Careful what you wish for. Tony Abbott’s fanatical resistance to a carbon price cops more flack today from the power industry and it’s looking pretty ridiculous on a number of fronts. The first is the investment uncertainty generated by Dr No. From the AFR:
National Generators Forum executive director Tim Reardon said…“It is not helpful to the industry to continually open up the possibility of changes to existing programs that are aimed at transitioning to a carbon-constrained economy,” Mr Reardon said.
“This only adds to the uncertainty that investors face. We will work with the government of the day to develop effective policies to achieve least-cost emissions abatement and this includes recognition of the impact on investors.”
That’s self-explanatory. Next up, nobody knows what “Direct Action” actually is (except that it’s real muscular):
Under Direct Action, it is proposed that companies will be able to sell abatement to the government if they can reduce emissions below “business as usual” levels. Businesses that undertake activity with emissions above their “business as usual” levels will incur financial penalties.
Energy Supply Association of Australia chief executive Matthew Warren said it was not clear how the baseline would be set under Direct Action. Any new scheme would have different financial effects on companies, depending on how it was calculated, he said.
…Mr Hunt said organisations would be given maximum input into the setting of baselines as part of a white paper process after the election.
Hmmm, so we’re going to fix a carbon price scheme that has already been debauched by industry compensation via “maximum input” from industry, further entrenching interests in the policy process and ensuring the slowest possible progress.
As well, following the required double dissolution election, we’ll require a fully consultative White Paper, with all of the interests again mounting their caravan to the Department of Redundancy Department in Canberra, again. Even then, the likely outcome is that the White Paper won’t make baseline prices transparent and a handful of bureaucrats will throw a dart to decide who wins and who loses, instead of a single and objective price set by the market.
But let’s assume these various issues are not so inefficient and contemplate who the likely winners and losers will be. Because the Coalition has committed to not clawing back any of the compensation already paid under Labor’s carbon price, presumably to avoid any political blow back from said industry, the winners will be the biggest polluters. Carbon gushers like Victoria’s LaTrobe Valley brown coal power stations, will be “unfairly advantaged” versus cleaner producers. Meanwhile, any alternative energy industries that would have been firing up investment as carbon is generally priced, will instead be winding down investment and shipping the IP to Germany. Auf Wiedersehen!
Finally, there is the question of why we are bothering. Will muscular Direct Action deliver change at a better price? From Grant King, CEO of Origin:
“the cost of abatement under Direct Action ought to produce a lesser cost outcome for any alternative for which it substitutes.
“If the alternative choice was to buy that same amount of credits or reduction units from the EU system, then that would tell you at what price it was worth paying to do that,” Mr King said.
Given the above problems, the answer is pretty obvious.
An emissions trading scheme is my favoured approach to addressing climate change because of the global efficiencies it presents. But if you have issues with it, a straight carbon tax works just as well. The point is, carbon needs to be priced now if climate change is to be addressed via private markets.
If it’s not done soon then climate change will destroy the current system as polities panic and radicalise. This may seem far away but it can be counted in decades not centuries. As a supposed ‘liberal’ in this context, Tony Abbott’s carbon policies make sense only as a fig leaf for climate change skepticism or as short term political maneuver. Given the magnitude of the challenge either is reprehensible.