Tuesday, December 16, 2008

Households pay as big polluters cash in on climate change

IF YOU accept the scientific evidence that there will be dangerous climate change in our lifetime unless we drastically reduce greenhouse gas emissions, you will have good reason to introduce an emissions trading scheme. And it would beggar belief that you would then ignore the scientific recommendations about how much action to take.

The Federal Government's pursuit of a 5 per cent emissions reduction target is like a patient with a deadly infection agreeing that they need to take antibiotics — but insisting they take only one-fifth of the recommended dose.

The scientific evidence is clear — unless the developed world agrees to reduce emissions by at least 25 per cent by 2020, the possibility of avoiding dangerous climate change is about as likely as a return by John Howard to the Liberal leadership. That said, it is hard to believe that the result would have been much different even if it had been the former prime minister making yesterday's speech.

The industry assistance package proposed by Kevin Rudd is one of the most generous in Australian history; it should be known as the carbon polluters' rescue scheme.

The combination of very weak targets and very large compensation to polluters raises the question of whether it has all been worth the effort.

Details of the scheme have finally been released after more than 12 months of suspense, but what a disappointment it is.

The dirtiest brown coal-fired plants will receive the biggest slice of the $4 billion of help to coal-fired power stations, and 90 per cent of the permits required by "emission-intensive" activities, such as aluminium smelting, will be provided free. Also, the agriculture industry, which is responsible for about 16 per cent of Australia's emissions, will be excluded from the scheme until at least 2015.

The arguments for all this assistance to polluters are as weak as Rudd's targets. We are told that our "trade-exposed" businesses will leave the country if we don't give them billions of dollars worth of permits, yet when the Australian dollar sailed up to 95 US cents early this year, there was no sign of them packing their bags. It seems that if the cost of energy rises, they are quite vulnerable, but if the dollar rises they are somehow immune.

The other argument is that they didn't see this coming and that it is unfair to the coal-fired power stations whose assets are worth less in a carbon-constrained world. Apparently all those highly paid executives haven't read the papers for the past decade and did not notice that Australia committed to reducing greenhouse gas emissions at the Rio Earth Summit back in 1992.

Over the past decade there have been countless fights over the development of new coal-fired power stations and the refurbishment of existing brown coal plants. The owners of those plants were free to risk their shareholders' money on a bet that there would never be a carbon price — the idea that taxpayers should bail them out for getting it wrong is beyond comprehension.

It is interesting that there is silence from those who usually criticise the provision of public money to industries such as the car industry or the textile industry. It seems that when the Government's objective is to protect shareholders rather than protect jobs, the ideological concern with industry assistance is less strident.

Finally, the scheme is inequitable. Not only does it shirk Australia's responsibilities to the rest of the world by concocting some new measure based on per capita emissions, it contains an unexpected sting in the tail for those households and small businesses that want to "do their bit" to save the planet. If it goes ahead as planned, it will mean that no matter how great the efforts that Australian households make to reduce their own emissions, the only effect will be to free up emissions for the big polluters to use.

That is, unless the Senate succeeds in amending these plans, Australia will be locking itself into a 5 per cent emissions reduction on 2000 levels until 2020. Any efforts by households to reduce emissions below that target, such as riding bikes to work and having shorter showers, will be futile. As the household sector uses less petrol and coal, the big polluters will have more permits available to them to increase their pollution.

There is, however, some consolation for householders who are keen to keep trying to reduce their emissions: the harder we try to save energy, the lower the demand for permits will be. The unlikely consequence of household and community efforts to "do their bit" will, therefore, be a reduction in the price of permits bought by the big polluters.

The scientists say we need to act quickly and the Treasury modelling says the costs of doing so would be trivial. The big polluters remain unconvinced. Sometimes patients must be forced to take their medicine, even if they would rather just keep on spreading their sickness around.

Dr Richard Denniss is the executive director of The Australia Institute.

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