Pinning hopes on a changing climate
After being subjected to months and months of climate change politics of an ever-deteriorating quality, Australians have finally been presented with some climate change policy. Was it worth the wait?
There are probably three criteria on which this release of the government's "Clean Energy Future" – the fourth attempt to introduce a carbon price – needs to be judged: Will it save Labor? Will it help Australia contribute its fair share to fighting climate change? And is it better than the CPRS? The answers to these are maybe, probably and yes (with caveats).
Much of the detail was leaked before Sunday’s announcement, but there was still plenty in the fine print. The carbon price for the fixed period of the scheme starting in July next year and lasting three years until a market based scheme will be $23, rising by 2.5 per cent (after inflation) a year – lower than some forecasts of 4 per cent.
The 5 per cent emissions reduction target will remain, and is locked in, but the government has increased its 2050 target to 80 per cent from 60 per cent. The traded price will include a price floor and a price cap.
A new body, the Climate Change Authority, to be headed by former Reserve Bank of Australia governor Bernie Fraser, will review those caps. Another new body has been created to oversee the rollout of clean energy, and the Productivity Commission will review assistance and compensation measures, including fuel tax credits.
Funds are provided to encourage households and business to be energy efficient, although an energy efficiency trading scheme will not be implemented until agreement is found to absorb the various state-based schemes. That might take years. The Greens and independents have won significant new funding for clean energy programs, and $1 billion will be provided for carbon farming initiatives and biodiversity programs.
Will it help Labor get re-elected?
There were several things that Labor strategists believe they could not allow to happen before the next election – consumers finding themselves out of pocket, coal mines and steel plants closing, and the lights going off if the generators shut down.
So, to try and keep the Opposition quiet, consumers have been showered with extra cash payments and crucial taxation reform, so more will end up better off than under the CPRS – with a carbon price offset of 120 per cent for couples with combined incomes of $95,000, in some cases, $45,000 for individuals, and 100 per cent for individuals with income levels of up to $90,000.
The industry lobbyists have done well, because there was some doubt they could ever repeat the over-generous allocations achieved in the CPRS. Overall, around $9.2 billion will be provided in assistance from 2001/12 to 2014/15. Assistance for trade-exposed industries largely remains the same as in the CPRS, but a few extra goodies have been thrown in, particularly to help the steel industry.
Further measures, such as an $800 million grants program to help manufacturers invest in low-pollution technologies, and targeted assistance of $500 million for steel manufacturers, food processors and metal foundries are also offered.
Abbott’s obsession with the price of door handles appears to have cost coal mines around $230 million, because that is how much their compensation is cut as funds are directed elsewhere. Incidentally, the coal mines get $1.27 billion and only got this because the government decided to do it. It was not part of the agreement with the Multi-Party Committee, and neither was $300 million of extra assistance to steel, or the decision to review rebates on heavy vehicles by 2014.
Coal-fired generators receive more upfront, and over a shorter time period. Many will wonder if this is entirely necessary, particularly as they have the further support of loan guarantees. There is even a buyback of 2000MW on offer, although it is doubtful whether this would go through to that capacity.
Overall, the compensation measures add another $2.9 billion to the budget deficit in the current financial year, because of upfront payments. The total deficit of compensation over carbon price revenues over the forward estimates out to the end of 2014/15 is $4.4 billion.
Ultimately, of course, Labor’s re-election will rely on its ability to sell the package and implement it. That is something it has not proved particularly adept at doing, up to now.
Will it enable Australia to play its full role in the fight against climate change?
This is actually about the policy. And the signs look good. The most important assessment was whether Australia could respond to developments in the international community. It must be remembered that the 5 per cent target – even though it means cutting 160 million tonnes of CO2e a year by 2020 – is a mere downpayment.
If the world moves, either under a global scheme or a series of regional initiatives, Australia must be able to increase its target to 25 per cent and beyond. The new long-term target of an 80 per cent cut by 2050 is a recognition of the overall task at hand, and a reminder that this is not a one-off event.
The critical element is the creation of the Climate Change Authority, to be headed by Fraser, which will have a similar function to the UK’s Climate Change Commission and advise on key aspects of the carbon pricing mechanism, including targets.
This will be a critical input before the government decides on emission caps in 2014, before the transition to a market based scheme in 2015. The CCA will advise on caps and targets every year for changes that could be made with five years notice. It will be hard to imagine that Fraser's CCA would not ramp up the 2020 target beyond 5 per cent, given the trajectory needed to get to the 2050 target.
The Productivity Commission’s monitoring of the assistance packages will be fascinating. The EITE formula will continue – it was considered too difficult to change – but the PC will conduct an initial review after 3 years, with the power to recommend changes which must have 3 years notice.
Was it worth the two-year delay and The Greens and the independents getting involved?
