17 July 2008


The government's proposals for economic reforms to reflect real costs of carbon emissions is eerily similar to industry protection through tariffs and import restrictions in the twentieth century.

Back then, the tradeoff for having to pay Australian workers higher wages than those elsewhere was that imports of foreign goods into Australia would either be banned outright or subjected to tariffs. Industries lobbied for protection from the dreaded foreigners and were granted round after round of "temporary assistance measures". Broadly speaking, Australian industry was insulated from price signals. It did not rise to the challenge of globalisation in the latter half of last century precisely because they had lobbied to have the challenge removed.

The federal government has certainly bent over forwards for the NSW government, which is as politically insulated as the most cosseted industry ever was. It is not going to change its behaviour, it is not going to stop ripping "dividends" out of the electricity generation companies in order to upgrade, and it is certainly not going to engage external researchers in innovative power solutions. Instead, it is going to play silly-buggers with merchant bankers and not do a thing to fend off the projected power shortfalls in 2013-14.

What the Rudd Government has done is to insulate Australian industry from price signals that would force them to change. The carbon licence giveaways won't be invested properly and third-rate managers will sit on or squander the windfalls from these giveaways. Mind you, Phillip Coorey is right that there is no alternative:
If Labor introduced a scheme as harsh as the one the Greens are demanding, the Government would be out of office in one term, no question. Prices would be up, jobs would be lost, compensation would be minimal and people would be cranky.

The Opposition is completely hostile and will offer no support. It spies opportunity at every turn.

Brendan Nelson, who last week was advocating doing nothing at all, would be in power - and imagine the bleating then.

However, he correctly analyses that the government's position won't spur Australian people to action:
What the Government will do is set up a scheme, give business some certainty in investing for the future, and give the Government an arguing point when it urges others to act.

The whole scheme will be able to be ramped up and the compensation for dirty industry dropped as soon as the big polluters agree to join a global effort.

Which, at this rate, looks like never.

See, that's more significant than the breathless argy-bargy that keeps Michelle Grattan and Annabel Crabb in thrall.

There is no certainty if the scheme is politically malleable, which it is. The Greens are making an ambit claim but their focus is on the fact that major parties do and will cave if lobbied to do so. Christine Milne has slotted neatly into the role of Senate Scold once occupied by Haines, Kernot or Stott Despoja.

As far as this stuff for families, families, motorists and families is concerned, there's your election grab-bag giveaway right there. Any attempt by the Coalition to match or exceed these will need to be anchored to a comprehensive plan on climate change - of which there is and can be none. It took the Coalition four elections to live down their opposition to Medicare, how long before it comes to terms with an ETS?
"We're going to get attacked from the left, and that's what the Greens are doing; we're going to get attacked from the right, and that's what Dr Nelson is doing. My job it to get the balance right for the future," [Rudd] told ABC television.

And there you have it, ladies and gentlemen: if Labor keeps to that position they can't lose electorally. That positioning also explains why the Democrats never made it back from the oblivion to which they consigned themselves.
Agriculture, responsible for about 16% of greenhouse emissions, will not be included in the scheme until 2015 at the earliest, with a decision to be taken in 2013.

Like hell it will. The US will exclude its agricultural producers too, and the Canadians and Australians will match them. Any residual political resistance will be leached away by whining like this.
Land clearing and logging are not included in the scheme, but those planting trees will be able to generate carbon credits.

At the very least, this is a stick to beat the Tasmanian pulp mill with. That mill is uneconomical without subsidies, and we all have to make sacrifices ...
Pensioners and other concession-card holders will receive direct payments, while other low-income earners will be helped through the tax and family payments systems.

No, what this means is that AGL and other power/gas companies will be on a steady drip of public funds, with dopey analysts convinced that these companies' steady income inflow is due to the inherent cleverness of management.

A sure sign that the carbon emissions market is working well is if all that talk about "clean coal" and sequestration stops cold. The Rudd government has taken the political middle-ground, putting it ahead of its opposition, but so what? This government is less likely to get bolder the longer it stays in office, the question is when the opposition will lift its game sufficiently to push policy not only in the right direction, but at the right pace.

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