The Rudd Government's Green Paper will no doubt earn the ire of some climate and environmental organisations for its gradualist approach to emission reduction.
Petrol is in the scheme but compensated by 'cent-for-cent' excise reductions until 2013. Agriculture is out until further notice (possibly starting in 2015) and coal power generators will receive government assistance. The Government appears to be easing voters into copping nanoeconomic pain, by hitting them first with upfront power bills (softened to an extent by increased government payments). This suggests that fast tracking renewable energy - as indicated by the proposed 20% national renewable energy target by 2020, is seen as a more palatable and effective option for achieving emission reductions. If stationary energy emissions make up 50% of all emissions, rising to close to 60% by 2020, a 20% rise in renewable market share would achieve between 10-12% emission reductions. That would suggest that Rudd's interim emissions target cannot be much higher than about 15% by 2020 from the current nominated suite of abatement options. Even to achieve these savings will require a considerable improvement in fuel efficiency and or energy efficiency at the current target levels. Such a target looks low by world standards and will barely be in the pack once developed nations crunch the carbon numbers.
This may well be the genius of Rudd's plan. The bar is so low that it reflects a pragmatic Liberal policy wish list. So low that in one sentence Nelson chastisted Rudd for lifting their excise-permit neutral idea and in the next called it a petrol tax. The end result of Labor's policy is that it puts the onus on the people to push it to take more action. It is almost the minimal possible response without jeopardising the integrity of action altogether. Rudd has effectively offered an election year handout with the electricity rebates and absolved the government of responsibility for excessive petrol hikes.
Nelson is left in nanoeconomic limbo. He has to either junk the scheme entirely or have a technical debate over the merits of 2012 action. Nelson has flirted with a faux policy debate about the hybrid model but if anything has smacked of 'The Hollowmen' in national politics, that search for an alternative was it. Possibly locking Turnbull, Hunt and Bishop into his Central Coast caravan for a weekend and designing a proper policy alternative would be more beneficial both to the debate and the long-term coherency of his party.
At the minute his argument boils down to 'there's a right way to do it (mine) and a wrong way (Rudd's)'. If the excise cut is my idea it's good policy and if it's his policy it is bad. The fact that all this operates in the future - i.e. after the battle has been won at the polls, makes Nelson's 'Rudd's 2013 review is Rudd-speak for ending the excise cut' ring hollow. If Rudd is to pay for injudicious action it will be in 2010. If he is to pay for inaction it will be 2013.
The scheme offers so much to the vulnerable polluters and the kind of targeted compensation scheme now becoming the Rudd trademark that it is highly unlikely the final draft will be any weaker. If anything, the challenge is being thrown down to voters to tell the government they want action and are prepared to pay for it.
Watching Penny Wong at the Press Club demonstrated a player in control of her material, confident in the merits of the argument and open to being pushed to further action. Watching Greg Hunt on Lateline demonstrated a puppet forced to parrot a line he did not believe in, wishing he had something coherent if not constructive to say. Only when Hunt got onto his pet subject of solar panel rebates did he seem to have conviction. Perhaps he should show some boldness and adopt the German bipartisan solar feed-in tariff where homeowners get four times the price for their surplus solar energy fed into the grid.
The danger with Rudd's policy is that in forcing the Liberals over the climate cliff, it will force a very swift acceleration of targets in the medium term. But by then Greg Hunt might be PM.
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Wednesday, July 16, 2008
Friday, July 4, 2008
The political inversion of the climate change debate
A number of journalists ranging across the spectrum from Fairfax's Annabel Crabb to News Limited stalwarts Dennis Shanahan and Andrew Bolt have identified the apparent contradiction between Rudd's 'I feel your pain' pitch to 'battlers' (or as the Piping Shrike has put it 'The New Sensitivity') and the inherent need for energy prices to rise to combat climate change.
On paper, it looks like a recipe for a Latham-Downeresque implosion. However, it both gives the voters no credit by implying they cannot hold two ideas in their collective heads at the same time and misunderstands the reasons for Howard's demise. Firstly, it is a well-established fact that voters can differentiate between state and federal politics. For at least two terms of the Howard government, large swathes of the country voted for completely different parties at the state and federal level. In fact, where Labor has run into trouble in the past is by dismissing many voters as 'ignorant' or 'unsophisticated'. The key basis of politics is persuasion, and a failure to persuade, while open to inteference from outside forces, ultimately comes down to whether the audience sees an essential truth in your message and your capacity to deliver. Rudd seems to be aware of the dangers of underestimating the public mind.
