in this digital age), until the subsequent election when he would find voters waiting with their figurative baseball bats.

With all that said, the persistent rumors that the Liberals will reinterpret their promise have led me to conclude there is at least some probability that I am wrong. So here I examine the implications of the alternate hypothesis argued by Renew Economy’s Giles Parkinson: the Liberals might move to an emissions trading scheme (ETS) sooner than the scheduled date of July 2015, and spin the change as fulfilling their promise to remove the carbon tax. This was proposed by the Australian Industry Group in March (indeed, AIG CEO Innes Willox seemed to suggest the Liberals lie to the electorate about their intentions then proceed to adopt AIG’s policy).

Firstly, is this likely and under what circumstances might it happen?

The Liberals have explicitly ruled out a reinterpretation, on many occasions. For example, Liberal environment spokesperson Greg Hunt said in March: “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.” So if you believe they would embrace an ETS after winning the election, it would mean they are explicitly lying now and Willox would be the unofficial Deputy Prime Minister – which in itself is reason enough not to vote for the Liberals!

However, former Liberal leader Malcolm Turnbull, who is often accused of plotting against Abbott, has hinted that the Liberals might move to an ETS. On ABC TV’s Q&A last November, when asked if his party was right to say it would scrap the carbon price, Turnbull pointedly responded: “Well, scrap the carbon – repeal the carbon tax.” He went on to say “I have never supported a fixed price on carbon ever” and unfavorably compare it to an ETS by arguing a floating price limits the cost of cutting emissions. (In reality, the higher the 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 – and thus a policy more effective at mitigating enormous costs from climate change.)

Turnbull’s remarks were certainly suggestive, but it seems more likely to me that they indicate a plot by Turnbull specifically rather than a secret plan by the entire party – otherwise, why would he be singing a different tune to his colleagues? It has even crossed my mind that Turnbull may be plotting with former Labor Prime Minister Kevin Rudd to try and replicate the ETS deal they made in 2009. So my present thinking is that Parkinson’s theory is most likely to become relevant if the Liberals replace Abbott with Turnbull (or someone else supported by Turnbull).

Secondly, what would be the implications if the Liberals do take the AIG route? Here it is important to understand the problems with the existing policy and how they would be affected.

Labor’s carbon price contains built-in time-bombs, inherited from the Rudd-Turnbull version and set to go off when it becomes an ETS. The main time-bombs are the lock-in of ludicrously weak emissions targets, and the allowance of international offsets which will displace domestic emissions cuts and (based on the present state of international carbon markets) cause the carbon price to crash to merely a few dollars per tonne, undermining any remaining incentive to decarbonize. The policy is for the moment redeemed by the concessions which the Greens wangled out of Gillard in 2011: an interim fixed $23/tonne carbon price while the independent Climate Change Authority (CCA) conducts a Caps and Targets Review that will hopefully recommend greater ambition than the Rudd-Turnbull ETS.

The Liberals have promised to abolish CCA, and on past form they seem unlikely to strengthen the ETS of their own accord (notwithstanding their present rhetorical opposition to international offsets, which I do not trust them to uphold in office). If a Liberal government chose to rush straight to an ETS without defusing the time-bombs, it would stop the present emissions reduction in its tracks and allow emissions to rise instead. That would arguably be an even worse outcome than Abbott simply following through on his repeal pledge.

Of course, the Liberals may decide to make a different set of changes. But unless they recognize the need for deep emissions targets, continue to resist the temptation of international offsets, and abandon their plan to rely on domestic land carbon offsets – which seems unlikely considering the large number of climate change deniers in the party – any changes they make are likely to be for the worse.

If you vote for the Liberals, you will be voting for either the sabotage or (more likely) outright abolition of the carbon price, at a time when climate policies need to be radically strengthened. The same may be true for Labor, judging from recent rumors that Bill Shorten is lobbying for the party to abandon carbon pricing. The only way to stop the Liberals demolishing Australian climate policy is to vote Greens. A vote for the Liberals is a vote against climate action.

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