4 Jul 2013

Rudd Goes Into Battle On Carbon

By Ben Eltham

Why would Kevin Rudd abandon the fixed carbon price? Moving to a floating price could put Labor on the front foot in the carbon war against Tony Abbott, writes Ben Eltham

Kevin Rudd will abandon the carbon tax. That's the word from Canberra as the Rudd 2.0 Government attempts to reboot Australian politics.

Carbon has not been kind to Labor since 2007. While climate change was a big factor in the election that unseated John Howard, the campaign to price pollution that followed was long and politically bloody. Under Rudd, Labor twice tried and failed to implement an emissions trading scheme, and the failed negotiations with the Coalition over carbon pricing were ultimately the catalyst for the rise of Tony Abbott as Opposition Leader.

Once confronted with an effective campaign against carbon pricing, Labor struggled to craft a strategy and stick to it. In early 2010 Rudd peremptorily abandoned the ETS, a decision seen by voters as a damaging backflip, and moved to tax big mining companies instead. It was the beginning of his decline.

The newly installed Julia Gillard couldn't quite make up her mind about carbon. Labor's 2010 election policy on carbon was a mess of contradictions. The party promised to introduce an ETS. But Gillard also promised a citizens' assembly to give ordinary voters a chance to deliberate on carbon policy. And, notoriously, she told Network Ten that “there will be no carbon tax under the government I lead”.

Once the circumstances of the hung Parliament forced Gillard to commit to carbon action, her record was admirable. Labor's second effort at pricing carbon was much better than its first one, and the final package of carbon legislation featured significant innovations, including strong public investment in renewable energy through agencies like the Clean Energy Finance Corporation and the Australian Renewable Energy Authority.

Indeed, you argue that Tony Abbott's scare campaign has largely come and gone. Whyalla has not been wiped off the map, and the effect of carbon pricing on electricity bills has been overwhelmed by the massive cost increases levied on businesses and consumers by greedy electricity companies passing on the costs of gold-plated infrastructure. Polls show it is not nearly as unpopular as it once was.

Now carbon policy is volatile again. There is widespread speculation that Rudd will dump the tax and move directly to a floating carbon price.

If it's not broke, why fix it? The answer, of course, is politics. Rudd's scheme was never implemented, so he can plausibly claim he never supported the carbon tax. Because carbon policy is so complicated, no-one will bother to check back through the old legislation and remind themselves that Rudd's CPRS also included a fixed-price period. That's right, Rudd's scheme would have been a kind of tax too.

But carbon politics has never had a lot to do with reality. If it did, Australia and the world would be moving to much higher carbon pricing and much tougher pollution regulations, and fast.

However, for Rudd, this very unreality gives him some considerable tactical opportunities. For instance, if Labor did decide to link the Australian scheme to the European scheme immediately, or at any rate very quickly, he could use that manoeuvre to put some real pressure on Tony Abbott and the Coalition. In a stroke, Rudd could turn carbon from one of Labor's biggest liabilities into a weapon with which to beat up on the Coalition.

There's no doubt the Coalition is vulnerable to carbon scrutiny. As we've remarked here before, the Coalition's so-called “direct action” plan on carbon is risible. Because Abbott's overriding priority has been to paint himself as the crusader against carbon taxation, the Coalition's plan is effectively a mirror image of an orthodox emissions trading scheme, in which a pollution permit on carbon provides a price signal for decarbonisation.

Tony Abbott and Greg Hunt's rickety scheme will instead use taxpayers' money to pay big polluters to reduce their current pollution levels, effectively creating a shadow price on carbon anyway. It will be a bonanza for brown coal generators and aluminium smelters, who will probably take the money and run. Few experts believe “soil magic” can credibly reduce Australia's greenhouse gas emissions enough to meet the Coalition's state goal of a 5 per cent reduction.

Indeed, on some estimations, the Coalition's shadow carbon price might even be higher than a floating price on carbon linked to the European ETS. Given how little anyone understands about the whole thing, Rudd could certainly make that argument – it's a lot more plausible than suggesting a regional city will be wiped off the map.

