Finance Finance News Why the climate change policy is stuck in a revolving door

Why the climate change policy is stuck in a revolving door

Round we go again with yet more discussion papers on climate policy. Photo: AAP
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The government’s climate change policy review, announced on Monday, will give anyone interested in the issue a powerful sense of déjà vu.

The review will look at whether Australia’s carbon emission targets are being met, and whether the “lowest cost of abatement” is being achieved.

Significantly, the government is ruling out both a return to a nationwide carbon pricing scheme, and any increase on the current 2020 renewable energy target, which it cut last June from 41,000 GWh to 33,000 GWh.

Beyond that, the review’s terms of reference look better suited to 2007 – the year John Howard asked the head of the Department of Prime Minister and Cabinet, Peter Shergold, to draw up plans for an emissions trading scheme.

It’s as if the Gillard government’s emissions trading scheme, erroneously dubbed a ‘carbon tax’, had never been designed, legislated, operated and then repealed.

Environment minister Josh Frydenberg wants "to hear from experts".
Environment Minister Josh Frydenberg wants “to hear from experts”.

Point of difference

Environment Minister Josh Frydenberg is trying to differentiate his Direct Action suite of policies as a “sector-by-sector” approach, stressing he will pay particular attention to the “impact of policies on jobs, investment, trade competitiveness, households and regional Australia”.

But hang on, that’s exactly what the Gillard government’s ‘Clean Energy Futures’ package did too.

It has specific carve-outs and compensation packages for sectors such as steel, aluminium and food processing, and left petrol off the list of carbon sources altogether.

Mr Frydenberg told the ABC he would engage in “close engagement with business and the community, beginning with consultation on a discussion paper”.

Again, it’s like being back in 2007, when the Committee for the Economic Development of Australia – perhaps the nation’s least partisan think tank – hosted an international debate between US economists Dr Robert Mendelsohn and Dr Robert Shapiro and Australians Professor Warwick McKibbin and Brian Fisher.

Back then, the main difference in opinion was over whether a carbon tax, an emissions trading system, or a hybrid of the two would be the cheapest way to change the nation’s power consumption habits.

And none of those economists would have called for a ‘standing Green Army’ to plant trees and fix other environmental programs – an Abbott government policy that looks set to be torn up at the next budget, to the chagrin of Mr Abbott himself.

Polluted politics

In the aftermath of Tony Abbott’s devastating campaign against the ‘carbon tax’ between 2011 and 2013, the cheapest way to cut emissions has become a political impossibility.

That said, one form of emissions trading ­– in which the price of permits to pollute are set by an auction process – is back on the table.

No Carbon Tax
The carbon tax was a hot topic for Australia. Photo: Getty

It will reportedly be considered only for big electricity generators – which sounds uncannily like the plan Labor took to this year’s federal election.

Overall, the politics of carbon reduction has become a farce, with Mr Frydenberg telling the ABC on Monday: “We want to hear from the experts, as to the lowest cost of abatement.”

But experts thrashed out those arguments a decade ago! They published pivotal reports such as the Stern Review in the UK, or the Garnaut Review in Australia.

Economist Ross Garnaut tackled what he called the “diabolical” policy problem, by creating Labor’s carbon price-setting mechanism, which included some of the carve-outs listed above.

Moreover, 80 per cent of the revenue raised by that policy was returned as tax cuts and pension/benefit increases – resulting, as noted last week, in a per capita impost on Australians of around $34 per year.

Abbottalypse now

Now, following the Abbott government’s repeal of that package, we have Direct Action – a package centred on the Emissions Reduction Fund, in which the government pays companies, via the cheapest tenders, to stop polluting.

An emission trading scheme for large electricity generators is reportedly back on the table.
An emission trading scheme for large electricity generators is reportedly back on the table.

So far it has boasted of a low cost per tonne for reducing emissions, overlooking the fact that such an ‘auction’ was always going to buy up the lowest-cost forms of abatement first.

By definition, the higher cost abatement plans will have to be purchased down the track – costing taxpayers more, and more and more, as Mr Abbott might have put it.

That’s why economists have stressed that emissions trading, or even a real carbon tax, is superior. The price doesn’t just keep going up.

But instead of trusting to either of those two approaches, we’ve ended up with a government that wants to “hear from experts” (again) to created a sector-by-sector plan (again), weigh up the impact on “jobs, investment, trade and households” (again) and consult with business and communities (again).

Déjà vu doesn’t begin to describe the revolving door this policy area has now been caught in for a decade.

To read more columns by Rob Burgess click here.

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