Abbott’s climate demagoguery

I know you’ve all made up your minds already but it is my duty to report that the most fictional election in living memory has ratcheted up the fantasy. Tony Abbott yesterday declared the following:

If Labor sneaks back, the carbon tax stays and goes up to $38 a tonne by 2020 and an almost unimaginable $350 a tonne by 2050.

Right now, that’s a $550 a year hit on families that will just get worse if Labor stays on.

…After insisting for two years that the carbon tax was good for you, Mr Rudd suddenly admitted that it was costing households some $550 a year.

That’s why he’s faked abolishing the carbon tax even though he’s done no such thing.

He’s simply proposing to bring forward by one year the change from a fixed tax to a floating tax.

Mr Rudd hasn’t abolished the carbon tax: he’s keeping it and increasing it, as the Government’s own economic statement confirmed two days before the election was called.

The carbon tax is going up to $38 a tonne by 2020 and is forecast to reach an almost unimaginable $350 a tonne within four decades.

The carbon tax damages our economy without helping our environment.

As the government’s own documents confirm, a carbon tax at $38 a tonne won’t actually reduce Australia’s domestic emissions.

In fact, Australia’s domestic emissions actually increase from 578 million tonnes now to 621 million tonnes in 2020 – that’s an 8 per cent increase, not a five per cent decrease.

We only achieve the five per cent decrease that year by purchasing over $3 billion worth of carbon credits from abroad.

Even by 2050, on the government’s own projections, Australia’s domestic emissions hardly decline at all despite a carbon tax at an astronomical $350 a tonne.

We only achieve an 80 per cent cut in emissions by purchasing in that year alone over $150 billion worth – that’s right, $150 billion – of carbon credits from abroad.

This is by far the biggest wealth transfer from Australians to foreigners that’s ever been contemplated.

The carbon tax hits households, threatens jobs and damages the economy without, it turns out, ever significantly reducing Australia’s domestic emissions.

The government’s own figures reveal the economic damage the carbon tax will do.

Australia’s gross national income per person is almost $5,000 lower in 2050 with a carbon tax than without one.

Australia’s annual GDP growth might only be 0.1 per cent lower every year with a carbon tax than without one but small reductions eventually add up so that total GDP in 2050 is almost 3 per cent lower with a carbon tax than without one.

That’s the equivalent of a $40 billion reduction now.

The cumulative loss in GDP between now and 2050 is $1 trillion.

It’s as if the entire country were to stop work at some stage over the next 40 years for the best part of a year.

What’s more, real wages are projected to be almost 6 per cent lower in 2050 with a carbon tax than without one.

That’s the equivalent of a $4000 a year pay cut now for someone on the average full-time wage.

The carbon tax means our aluminium industry will shrink by 60 per cent.

The carbon tax means our iron and steel industry will shrink by 20 per cent.

The Government’s own modelling predicts it.

The carbon tax will reduce Australia’s domestic coal use from over 70 per cent of our power needs to under 10 per cent, absent carbon capture and storage.

The Australian coal industry will only survive because the Chinese, without a carbon tax, will do what we are no longer supposed to do: namely buy and burn coal.

Australia’s biggest export industry will only endure because others will do what we think we should no longer do ourselves.

This is straight demagoguery. The carbon price is not a tax. It is a relative pricing mechanism that forces the private sector to account for its carbon output. It does not take money from households. They are compensated with lower taxes. It takes money from carbon polluters to price them out of production and pushes up the price of goods with high carbon intensive input so that consumers chose elsewhere.

The whole point of carbon trading is it allows different nations with different strengths to reduce carbon together at the cheapest cost. Cherry-picking what China does versus us makes no sense whatsoever.

Turning to power bills, the carbon price has to date had a limited impact. The main culprit in price rises is the regulatory regime. From the Productivity Commission:

Average electricity prices have risen by 70 per cent in real terms from June 2007 to December 2012. Spiralling network costs in most states are the main contributor to these increases, partly driven by inefficiencies in the industry and flaws in the regulatory environment.