What will the effect of linking to the European scheme be? In a nutshell, lower carbon prices. That's because the international price is effectively set by the European market, which remains in the doldrums. The graph here shows the price of European permits in recent years, which are currently trading at around €4.70. That's about $6.75 and a huge discount on the $24 currently mandated by the Clean Energy Future legislation. The European carbon price has plunged in recent years. Despite this, emissions in Europe are declining. Image: Spiegel Online.

But here's the catch: most big polluters are not really paying the full price for carbon anyway. The Australian legislation gives big polluters that are “trade exposed” a special discount of up to 94 per cent on the nominal price. On top of that, certain industries have received big cash grants from the Commonwealth in the form of “compensation” for the supposedly dastardly effect of carbon pricing. Brown coal electricity generators, for instance, have received around $1 billion under former energy minister Martin Ferguson. For all but the very dirtiest emitters, carbon pollution is already cheap.

In fact, one of the biggest losers of a cheaper carbon price might be, paradoxically, black coal generators. That's because, due to the complex interaction of the Renewable Energy Target and the carbon price compensation, black coal would suddenly be more expensive than brown coal. Expect plenty of calls for extra hand-outs from that sector if the change does materialise.

While this is being debated, Europe has finally shown signs of propping up its own carbon price, overnight passing legislation to “backload” carbon permits there, boosting the European price. Eventually, Europe may even decide to cancel existing permits that aren't required, which would remove the big supply overhand currently depressing the EU price.

Back home, Rudd and Labor have some tricky numbers to crunch on the matter. If the fixed price is abandoned, Australian carbon prices will plunge, punching a further hole in the government's tax revenues – a development new Treasurer Chris Bowen would hardly welcome.

One of the reasons why the Australian carbon price was set at $23 a tonne, rising gradually each year to 2015, was to try and put a floor under carbon permit prices. The stability would allow companies a period of certainty before carbon was exposed to the volatility of a freely-traded market in 2015. Some companies have now written forward contracts based on the fixed price out to 2015.
They might have to be compensated. It could all get messy fast.

But these are all problems for a third term of government – if Labor gets one. In the meantime, killing off the carbon tax might be too tempting an opportunity to pass up.

Log in or register to post comments

Discuss this article

To control your subscriptions to discussions you participate in go to your Account Settings preferences and click the Subscriptions tab.

Enter your comments here

Posted Thursday, July 4, 2013 - 13:42

This is NOT a battle. It is not a war. That terminology is primitiv and out of date. This is not a clash of personalities. We are talking policy here. What we have is common sense (ALP) versus stupidity (LNP).Just introduce the ETS as soon as practicable, it is a no-brainer. The consequences are predictable and acceptable. 

Reminder to journalists: Next time you are tempted to publish poll results, don't. You should feel ashamed because the poll results are an indication what a lousy job you are doing to provide accurate, factual, reliable and up-to date information to the public. If you had done your job Julia Gillard would still be PM, Rudd would be sitting on the back bench and incompetent characters like Abbott and his cohorts nowhere to be seen. Why don't you finally get your act together. Take your responsibility seriously. Shame on you people! Don't you care for the well being of all Australians?

Warwick Rowell
Posted Thursday, July 4, 2013 - 14:18

Ben says:

"But carbon politics has never had a lot to do with reality. If it did, Australia and the world would be moving to much higher carbon pricing and much tougher pollution regulations, and fast."

He then goes on to describe the incredible mess both sides have made of the politics of carbon pricing.  And the rorts, and the swindles, and the back room deals, and the "we can pick winners", that is the imbecility of the current and proposed "policies" of the major parties, and some overseas schemes we may emulate!

