'One input' wields an unyielding message

• Michelle Grattan
• The Age, July 5, 2008
• http://www.theage.com.au/national/one-input-wields-an-unyielding-message-20080704-31xn.html

ROSS Garnaut has delivered a very inconvenient truth about the emissions regime. He's told the politicians they'd be cheating to avoid the political pain of still higher petrol prices by cutting excise.

Blowing the whistle on the "fix" proposed by the Opposition and being considered by the Government, Garnaut has stated the obvious. Dealing with climate change is about changing behaviour. Why have petrol in the scheme if you don't send the price signal telling people they should use less of it?

Garnaut has put up a pure model. Don't delay in starting the scheme; begin in 2010 and, if possible, without phasing. Don't exclude sectors (except agriculture, for now). Direct compensation strictly according to need and means. Let the market signals do their job.

Despite the inquiry being commissioned by Kevin Rudd with support from the Labor premiers largely as a political exercise, Garnaut is strongly independent. "I'm just one input into the Prime Minister's thinking and he's just one input into mine." Ouch. The Government had distanced itself from Garnaut, saying his is only one "input".

The draft report is testing for Rudd, effectively setting benchmarks against which to judge the coming green paper. On some issues - almost certainly including petrol - the Government won't want to be as pure as Garnaut. Nelson believes it is better to be populist (and, he hopes, more popular) than pure. He's sticking with his offset proposition, saying the Coalition will protect motorists.

Garnaut says all revenue from permit sales should be returned to households or business. Household help should be concentrated "on the bottom half of the income distribution" to overcome the scheme's regressive effects. The intersection between winning and losing families could be political dynamite.

In 12 months, climate change has turned from electoral gold for Rudd into what Garnaut dubs "a diabolical policy problem". Voters saw combatting global warming as

a romantic cause. Confronted with the costs to them personally, inevitably that cause won't seem so attractive. The community's most vulnerable will be worried, regardless of compensation; higher income earners will feel short-changed. Big business has bluntly declared it will pass on the costs.

Selling emissions trading will be an enormous challenge for Rudd as he tries to contain the losers and cope with the detail, as well as keep alive the cause, so people think saving the planet, or at least the Murray Darling, is worth some personal pain.