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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

a hot political potato « Previous | |Next »
June 29, 2008

Clearly petrol is becoming a politically volatile issue in big-party politics of the Rudd Government's first term. Where there's debate about climate change there is also angst about petrol. And that is creating difficulties for the Government, as Brendon Nelson plays his 'I feel your pain' politics.

talkbackradio.jpg Matt Golding

Emissions trading is due to begin in less than two years. It will cause far, far greater economic upheaval than introducing a goods and services tax, and it is already a hot potato, politically speaking already. As Nelson has clearly flagged that the Liberal /National Coalition will confront the Rudd Government on climate change, so it is not likely that Australia will become a "cleantech hub" in the Asia Pacific region. Australia will remain a technology consumer rather than become a technology producer.

The 6.1% swing against the ALP in the Gippsland byelection was a big sign of discontent with Rudd as, there was unanimous agreement that petrol and the cost of living in general were key issues. Rudd never actually promised to lower these costs but people are so angry that they believe he did and will not hear otherwise.

The Coalition, under Opposition Leader Brendan Nelson, see rising fuel prices as their ticket back into government and they are going to ride them as far as they can. The Coalition oppose the Rudd Government's blueprint to tackle global warming. The Coalition stands for lower taxes, protecting people on petrol and electricity, and in making sure that jobs and industries don't leave the country.

Geoff Evans says in a paper at the Centre of Policy Development that:

as the global warming threat grows, many Australian political leaders remain under the spell of the coal industry and its ‘greenhouse mafia'. Indeed, despite the obvious risks some are still advocating new coal-fired power stations and a massive increase in coal-exports. The federal and state governments are gambling that carbon capture and storage (CCS) technologies will save the industry, even as growing numbers of experts note that this technology is likely to be too little, too late and too risky to be commercialised and installed widely enough to make a difference in the short window of opportunity needed for action. They are throwing billions of dollars in subsidies towards CCS and the mythical ‘clean coal' at the behest of the industry.

Meanwhile investment and incentives for markets for renewable energy and energy efficiency technologies in which Australia could be a world leader are being seriously frustrated.

Update: 30 June
It looks likely that the global "cleantech" hub will happen in the Middle East, as Masdar PV, an arm of the Abu Dhabi government-backed clean energy initiative, will build the world's first zero emissions city in the next decade. There's a game changer or milestone. Masdar, Abu Dhabi's $15bn future energy initiative, is a significant step toward making Abu Dhabi the global centre for future energy.

| Posted by Gary Sauer-Thompson at 2:30 PM | | Comments (29)
Comments

Comments

Gary,
I'm puzzled that the Rudd Government has done almost next to nothing to really explain to people what is about to happen with an emissions trading scheme. They are really are waiting for Garnaut. Why cannot they say that the Emission Trading Scheme will cause pain and higher prices, but that it is necessary to do to address global warming.

I see that global warming in South Australia means that the Goyder's line, which marks areas with reliable rainfall in South Australia, is confirmed to have shifted south.It is projected that the central section of the line would shift up to 100km south to reach the Clare Valley, and that this could happen as soon as 2040 unless greenhouse gas emissions fell.

So says CSIRO climate expert Mark Howden

Nan,
The tension /contradiction between the new proposed emissions trading system and the four brown coal-fired power stations would have been stark in the Gippsland electorate's Latrobe Valley.

Nan,
I heard the Warren Truss the leader of the Nationals, on the issues of the Gippsland by election. He talked about jobs being lost in the coal mining communities.What was not even mentioned was what Geoff Evans said

Coal communities need alternative employment opportunities in well-paid, secure and satisfying jobs. Workers in transition between jobs need redundancy entitlements, income maintenance and opportunities for retraining tailored to individual skills, needs and local opportunities. Workers who relocate to seek work elsewhere should receive relocation assistance. Research shows that workers with less formal education, older or disabled workers need special targeted support.

Truss talks about emissions trading as a big tax--the politics of fear.

Peter,
The large corporations are saying they should be compensated for the introduction of a national Emissions Trading Scheme (ETS). Their usual argument goes that to refuse compensation would penalize these industries and their shareholders unfairly, and send a chill message to potential future investors.

