In a press conference today, with Al Gore, Clive Palmer announced that his party will vote in the Senate to repeal the carbon tax. On one condition: That energy companies are legally required to pass any savings on to consumers.
He also said he wants to replace the carbon tax with an emissions trading scheme (ETS) that would come into effect when our main trading partners (China, Japan, the US and South Korea) implement schemes of their own.
And, lastly, he said he’ll oppose:
- The abolition of the Climate Change Authority (CCA) – The Authority provides expert advice on Australian Government climate change mitigation initiatives.
- The abolition of the Clean Energy Finance Corporation (CEFC) – A body that invests in renewable energy generation.
- Any cuts to the Renewable Energy Target (RET) – The RET is the proportion of electricity we get from renewable sources. Our current target is 20% by 2020.
So is his announcement good or bad?
I’d rather keep the carbon tax
In reality, the carbon tax and the ETS are pretty much the same thing. They’re both ‘carbon trading’ or ‘carbon pricing’ mechanisms. Both require polluters to pay the government a certain amount for each tonne of greenhouse gas they emit.
The biggest difference is that the carbon tax costs polluters more. ($24.15 per tonne of CO2 emitted, as opposed to around $6 per tonne.) And in my book, that’s a good thing. If we cut it, we’ll not only remove a proven effective disincentive to pollute, but we’ll also lose around $7.6 billion per year in government revenue.
(Here’s a simplistic summary of the technical differences, if you’re interested. Under the carbon tax system, the government sets the price, whereas under an ETS, the market sets the price. The ETS is like a pollution auction: Companies bid on a limited number of ‘units’, where each unit is the right to emit a certain amount of CO2. This not only sets the price, but also caps emissions: Because there are only a certain number of units available, there’s an actual limit on the total emissions that all our companies can produce.)
But the carbon tax was always a temporary thing
Labor introduced the carbon tax as a temporary measure in 2012. They always planned to switch to an emissions trading scheme next year. (They talked about bringing this back to July 1, 2014, but it never happened.)
In other words, Clive’s proposal was really what Labor was going to do anyway. Except for one thing…
Clive wants to wait for the rest of the world before making polluters pay – That’s not good
During his press conference speech, Clive said:
This scheme would only become effective once Australia’s main trading partners also take action to establish such a scheme.”
This, I really don’t like. Why wait ’til other countries do it? Why not be the leaders? After all, we’re the leading greenouse gas emitter per capita, so it only seems fitting.
- China is currently piloting an ETS in 7 cities, with a view to rolling out a national scheme within the decade.
- Japan is refusing to introduce a national scheme.
- The US has schemes in some states, but Congress has blocked a national scheme.
- South Korea is starting a national scheme in 2015.
What’s more, if we can survive more than 2 years of the carbon tax (at more than $23/tonne), I’m sure we can survive a few years of an ETS (at around $6/tonne)…
Worse, we may end up with nothing at all
In his press conference, Clive said:
In voting against the abolition of the Climate Change Authority, Palmer United senators will move an amendment to establish an emissions trading scheme.”
This means the ETS isn’t a condition of his vote on the carbon tax bill. It’s a condition of his vote on another bill entirely. I thought he might have mispoken at his press conference, but Clive confirmed this position in an interview with Tony Jones on Lateline last night:
Tony: Your senators plan to pass legislation repealing the carbon tax… Will it be contingent on an emissions trading scheme?
Clive: The repeal of the carbon tax is contingent upon the government bringing into law a system where the energy producers will refund the benefit to their consumers…
Tony: But you won’t make your repeal of the carbon tax contingent on any of these other things you want to see happen?…
Clive: That’s right.”
In other words, he’s simply going to vote with the Coalition to repeal the carbon tax, unconditionally, and hope that his ETS amendment gets up. If it doesn’t, we could end up with no carbon tax and no ETS. Or as economist and Former Australian Minister for Trade and Competitiveness, Dr Craig Emerson, says:
…will commence following the repeal of the carbon tax.” (p.3)
The House of Reps would naturally approve this plan (the Coalition has the majority there), and it’ll be passed to the Senate for approval. You’d assume Labor, the Greens and PUP would oppose it there, but if Clive is silly (or crafty) enough to let this situation occur in the first place when he has the balance of power, that may not be a safe assumption…
This would all be a crazy outcome! Especially as all Clive has to do to get an ETS is oppose the repeal of the carbon tax and wait until next year, when the carbon tax will automatically become an ETS. It’s already legislated!
We don’t want Abbott’s ‘Direct Action Plan’
Abbott’s Direct Action Plan is completely different from the carbon tax and ETS. Instead of making companies pay to pollute, he wants to pay them NOT to pollute. Or, put another way, he wants taxpayers to fund the cleanup, not the polluters themselves.