A policy provides clarity, direction, and is in the public interest.  A policy which said: We will have a carbon levy that is sufficiently high (in time) to keep 80% or more of current fossil fuel reserves in the ground, and STOP future developments, which is returned wholly as a dividend to the citizens of Australia, with no compensations, no deals, no credits, no exemptions, would win that party a landslide of votes.    See 350.org and James Hansen for more detail and analysis..

Instead, Ben forecasts a dismal, ineffective mess, full of ineffective disinformation from both sides.    We truly will get the government we deserve..   

This user is a New Matilda supporter. douglas jones
Posted Thursday, July 4, 2013 - 15:29

Unfortunately for the context of CO2 politicians have to deal with a democracy. Sure a super leader might be able, even with a semi hostile media, to implement a sensible pollutio policy, without promply being thrown out, but we lack such. Just home grown humans mostly of good intent.

Posted Thursday, July 4, 2013 - 20:38

The key political reality is that neither the Coalition (the Libs) nor Labor (the Labs) have any intention of seriously tackling climate change - they both have the same morally and intellectually bankrupt position of "5% off 2000 pollution by 2020" coupled with unlimited coal, gas and iron ore exports. While the Coalition's Direct Action s too  little too late, Labor's Carbon Tax is a  fraudulent "futile cycle" of taxing industrial  and domestic users and then returning 90% of the revenue back to them. Labor's ETS is an approach that empirically has been unsuccessful, is accordingly counterproductive and is utterly fraudulent in selling something Labor has no right to sell, namely licences to pollute the one common atmosphere of all countries on earth.

On 1 July 2013, The Guardian Australia published an important article by  Lisa Caripis entitled  “Carbon pricing one year on: independent expertise is crucial” :  http://www.guardian.co.uk/commentisfree/2013/jul/01/carbon-tax-anniversary-climate-change-authority?commentpage=1  which crucially stated: "[Dumping the Carbon Tax and ]  moving to an emissions trading scheme will make it cheaper for business and industry to comply with the scheme because they’ll have access to the dirt-cheap European Union permits (currently trading at approximately $4.65 in Australian currency, compared to the scheme’s 2013-2014 fixed price of $24.15) and distance the Rudd government from Gillard’s much maligned “carbon tax”".

In other words, spinmaster Rudd proposes to price GHG pollution 5 times less than before - an utter betrayal of urgently required climate change action that will mean Rudd LaBORsimply does not  desereve to be re-elected. .

The world is running out of time to deal with the carbon crisis. Thus both the Australian Climate Commission and the WBGU (which advises the German Government on climate change) both agree that for a 75% chance of avoiding a catastrophic 2C temperature rise, the world can emit no more than 600 billion tonnes of CO2 between now and zero emissions in 2050. The Australian Climate Commission estimates that the world has only 16 years left at current rates of pollution before it exceeds this terminal greenhouse gas (GHG) pollution budge (see (see Climate Commission, “The Critical Decade 2013”, p7: http://climatecommission.gov.au/wp-content/uploads/The-Critical-Decade-2013-Summary_lowres.pdf ) ). However using the latest NASA GISS, US EIA and World Bank estimates I estimate that we have only 5 years left and that Australia exceeded its share of this terminal budget in 2011 (see Gideon Polya, "Doha climate change inaction", MWC News: http://mwcnews.net/focus/analysis/23373-gideonpolya-climate-change.html ).

The Coalition and Labor (the Lib-labs, the Liberal-Laborals) have the same disastrous policy of a derisory 5% reduction in Domestic GHG pollution and unlimited GHG exports (via coal, gas and iron ore) that will see Australia exceed the whole world's terminal GHG pollution budget by a factor of three (3). Labor's deceitful Carbon Tax underestimated the tax on fugitive emissions of methane by a factor of 137-329 (Gideon Polya, "Australia's Carbon Tax scandal", MWC News: http://mwcnews.net/focus/analysis/23026-gideonpolya-carbon-tax.html .) and as pointed out by Lisa Caripis, the adumbrated Labor fast-track to an ETS would emplace a scam whereby pollution permits can be purchased overseas for a laughable $5 per tonne CO2-e (taking into account huge $12 billion pa subsidies for fossil fuel burning and the cost of circa 10,000 Australian deaths annually from carbon burning, the ACTUAL Carbon Price is presently circa $150 per tonne CO2-e; Gideon Polya, "Australian carbon burning-related deaths", Yarra Valley Climate Action Group: https://sites.google.com/site/yarravalleyclimateactiongroup/2011-carbon-burning ).