Hmmm. There does seem to be a pattern building in Australian politics of late that if you are opposed to something then you are immediately accused of mounting a "Fear Campaign"

Nan,
I am puzzled by Rudds lack of backbone too. Yes why doesn't he just come out and say it. Its what we all know.

Les,
emissions trading is using market mechanisms to drive change by pricing carbon emissions. It is not a tax.

For Truss to call it a tax is to raise fears amongst the battlers/aspirationals/ working families/ute men drinking alcopops (take your pick) about the ALP as a big taxing government.

The Nationals have little credibility on greenhouse emissions, and their current tactic (they have no strategy other than handouts and protection) is to fuel the outrage about rising petrol prices, when even though they know the days of cheap oil are well and truly gone.

An alternative interpretation is that the Nationals have their collective head buried in the sand over petrol. They suffer from a collective delusion.

What needs to be done is investing in solar power station for isolated communities --as is happening in Kalgoorlie with Solar System (and possibly in the PIlbara by another company) in WA--so as to diversify energy supply. Despite this, the Nationals' talk is all about a tax on hard working workers in regional communities causing them to lose their jobs, instead of alternative sources of energy creating new jobs.

It's the politics of reaction to reform.

The Libs and their media are playing up a relationship between the Gippsland result and climate change policy for all it's worth but choosing to ignore a few things.

In a three cornered contest the Nats won, which they were always going to, and the ALP came second.

Very specific local issues played a big part, coal in one half of the electorate and aged pensions in the other half. The ALP has time to please pensioners before the next federal election.

Gippsland is not even vaguely representative of the rest of the country where the ALP is still walking all over the Libs, even in WA.

People may be complaining about the price of petrol, but that won't make them vote Nelson Lib.

Commentators are demanding to know about Rudd's big picture, but we know people don't like big pictures that come with the possibility of upheaval. After Garnaut they'd be better off staggering the ETS, introducing change little by little, and refusing to play Nelson's baiting game.

Gary,
Aren't all charges made by government taxes?

You dress the emissions trading scheme up in a pretty little party dress.

What is the difference between a government charge and a government tax?

Les,
the market works in terms of prices to coordinate supply and demand not taxes.

Coal is going to be priced for the externalities it causes (greenhouse gas emissions) so that courageous, risk taking entrepreneurs in the market can develop new forms of energy.

That means the price of energy becomes more expensive---- that has been happening over the last 5 years--which will encourage people to change their conduct. The days of cheap energy are gone.

Les
here is a description of an emission trading scheme ---cap and trade ---from Wikepdia

A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emissions must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society.

The key is the cap---not a tax as Truss is saying.

We are familar with cap and trade. Water allocations are capped in the Murray Darling Basin and no one talks about that as a tax. Even the Nationals accept a cap despite their historical resistance to it--Zap the Gap. True, water trading is limited in the Basin--once again that is due due to resistance by the Nationals to change to ensure a more sustainable Basin.

Lyn,
there is going to be upheaval. My cheap airfares to Melbourne to buy clothes--look like going down the gurgler very soon.

Les,
the shift away from a cheap, polluting carbon economy will involve large investment in alternative energy technologies (ie., low or zero emission technologies) over the next couple of decades, so as to prevent carbon emissions from doubling.

It also involves a big increase in energy efficiency ---reducing the amount of energy efficiency per unity of production.

That means lots of employment for engineering and technology graduates.

Onthe downside those businesses that cannot adapt to carbon trading will risk damage to their reputation, brand and capitol. They should see carbon trading as an opportunity to seize a strategic advantage over their competitors, rather than as a regulatory compliance issue.

Les,
re your comment

"I am puzzled by Rudds lack of backbone too. Yes why doesn't he just come out and say it. Its what we all know.

Rudd's energy policies are contradictory. On the one hand he advocates an emissions trading scheme by 2010 which will make energy more expensive. On the other hand, his short term aim is to keep fuel costs down for motorists who hate high petrol prices.

He hasn't long to get his act together. Will the short-term hip politics derail the long-term plan? They cannot even say whether they will include petrol (and transport) in the emissions trading scheme in spite a of all their talk about the scheme being comprehensive. They wobble on this.

All they need to say is that low income families can be compensated. QED.

Lyn,
your'e right. The Coalition has decided that they will make life as difficult as they possible can for Rudd on the petrol and emissions trading nexus.