See that small purple stripe? That’s your carbon price. 7.5% of the total bill and 15% of the price rises over the past five years. And, as I’ve argued before, it won’t come out when the price is scrapped. The power generators know that carbon mitigation will continue via Tony and his bureaucrats throwing darts at the sector and raising costs further, so they will keep the margin.

Which bring us to “Direct Action”. Aside from anything else, pretty much everyone agrees – Treasury, the Productivity Commission, various academic studies – that it will be a more expensive way to reduce our emissions. But OK, I can take that, if that’s what the people want. Monash University and the Climate Institute estimate Tony’s policy has a median black hole of $7 billion up to 2020.

But this is where Tony Abbott went much further yesterday and revealed climate change skepticism. From the SMH:

Mr Abbott confirmed he was prepared to break the Coalition’s pledge to cut Australia’s greenhouse gas emissions by 5 per cent by 2020 (on the levels recorded in 2000). Estimates by Treasury and independent modelling companies suggest that the Coalition’s $3.2 billion Direct Action policy will fall several billion dollars short of reaching the targets.

“The bottom line is we will spend as much as we have budgeted, no more and no less,” Mr Abbott said.

“We will get as much environmental improvement, as much emissions reduction as we can for the spending that we’ve budgeted.”

I spent 10 year running The Diplomat magazine during the Howard era and had many occasions to discuss climate change politics and diplomacy of the period with high ranking officials. Howard’s stand against Kyoto was damaging to the global effort, consistently undermining attempts to establish either law or global norms over which nations could be sanctioned. This is not supposition. The world is made up of people and they reform together via diplomats. I lost count of the occasions on which Australia was quietly fingered for holding things up (along with the US of course).

If Australia strips back its carbon price it will have dealt a blow to all such schemes worldwide. But if it backs away from our 2020 carbon reduction targets it will become the pinup boy for climate demagogues everywhere and open the door wide for everyone else to do the same. Don’t kid yourself, this will do real and lasting damage to the global mitigation effort.

Abbott concluded yesterday:

The Government has pretended to abolish the Department of Climate Change but it certainly hasn’t abolished the new bureaucracies that it has created to administer the carbon tax, such as the Climate Change Authority.

Fixed or floating, the carbon tax is still a great big tax, a great big bureaucracy, and a great big source of revenue over time – only with a short term budget black hole thanks to the recession-induced collapse of the carbon price in Europe.

Mr Rudd knows that the carbon tax is an act of economic self-harm – that’s why he has pretended to abolish it.

But the only way to really abolish it is to change the government.

Actually, thank God, that’s not true. From the AFR:

Labor says it will call Tony Abbott’s bluff over the carbon tax and force him to call a double dissolution election, which he has vowed to do if he wins the election but is blocked by the Senate.

…At the same time, Mr Abbott made room for the Coalition to walk away from its long-stated commitment to cut emissions by 5 per cent by 2020, using its so-called Direct Action policy, which would pay polluters directly for reducing carbon emissions.

Using his last major speech of the campaign, Mr Abbott told the National Press Club on Monday that Labor would destroy itself if it persisted with the carbon tax in opposition, because it would be choosing the philosophy of the Greens over “decent ordinary workers of this country’’.

But Climate Change Minister Mark Butler, someone who will be instrumental in rebuilding the ALP fortunes should it lose the election, rejected the threat.

“Tell him he’s dreaming,’’ Mr Butler told The Australian Financial Review.

He said a price on carbon had been Labor Party philosophy for years and “we are absolutely not shifting’’.

“We have had a climate change policy since before the Australian Greens existed as a political party,’’ he said, adding that the Liberal Party and the US Republicans were the only conservatives in the world who opposed such a market-based approach.

…It is understood…that Mr Butler’s resolve is shared by other key figures in Labor, one of whom said that after the election, if Labor lost, it would face an existentialist debate about what it stood for and this would not be helped by abandoning core policy principles.

Do I know climate change is certain? Nope. Am I certain it’s man made? Nope. Do I think that listening to politicians ahead of scientists is a good idea. Nope. Will I bet the lives of my children on Tony Abbott being right and science wrong? No bloody way.

I’m voting Green.