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Not easy going green on issue of carbon

| Sourced From Theaustralian |

THE politics of climate change are not getting any simpler to navigate.

TONY Abbott is not prone to political understatement. He says Julia Gillard’s post-election willingness to consider the imposition of a carbon tax means the government is “based on a lie”.

“To win votes, the Prime Minister specially ruled out a carbon tax,” he says. “To form government . . . the Prime Minister has specifically ruled in a carbon tax.

“There has been a fundamental breach of faith with the Australian people and this fundamental breach of faith will haunt this government from now until its ultimate demise.”

Gillard’s obvious response is that minority government means the political reality has changed and a cabinet and prime minister can’t just decide on a policy without taking that into account. “I’ve agreed with the Australian Greens and the other independents that we will have an inclusive climate change committee to discuss questions of best tackling climate change,” she says.

No, the politics of Australia’s response to climate change are not getting any easier.

Labor is wedged between the expectation it must come up with a substantive policy on carbon pricing and the knowledge the Abbott-led Coalition will relentlessly attack it with its “big new tax” bludgeon.

Forget any appealing notions of a developing consensus over this. That’s about as likely as Abbott becoming an atheist. Gillard’s “inclusive” committee excludes those who disagree with the need for Australia to act.

This brawl, ultimately, will defeat any attempts by Labor to pretend there won’t be costs involved to consumers and businesses, particularly the prospect of energy prices rising even faster and higher than they will otherwise.

But it will also defeat the Liberals’ assertions that Australia can meet its agreed targets for reducing emissions without putting a price on carbon.

Both sides are guilty of glossing over the real-world impact of their positions in the interests of winning short-term tactical advantage.

Labor has wanted to leave the impression that shifting to a carbon price – whether a tax or a scheme involving trading credits – will be relatively painless for the economy and for households. The Liberals – with the glaring exception of Malcolm Turnbull – have wanted to imply that the strike on investment in electricity generation in the meantime has no long-term consequences for consumers and business.

To that extent at least, a more open fight is useful in stripping away the political sophistry. This has come, however, a little more quickly than Gillard was anticipating as she desperately tries to solidify her tenuous grip on political authority.

A large part of that timing pressure is because of BHP Billiton’s Marius Kloppers’s call for Australia to put a price on carbon without waiting for an international agreement. It made it obvious that some senior big business executives – though not all – believe a carbon-intensive economy such as Australia’s can’t afford to wait and see. Not when, as Kloppers pointed out, investment decisions on Australian power generation will lock in carbon emissions for 30 to 50 years.

The figures underscore the stark logic. Australia’s energy sector produces just more than half of Australian emissions and about 90 per cent of carbon emissions from our electricity sector come from coal-fired power stations. These provide relatively cheaper power, but for how much longer? Most companies don’t want to bet on how much and when coal will be penalised to make other investments such as gas more financially attractive. That has led to investment paralysis in power generation.

Ultimately, Kloppers’s views are about protecting his shareholders’ interests. Andrew Forrest from Fortescue Metals accused Kloppers last week of backing a carbon price primarily to move the national conversation away from the mining tax and avert changes to the “sweetheart deal” BHP, Rio Tinto and Xstrata negotiated with Gillard before the election.

But BHP Billiton and other miners have a sound rationale for trying to avert a repeat of last year’s emissions trading scheme being unleashed on their companies. Kloppers has chosen to exert early influence on the terms of whatever package comes out of this complicated and unpredictable process. Understandably, he’s not confident on just relying on the supposed good sense of the government and a hand-picked group of members acceptable to the Greens and the independents.

This strategy includes becoming part of the in-crowd acknowledging the need for unilateral action if necessary rather than the “Just Say No” lot backing Abbott’s view. The other big miners have taken a different approach, preferring a tactful silence on Kloppers and reiterating their faith in technology developments rather than taxes. .

But BHP Billiton is arguing for a mix of measures, specifically including a carbon tax, which Kloppers argues is easier to implement than a trading scheme. The BHP chief also decided to avoid the consequence of his logic: that this requires Australia to consider nuclear power as an option. Kloppers didn’t want to become embroiled in that argument as well.

He still put enough caveats on his version of carbon pricing to ensure Bob Brown is likely to choke as much as Abbott.

Until there is an international deal, Kloppers wants a full rebate for trade-exposed companies such as . . . BHP Billiton. He also wants any tax or trading scheme to be revenue neutral, with extra money raised to be returned to companies and households via tax cuts or perhaps special payments for lower-income earners. That means no additional federal government funding for all those “green” projects or further subsidies for “winning technologies”. Hmm. Watch this (budget) space.

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