This would cost us $7.6 billion per year in lost revenue from the repealed carbon tax, plus another $3 billion in handouts to polluters. Plus there’s all the admin overhead and thousands of extra staff that would be required to process grant applications. Indeed, the OECD conducted a study which found subsidy schemes like Direct Action to be far less cost effective than carbon pricing:
The highest costs by far per tonne of CO2 abated are associated with various capital subsidies… The lowest costs per tonne abated were for trading systems, in line with classical economic theory – a fact which confirms “textbook suggestions” that trading systems (and broad-based carbon taxes) are the most economically efficient policy tools to mitigate climate change.”
Experts have noted many other problems with Direct Action too, including difficulty verifying emissions reductions, a propensity for short-term gains, an inability to cap emissions across the board, and a tendency towards a culture of entitlement.
So you can see why I wouldn’t want that to be passed! :-\ (I’m not alone either. Only 22% of Australians support it.)
Carbon pricing (either the carbon tax or ETS), on the other hand, has been cited by the World Bank, the OECD and the IMF as the best approach for reducing greenhouse gas emissions. This has certainly been the case in Australia. Emissions from companies covered by the carbon tax fell 7% in 2012–13.
Al Gore’s involvement is a good sign… in the long term
I can only guess at Al Gore’s reasons for taking part in all this. It’s strange that he’d help announce the repeal of a carbon tax, so he must have his own agenda. I suspect his goal is to get America’s trading partners moving on ETS schemes, so there’s less resistance to an ETS back at home. Congress has proved a sticking point for a US ETS in the past, but if all their trading partners have one, there’ll be fewer excuses.
If I’m right, this is a good sign, globally, but from Australia’s immediate perspective it’s a bit unfortunate. It looks to me that he’s treating us as a loss-leader. We’ll lose out in the short-term by exchanging a profitable, effective carbon tax for a zero-rated ETS. But the world will win in the long-term.
There’s also the possibility that Gore’s doing this to pressure Abbott into adding climate change to the agenda of November’s G20 conference (Australia is chairing it this year, in Brisbane). The US and EU have repeatedly asked that it be added, but Abbott has repeatedly refused. Despite the fact that most Australians think it should be on the agenda:
The rest is good news too
Clive’s other announcements are great news…
Firstly, he’s opposing the abolition of the Climate Change Authority (CCA). This is great because the CCA provides independent research and analysis, which is critical in this age of misinformation and climate change denial.
Secondly, he’s opposing the abolition of the Clean Energy Finance Corporation (CEFC). Again, great for Australia, because the CEFC has not only helped reduce emissions by funding renewable energy ventures, it’s also been operating at a 7% profit – about $200 million per year in revenue for the government!
And finally, he’s opposing any cuts to the Renewable Energy Target (RET). This target is successfully reducing emissions and will lower electricity bills. Abbott has been trying to reduce/abolish it since winning office, despite the fact that 71% of Australians want to retain or increase it. He commissioned a review soon after the election, with a hand-picked panel of climate-science skeptics, who then chose a firm to crunch the numbers, and EVEN STILL, the figures show we’ll be better off economically if we retain our target. More so if we increase it:
…household bills will be higher in the years to 2020 but after that they will start to fall and consumers will be better off by an average $56 a year from 2021 and $91 a year from 2030.”
So overall, I think there’s more good than bad
BAD: I’d rather see Clive block the repeal of the carbon tax. Then it would switch automatically to a low-rate ETS next year, and polluters would continue to pay, throughout. Instead, he’s angling for a zero-rate ETS from July, so polluters would stop paying next week, and may not start paying again for years.
BAD: But if he must vote to repeal the carbon tax, and he must have a zero-rate ETS, then I wish he’d only do the first in return for the second. i.e. Make his carbon tax vote conditional. As things stand, we could end up with neither.
UNSURE: It’s possible that Clive’s ETS could be used to fast-track ETS schemes in other countries (especially the US, but also Japan). But if this is going to happen, surely it would have happened next year anyway, when the carbon price automatically switched to a low-rate ETS. Maybe Gore thinks the extra year will make a difference?
GOOD: I’m ecstatic that Clive’s voting to keep the CCA, CEFC and RET. This is great news! And probably outweighs the negatives above.
So although it’s not black-and-white, I think the there’s more good news than bad in Clive’s announcement. And from what I’ve read, most of Australia’s environment movement agrees.
But that doesn’t mean CLIVE is more good than bad
Clive’s a mining baron, and no matter how affable he appears, no matter how straight-talking, we have to remember that. This is the bloke whose nickel refinery pumped toxic waste into the Great Barrier Reef park, and threatened to sue them if they tried to stop him. The guy who admits to rigging (bribing) opinion polls. The guy who sued the government because they rejected a railway proposal, then offered to drop the suit if they backed a mining proposal. The guy who still thinks big political donations are fine. So to assume he has the environment and the people in mind may be a bit optimistic. Sure, it’s possible he had a change of heart, but this first move doesn’t necessarily suggest that. It looks more like he’s simply swapped a carbon price for no carbon price.
What did you make of Clive’s press conference?
Please comment with your thoughts.