Turnbull 1, The Atmosphere 0


After a four-and-a-half hour meeting, Malcolm Turnbull has finally won the right to negotiate with Labor over the emissions trading scheme from his recalcitrant party room.

It’s a gauge of just how badly the Opposition leader has been travelling that this meagre victory seems like a fresh start. Turnbull can now claim to be in control of his party, and the Opposition can finally get on with the job of being, well, an opposition.

And what are the amendments that caused so much heartache for the Liberal backbench? Bribes to big polluters, of course. The main thrust of the proposed Coalition amendments, released on Turnbull’s website late last night, is to give away far more free permits (that means, free money) to the so-called Emissions-Intensive, Trade-Exposed (EITE) industries. Under the proposed amendment, any corporation that can lobby its way inside the EITE tent will only have to pay for 5.5 per cent of the greenhouse gases it emits.

Sound ridiculous? That’s because it is. The justification for giving free permits to polluters has always been the dubious "carbon leakage" argument — in other words, the claim that large factories and plants will shut up shop and relocate overseas to jurisdictions with no carbon prices. As I explained way back in September last year, carbon leakage is largely a myth.

Take Alcoa’s aluminium smelter in Portland, Victoria. As a recent investigation by The Age revealed, the plant operates under a 30-year-old contract that forces the Victorian Government to provide it with electricity at below-market prices. That electricity — an astonishing one-fifth of all the electricity generated in Victoria — comes straight from the brown coal-burning power stations in the La Trobe Valley, making the smelter one of the dirtiest in the world. In contrast, newer aluminium smelters in Africa and Iceland are generally powered by cheaper and cleaner hydro-electricity.

In any sane policy environment, the ETS would force that smelter in Portland to close. Yes, jobs would be lost. But the difficult truth is that the planet, and our children and grandchildren, can no longer afford to smelt aluminium by burning brown coal. Even if the same smelter was then rebuilt overseas, the atmosphere would still be better off. Better still, the state of Victoria would be billions in the black.

Not under the Liberals’ amendments. They are so hell-bent on neutering the price signals of the ETS that they would rather subsidise dirty and polluting aluminium smelters than give a leg-up to Australia’s emerging clean-tech industries (Labor’s bill, of course, is hardly any better in this regard).

As Ross Garnaut pointed out in his original climate change report, there is no good justification for giving away free permits. The massive government give-away simply acts as a subsidy from consumers and small businesses to big polluting corporations.

It gets worse. The Coalition proposes to give electricity generators extra compensation — in total around $10 billion over 15 years. Again, the reasoning is flawed. Electricity generators claim they will go bust if they have to pay the full cost of their carbon permits. But owners of power generators like International Power have known about the climate change problem for two decades and have had at least a decade of carbon pricing in the European Union. Every dollar spent bailing them out now is a dollar that can’t be spent on renewable power. From a scientific and economic perspective, it simply doesn’t make sense to prop up some of the dirtiest power stations in the world merely "to ensure security of electricity supply and enable them to transition to lower emission energy sources".

The other major Coalition amendment is to give agriculture special treatment, so that agricultural emissions are "permanently excluded" from the ETS. But, in order to allow farmers to get paid for carbon they sequester through tree planting and unproven soil carbon technologies, the Coalition will seek to introduce an "agricultural offset scheme in line with similar offset schemes to be introduced in comparable economies such as the US and EU".

In other words, the agricultural sector will be excluded from the costs of its pollution, but will be able to bank the profits of any carbon it can sequester or offset. Is this fair? No. Is it rational? No. Is it a giant bribe to keep the National Party from walking out of the Coalition for good? Draw your own conclusions.

On any issue you care to name, the Coalition has gone for the dirtier option. Fugitive methane emissions from coal mines? The Coalition will ignore them. Thresholds for free permits? The Coalition will lower them, allowing more free permits to be given away. More expensive electricity, in order to encourage consumers and businesses to move to improve their energy efficiency? Not under these amendments. It’s difficult to think of a worse way to go about carbon abatement.

Most amusing of all, these changes blow any claim of fiscal responsibility by the Coalition out of the water. The Liberals are simultaneously claiming Labor is a profligate spender, only to turn around and promise billions more to the corporations who are destroying the world’s climate. Any jobs saved will be vastly more expensive than those saved by the Government’s stimulus package.

That’s if there are any jobs to be saved at all by locking Australia into a high-carbon economy for the next decade at least.

But don’t expect many in the mainstream media to pick up on that fine distinction. They’ll be too busy proclaiming a "win" for Malcolm Turnbull and parsing the finer points of the negotiations over the amendments. Once again, it will be left to lone voices in the wilderness like David Spratt to point out the folly of those who would seek to "negotiate with the laws of physics and chemistry".

The really tragic part of the equation is that some — perhaps many — of these amendments will likely get up.

I think Labor will deal with the Opposition on these amendments to the ETS. The Government would dearly love to pass the bill before going to Copenhagen. Not only would it allow Kevin Rudd to strut the world stage, it would also deliver on a key Labor election promise. Flummoxed by the complexity of the issue, voters show every little sign of understanding the flaws of the scheme as they are emerging.

It will take one or more "climate Pearl Harbours" before the majority of the electorate realises just how critical the climate threat is.


Ben Eltham is New Matilda's National Affairs Correspondent.