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Rudd wimps « Previous | |Next »
July 16, 2008

The leaked reports say that the Rudd Government's Green paper (the white paper comes later) on emissions trading scheme, which is to be released today, will shield motorists from petrol price rises for at least the first three years of Australia's emissions trading scheme. It will offset resulting price increases with corresponding cuts in fuel excise. For every cent petrol rises due to emissions trading, a cent will be knocked off excise - for a minimum of three years after the scheme is launched. After that, the policy of a three-year moratorium on petrol price increases will be reviewed. The debate moves on.

So the ALP has embraced the Liberals policy whilst belting them over the head for being wimps. They argued that if transport is left out of emissions trading in the long term, everything else, including power, will cost more. So a pattern has emerged: the Rudd Government is strong on rhetoric about moving the economy from a high-carbon-polluting economy to a low-carbon-polluting economy and weak on the politics.

Professor Garnaut argued cutting a deal on petrol would blunt the message, which was to use price signals to encourage people away from high carbon energy. Protecting motorists from the effects of an emissions trading scheme will undermine the scheme's primary purpose - to discourage the burning of fossil fuels such as petrol, and to facilitate a shift to more efficient hybrid cars and public transport.

So Rudd Labor is ensuring it's re-election in 2010 by buying off the opposition. Business continues to cry out for more time and to question the implementation timetable. Doubts do arise. The allocation of permits is an area where governments routinely fail -- whether its over-allocating water licences or maintaining the taxi licence racket. State governments love doing deals and favours -- as it’s already happened in NSW by the Iemma government indemnifying Bluescope steel against any future carbon tax. Some of the wording we have seen about the carbon cap talks about "measured", "soft", "modest" targets. The problem with a soft or moderate target is, is that it probably not going to drive the right sort of investment. But we await Treasury's modelling.

The other area of concern is that the introduction of an emissions trading scheme with soft targets also requires renewable energy targets and energy efficiency targets. An emissions trading scheme is not the silver bullet, as we still need development in renewable energy technology as well as energy efficiency measures to curtail energy consumption. There has been reduced investment in renewable energy under the Rudd Government, and little talk about energy efficiency targets. The states of course (Queensland, Victoria and NSW) continue to invest in coal, pinning their hopes on clean coal technology to reduce the carbon footprint.

| Posted by Gary Sauer-Thompson at 7:57 AM | | Comments (19)


As you say Gary, Labour is trying to ensure its re-election, is this a bad thing? The libs had already indicated they'd do the same thing (excise) and yet I think Labour is still a better mindset for future enviro challenges than the Libs at this point.

Consider the possibility that there was no softening for motorists, who turf Labour in a simple knee-jerk reaction. The libs could ride into govt on the mandate that the ETS is unpopular remove fuel from it and worse scrap it arguing that waiting is better possibly ensuring their next re-election.

Was wondering how the govt will gauge whether a price rise was caused by the ETS or oil companies/market?

They will form a committee to evaluate the rises in fuel prices by the introduction of the ETS of course.

This is a good political move from Rudd. So does the Coalition now look the bad guy for not backing it? In 2010 can Labor be trusted with the numbers to get the balance right? (They didn't exactly come off squeaky clean over the Fuel watch numbers) Thats a long way off though and this solution just makes them right until the excise needs to be adjusted.

a case of good politics bad policy?

Agreed Les and Nan.
Its interesting that the nature of the environmental challenges facing us is directly disproportionate to the length of governing terms. So any govt that is interested in tackling the long term needs to make room for re-election strategies, esp when most schemes involve pain in the short term.
While we say its a good strategy for labour does it really, when you consider the opposition's posturing, damage the advancement toward a low emission economy enough to really hammer Rudd over it?
Is 7-8 yrs of labour better for the environment than 3-4 years?

re your question:'Is 7-8 yrs of labour better for the environment than 3-4 years?'

It all depends on whether it is a reforming government or not. So far the action does not match the rhetoric. They do appear to be holding firm on the biggest polluters for the moment by refusing to issue free permits. Business has known about this since 1997 and, as all investments since then should have been made with that cost in mind, and they will pass on their costs to consumers anyway. There are no genuine grounds for compensation. If they took a punt that nothing would happen, then tough, that's business in a free market.

The trade exposed industries do need consideration. You could tax imports of carbon intensive items such as steel.

Rudd wimps - that is very true. Here's a summary of my understanding of the green paper: There will be big handouts to both "emissions-intensive trade exposed industries" (EITEs) and "strongly affected industries". These handouts will probably be free permits.