I'm not sure what the Coalition will electorally gain in the long term--people are increasingly becoming aware that high petrol prices are here to stay--its permanent.

The Senate is the place where climate change will be fought out, and that means dealing with the Greens as well as Family First and Xenophon. Calling the Greens zealots who adopt implacable positions on issues does not take Rudd Labor very far in working with the Greens. The latter see the Senate as more than a house of review (The Democrat's position), as they see the Senate as a place that instigates legislation and ideas.

Lyn,
Yes I agree that all this talk of the Gippsland win for the Nationals is no reflection on the job that Rudd is doing.
Gippsland was a safe Nationals seat. Their candidate was a nice looking and well spoken family man while the labor candidate was a short fat looking boof head.
Not a hard choice. 20% voted Liberal because they were given the opportunity to do so.


No I am unconvinced. Truss has every right to call it a tax as do I.

Les,
no one is questioning Truss's right to call it a tax.Who is saying that he can't?

What is more important is whether Truss helps us to understand the issues and policy options re reducing greenhouse emissions, since that is where the policy debate currently is. Is he making an informed contribution?

Unfortunately, Truss shows that he is confused, since cap and trade and a carbon tax are two different approaches, or economic strategies, to limiting greenhouse emissions. The former creates a property right the latter doesn't.

The ALP has favoured cap and trade up to now, though they may change their approach after the Garnaut report. A carbon tax might have some merit, even if Garnaut has ruled it out in his public comments.

Meanwhile Truss is publicly showing that he does not understand the economic policies and theories re greenhouse emissions--only the populist politics of petrol. But that's what you'd expect from agrarian socialists in the Nationals. It's all just subsidy and protection, even though they sometimes mouth motherhood statements about the free market.

The inference is that the Nationals can be ignored in the debates about designing an emissions trading scheme, as they little of note to say. They're still going on about the science of global warming not being good enough, for heavens sake.

It's about time the populist National Party got their act together and learn a bit about economics. They have the staff to do a bit of research to help Coastal Australia.

Peter,
there's a fair bit of gossip around about double dissolutions if the senate proves unworkable. No government in its right mind would contemplate one so soon after an election, but by late 2009 it would be a possibility which wouldn't have too much appeal for the Libs, with obvious connotations for Fielding and Xenophon just in case they're thinking of using their power for the hell of it.

Looking at the state of the coalition you'd have to conclude that they're not thinking about long term gains, which would involve strategy and therefore an electable leader, but about stalling tactics. Doing stuff for the sake of being seen to do stuff.

Peter
the Nationals won't have much to contribute. recognition that global warming even exists as a man-made problem is far from universal amongst Nationals, and many of those who concede that the scientific proof is now fairly strong still resist doing anything about it.

Gary,
the Nationals may be secretly flagging that they are in favour of a carbon tax, as opposed to an emissions trading scheme. Conservatives prefer taxing transactions to taxing income because it's a way to avoid progressivity; rich and poor get taxed at the same rate.

Even these agrarian socialists recognize that if one person's activities impose costs on society as a whole (in this instance, by contributing to global warming), then that person ought to compensate society. So they may be signaling they are taking the route of a Pigovian tax (named after an English economist of the early 20th century named Arthur Pigou ).

He originated the idea that governments can, via a mixture of taxes and subsidies, correct perceived market failures (eg., in this case greenhouse emissions) — or "internalize the externalities". Pigovian taxes, taxes used to correct negative externalities, are named in his honor.

Gary,
It seems to me that you are questioning his use of calling it a tax to creat fear in the battlers.

"emissions trading is using market mechanisms to drive change by pricing carbon emissions. It is not a tax."

"For Truss to call it a tax is to raise fears amongst the battlers/aspirationals/ working families/ute men drinking alcopops (take your pick) about the ALP as a big taxing government".

Your words gary.

Anon,
would the Nationals understand what market failure is? Or what market externality means? That means they understand economics over and above yet more subsidies and ever more protection. Maybe they have staff googling away on Pigovian taxes and then trying to explain the idea to Truss as a way to engage with greenhouse emissions.

Truss gives no such impression of understanding the economic policies around the negative externalities of Greenhouse gases, and the Nationals have shown no understanding of these concepts re water issues in the Murray-Darling Basin.