If Rudd Labor continues to support a disastrously counterproductive coal-to-gas transition (see Gideon Polya, "Expert witness testimony to stop gas-fired power plant installation", Countercurrents: http://www.countercurrents.org/polya140613.htm) and indeed opts for a derisory ETS fraud (it is fraudulent for an Australian government to sell permits to pollute the one common atmosphere of ALL countries) then decent Labor voters will vote 1 Green and put Labor last until it reverts to decent values e.g. saving the Planet for our children and grandchildren (the Coalition is just as bad but unlike neoliberal Labor has not actually betrayed Labor voters and values; see Gideon Polya, "100 reasons why Australians must reject Gillard Labor", Countercurrents: http://www.countercurrents.org/polya240613.htm ).

Ian MacDougall
Posted Thursday, July 4, 2013 - 20:41

What we have is a token reduction, when what is needed is a dramatic one. As John Howard reluctantly conceded, Australia's contribution to the global atmospheric greenhouse gas load has been 1.5%. But that is 1.5% of the ENTIRE global GHG load: a colossal and non-trivial amount.

Politicians of both sides have been trying to kid the voters that this can be done without costing much at all. The Greens pretend that it can all be passed to the 'big polluters', neglecting that those polluters will simply pass it on to their customers - us - or else go broke trying to.

The ALP's neo-Ponzi carbon scheme tries to cost nothing to anyone who matters. But the task is to restructure the entire way we source energy for the human economy, and that will cost heaps: akin to the cost of fighting WW2. And the leaders of that era did not try to kid the people that it would cost them nothing. 

But the Coalition offers the most rortable joke of a scheme of all: 'Grass Roots': meaning pull down the CO2 out of the air and convert it to soil carbon, paying landowners (ie agribusiness with taxpayers' money) to do so.  For how long? Centuries would be needed, but the more realistic time frame would be until the agribusiness has spent the cash and needs to put a cash crop into the paddock again to earn some more. So a fortune will have to be spent on soil inspectors to keep the bastards honest.

I would trust Tony Abbott and his cronies to do that about as far as I could kick a grand piano. Barefoot.

Posted Thursday, July 4, 2013 - 23:49

I thought the idea was to reduce emissions. But in and article titled 'Do Markets Punish Pollution Control' the US Network for Business Sustainability reported on the 20th of June that 'that buying emissions-trading permits is more profitable for companies than reducing their actual greenhouse gas emissions'. But in the long term 'environmental actions by these companies may lead to greater returns for them'

So it is hard for me to see how moving to an ETS will do anything to improve our local  emissions or global CO2 levels, particularly when we are exporting increasing quantities of coal and Gas.

In the light if the of the Climate Commission's 'Critical Decade' report, which stated amoungst other things that  - 'Most of the available fossil fuels cannot be burned if we are to stabilise the climate this century' - it might be time for the Government to adopt the proposal from BZE's 'Laggard to Leader' paper and declare a moratorium on all NEW coal and gas projects.


Posted Saturday, July 6, 2013 - 13:24

I was never a believer in carbon tax or carbon pricing.

We need to do something about the output as in convert it right at the source.

Taxing or pricing it doesn't get rid of it, look at the evidence.

As for the constant battle between Government and Industrialists 

No amount of external constraint will make up for a change in attitude.

More than anythng the idea of Carbon Pricing shows how stupid the whole idea of taxation has become.

Posted Saturday, July 6, 2013 - 22:17

So who exactly can I and the millions of other Anthropogenic Climate Change Deniers get to vote for??
Considering that the proposals of Green-Lib-Lab deny a voice for millions, then it's hardly a democracy, is it?