Strongly affected industries are industries that emit 1500 tonnes carbon dioxide equivalent per million dollars of revenue and include electricity generation (especially from brown coal), waste, and production of natural gas. Strongly affected industries will receive handouts on the basis for their assets while trade exposed industries will receive handouts that are based on their emissions.

A 60% cut in emissions by 2050 is still proposed, so Australia will probably remain among the highest per-capita polluters; the trajectories will be determined by 5 to 10 year gateways which will provide certainty for industry but reduce our flexibility if we decide that we need reduce emissions much more quickly; petrol left out for the time being; no price floor; land clearing and revegetation not included or funded; emissions from our coal exports not mentioned; emissions from livestock not included until at least 2015; emissions from forest degradation and grazeland degradation are not mentioned (except for in developing countries), so logging and burning old growth forests will probably continue to not be measured in Australia's greenhouse accounting and reporting unless things are changed at the international level.

There will be some compensation for low to middle income households but there may not be so much after the big polluters have been catered for.

Petrol is in, but the excise will be cut on a cent for cent basis. The only listed strongly affected industries are aluminium and cement.

Deforestation not included but planting people can get into the trading scheme if they want.

Another fund to be established, hopefully in response to the negative response to assisting renewables, which is the bit of politics we haven't seen directly addressed yet.

Fuel to be adjusted periodically over three years, then reviewed again. Blatantly politics but Swan has argued that the rising cost of oil has pretty much done the job anyway.

A new report from the Climate Institute divying emissions up by residential, commercial and manufacturing sectors is interesting here

They're having a go at changing the politics of the whole issue by calling it a carbon pollution reduction scheme, changing the focus from the deniability of climate change science to the undeniable good of reducing pollution. Pity they didn't think of that earlier.

"While we say its a good strategy for labour does it really, when you consider the opposition's posturing, damage the advancement toward a low emission economy enough to really hammer Rudd over it?"

The opposition are unelectable in their current form federally and are likely to stay that way as long as Minchin is calling the shots. The political logic of this, timing wise, is to get it out of the way early. It's got plenty of public support and by 2010 people will be used to it, while between now and then Labor can offer plenty of sweeteners. In the meantime the opposition have a few leadership brawls to get through and some coherence to invent.

I think Les is right about the opposition looking bad - the only thing the opposition can do with this to benefit themselves electorally is to say it's too soft on big polluters, which would run contrary to their policy and their support base. Their only other option is to put it off, which doesn't have public support, or bang on about grocery prices and hope people don't understand global news.

THe Green paper is not online yet. So Iam working off media summaries.

What caught my eye was that Rudd Government proposed to offer up to 30 per cent of permits to pollute free of charge to emissions-intensive trade-exposed businesses such as aluminium, steel and cement industries. But the 30 per cent estimate of free permits will not be included in the scheme until 2015. So the actual amount of free permits offered will be closer to 20 per cent.

So what happens between 2010 and 2015 for the emissions-intensive trade-exposed businesses?

In a separate measure, the Government will offer a special package of compensation for coal-fired electricity generators to help offset the cost of carbon.

More generous compensation has been flagged for Victoria's brown coal generators, which will be hardest hit. Like what? Handouts as suggested by Peter Wood? What sort of handout?

The Rudd Government's Green paper on their emissions trading scheme at the Department of Climate Change website.

Oops, it is now called the Carbon Pollution Reduction Scheme Green Paper, which is also available at the Prime Minister and Cabinet's website

The coalition still have plenty of ammunition on this. They are far from spent.
The media will dig out all the negatives (they are good at that) Then Brendan can pick the best ones.

you ask:

More generous compensation has been flagged for Victoria's brown coal generators, which will be hardest hit. Like what? Handouts as suggested by Peter Wood? What sort of handout?

The Green paper talk is in terms of a transitional regime through an "Electricity Sector Adjustment Scheme".The green paper argued that support for coal-fired power stations was warranted to sustain investor confidence and the security of power supplies in Australia. It could be delivered as either cash or carbon permits.Payments would be a "one-off" and made to generators before the scheme began.

Kevin Rudd has said there would be negotiations with individual generators before the size of payments was set. He hinted that payments would vary between generators depending on factors such as the age of the plant.

There are free permits stuff for the big polluters like aluminium producers in an effort to stop them shifting overseas. Is that a design flaw? Probably not. They need to be kept in Australia but there is little about making them more energy efficient.

