The Australian On Rudd’s Climate Change Policy

Very good Editorial in today’s Australian by Paul Kelly.  I hope all NZ policy makers read this as should those criticising our Government

THIS was the only way Australia was going to price carbon: with huge household compensation, help for trade-exposed industry, a modest absolute target equating to an ambitious per capita target and locking our effort into the global agenda.

John Howard, where are you now? This is a deft policy in which Kevin Rudd is Howard. Put precisely, Rudd is a green Howard. He has made climate change into a magic pudding. It is a work of political genius that would make Howard proud.

This is a huge fiscal churn: pricing carbon from just the top 1000 companies is a classic top-end revenue base with the proceeds distributed to households with a bias to the poor and families, where low-income families are over-compensated at 120 per cent, petrol is quarantined from price damage, new funds are created to assist small business and big businesses at risk win healthy protection money.

All the parts of this political machine are stolen from John Howard Incorporated. No wonder the Coalition is tight-lipped. If only Howard had realised emissions-trading policy could look like this. If you thought Howard’s GST compensation was generous – and it was – then have a look at Rudd’s even more generous carbon pollution compensation. It sure beats the hell out of the GST. Households get more money plus the moral vanity of telling the neighbours they are saving the planet.

Paraphrasing a famous line, Kevin is here to help you, help your pocket and help your planet. The greens and the scientists are still playing in the warm-up arena, having missed the main event entirely.

The policy papers are filled with increases in Family Tax Benefit A, Family Tax Benefit B, sweetheart deals for pensioners, special guarantees for motorists, rewards for self-funded retirees and proof of Labor’s commitment to equity. Appendix E of the white paper says the Rudd Government “will use every cent it receives from the sale of pollution permits to help Australian households and businesses” adjust to pricing carbon. In the first two years of the scheme, the extra revenue is $11.5 billion and $12 billion.

The message from Rudd’s policy is that politics has not been suspended and the world has not changed. Just the reverse. The wheels of government spin. Only the method of the tax-transfer system is modified and redirected in a new crusade to re-elect another government.

Rudd’s white paper occupies the middle ground of politics around a new structural reform.

This is how Australian democracy pioneers historic reforms. It is the same middle ground that Bob Hawke and Paul Keating used in the 1980s to carry their reforms, and it is the middle ground that Howard used to introduce his GST-led tax reform.

But the price of reform keeps increasing. Rudd cannot make everyone a winner but, at a carbon price of $25 a tonne, the cost-of-living impact is estimated at 1.1 per cent, less than the GST, with household compensation running at $9.9 billion during the first two years, which is far higher than for the GST.

The key to Rudd’s policy lies in its balance, its hip pocket and its idealism. “Our primary objective has been to get the balance right,” he says.

Like every successful PM, Rudd is pragmatic. He doesn’t pretend that Australia can save the world. He won’t jeopardise Australia’s interests by offering binding cuts unreplicated by others. And he refuses to privilege climate change science with an absolute command of the public policy.

The feature of the climate change debate during the past six months has been its fantasy element: the range of people who deluded themselves into thinking the rules of Australian politics and public policy had been abolished. That didn’t happen in World War I or World War II and itwon’t happen in the climate change war.

The scientists, frankly, should heed the lesson from this decision. They don’t grasp what is happening. They risk seriously misreading this issue in Australia and globally.

Rudd’s unconditional reduction target of 5 per cent by 2020 off 2000 levels with the option to lift to a 15 per cent reduction constitutes the policy balance the Australian community expects from its leaders.

It is not a sell-out.

The 5 per cent target (taking note of Australia’s high population projections) equates in per capita terms to a 27 per cent reduction. The 15 per cent target – Rudd’s option if the world concludes a tougher global deal – equates to a 34 per cent per capita reduction. Such Australian goals are comparable with or tougher than counterpart EU per capita targets.

President-elect Barack Obama’s position is for the US to return to 1990 emission levels by 2020, or a zero reduction. Obama, presumably, will be pushed further in global negotiations. But this benchmark represents a 25 per cent reduction in per capita terms. So Rudd’s targets compare favourably with those of other industrialised nations.

This reality has been apparent for some time. It was documented at length by Ross Garnaut.

The propaganda campaign by greens, scientists and non-government organisations for Australia to embrace an unconditional 25per cent to 40 per cent reduction target was always doomed. Rudd concluded this required too extreme an adjustment for Australia and too great an exposure compared with lesser efforts from other nations.

There is no prospect the Obama administration will commit to such 25per cent to 40 per cent reductions. The Australian Government has long recognised this reality. The EU’s campaign to this effect created a benchmark that originated in science and not global negotiating reality.

The key to the genuine global progress lies elsewhere: in a deal between the US and China. The question is how much extra Obama must move to force China across a threshold to stronger action creating the basis for a global compact. When they meet, this will be Rudd’s message for Obama.

The immediate politics will assist Rudd and create a dilemma for the Malcolm Turnbull-led Coalition. Rudd is selling two ideas. First, Labor has acted on climate change. It made the promise and it honoured that promise. The scheme will start in 2010 and be in its infancy at the next election. Rudd will depict himself as a hero who responded to the climate change threat “to our people, our nation and our planet”.

Every delaying tactic by the Coalition will be painted as proof of climate change scepticism. Labor will turn this against Turnbull in his own seat. Rudd wants to negotiate Senate passage with the Coalition and this will become a political wedge against Turnbull. If Turnbull resists he becomes a sceptic; if he agrees he faces an internal revolt. Meanwhile Rudd will define Labor forever as the party that acted on climate change.

Second, Rudd depicts his action as the essence of responsibility, recalling his fiscal conservatism in 2007. Unlike the Australian Greens, Rudd says he gets the balance right between “a scheme that reduces carbon pollution and supports economic growth”. Rudd will sell his scheme as pro-jobs.

The economic consequences of this policy will take several years to have an impact. In the near term this policy is the moment when climate change and happy families came together.

 

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One Response to “The Australian On Rudd’s Climate Change Policy”

  1. adamsmith1922 Says:

    Your readers might care to glance at this piece

    http://adamsmith.wordpress.com/2008/12/17/11555/

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