Is Clive the climate king or clown?

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Well, what can I say? From the AFR:

Clive Palmer has thrown the government’s carbon tax repeal plans into ­disarray by teaming up with former US vice-president Al Gore to demand Australia be part of a global emissions trading scheme which doesn’t exist.

In an announcement in Canberra on Wednesday night, which the government said it was prepared to consider, Mr Palmer said he would repeal the carbon tax as he promised, but he will also insist the government keep associated ­climate programs, scrap its “direct action” policy and adopt an emissions trading scheme.

The trading scheme, a market mechanism that places a floating price on carbon, would have to be globally linked and would have a zero price on carbon until Australia’s main trading partners – the United States, China, Japan and Korea – joined Australia and the European Union with trading schemes of their own.

Only then would a price be put on carbon based on what the other nations had done. There is no indication that this would happen any time soon.

And on his climate conversion, from the SMH:

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The enigmatic mining magnate defended his previous doubts about pricing carbon and his questioning of the science behind anthropogenic global warming.

“All of us can change our view given more information and Al Gore was good enough to come to Canberra to talk to me and discuss issues with me and he took the challenges I gave him on a number of things and I’m satisfied it is a matter of great concern,” he said.

So Clive converted the afternoon of his announced policies? The cunning of Clive’s move is obvious. He still gets to cut his own tax bill but can’t be so clearly blamed for it. It’ll be a huge vote winner, allowing the punters to believe they’re contributing to climate mitigation but not getting ahead of the pack. It wedges the Libs, Labor and the Greens all at once, casting them all as extreme.

Palmer United is calling for:

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  • retaining the Climate Authority
  • retaining the Clean Energy Finance Corporation
  • retaining the Renewable Energy Target (RET)
  • replacing the carbon tax with an emissions trading scheme priced at zero, and
  • the abolition of “Direct Action”.

What does that achieve, you may well ask? First of all, it turns climate change discussion into a personality disorder in which black is white, up is down, left is right, inaction is action, action is inaction and confusion the only constant.

The carbon tax is an emissions trading scheme with a very short term fixed price. It is already going to be linked to the EU scheme in one year, enabling local business to buy carbon permits for the current EU price of $9. Palmer’s proposal presumably breaks this link if it’s got a price ceiling at zero so it works against international emissions trading.

Moreover, the problem with the alternative “Direct Action” policy platform was not that it did not work. Paying polluters to shut down does reduce carbon output. The problem is that it is far less efficient than an ETS (ie, more expensive). Rather than a simple widespread price causing behavourial change everywhere in the most efficient manner possible, you have a handful of bureaucrats throwing darts at specific targets, with all of the accompanying distortions, including higher energy prices. But it did at least work, if funded properly, which it was not. Abolishing it means the mitigation project will now fall exclusively upon the renewable energy target to generate lower emissions change.

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Is the RET up to it? That depends upon how big it is and what your carbon reduction target is.

Australia has pledged to reduce it carbon output by between 5% and 25% below 1990 levels by 2020. We’re currently headed for the less ambitious target, which may make us happy but in reality it is nowhere near enough to meet reduction targets that will keep temperature rises to a global average of 2%, the agreed threshold of dangerous climate change. The Climate Institute sums it up:

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Modelling by the Treasury for the CCA…shows that abatement at the price incentives required by the budget constraints on the ERF the Government has announced (around $5-8/tonne) would fall well short of the abatement required to achieve Australia’s emission budgets. They conclude “an effective carbon price rising to over $65/t CO2-e by 2020 would be required to achieve the minimum 5 per cent target through domestic reductions alone.” At these prices, this would require spending $8.5 billion in 2020 alone to achieve the minimum emission commitment.

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In short, Direct Action would need to be spending $8.5 billion in 2020 alone to meet the minimum reduction target, let alone aiming for targets that will actually help our children. This modelling is from last year and since then the efficacy of the carbon price in shifting demand and the boost to renewables by the RET has reduced the potential Direct Action bill. But Clive is proposing to freeze the carbon price at zero and scrap Direct Action. The RET will need to be enormous to offset the changes and meet our most flimsy commitment.

In sum, the PUP proposal is a clever political poly that has little to do with actual policy aimed at avoiding dangerous climate change for now. There is something to be said for the preservation of mitigation infrastructure, especially given an idled ETS could be revived by some future government and it means Australia isn’t so clearly setting back the international agenda around a carbon price. But the sum total of these policies is the use of makeup, antics and bright pants to distract the nation from its real and pressing carbon mitigation task.

There is little here to upset a Government skeptical of climate change.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.