How many, other than those steeped in environmental science, have a clear idea about what is entailed in the Government’s CPRS? Ordinary people could be forgiven for feeling that they are flying through thick climate change fog in an ill-defined direction towards an uncertain destination, with the flight crew being harangued by reluctant passengers, some wanting to turn back because they never wanted to embark in the first place, with others wanting to continue but in a different albeit hazy direction.
The CPRS to be presented to the Senate on 13 August has been described as a dog, a deeply flawed scheme, a pointless exercise that will make a negligible difference to environmental pollution. Such generic descriptors do nothing to clarify what has always been, and increasingly is confusing to the average citizen. Words like ‘deeply flawed’ or the canine metaphor are singularly unhelpful. [more]
This piece attempts to dissect out the flaws that opponents talk about unremittingly but rarely define, with the hope of clarifying what they are, what they mean, what might possibly be done about them, and whether the term ‘flaw’ is applicable at all.
The piece is not about proving that global warming is occurring and that it is mainly anthropogenic. Whether that is incontrovertibly so has never been the crucial question. The crucial question is whether the risk that this is so is sufficiently high to demand drastic action. To most that seems self evident, but there are still deniers of climate change and AGW who believe the whole issue is a furphy, even a conspiracy, and that no action is needed. So let’s leave that debate for another time.
So what are these CPRS flaws? Why are they seldom clearly articulated? Let’s try to deduce what they might be.
We’ve heard that thousands of jobs will be lost with the CPRS, perhaps hundreds of thousands. Heavy losses are predicted to occur in the coal and related industries. This is predicated on coal mining being curtailed, perhaps severely. But there are mechanisms in the legislation to compensate miners, so we don’t know how bad the job losses will be and how rapidly they will occur. But that does not stop worst case scenarios being painted by opponents of the CPRS, none of whom mention that other jobs will be created to at least partly compensate for job losses in the affected sectors. There are bound to be structural changes. So are job losses or job changes flaws in the scheme, or simply the inevitable consequence of moving to a low carbon economy?
Industries dependent on coal or coal-fired electricity generation are cited as vulnerable and likely to suffer cost blowouts, loss of production and consequent loss of jobs. Is this too a flaw, or simply an expected outcome?
Some industries and small businesses are said to be threatened with such increased costs that they will suffer financial loss, possibly bankruptcy and closure, and as a result will export production, jobs and pollution overseas. These too are cited as flaws of the scheme. Malcolm Turnbull seems to be suggesting this is so in his press release last Friday: “Every party and interested group except the Government agrees that Labor’s ETS legislation is flawed and must be improved if we are to save jobs, protect small business and industry in Australia and prevent production and carbon leakage which frustrates any net global CO2 abatement.”
Under the CPRS legislation all these affected sectors are subject to compensation for unavoidable losses, which is intended to ameliorate the situation if not entirely resolve it. This is scarcely mentioned in worst case scenarios.
The rent-seekers in affected sectors are asking for more compensation, predicting catastrophe without it, while the environmentalists are remonstrating about giving them compensation at all. So is giving compensation a flaw? Or is not giving enough a flaw?
Is the scheme too complex to understand, or too difficult and costly to administer? Are these the deadly flaws to which people refer?
Malcolm Turnbull, in an attempt to be relevant in this debate, and to avoid giving the Government an election trigger, issued a nine point ‘set of claims’ in a press release at 5.30 pm on Friday 24 July. You can read the full release here.
Part of the preamble reads:
“The Coalition supports an environmentally effective and economically responsible ETS in Australia as part of a co-ordinated global response to climate change. In our view, the design of the Australian ETS should be completed following the passage of the United States ETS legislation (the Waxman Markey Bill) through the US Congress and the conclusion of the Copenhagen Climate Summit in December.”
Turnbull goes on to say that if the Prime Minister is determined to force an earlier vote on this legislation, the Coalition would be prepared to consider supporting the legislation prior to the Copenhagen Summit, so long as the principal issues set out in a nine point plan are addressed. He reiterated this on ABC’s Insiders this morning.
Here is an abridged version of the nine-point plan. Does this point to the flaws in the scheme?
1. An Australian ETS should offer no less protection for jobs, small business and industry than an American ETS.
2. There must be an effective mechanism to ensure that the ETS does not materially disadvantage Australian industries and workers relative to American industries and workers.
3. To ensure that an ETS does not result in carbon and production leakage – exporting the emissions and the jobs – Emissions Intensive Trade Exposed industries (EITEs) should at least be on a level playing field with the United States and other advanced economies and should therefore receive full compensation for higher energy costs.
4. Fugitive methane emissions from coal mining should be treated in the same way as they are in the United States and Europe.