But free permits for power generators to allow windfall profits is a design fall. No wonder the power generators are happy with the direction of the Green paper. The green paper supports compensation for electricity generators for which Garnaut could find no justification. So they have buckled from the screams from the generators and NSW Treasurer Michael Costa who is trying to sell off the state's coal-fired power stations. The result is that it will take longer to shift from dirty to cleaner coal or other alternatives.

Most of the Government talk is about cost and reducing it and not about new forms of energy production, energy efficiency, or public transport.

Wayne Swan on Lateline last night talked in terms of being economically responsible:

And we've made it very clear that we are going to protect households as we introduce this scheme just as we are going to provide additional assistance to business that may be adversely affected. It's very important that we do this in an economically responsible way which protects legitimate interests of households on the one hand and business on the other.

Rudd Government has melted under the heat of rising petrol prices without alternatives such as taxing vehicles according to the volume of their emissions and providing incentives for cleaner fuels.
Swan adds that:
What we've got to do is fight for what will [sic] right; fight for what will build prosperity in this country and deliver the jobs and the prosperity that our children and grandchildren deserve; and that is what you we will do.

its all about prosperity not a shift to new forms of energy. He says he is going to leave the politics to the Liberals on the one hand and the Greens on the other.

This document is all about the politics to reduce the politics of fear. The Coalition has said that it is in favour of the scheme but they only want to start it latter in 2012. So where do they go? Motorists will have five years "to plan for potentially higher fuel prices", such as by buying a new car, and it is anyone's guess whether the Government will have the courage then that it lacks now.

The core politics will take place in the Senate when the legislation is introduced.

This is simply the true face of modern democracy shining. The more big structural issues like the human impact on the environment come to the public's attention, the more the absurd face of modern mass democracy will shine.

How can we expect government politicans do anything less than grandstand over a very serious issue when the very nature of the our political system revolves around the personal career aspirations of cunning individuals who compete to play to whims of an ill-informed and overly self-interested public who come together to make decisions only once every few years?

So the Rudd government is looking ahead to the prosperity of my grand children eh. Thats nice to know. I better tell the kids to get busy and make some before the next election.

Swan is talking about todays prosperity (for business and working families) more than that of future grandchildren. He is from the ALP Right and so is colour blind re the colour green.

working families will do all right, as they will be comensated---ooops compensated. It looks as if it is the middle class households that will bear the burden.

Or have I misunderstood the politics of this?

Comensated: Having ones common sense eaten?

The collective wisdom of the blogosphere suggests that the politics of this is not directly electoral. Gary pointed out that the core politics will play out in the senate, which is pretty much what everyone else is saying. The only place commenters think otherwise is Andrew Bolt.

It's hard to remember who said what, there's been so much said, but there seems to be general agreement that it's a policy/politics mix aimed at the senate, with the intention of either putting the Libs or Greens or Fielding or Xenophon in their place, or, that it's a lure fishing for a double dissolution trigger.

One thing it's not doing is convincing anybody that it's serious about lowering emissions, but the blogosphere is hardly representative of the electorate.

I think it was Andrew Bartlett who suggested that it's a green paper and, as such, could be used to generate enough public support to make most naysayers back off. In that case support could be used as leverage to do something more substantial. That seems a bit optimistic to me, but you never know.

it probably is about putting the pressure on the Coalition as Rudd and Wong are reliant on getting their legislation through the Senate next year. The Liberals have dealt themselves out of the game already by their lack of credibility. They stand for opposition, despite the best efforts of Turnbull and Hunt to say otherwise. The pressure is in the form of taunting and mocking.

The biggest fight for the ALP is with the Greens. So the ALP they will try and drive the Greens to an extreme position--as just too radical and irresponsible. The Greens will have to support the legislation when it comes to the crunch, even though, from their perspective, the Rudd /Wong minimalist scheme only gets to first base. They cannot afford to not support it.

It's not a question of putting Fielding or Xenophon in their place. It's a question of getting their vote to pass the legislation. Fielding is way off beam--he's talking in terms of an emissions inflation even though the Reserve Bank said it would discount the 1% increase from the scheme.

Xenophon is horse trading already. His position is pretty clear: His vote can be bought with more water for SA irrigators in the Riverland. Simple really. He protects SA as Harrradine protected Tasmania. The problem with Xenophon's position from an SA perspective is that he doesn't really care about the ecological health of the River Murray.