The Good News About The Carbon Tax

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Like an alternative universe in a science-fiction story, it’s the same familiar world we knew on Saturday, but with a few strange differences.

For starters, Australia’s largest polluters now have to pay a small charge for the right to dump toxic gases into the atmosphere. For my mind, that’s a win for Australian society on a moral level, immediately and transparently. No-one has a natural right to despoil the environment, not even local councils with a particularly gassy rubbish dump, and least of all the large and profitable corporations that own aluminium smelters or coal-burning electricity generators.

The moral imperative of taxing carbon pollution is an argument the government and the environment movement has comprehensively lost, and more’s the pity. Carbon regulation is a great milestone for progressive legislation in this country, every bit as important as workplace health and safety laws or universal healthcare. Unfortunately, the government folded on the moral argument for carbon pricing when Kevin Rudd decided to backflip on the emissions trading scheme back in early 2010. When he abandoned the "greatest moral challenge", he also traded away most of his own moral credibility, and set the scene for his own downfall.

Labor’s regularly faltering courage on climate policy has been tactically disastrous — twice. On both occasions, Julia Gillard was a key player. The first backflip, Rudd’s mealy mouthed cave-in on the ETS, was reportedly the result of fierce lobbying from the right of the party, and conveyed to Rudd by his then deputy. After she deposed Rudd, Gillard then went to the 2010 election campaign with her infamous promise that "there will be no carbon tax under the government I lead".

It was a foolish pledge at the time, and when Gillard reversed it, she caused untold damage to herself and Labor. It was the decision to reverse course in order to gain the support of the Greens in August 2010 that precipitated the collapse in Gillard’s own popularity, and the trashing of Labor’s credibility with much of the electorate.

We can debate the dismal politics of carbon at length, but the fact remains that Labor, with the support of the Greens and the independents, has implemented a tough and immensely unpopular reform for the good of the country. You might disagree with that reform — in fact, according to all the opinion polls, you are likely to disagree.

But no-one should have any more doubts about Labor’s reform credentials. The overall policy package is, I think, a profoundly positive one for Australia in the long term. As Ross Garnaut said on Lateline last night, "there’s a package of measures that came through the Parliament that involve raising a price on carbon, collecting quite a lot of revenue for that, giving quite large tax cuts in a way that improves economic efficiency, substantial family payments, support for trade-exposed industries, support for renewable energy and it’s very hard to get a serious discussion of the package as a whole".

Hold onto that thought, because it shows why carbon pricing is good for Australia’s economy and society. Firstly, pollution is taxed. Secondly, the proceeds are used to compensate low- and middle-income earners, in ways that will make a small but meaningful difference to Australia’s growing problem of inequality. Thirdly, there’s money to invest in renewable energy and the clean-tech sector to help the transition. Finally, there’s even some money — lots of money, actually — to help the dirtiest parts of the economy get used to the new environment.

In policy terms, as Peter Martin points out, this is not really about Gillard’s broken promise, the existence of global warming or the fact the party of free markets now appears to believe that government knows best when it comes to emissions reductions. "It is all about what will work and what will work at least cost to taxpayers and the community," he argues. Martin observes that electricity prices in Perth have risen by 57 per cent since December 2008 — for reasons that have nothing to do with carbon pricing. The WA economy is doing just fine.

So it’s a great reform package, economically. Politically, however, it’s a bust. Like most of the big reforms politicians have pushed through the Australian parliament in the last two decades, this one is unpopular. I think it would have been reasonably unpopular even had it enjoyed bipartisan support. But what has made it truly toxic is the full-throated, almost maniacal opposition of Tony Abbott and the Liberal and National parties.

Whenever a big social issue is ruthlessly politicised, it quickly becomes polarised and unpopular. Labor’s long-running battle against the GST helped make that tax unpopular. The bitter campaign against the republic — led, in no small part, by none other than Tony Abbott — led to its defeat. And the sustained campaign of fear and disinformation around climate change and the carbon tax has meant that the whole field of climate policy in this country is now so polarised that the facts of the debate appear to have little traction in the electorate.

No great insight is required to understand why the Coalition is so opposed to sensible, pro-market economic reform in the form of a carbon price. There was always a hard core of climate sceptics inside both the Liberal and National parties, but even if there weren’t, the almost overwhelming political advantage the the Opposition has accrued since Tony Abbott took the leadership on a platform of attacking carbon policy is reason enough.

But some measure of responsibility should be apportioned here. Led by a transparent ambition, Tony Abbott has muddied the waters of climate policy and trashed the reputation of Parliament. These spoiling tactics may well get him elected, but they are not in the best interests of Australians at large, or the long term future of the Australian economy and environment.

They are not even in the narrow interests of his own supporters, many of whom will in fact benefit from the carbon package in the form of tax cuts and increased family payments. If he does win next year, Abbott will also take office in a political environment of deep partisanship, which is unlikely to make life easy for any government.

Meanwhile, out in the economy, all sorts of subtle changes are already making themselves felt. Did you know, for instance, that demand for electricity in this country is falling? Despite (and also because of) power prices going up, Australian businesses and households are using less of the stuff. Millions of solar panels have been installed on roofs across the nation. This is starting to have a real impact on the amount of electricity the grid needs.

That change is being driven in part by policy, like solar feed-in tariffs. But it is also being driven by factors that few would have predicted even three years ago, like rapidly falling prices for solar PV cells from China. Indeed, as Garnaut observed last night, the international environment for renewables is changing rapidly — so rapidly that Australian policymakers and politicians are struggling to keep up.

Australia may no longer need to build any new base-load electricity power plants. Energy efficiency and household solar are doing it for us. As the boss of the Australian Energy Market Operator, Matt Zema, told Renew Economy’s Giles Parkinson, "this is the first time we can find that even with strong GDP growth there has not been an increase in energy consumption. We are seeing quite a shift."

With solar PV now close to the magical "parity" figure — that is, where the cost of electricity generated on your roof is cheaper than the electricity coming to you down the grid — Australia is already well on the road to rapid decarbonisation, whatever the public and the politicians think.

In the long term, that may help Labor and the Greens. In the short term, public hostility to the carbon tax — and to climate policy in general — is baked in. When it comes to carbon pricing, it seems that we don’t know what’s good for us. In fact, we don’t even want to know.

Ben Eltham

Ben Eltham is New Matilda's National Affairs Correspondent.

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