Thursday, June 5, 2008

Green? In your dreams

Illustration: Spooner
  • Tim Flannery
  • June 5, 2008

The Rudd Government's first budget failed to really tackle the challenge of climate change.

THE Rudd Government's first budget was a disappointment. Changes to the solar rebate scheme crippled one of Australia's most important renewable energy industries, and the luxury car tax - the only substantial change to taxation of motor vehicles - did nothing to improve the efficiency of the nation's vehicle fleet. In brief, there was a profound disconnect between the Government's promise to introduce carbon trading by 2010, and its willingness to prepare Australians for this momentous shift.

The greatest danger for the Government in this electoral cycle is the implementation of a carbon trading scheme to an unprepared population. Under the scheme the price of burning all fossil fuels - oil, gas and coal - must increase. As the recent outcry over petrol prices underlines, unless the Government has acted to minimise the impact of the scheme, and protected the most vulnerable, it will most likely be flung out of office. Lack of action to prepare people may lead to another outcome - Rudd reneging on his climate change election promises. There are many climate sceptics in the Government and the bureaucracy who would be delighted see the Prime Minister manoeuvred into a position whereby he has no choice but to break his election promise, and I believe that it's their white-anting that's responsible for the failure of the first Rudd budget in regard to climate change.

So what must be done to prepare Australians for life after 2010? Clearly, the efficiency of the nation's vehicle fleet must be upgraded. Our country is one of the few developed nations that lacks fuel efficiency standards for motor vehicles. Clearly, high standards need to be introduced immediately. Furthermore, the Government should deploy a means-tested buy-back scheme for the oldest and least efficient vehicles on our roads. This would have multiple benefits: not only would it help the disadvantaged to buy more efficient cars, but it would improve road safety and urban air quality. The $1.9 billion proposed by the Opposition to cut the fuel excise by five cents per litre could, if used in buy-backs instead, have a massive impact on the least well-off Australians. Cutting the price of fuel is like giving someone a fish, but helping them buy a more efficient vehicle is like teaching them how to fish. The Government should also eliminate tax concessions on motor vehicles in relation to employment packages. Before the budget, the public was prepared for this to occur; indeed, I think they were expecting it. The taxation regime on imported cars should also be altered so that less efficient vehicles attract more tax. All of this will ensure that the shock of any future rise in fuel prices is reduced.

Before the election the Labor Party had moved some way towards achieving these goals. In March 2007, while it was still in opposition, it announced a $500 million "green car fund", which was welcomed by Australian car manufacturers. Given the scale of the challenges facing the industry this must always have been seen as a first step, so just why Labor failed to build on it in their first budget is mysterious. As they seek to build a more efficient vehicle fleet Labor must take a tough stance with the industry, tying any additional assistance to co-operation from the auto sector for steep, mandatory efficiency increases in vehicles, and with changes to the tax regime.

Changes to the taxation of fuels is also required. John Howard was determined to tax transport fuels of a joule basis (that is, on the amount of work each litre of fuel could do). This regressive measure urgently needed to be reversed, and a taxation system based on fossil carbon content introduced in its place. There's a good argument for making sustainably produced biodiesel and ethanol tax-free under such a scheme, both to encourage their production and to soften the blow to consumers from the rising prices that must come in 2010. A $40 per tonne cost of carbon is projected to raise the price of petrol made entirely of oil by about 10 cents. Making ethanol and biodiesel tax-free, and mandating a richer ethanol and biodiesel mix, could substantially offset this rise.

Dealing with problems arising from an increase in the price of electricity is also required. The star rating system for white goods needs to be tightened up and broadened to a wider range of electrical goods. Furthermore, inefficient imports should be either banned or heavily taxed. For the goods that use the most electricity - such as fridges and air-conditioners - the Government should also introduce a means-tested buy-back scheme of inefficient models.

Recent changes to the rebate on solar panels should also be repealed. After all, anyone who has solar panels installed by 2010 is likely to be happy with the new carbon trading arrangements. It's true that only the wealthy are likely to be able to afford large arrays of solar panels, but rather than destroying the effectiveness of the scheme in an attempt to protect the less well-off, why not offer rebates, and deploy means-tested buy-back schemes, to assist those who cannot afford solar panels?

Our Prime Minister is a hard worker, but it worries me that he has been unable to enforce the discipline required if he is to honour his election promises. I'm also concerned that he has been unable to develop the broad vision required of a government about to embark upon momentous change. Instead, "old Labor" thinking prevails, as is evidenced by the new tax on luxury cars. Such thinking frames everything in a rich versus poor mentality, while ignoring urgent environmental issues.

If we are to rise to the challenges of the 21st century we'll need to be more agile in our thinking than that. And if Kevin Rudd is to be anything more than a one-term wonder, he and his cabinet will need to start planning - right now - for the new economic environment they are pledged to create in 2010.

Tim Flannery is chairman of the Copenhagen Climate Council, a professor at Macquarie University and Australian vice-chairman of The Climate Group.

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