Rothschild Australia are poised to make squillion$ out of this as Dr Megan Clark Chief Executive of CSIRO had arranged and announced when she was Director, NM Rothschild and Sons (Australia) 2001-2003.
The Union Carbides of this world will continue to set Guinness Records for killing people in industrial chemical "accidents" as they did in Bhopal, we will continue to pump chemical cocktails into the ground for "fracking" and we will continue to make bullets out of Uranium [DU, Depleted Uranium Projectiles] and dump it on places like Fallujah in Iraq where deformities are so high that women are being warned against having babies, and places like Port Pirie South Australia will continue to suffer great ills and guess what folks... none of these ills have anything to do with CO2.
But CO2 will kill us, and you want us to pay for it... so who suffers... cattle farmers.
That's right, "cattle farmers" and flatulence are as they have always been, the greatest threat to humanity.

And as I understand, temperatures will continue to rise "preceding" increases in CO2 as they have for the history of the planet, indicating that increases in temp are not caused by increases in CO2 but vice versa.
And never is solar activity discussed in public temperature debate.
The very Poles have reversed on this planet many times in the earths history, and yet we think temperature changes are unique to our time.

And getup.org and 350.org moveon.org will continue to be mouth pieces for George Sorros.
Don't you people use google?

Time and again the media sources most of you [we] rely on for your knowledge have proven to give you "bad intell" and yet you still swallow it from those very same sources.
Isn't it a sign of madness to keep doing the same thing and expect a different result?

Ken Fabos
Posted Sunday, July 7, 2013 - 10:14

If our elected representatives took seriously the public trust and responsibility that their positions embody there would be no-one people like 'Phony' could vote for. Our representatives would become  as well informed about the nature of the problem as possible, take seriously the abundance of expert advice at their disposal and refuse to put the short term interests of narrow interests ahead of the long term interests of our nation and world. They would all turn on Phony and his kind with clear conviction that their combined ignorance, misunderstandings and selfish disregard for the consequences of excess dumping of GHG's into the atmosphere is dangerously irresponsible.

Of course Phony exaggerates that there is no-one he can vote for. Clive Palmer would welcome his vote, I'm sure, but even in the mainstream the choice is between LiberalNats who will do all they can to obstruct effective action on climate - no-one believes their 'commitment' to the absolute minimum 5 of the 5 to 20% that Australia signed up to is really binding any more than they believe Australia under LNP would enter into climate treaty negotiations in good faith. They seem to be betting that the world can't commit to limit emissions and their own lack of commitment will be prescient. Then there is Labor, that want to appear to be committed to the absolute minimum 5% (but nothing more) whilst actually doing nothing that would prevent Clive and his mates ensuring global consumption of fossil fuels continues to grow without restriction.

Rudd will move to an ETS but it won't be to advance efforts to reduce emissions - it will be  because that will lower the carbon price and advance his popularity. We can hope current efforts in Europe to force their ETS price higher can force a more effective (higher) carbon price here as well but if that happens any time soon Rudd will be forced to choose - get elected by dumping carbon pricing altogether or risk losing the populist momentum.

Posted Sunday, July 7, 2013 - 13:07

....  and then there is the outspoken French left wing activist, Alain Soral, on the Carbon tax scam with views and opinions which make commentary and opinion pieces of the English speaking media seem childish and simplistic by comparison.....





Posted Sunday, July 7, 2013 - 13:20

Ken Fabos is calling for the Stalinist Approach to 'people power'.
Like the call from other Disciples of Totalitarianism leading up to the Iraq invasion in 2003; their answer was, as his is now to silence all dissenters from the politically dominant correct view as if they are seditious heretics.

"The intell is in", "the debate is over", "you're either with us or agin'us".

