Rudd Makes The Right Move On Carbon


Over the weekend, more than 1500 young Australians gathered in Melbourne to discuss and organise around an issue they consider critical to their future: climate change.

The Australian Youth Climate Coalition’s Power Shift conference represents the largest event of its type in the country. It’s an indication of the strength of climate sentiment amongst Australia’s younger voters, who are all too often taken for granted in our political process. With over 80,000 members, the AYCC is becoming an significant pressure group on the issue. Perhaps that’s why some of the best-known climate scientists in the world spoke and attended the event, including pioneering US climate scientist James Hansen and Climate Commissioner Tim Flannery.

New Matilda spoke to some of the delegates attending the conference. Sam Cooper grew up in Armidale before moving to Sydney’s northern beaches. “I had an incredible geography teacher in year 12 who told us all about climate change,” she told NM. “It was when I got to university and started to learn that the people who would be most affected by climate change are the ones who have done the least to cause it that I decided that I should stand up and do something about it.” She’s been volunteering for the AYCC since 2011.

Leonora Herwijer was also at Power Shift. “I think as soon as I found out the severity of climate change and what the impact could and will be if we don’t change our ways, I especially felt as a young person that I should do something for my future,” she said. “I was quite scared and concerned, but it also really wasn’t fair not to do something.” Herwijer is heavily involved in a campaign to build a solar thermal plant in Port Augusta in South Australia.

Echoing the sentiments of many at the conference, she wants to see Australia move rapidly to a completely renewable electricity grid: “We want to see investment in renewables so that we are transitioning to that 100 per cent renewables."

The scale and sophistication of Power Shift should worry the major parties, particularly those like the Liberal Party that have yet to truly embrace climate change as a transformative issue. Events at the conference included detailed campaign strategy workshops to finalise the AYCC’s plans for the 2013 election campaign. While much of the mainstream media stays fixated on asylum seeker policy and “the boats”, the AYCC is quietly mounting an Australia-wide grassroots campaign on climate that will aim to tap into the movement's increasingly active membership. 

While the conference was going on, Prime Minister Kevin Rudd was putting the finishing touches on a major announcement on climate change policy.

Speaking in Townsville on Tuesday, he announced that he was “terminating” the carbon tax. If Labor is re-elected, Australia to an emissions trading scheme one year early, and the carbon price will move from its current fixed price of around $25 a tonne to an open market, where the price will fluctuate according to international supply and demand.

“The Government has decided to terminate the carbon tax, to help cost of living pressures for families and to reduce costs for small business,” Rudd intoned.

“From 1 July next year Australia will move to an emissions trading scheme, one that is used around the world including in countries like Britain, like Germany and soon in China itself.”

As I argued a fortnight ago when the change was first mooted, the decision to move to a floating price is being driven by politics, enabling Rudd to announce he has axed Julia Gillard’s hated tax.

But, according to the experts New Matilda has spoken to, that doesn’t mean it is necessarily bad for the environment. In fact, the move to the floating price may actually help reduce carbon emissions.

The reason is that with the floating price comes a key carbon policy: the emissions cap. Under the fixed price scheme, Australia’s carbon pollution wasn’t capped. Emissions reductions were to be achieved by a reasonably high carbon price, starting at $23 a tonne, that would then transition to a floating price and a cap after three years. By moving forward the start of the floating carbon price, Kevin Rudd also moves forward the start of an economy-wide emissions cap.

According to Bloomberg New Energy Finance’s Kobad Bhavnagri, “we've actually done some analysis that from an emission perspective, starting an ETS one year earlier will mean emissions are lower than under a fixed price.”

“It’s essentially because with the ETS you have a cap,” he explained in a phone interview. “With the fixed price there's no actual demand created for offsets, outside of a few things you can buy from the carbon farming initiative, and even though that price is substantially higher, it’s still not really enough to drive abatement.”

According to Bhavnagri, “under a cap, domestic emissions will probably be the same, but what it will do is force a liable entity to buy an offset either from the international market or the European market, and therefore the demand for abatement is actually higher.”

Peter Castellas, CEO of the Carbon Market Institute, agrees. “What shouldn’t be lost in all this is that it’s going to place a limit on emissions, and we’re going to get a better outcome,” he told New Matilda this morning.

“The fundamental design of an ETS is that’s it’s a cap-and-trade scheme,” he continued. “Carbon equivalent emissions will fall over time, that’s the fundamental policy objective.”

“You can get caught up on price, but the principle behind the scheme is that it’s designed so that Australia meets its unconditional emission reductions target of 5 per cent below 2020,” Castellas said. “In this accelerated transition it is also bringing forward the overarching regulations that will ensure we have a mechanism in place to reduce the number of tonnes of CO2 that are emitted.”

That crucial point about the earlier move to an emissions cap has not been picked up by many political journalists, who have tended to neglect the policy details. But, according to Bhavnagri, the lower carbon price in the short-term won’t necessarily harm long-term investment in renewable energy and the so-called “clean tech” sector.

“No it won’t, actually,” he told us. “The thing is, in a carbon market when we talk about investment the price in one year is not really of that much importance. It’s about the long term price signal and the long term existence of policy.” Bhavnagri says he is quite bullish about European carbon prices towards the end of the decade. “We think that European price will recover quite strongly.”

One thing Rudd and Labor will be happiest about in the move to a floating carbon price is the space it has opened up between Labor and its political opponents on the issue. The Greens have signalled they will block any move to abandon the fixed price in the Senate, while the Coalition remains wedded to its increasingly convoluted “Direct Action” climate policy.

Greens leader Christine Milne is arguing that the current system is delivering excellent results and doesn’t need fixing. The Greens would of course like a much higher emissions cap than 5 per cent. “Kevin Rudd believes a 5 per cent emission reduction target is enough,” she said in a media doorstop this week. “This denies the science which requires a much higher level of ambition.”

Meanwhile, Opposition Climate spokesman Greg Hunt has been giving speeches in which he tries to explain how the Coalition’s plans to spend taxpayer money on purchasing emissions reductions are somehow a) not a tax and b) a fair-dinkum market mechanism. Good luck with that, Greg.

For their part, the Power Shift delegates are looking for much stronger action from Australia’s political leaders. “We’re quite disappointed,” Leonora Herwijer told us. “We want to see more ambition and what we’re seeing at the moment from both major parties is a lack of ambition what it comes to action on climate change.”

Additional reporting by Georgie Moore.

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