5. As in the Waxman Markey legislation agricultural emissions should be excluded from the scheme and agricultural offsets (e.g. bio-sequestration or green carbon) should be included.
6. The scheme design must ensure that general increases in electricity prices are no greater than in comparable countries.
7. Electricity generators should be fairly and adequately compensated for loss of asset value to ensure capacity to invest in new abatement technology and to fund maintenance of existing facilities.
8. Effective incentives and/or credits must be established to capture the substantial abatement opportunities offered by energy efficiency, especially in buildings.
9. There must be adequate incentives for voluntary action which can be added to Australia’s 2020 target.
The first five items relate to the Waxman Markey Bill which has been approved by the US House of Representatives but is yet to pass the US Senate. The final form of any legislation may be materially different from Waxman Markey and will not be known until later in the year.
None of the items is in the form of amendments, for which Penny Wong has called. She has labelled them as simply aspirational, something that might be expected from a Young Liberals conference. In rejecting this assertion as arrogant, Turnbull has intimated that it will not be possible to draw up amendments before 13 August, his reason being that much of the detail of the CPRS is in the regulations, the full version of which is still to be revealed. No doubt it will be possible to draft such amendments in due course, but how legislative measures in Australia’s federal parliament can be dependent on legislation in another country’s legislature when the remote legislation is not finalized is still to be explained Until the US legislation is finalized, parallel amendments here seem implausible.
Whether Turnbull can carry his party room to endorse the amendments he hints he wants is another matter. That difficulty might scuttle the whole process of collaboration with Government he seeks. For its part the Government is not going to make it easy for Turnbull to look as if he and his party are contributing meaningfully to the CPRS debate. It will point out that because Turnbull’s proposals will cost more and generate less revenue the cost neutrality of the scheme will be compromised. It’s all very political and will stay that way.
But to get back to the initial question of what the flaws are in this ‘badly flawed’ CPRS scheme, this ‘dog’, unless I’m missing something important, it seems that the flaws to which Coalition members refer can be boiled down to increased costs to industry and consumers, loss of production, loss of jobs, structural changes to the workforce, transfer of pollution elsewhere, and administrative difficulties. These seem natural consequences of moving to a low carbon economy. If that is the case, instead of talking generically about flaws, as if they are immovable and mysterious evil spirits that afflicts the scheme, why can’t politicians just say what they are, and thereby remove much of the fog and mystique enveloping the CPRS? And why can’t proponents simply say that affected industries, individuals and consumers will be compensated, although structural changes will be necessary and pain cannot be entirely avoided in the evolution of our economy to a low carbon one?
For the Greens, perhaps the most lamentable flaws are carbon mitigation targets set too low, and compensation for affected industries, especially coal mining and coal-fired electricity generation, set too high. At least these ‘flaws’ are comprehensible even if one does not agree with them.
So can we stop talking endlessly about flaws, be more specific about what really might be a genuine flaw, and desist from labelling the inevitable consequences of a low carbon economy as flaws, or a dog for that matter.
Another thing. The ‘waiting-for-everyone-else-to-act-first’ is superficially plausible only if it’s true that AGW is a furphy. Why act and disadvantage the country if there’s no problem? But if there is a deadly and dangerous problem, standing back hoping someone else will act looks like bystanders witnessing a brutal assault, blithely leaving it to someone else to intervene while the victim dies.
What do you think?
POSTSCRIPT
For those who might be interested in the progression of the emissions trading scheme, the following links are offered.
It was on 21 July 2008, before The Political Sword began, that I first attempted to throw light on what was then called a emissions trading scheme in an article on Possum Pollytics Possum Box A plain man’s guide to an emissions trading scheme. It attempted to explain the terms used and the concept.
The Garnaut Report came out first as Draft and Supplementary Draft Reports in June and September 2008, and the Garnaut Climate Change Review Final Report was published on 30 September 2008.
The Government’s Carbon Pollution Reduction Scheme home page is where you can access the Green Paper released in July 2008 and the White Paper released in December 2008, both authored by Kevin Rudd, Wayne Swan and Penny Wong.
After the Green Paper there was some Treasury modelling and the publication of Australia’s Low Pollution Future Fact Sheet. There was also a paper by Penny Wong and Wayne Swan Australia's Low Pollution Future - The economics of climate change mitigation - Summary.
On 3 November there was a piece on TPS The CPRS, Treasury modelling, and the predictable reaction.
After the White Paper there was a piece on TPS on 16 December. The convoluted politics of climate change.
In June 2009 Steve Fielding queried the existence of carbon dioxide generated global warming and posed three questions to Penny Wong. Her response is here.
There was a Review of the proposed CPRS prepared for the Menzies Research Centre by the Centre for International Economics in April 2009 which you can view here.
I have listed all the reports I have. If any reader has links to any other reports on the subject, please let me know.
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