Will Billions For Big Carbon Be Enough?


It’s the last dangle of the carrot for a recalcitrant Opposition. But will billions for big carbon be enough?

After weeks of negotiations between Penny Wong and the Opposition’s Ian Macfarlane, the two major parties have finally cut a deal to pass an emissions trading scheme into Australian law. Billions more taxpayer dollars will be sacrificed on the altar of making the emissions trading scheme palatable for big polluters. Now all Kevin Rudd needs is for the rebel Liberal and National senators to actually agree. This deal might just ensure enough of them do to get the bill passed.

In case you haven’t been following, or have simply given up on the long-running ETS circus, here’s a brief story so far.

The Rudd Government’s proposed response to the issue of rapid and dangerous global warming is called the Carbon Pollution Reduction Scheme, or CPRS. Developed over the first 18 months of Kevin Rudd’s first term in office, the bill was itself a compromise between the interests of low-income consumers, electricity generators and the heavily polluting but politically powerful resource industries.

Ignoring all the various concessions, compensations and carve-outs, the CPRS is meant to reduce Australia’s greenhouse gas emissions by 5 per cent of 2000 levels by 2020. If, by some miracle of international diplomacy, the world reaches a global agreement on climate change at the Copenhagen conference or one of the planned follow-up meetings, the CPRS will ratchet up to a 15 or 25 per cent reduction in emissions.

The Opposition initially opposed the CPRS, blocking the legislation the first time it was introduced to parliament. Partly this was a political tactic, but it also reflected the strong minority of the Liberal Party — not to mention the entire National Party — that doesn’t believe climate change is happening at all. In a way, the denialists at least have the benefit of logic. If you don’t believe climate change is happening, why do anything about it?

The Rudd Government used this first rejection as a lever to destabilise the Opposition. Under the Constitution, if a bill is rejected twice it can then provide a "trigger" for the government to go to a so-called "double dissolution" election, in which all seats and senate spots in parliament are up for grabs. This would be a nightmare scenario for the Opposition: on current polls Kevin Rudd would romp back in.

The combination of a growing and vocal faction of climate sceptics in the Liberal Party, a weak leader in Malcolm Turnbull, and the threat of electoral oblivion at a double-dissolution poll has driven a deep wedge through the conservative parties. At times the Liberal Party has looked like it might split altogether over the issue of climate change.

But Kevin Rudd has his own reasons for trying to pass this bill. An emissions trading scheme was a key Labor election promise, and Rudd wants to go to the Copenhagen climate change conference next month with a firm Australian commitment.

The result is that Labor’s Wong and the Liberal’s Ian Macfarlane have been locked in a small room for the past fortnight in an attempt to cut a deal. And what a deal they’ve emerged with. Way back in March this year, I called the CPRS "absurdly ineffective". The result of the concessions that Wong and Rudd have offered in order to reach this agreement with the Liberals means that the new compromise is even worse.

The new dollars promised to noisy heavy industries turn the newly compromised CPRS even browner. Electricity generators get a whopping new bribe of $4 billion, taking their total assistance package to $7.3 billion — not to help keep your power bill down, mind you, but simply in return for keeping the lights on. It’s quite amazing that this recently privatised sector of the economy, which has known about global warming for two decades and has been on notice that a carbon price is coming for at least 10 years, can still manage to hold elected governments to ransom.

The coal industry gets an extra $750 million in assistance, taking its total assistance to $1.5 billion over the next five years, plus an extra $270 million for gassy coal mine abatement (coal mines leak a lot of methane, a potent greenhouse gas). Food processers, which use a lot of electricity, get $150 million. There’s also a "Transitional Electricity Cost Assistance Program of $1.1 billion to assist medium and large manufacturing and mining businesses with CPRS-related increases in electricity prices in the early years of the Scheme".

For the really dirty parts of the Australian economy, there are buckets of new money. The so-called "emissions-intensive, trade-exposed" industries like aluminium smelting and natural gas mining — which were already slated to get free carbon permits under Labor’s original bill — will now get even more free permits, up from 60 and 90 per cent to 70 and 95 per cent. This new deal means that for the dirtiest polluting industries that just happen to export their pollution overseas, the Australian taxpayer will pay for an astonishing 95 per cent of their pollution.

Carbon leakage? How about carbon bonanza! This is the kind of assistance that your local cafe or garage can only dream about. But then again, your local cafe or garage hasn’t had a team of lobbyists in Canberra working around the clock for the past two years.

And, as previously announced, the Government will permanently exclude agriculture from the scheme. Agriculture generates something like 16 per cent of Australia’s greenhouse gas emissions, much of it through land-clearing and burping cows. Those emissions will now not be covered by the scheme, but somehow "offsets for agricultural emissions abatement will be included".

On the upside, the Government has announced a nebulous mechanism to allow voluntary reductions by households and businesses to count under the emissions reduction cap. How it will do this has yet to be outlined and there are many difficulties in making such a scheme work.

All in all, this is a deal that rewards big polluters and punishes small businesses, consumers and the environment. If you ever needed an object lesson in the way money and power interact in a democracy, the CPRS deal is it. No wonder Bob Brown is calling it "pay the polluters".

For his part, Kevin Rudd claimed in his press conference this morning that the new deal is "both environmentally credible and economically responsible".

It’s neither. In terms of environmental responsibility, the consensus of the world’s top climate scientists is that much, much deeper cuts are required globally to hold carbon dioxide levels at a relatively safe level. When it comes to the dollars, the Government’s relatively modest headline figure of $7.01 billion in extra costs as a result of this deal doesn’t take into account the potential fluctuations in the future carbon market. All those extra free permits could see the Australian taxpayer on the hook for billions extra if the coal price or the Australian dollar change significantly.

Of course, that is if this bill even passes. Although the Shadow Cabinet has approved the deal, the Coalition party room is still debating it, and some Liberal and National Senators are almost certain to cross the floor.

The Prime Minister said today that this deal "is a deal for this week because we need to get this thing through". If the bill goes down in the Senate, Labor is likely to go back to the drawing board, possibly taking the country to a double-dissolution mid-next year. If that happens, it will probably reconsider many of the generous concessions it has offered in this deal. Senior executives in the fossil fuel and electricity industries will be holding their breath and hoping this bill will pass. It’s the very best deal they will ever get. In fact, it’s far better than even they might have imagined.

As for ordinary Australians like you and me? We’ll be paying for this cave-in through higher taxes for the next decade at least. And it won’t stop global warming one jot. For that, we’ve got to hope and pray the world can reach some kind of agreement at Copenhagen. It’s a bleak time to be an optimist on climate change.

UPDATE 4pm: After a long Coalition party room meeting, the Opposition is still unable to reach a decision on Labor’s CPRS deal. The Australian and the Fairfax newspapers are both reporting that Liberal climate change spokesman Andrew Robb made a dramatic intervention against the proposed deal, speaking out against Ian Macfarlane and Malcolm Turnbull’s position.

There is even considerable speculation of a leadership spill against Turnbull.
In a dramatic day in Canberra, it looks as though Kevin Rudd will be gifted his dearest wish, with the possibility looming that the Liberals will not only give him a double dissolution trigger, but a new and untried Opposition leader as well.

Ben Eltham is New Matilda's National Affairs Correspondent.