Yes. Debate will rage over the extent of compensation packages, which look more than needed in some key sectors, and many corporates will no doubt be making windfall gains. But much of this assistance is now better targeted.
The governance measures and the creation of new independent statutory bodies such as the Climate Change Authority and the Clean Energy Finance Corporation are critical elements.
The Productivity Commission’s monitoring of the assistance packages will be fascinating. The EITE formula will continue – it was considered too difficult to change – but the PC will conduct an initial review after three years, with the power to recommend changes which must have three years notice.
The pricing mechanism has some new bells and whistles. The carbon price will have a price floor of $15 at the start of the ETS, rising 4 per cent a year. There will be a price cap, which will be set at $20 above the expected international price for 2015/16 and will rise by 5 per cent in real terms. International offsets will be limited to 50 per cent of an entity’s liability, and will have strict quality controls. No Russian hot air, for instance.
Now, back to the politics.
Comments on this article
Labor pins hope on a "changing climate"
Reply to Parry Monckton ( any relation to Lord Christopher Monckton ? ): I defend the remark 'dodgy science' having seen on a TV show a segment called "the Dodgy Brothers". The similarities between them is inescapable !....If only it was as amusing ! THE FACT that the IPCC "evidence" was tweaked , trick-ed , massaged (& other euphemisms for LYING & DISHONEST RIGGING ) to produce the results to agree with a previously-determined-outcome was exposed before the Copenhagen "conflagration" occurred.That inadequate explanations & false claims of "misunderstanding their position ", rather than apologies & a promise to limit themselves to the truth in future , have forever undermined their 'respectability' in my eyes & in lots of others if any of the polls on the subject are reliably reported.
Conspiracy by 20,000 scientists you say is NOT possible.
Try 130,000 to 200,000 people (many of whom were scientists ) involved in the Manhattan Project in USA , Canada & Britain. By coercion or co-operation this "conspiracy" developed the Atomic weapons of WWII & nary a word leaked out to the general public (apart from Fuchs supplying information to their ally , the Russians ).
Try "The Weapons Of Mass Deception...sorry...Destruction" allegedly held by Iraq and used to justify the invasion & current war ! Military Intelligence (a wonderful oxymoron ) & satellite telemetry (don't you just love those weasel words !!? ) confirmed "to a high degree of certainty" the presence of Anthrax production Facilities in Iraq. Turned out to be a cow-shed !
No. I don't trust "The Bureaucracy" (The Establishment) to be truthful & neither should you !
Labor pins hopes on a "changing climate" ? Part 3
Reply to alistair clark (sic): You seem to read things into other's statements that I can't find. e.g. Janet Barlow didn't mention anything about depriving you or your grandkids of " a better world than you think is warranted" ! ??
Again , I don't think I expressed " a poor opinion of humanity".
I expressed a poor opinion of bureaucracy ('The Establishment') & where the funds sent overseas end up as a result of corruption........in the vaults of arms manufacturers or 'Swiss Bank Accounts' of corrupt officials....based on years of personal observation .
Have you not seen ( on TV ) the massive HYDROELECTRIC DAM PROJECTS currently being built in the Amazon region.So much for funds to save the forest !
It was you who wrote "short sighted,inept management ,narrow minded unions..."
It was you who seemed indifferent about the employment prospects of your fellow countrymen & I pointed this out to you ...........I noticed that you gave an improved version of your chosen outcome for the people you so casually discarded in your previous letter to which I reacted . As for windturbines , you wouldn't mind some on your "large rural holding" as long as someone PAYS YOU for the privilege.....Enough said !
However , I refute your assertion that I am "a pot calling the kettle black". I am not even in the same kitchen as you ! I don't accept your analogy & I certainly hope that I am NOT an empty vessel accompanying your empty 'black kettle' !
Carbon Tax
What a mess...reminds me of Rex Connor and the Kemlahmi ? affair. the Nine MSN poll today says it all 20% for a tax and 80% against ....there is more than a lot of convincing to be done to change that.
What is it with the comments
What is it with the comments of people like the Trevor Ridgeways? They declare their climate change denial in their responses and then fit their anti carbon tax philosphy around it. Calling it dodgy science! By this they mean 20000 climate scientists world wide are in some sort of monumental universal conspiracy to highjack the debate for their own ends? 20000 climate scientists are in best referreed and published agreement with perhaps a few who hold a different opinion. That doesnt make the few right either. Why dont they understand that all scientific method and research is NEVER EVER settled! Climate science is no different to any other field of science. No absolute certainty I'm afraid. Not one molecule of CO2 will be saved is also incorrect, because clearly as soon as you burn one kilogram of carbon less and leave it in the ground (eg in the form of coal) and use the sun instead directly through eg solar or wind power then you just saved all those billions of molecules of CO2 from being released into the atmosphere of this planet!