Secondly, Howard's fall from grace came from Rudd altering the economic debate from the macroeconomic level to the nanoeconomic level. Hence he recognised the problems of petrol and grocery price vulnerability and promised government assistance around the margins. Petrol and food prices operate however as free markets without government command and control influence, so real power here is limited to a 'watching brief', keeping an eye on price fluctuations and opening up the field for more competition.
What Rudd aims to do with climate change is again redefine the economic debate, this time on the macroeconomic level. Setting a price for carbon will integrate environmental costs into the economic system. That is the first step. The second will be for environmental and economic management to be seen as covalent. The third step is to break the nexus between economic growth and environmental emissions growth thus ensuring a political, economic and environmentally sustainable future. Unlike previous reforms such as the GST, support for an emissions trading scheme is consistently over 50%, while opposition sits around 25% with around 20% of people waiting to hear more details. Thus aligning economic and environmental action is what the people want at this point in time.
Unlike petrol and food commodities, the Rudd Government will have the power to set the starting price for carbon, define the parameters of the market and redistribute revenue from carbon permits to compensate the people. This market will afford government a measure of control rather than the watching brief seen in the nanoeconomic field.
The other thing that climate change does is transform energy increases into issues of personal responsibility. It thus becomes almost a civic duty to accept and embrace higher energy prices and encourage a larger share of renewable energy usage. In this climate, the goodwill to government is not dependent on keeping prices down but ensuring there is appropriate action being taken which is manageable on both the national and personal level. So government will both have more power to act and a proportionally lower need to act to ease public concerns.
The critical factors with the climate change carbon transition process will be the quality of the Rudd Government's communication with the people and its capacity to persuade voters that action is in all our interests. On this, expect to see a lot of Garrett and Rudd, and very little of Wong, who will be behind the scenes dealing with business and other large stakeholders.
On paper, it looks like a recipe for a Latham-Downeresque implosion. However, it both gives the voters no credit by implying they cannot hold two ideas in their collective heads at the same time and misunderstands the reasons for Howard's demise. Firstly, it is a well-established fact that voters can differentiate between state and federal politics. For at least two terms of the Howard government, large swathes of the country voted for completely different parties at the state and federal level. In fact, where Labor has run into trouble in the past is by dismissing many voters as 'ignorant' or 'unsophisticated'. The key basis of politics is persuasion, and a failure to persuade, while open to inteference from outside forces, ultimately comes down to whether the audience sees an essential truth in your message and your capacity to deliver. Rudd seems to be aware of the dangers of underestimating the public mind.
Secondly, Howard's fall from grace came from Rudd altering the economic debate from the macroeconomic level to the nanoeconomic level. Hence he recognised the problems of petrol and grocery price vulnerability and promised government assistance around the margins. Petrol and food prices operate however as free markets without government command and control influence, so real power here is limited to a 'watching brief', keeping an eye on price fluctuations and opening up the field for more competition.
What Rudd aims to do with climate change is again redefine the economic debate, this time on the macroeconomic level. Setting a price for carbon will integrate environmental costs into the economic system. That is the first step. The second will be for environmental and economic management to be seen as covalent. The third step is to break the nexus between economic growth and environmental emissions growth thus ensuring a political, economic and environmentally sustainable future. Unlike previous reforms such as the GST, support for an emissions trading scheme is consistently over 50%, while opposition sits around 25% with around 20% of people waiting to hear more details. Thus aligning economic and environmental action is what the people want at this point in time.
Unlike petrol and food commodities, the Rudd Government will have the power to set the starting price for carbon, define the parameters of the market and redistribute revenue from carbon permits to compensate the people. This market will afford government a measure of control rather than the watching brief seen in the nanoeconomic field.