Then again, maybe you are right. The right wind populists are being sneaky. Playing the populist politics of petrol card (the politics of fear) whilst secretly softening up the battlers in the regional Australia by linking greenhouse emissions to tax and thus implicitly to a carbon tax. Would they be so clever?

Lyn doesn't seem to think so when she says' Looking at the state of the coalition you'd have to conclude that they're not thinking about long term gains.....but about stalling tactics. Doing stuff for the sake of being seen to do stuff.'

Lyn,
The Canberra Times saysthe following about Nelson's populism on petrol:

But if Nelson and the Opposition can congratulate themselves for succeeding in making Rudd, and his entourage, mugs over petrol, he must also survey the damage he has done to himself and to his party from his populist stunt. The applause in the peanut gallery has, for the moment, drowned out the muttering among those who had hoped for serious economic policy from the alternative government, not least some willingness to level with the community about the realities of climate change and the long term direction of energy prices.

In the long run, the Opposition cannot hope to regain power if it has blasted its economic credibility among the business and commercial establishment, or if its response to climate change is based not on good policy but on cheap political stunts.

Another indication of a limited grasp of an emissions trading scheme. This is Dennis Shanahan:

The closer you get to the nitty-gritty of implementation and the more you understand the implications, the more reluctant you can become if you earn less than $100,000 year or are young and like driving or are part of a “working family”. Because of the focus on petrol costs through global oil prices and the Opposition’s populist campaign to cut fuel excise by 5c a litre, there is no doubt petrol is at the top of people’s minds when they think about an ETS. But cabinet is wrestling with issues that range further, and could send up power bills and the grocery bill. How do you measure a cow fart and should that push up the price of beef?

It's all reduced to absurdity --measuring a cow fart.

Nan,
Rudd would be more concerned with pushing ahead on the ETS at present because he fears loosing the Greens. Weighed up against the likelihood of losing the battlers a person with his personality would be of a mind that he won their hearts before with his rhetoric and youthful smile he can do it again.
I don't think he can and I believe that if he pushes though with this scheme (and I am not saying that it is a bad scheme) Labor will go to the next election with Gillard as leader.

Les,
how can you say that in the face of the special Newspoll on the environment. The punters indicate that they know the Rudd Government can't control petrol prices, but they do see a role for government in dealing with climate change.

A strong majority of voters (61per cent) say a carbon emissions trading scheme could help slow global warming. Almost as many again (56 per cent) are prepared to pay more for energy sources such as petrol, electricity and gas under an ETS.

Asked if they wanted petrol exempted from an ETS, more voters said no, keep petrol in, than wanted it out - 46 per cent versus 42 per cent.

These are the figures even though Labor has offered few specifics on an Emissions trading trading scheme other than to dissemble at the mere mention of petrol being included.

Les,
how can you say that in the face of the special Newspoll on the environment. The punters indicate that they know the Rudd Government can't control petrol prices, but they do see a role for government in dealing with climate change.

A strong majority of voters (61per cent) say a carbon emissions trading scheme could help slow global warming. Almost as many again (56 per cent) are prepared to pay more for energy sources such as petrol, electricity and gas under an ETS.

Asked if they wanted petrol exempted from an ETS, more voters said no, keep petrol in, than wanted it out - 46 per cent versus 42 per cent.

These are the figures even though Labor has offered few specifics on an Emissions trading trading scheme other than to dissemble at the mere mention of petrol being included.

Nan,
I think a lot of these environment polls are like asking people Do you like fluffy bunnies? Yes we do but is there is nothing to eat Bugs gets it Chop Chop.
I think in short that the scheme will have a bigger impact on prices than the punters realize and they will blame Rudd for it. Businesses concerned will be beginning to edge up prices from now so as not to appear to be profiteering when or IF the scheme starts. I am concerned with the rises in the general cost of living in Australia and not just with fuel/power but the fact that Iran has started digging 350,000 graves doesn't speak well for the price of fuel does it.

Les,
On one hand you could be right, but on the other remember how Hawke/Keating kept telling us to tighten our belts another notch, year after year, and people kept doing it, and kept voting for them anyway, because they felt it was the right thing for the country.

I think Nan's right on this, if Rudd can get his act together on the right message, people will put up with higher prices if they feel they're doing the right thing.

Lyn,
I am anticipating 2010 to be very different to 2008 for people in Australia. People could absorb it now I don't think they will be happy to in 2010.