Narrow mindedness
Trevor Ridgway, you seem to be the pot calling the kettle black. Its you that seems to have a poor opinion of humanity and the type of world we should leave to our great grandkids. What is the use of living in a walled community of a country when our kids know they live in the wider world.
As a farmer and large rural landowner I find wind turbines awesomely beautiful. No probs if someone pays me to have some on my place!
Australians in 30 years time will generally have better paid jobs than the average today but, yes, the proportion employed in manufacturing industry might be lower. Hopefully however many are employed in new technology industries unless, as in the recent past, Australian Governments continue to gut academic and industry research and commercialisation work.
Old, dying industries always have their coterie of protectors, mendicants and general spruikers. Unfortunately tommorrow's industries have a harder road to travel to get their place in the sun.
Labor pins hope on a "changing climate" Part 2.
Janet Barlow......you are right in your assessment , even if it has drawn a criticism. They are actually windturbines (power generators) not windmills (which pump water or grind grain etc ) BUT to add to your description they are also UGLY ( a blight on the landscape !! ) , NOISY & DISRUPTIVE OF FAUNA & FOWL IN THEIR VICINITY (including humans ) !
alistair clark (sic) .........you are also right IN SOME PARTICULARS ! but I disagree with the main thrust of your "epistle" (you DO have a low opinion of your fellow-countrymen don't you ! I don't suppose it matters what sort of "job" they end-up with does it ? ) & I'm glad you don't mind your funds going overseas BUT most of us DO MIND !
Incidentally , 30 is an EVEN number .
Especially as almost NONE of it will go towards rainforests in the Amazon or Indonesia or anywhere else.Most of it will probably go to an arms manufacturer or a Swiss-bank-account if one is realistic !
Labor pins hopes on a "changing climate".
Giles , I assume you mean a "changing political climate".
This 'Carbon Tax' is obviously designed to be set at a low level initially (& thereby attract less opposition to it's introduction ) BUT the intention of handing it over to 'an independent authority' ( 'washing one's hands' of the resposibility) is indicative that it WON'T REMAIN LOW for long.
Quote: "It will be hard to imagine that (Bernie) Fraser's CCA would not ramp up the 2020 target beyond the 5%,given the trajectory needed to get to the 2050 target."
Apart from creating yet another stream of bureaucrats ( who will manage to absorb a large amount of the collected tax in administration, lurks,perks & salaries !) this will achieve absolutely nothing ! Not one molecule of CO2 will be reduced from the emissions ....it will just have a tax put on it !
This is a daft response to a 'dodgy science finding' which is , as yet , unresolved but is probably untrue & founded strictly on an ego-driven political ideology promulgated by people who probably don't have Australia's best interests in mind !
We are answerable to overseas "Authorities" now "we" have signed the agreements , & regardless of others complying or failing to comply, "we" are locked into something which incurs penalties for non-compliance.
So, "we" have lost another piece of our autonomy & as "we"will now be subject to even more governmental scrutiny, both nationally & internationally,we have less freedom than before. Not clever OR much of a deal really !
Let's hope "JOE PUBLIC" votes wiser NEXT TIME !
All for it
Totally disagree Janet Barlow. In case you have been asleep for past 30 odd years, Australia's manufacturing industry has rarely been competitive, but not due to energy costs (Oz electricity costs are still dirt cheap) but due to short sighted, inept management, narrow minded unions and a high dollar. Latter due to booming mining industry which isn't going to stop booming for some time.
I'm all for funds being transferred overseas if it saves Amazon or Indonesian rainforest. I want my great grandkids to have a better world than you think is warranted.
And yes, there will be heaps of Oz jobs, just different to what we have now. Same as today is different to 30 years ago etc. etc.
windmills it is
The spin doctors in the government can now tell the media to replace those pictures of water vapour issuing from cooling towers with pictures of shining windmills.
What is this carbon tax is all about? Everybody knows that it will have no impact on climate. The reality is that the tax is all about the importation of expensive, inefficient, and unreliable windmills and the eventual transfer of funds overseas to buy carbon credits.
No matter how much subsidised research goes into renewable energy in Australia we will not be able to compete in manufacturing with countries that do not have an impost on energy.
The most complicated and expensive path to do nothing.
It would be impossible to find a more complicated and expensive way of doing nothing. Like a bad broom, it will make a lot of dust and will achieve virtually nothing. It is clear that the Green somehow managed to force Julia Gillard to agree to their plan. I am sure that Julia Gillard is educated enough to know that the plan is just plain stupid, but she needs the Greens to remain in power. The plan has nothing to do with helping the environment but with the political survival of a few politicians.
I still think a mandated 3% decrease of non renewable energy would achieve far more and would not require taxes. It is better to spend money to conserve energy than to give it a new bloated bureaucracy in Canberra.