The other thing that climate change does is transform energy increases into issues of personal responsibility. It thus becomes almost a civic duty to accept and embrace higher energy prices and encourage a larger share of renewable energy usage. In this climate, the goodwill to government is not dependent on keeping prices down but ensuring there is appropriate action being taken which is manageable on both the national and personal level. So government will both have more power to act and a proportionally lower need to act to ease public concerns.
The critical factors with the climate change carbon transition process will be the quality of the Rudd Government's communication with the people and its capacity to persuade voters that action is in all our interests. On this, expect to see a lot of Garrett and Rudd, and very little of Wong, who will be behind the scenes dealing with business and other large stakeholders.
Wednesday, June 25, 2008
Breaking the economic - emissions growth nexus
The realpolitik challenge of climate change lies in its economics. Although governments and environmental movements alike have long advocated the use of market mechanisms such as emissions trading in concert with traditional regulation and conservation measures, the major stumbling block to building a universal consensus for action is the link between economic growth and emissions growth.
It is axiomatic that, while powered predominantly by fossil fuels, economic growth will result in an increase in carbon emissions. This makes economic transitions from developing to developed countries have an exponential effect on carbon levels and push the atmosphere into dangerous territory. It paradoxically makes the problem more urgent and less amiable to agreement and action. Hence overtly capitalist, free-market theorists and commentators dismiss the need for climate change and heavily critique emissions trading despite its core reliance on market principles.
It is clear that unless this nexus is broken, we will find out exactly how much effect carbon can have in the atmosphere. The key to breaking this nexus comes when our power supplies need to either be replaced or augmented with new installations. That means that renewable energy and low emissions technology such as gas have to be utilised in a way that makes them economic competitors with fossil fuels.
The key tools for this task are a thorough assessment of power station requirements, an emissions trading scheme recognising the true price of carbon, international targets for renewable energy production to stimulate development, international accounting charting a decline in emissions growth versus economic growth, adequate compensation mechanisms for people overly affected by increased prices, vigilant regulators preventing profiteering, removal of artificial barriers supporting coal and oil over gas and encouragement of technology adoption through government initiatives.
We need to attack assumptions such as the supposed inability of renewables (or anything other than nuclear or coal) to produce baseload power. We need to encourage innovative technology and find ways to exploit our geothermal, solar and wave resources rather than our oil. Gas and energy efficiency can set the ball rolling, but wave, solar and wind technology must be facilitated to become more efficient and cheaper.
In short, we need to recast, redefine and adapt our economic structures and the energy delivery systems that power them to subsume environmental and economic responsibility into the one concept. We need to set meaningful targets, design appropriate processes and coordinate action and encourage innovation.
It is axiomatic that, while powered predominantly by fossil fuels, economic growth will result in an increase in carbon emissions. This makes economic transitions from developing to developed countries have an exponential effect on carbon levels and push the atmosphere into dangerous territory. It paradoxically makes the problem more urgent and less amiable to agreement and action. Hence overtly capitalist, free-market theorists and commentators dismiss the need for climate change and heavily critique emissions trading despite its core reliance on market principles.
It is clear that unless this nexus is broken, we will find out exactly how much effect carbon can have in the atmosphere. The key to breaking this nexus comes when our power supplies need to either be replaced or augmented with new installations. That means that renewable energy and low emissions technology such as gas have to be utilised in a way that makes them economic competitors with fossil fuels.
The key tools for this task are a thorough assessment of power station requirements, an emissions trading scheme recognising the true price of carbon, international targets for renewable energy production to stimulate development, international accounting charting a decline in emissions growth versus economic growth, adequate compensation mechanisms for people overly affected by increased prices, vigilant regulators preventing profiteering, removal of artificial barriers supporting coal and oil over gas and encouragement of technology adoption through government initiatives.
We need to attack assumptions such as the supposed inability of renewables (or anything other than nuclear or coal) to produce baseload power. We need to encourage innovative technology and find ways to exploit our geothermal, solar and wave resources rather than our oil. Gas and energy efficiency can set the ball rolling, but wave, solar and wind technology must be facilitated to become more efficient and cheaper.
In short, we need to recast, redefine and adapt our economic structures and the energy delivery systems that power them to subsume environmental and economic responsibility into the one concept. We need to set meaningful targets, design appropriate processes and coordinate action and encourage innovation.
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