AN old lesson all governments have to learn anew is that it is the election promises you keep that are likeliest to get you into trouble. It is a lesson Kevin Rudd is learning the hard way, with his ignominious retreat from his (always delusional) ambition to make Australia a world leader in its response to global warming.
It has been obvious for months that rushing ahead with a clearly flawed carbon trading scheme, one that would have serious adverse consequences for jobs and economic activity in the midst of what Rudd and Wayne Swan refer to, correctly, as the worst global recession since the Depression of the 1930s, was an act of national irresponsibility. However, the Rudd Government appeared to be living in a parallel universe.
The Treasurer likes to say that the world changed in September last year, when the collapse of Lehman Brothers triggered a near meltdown in global financial markets and a precipitate decline in economic activity.
Yet in December last year, when the escalation of the crisis was frightening governments and central banks across the world, Rudd and his Climate Change Minister Penny Wong were telling us it would be reckless and irresponsible for our economy and environment to delay the introduction of an emissions trading scheme.
So, what changed? Or as Rudd was asked at his press conference on Monday: “Why isn’t today’s decision reckless and irresponsible?” His reply was unusually short, perhaps indicating irritation at this impertinence.
“Well, what we’ve had is a deepening of the global financial crisis, which has now become a global economic crisis and the worst recession in three quarters of a century. That’s what happened.” Oh, really?
Delaying the introduction of an ETS is a sensible decision but it should have been made months ago. Presumably it has been made now because the political risks of pushing ahead have become unacceptable. There has been a rising chorus of complaint from business and Labor’s legislation faced certain defeat in the Senate.
The Government has resorted to heavy political spin and artful manipulation of interest groups to minimise the damage. At his press conference, Rudd helpfully identified the groups the Government spent a lot of time massaging ahead of its announcement, to give it political cover for its embarrassing backflip.
These were, in order, the Business Council of Australia, the Australian Industry Group, the Australian Conservation Foundation, WWF, the Climate Institute, the ACTU and the Australian Council of Social Service.
The last five are obvious allies of the Government on climate change, if now somewhat disillusioned ones. But you may have thought the BCA and the AIG would have seen the opportunity to take a much harder line on the threat the Government’s scheme posed for many of their members. But no, both rushed forth to compliment the Government on its decision and urge support for its proposal to push its (amended) legislation through parliament as quickly as possible.
A few months ago John Roskam, executive director of conservative think tank the Institute of Public Affairs, posed some interesting questions: What are business organisations for? Do they exist so their chief executives can sit on government advisory boards and have afternoon tea at the Lodge? Or is their purpose to represent the interests of enterprises and employers?
Not the latter, it would seem. As Roskam also has observed, business is to blame for allowing the ETS juggernaut to progress as far as it has: “There’s not a single significant business association in the country that has opposed the notion that Australia should have an ETS.”
They will protest, of course, that they have succeeded in winning delay and cash handouts, and that their objective is to provide certainty for business about future investment plans. But there is no certainty in the Rudd Government’s plans. Nor can there be, as the outcomes that really matter are out of its hands and have to be determined internationally.
To be fair, some business organisations have expressed considerable scepticism about the ETS, notably the Minerals Council of Australia and the Australian Chamber of Commerce and Industry, as have leading companies. The MCA, for example, recognises the promised certainty as an illusion, “a temporary stay of execution for thousands of mining jobs and billions of dollars in investment”.
None has gone so far as the IPA in calling for the ETS to be scrapped in the absence of a comprehensive international agreement to reduce carbon emissions, and realistically there is not much chance of that.
But the Rudd Government’s backdown gives the lie to all the hysterical claims by it and others that immediate action is needed to save the planet. Instead Australia should take the opportunity to have a comprehensive, independent, review of the Government’s emissions trading plans, the alternatives, the Government’s modelling of the economic effects, and challenges to the so-called scientific consensus on global warming.
The report on the Government’s ETS by economist David Pearce of the Centre for International Economics for the federal Opposition exposes a range of serious problems and risks with the present scheme. In particular, the scheme fails to offer any rigorous assessment of the transitional costs of moving to a low carbon future.
These transitional costs for an economy such as Australia’s – with its abundant carbon-based energy resources, its energy-intensive industry structure, coal-based electricity generation industry and its coal and gas exports – are potentially large and the associated risks considerable.
Pearce suggests the Productivity Commission should be asked to examine the Government’s scheme and alternatives, a suggestion taken up by Malcolm Turnbull and which industry should get behind.
The terms of reference for such an inquiry should let the commission start with a clean slate and not have its hands tied by government-imposed policy assumptions. And no pre-emptive legislation should be passed ahead of the international climate change conference in Copenhagen at the end of the year.
If that conference fails to come up with a comprehensive agreement on emissions control that includes India and China, as seems likely, then it’s back to the drawing board and the commission’s inquiry can inform a new course for policy here.
