Kevin 07 morphs into a classic version of Howard

• Tim Colebatch
• The Age, December 16, 2008
• http://www.theage.com.au/national/kevin-07-morphs-into-a-classic-version-of-howard-20081215-6z1m.html?page=-1

AFTER all that, we are more or less back where we started. The Rudd model for tackling climate change now looks remarkably similar to the Howard model from 2007.

By the time the Coalition has forced further changes in the Senate — as it will — the scheme could end up almost identical to John Howard's.

Perhaps it was inevitable that the clean, hard lines of the Garnaut model would turn into a smudgy political compromise. Perhaps it was inevitable that Labor, like the Liberals, would try to shield from change everything emissions trading is meant to change.

The Rudd model aims to shield any industries or blocs of voters that would feel the pointy end of change. It aims to make emissions trading (ET to its friends) acceptable to business, and to the Liberals, who will have to vote it through the Senate. (Wouldn't it make sense to invite the Liberals to join in designing the scheme, so it had bipartisan support and investors would know it would last? Yes, but we don't do things that way.)

All Rudd's shields have blunted the point of ET: to drive change. The way we live and do business is heating up the planet. We have to change it. ET aims to create a way to do so at least cost, and prod us to shift to low-emission ways to live and do business.

But change means some things must pass. Modelling for the white paper found that ET could close one, two, even three of the Latrobe Valley power stations, because they produce megatonnes of carbon dioxide. That's how the scheme works: it makes us scrap old polluting technology for new, cleaner tech, such as the gas and wind power stations now being built. That's how we reduce emissions, but it ain't painless.

The trouble is that Kevin Rudd wants ET to be painless, so the scheme will give the generators almost $4 billion of free permits over the first five years — with no quid pro quo.

The Rudd model gives away so much to interest groups that it plans to spend the entire revenue from ET simply to compensate everyone affected. Only a tiny fraction of that would drive changes in behaviour.

Polluting firms, electricity generators, households, motorists and small business: everyone is looked after. Many will be deliberately overcompensated. Treasury predicts that ET will raise prices by 1 per cent. But the Rudd model uses the revenue to pay for a permanent 2.5 per cent rise in pensions, family benefits and all other welfare benefits.

Aluminium smelters whose electricity bills will rise with ET will be given that money back, in spades, receiving permits for one tonne of free emissions for every 0.7 tonnes included in their electricity bill. Come to Australia, polluters' paradise!

Coal-fired power stations will be given $700 million a year to compensate them for the loss of asset value. But if their asset valuations assumed that tackling climate change would not diminish the plants' value, they were unrealistic. That is not taxpayers' fault.

Ross Garnaut envisaged a rigorous emissions trading scheme with few exemptions, and raising $4 billion a year to speed research, development and commercialisation of clean technology. The Rudd model spends everything on compensation, and has nothing left over to help solve the problem.

There is nothing left to promote change, such as the Greens' plan to retrofit the homes of low-income earners with energy-saving equipment. There is nothing to help developing countries such as Tuvalu and the Maldives adapt to the rising oceans.

The targets — 5 per cent below 2000 levels without a global agreement, 15 per cent below with one — are defensible in per capita terms, but will not persuade the world that Australia is taking climate change seriously. And the world may be right about that.