These totalitarians, apart from taking the time to face the "responsibility that their positions embody" as informed citizenry in a democratic process, insist that we look to our political leadership to tell us what to believe.
Rather than have political representatives of our will, we are to accept a politically created agenda which dictates to us.

Where exactly did this theory of AGW emanate from?

Media coverage on global warming has been criminally one-sided. The public doesn't know where the global warming theory came from in the first place. Answer: the U.N., not a scientific body. The threat of catastrophic warming was launched by the U.N. to promote international climate treaties that would transfer wealth from rich countries to developing countries. It was political from the beginning, with the conclusion assumed: the Intergovernmental Panel on Climate Change (U.N. IPCC) was funded to report on how man was changing climate. Its scientific reports have been repeatedly corrected for misrepresentation and outright fraud.

"Australia" signing up to international political agreements is not democracy and not science either.

Citizens of this nation, like Ken Fabos, who are willing to surrender their obligation to making an [rightly or wrongly] informed vote on election day rather than rely on a politician who tells them what to believe are useless statistics in a democratic process.

Ken Fabos
Posted Monday, July 8, 2013 - 09:23

Phony ID = Uninformed and misinformed. A known danger of unprecedented scale not faced - every institution studying climate in agreement on that and every peak science body finding their science solid. Worse, willful effort to obstruct  and encourage others to obsruct the legitimate and honest efforts of informed people from doing anything effective about it.

Phony ID, when you do this as a private citizen its your right  to choose to be wrong; for our elected representatives to do so is not the exercise of a right, it's a failure of responsibility and trust. Those that do so out of ignorance are failing us all with incompetence. But those that know full well that the science is almost certainly right and catastrophic climate change is the likely outcome of global failure to address it - but who choose doubt, deny and delay - for the sake of solidarity with a misguided political party or ideology, or popular standing in their electorate or for the sake of influential business interests and their threats of dire economic outcomes - are doing something much worse than simply failing to have good judgement; they are betraying the responsibility and trust they hold on our behalf. 

The climate problem has never been "owned" by the green left, no matter that they choose to frame it that way. It's been a deeply regrettable choice of the political Right to promote the ideas you appear to have taken to heart and espouse here, of some grand socialist/communist conspiracy.  Our conservatives might have managed some positive contributions to getting effective policies in place by now. Having created a tribe of true disbelievers like yourself, now they are hobbled with them, incapable of rational policy on climate and energy for fear of losing your votes.

Posted Monday, July 8, 2013 - 11:16

But it's you that exaggerates, because all major Parties have policies which are based on acceptance of the AGW theory and I have relied on none of them for enlightenment, and none of them have my vote.
If you don't see that agenda as being born of and funded by political idiologs and the grooms of the stool for mega-financial interests then you are clearly UN-informed.

Further; IF, for argument's sake, your AGW theory is correct and, as the proposed political remedy goes, those in the word that have had a greater proportionate financial benefit in bringing it about should logically pay to correct it, then why expect us "free range" cattle to pay for it?
Doesn't it logically follow that we should expect those top 0.01% "entities" that have extracted the bulk of financial gain from our "demise" to pay and spare those among us that have little more than food or a roof over our heads?
ie. The Mr/Ms Rothschilds, HSBC, Rio Tinto, Boing, etc.. and of course our illustrious Queen.
What logic explains to you how it is that Rothschild are poised to come out of this with yet even more $?
Have you even considered that we plebs are possibly being played for suckers once again? Do you ever admit to yourself "I'm not sure"?
Do you ever think for yourself?

Posted Monday, July 8, 2013 - 15:39

My name is Rockjaw and I am a Climate Change Denier.

I have not had a single sip of climate change guilt for over 38 years and I continue to doggedly refuse any support for the creation of yet another paper based derivative currency designed to vicariously function as a societal expression of guilt for the destruction of our environment when the proposed new currency's true purpose is to establish multi-national debt based economic tax, customs and banking zone.

If I do not do teshuva for failing to sip from this cup of guilt, do you think Big Brother might still allow me into socialist heaven?