John Hepburn was the only one who noticed Labor burying the Wilkins Review in budget media releases. It’s becoming increasingly clear why it was buried. The CPRS discussion has thus far failed on its own terms to “change … relative prices [by providing] businesses and consumers with incentives to adjust their behaviour, invest in low-emissions technologies and help Australia reduce emissions.” As Giles Parkinson noticed in the transcript from the Senate Climate Policy [pdf] hearing to get the various stakeholders’ reactions to the changes announced by the government, the handouts are settled – and have been since at least last July when Citi released their first report on ‘likely impacts’:
“My mainstream fund manager clients are generally taking the view that, having established that the likely impact of the scheme on [heavy industry eg. aluminium, steel, cement, paper, LNG, chemicals and mining] is small, they do not need to be continually updated,” she told the committee.
“They are actually getting a bit bored with it. Most fund managers I speak to are pretty sanguine, feeling that the impact of the CPRS will be small given the number of free permits that will be allocated. They feel that other influences like commodity prices, exchange rates and the state of the global economy are more important to their investment
They’re not just bored of it because of the quantity of emoting, but because it’s completely empty rhetoric:
“I have sometimes attempted to engage with companies through the standard process, the investor relations function, to see whether I am misunderstanding the situation or have got it wrong where a CEO is very concerned, but my numbers do not particularly show it, but the market has not been given information that would cause me to change my numbers,” [Citi analyst Elaine] Prior said.
“To the extent that companies feel that the market is misinformed on carbon trading and is not taking into account the risks appropriately, it would be up to the companies to inform the market through the normal processes. But I have not seen anything come through that I have noticed.”
This isn’t to say that nothing is happening, just to point out that it’s the price of RECs – not the carbon price – is driving investment in renewables. That market, combined with exemptions to fuel and EITEs and large scale direct public investment technologies like biochar ($1.5bn $1.4 million announced today), solar thermal ($1.5bn announced in the budget) and CCS have largely crushed Roger Wilkins’ dream of imposing price theory on the problem of climate change.
Is it just a coincidence that the history of ‘neoliberalism’ is now being rewritten as a doctrine that advocated a ‘strong state’? As if the Chicago Boys’ sneering critiques of law as ‘nonsense’ never happened? (cf. Mark’s excellent post On the futility of arguing about Hayek)
Richard Denniss also responded, at the same hearing, to the changes announced under the sign of ‘recognizing voluntary action’:
the proposal that was put forward is bizarre—that is the only way to describe it. The notion that individuals who make decisions to use less energy—be that through transport or in their household—would log on to a website, calculate how much money they had saved on their electricity bill, donate that money to Kevin Rudd and that he in turn would go and purchase a permit from someone that they recently gave it to for free is just inexplicable—bizarre. Add to that the fact that people might have spent extra money of their own on buying a Prius or installing insulation in their house, if they did not get the thing, or installing a solar panel— people are spending their own money. And then, if they save electricity, they are expected to donate money to the federal government. As to the argument, ‘At least it is tax deductible now’: it was always tax-deductible if you donated it to an environment group who went and purchased the permit. But the idea that the solution to this is to purchase a permit-
Senator MILNE—To pay twice.
Dr Denniss—to pay twice—is just inexplicable.
Senator XENOPHON—It is not easy being green, is it!
Dr Denniss—It is not easy being green! And it is not even cheap, because they have removed the alleged double dividend of, ‘It is good for the environment and it is good for your hip pocket.’ No, you donate the money to the Prime Minister. I mean, it would be more intellectually honest to say: ‘We don’t care about this problem. We have no intention of fixing it. Get over it.’ I could wear that. I would be disappointed, but I could wear that. It would at least be intellectually honest. I just want to focus on that lack of honesty….
Update: richard comments below
Well the shenanigans by Labor over this issue have converted me from a Labor voter to a Greens voter – and I bet I’m not the only one.
That’s despite disagreeing with most individual things in the Green platform – too far left, too many symbolic gestures, too much refusal to acknowledge painful tradeoffs and above all too much selfrighteousness. But the Greens do seem to be the only ones who realise that its the future of the planet, stupid. That should pretty well swamp everything else.
Even at a realpolitik level Rudd has forgone a magnificent wedge here. He could have wiped out the Libs (not to mention Fielding) at a DD on this – instead he’s tried for a fake “bipartisanship”.
I agree with you, Derider. I have long argued that what have you gained with the very best of government outcomes, made to the exclusion of the environment, if that lapse of attention to the environment ultimately leads to the collapse of the community being served.
I’ve gone Green with anger over Labour’s handling over this (I don’t think that “issue” is strong enough) looming disaster.
derrida, after a few years of “it’s the future of the human race, stupid” you will probably seem even more self-righteous than you do now. It’s hard not to when you actually believe what you’re saying. But at least The Greens are open to members input… you could cough up the $20 or so and have a say.
The correction is needed because trust me, the planet will be just fine right up until something big hits it or the sun turns into a red dwarf (not forecast to happen for a while yet).
Penny Wong has done a good job of trying to avoid some of the inherent problems associated with ETS. Which hopefully means that she understands that ETS is hopelessly flawed and that the government needs to find another way of creating emission credibility before it announces officially that CPRS is not the best way to drive down emissions.
I think its an interesting demonstration of the mindset of Labor as opposed to Liberal politicians.
Labor are more team-oriented. The absolute priority is the good of the group, and personal ambition is expressed through following group dictates. With the implication that rewards will follow (and they usually do; witness the union movement).
On the other hand, the liberals are inherently more individualistic. Their business/law background rewarded them for finding new and creative ways to advance themselves. Success through betraying the team is relatively respected and expected.
Howard’s rule was characterised by systematically removing those who were likely to undermine him (the ‘wets’). Costello was too senior to do this to, and too smart to raise his head far enough above the parapet to become a large and public enough target to justify Howard taking direct action. He also had interpersonal skills that Howard lacked and feared, but that is another story.
Labor don’t need to remove enemies as all tend to want to be part of the team. Notice how the right/left divide has been forgotten? Rudd has been strong enough to pull these two teams together. The left and right in the Liberal party are far more a collection of self-serving individuals than anything ideological.
Anyway, my point being that Wong and Garrett are imprisoned by this mentality. We need Rudd to see that changing direction will not destroy his cohesion; which is what he believes his success is purely based upon. Labor people are brainwashed to follow the crowd. Rudd is the leader, and will not stop being so if he rethinks his policy direction. In fact, to not do so reveals his confidence as intrinsically shallow, and fosters the very doubt in the subordinates (and eventually the electorate) that he is most afraid of.
dk.au, interesting post. The CPRS seems to me a bit like an ETS on training wheels. Except that it does shift resources around a bit and is not entirely innocuous.
The research on biomass is good news. It seemed like a really good idea until George Monbiot had a go at it.
BTW, dk.au, the link to Mark’s post on Hayek is busted. [fixed - dk]
“…and large scale direct public investment technologies like biochar ($1.5bn announced today),….”
The funding for biochar is 1.4 million – not BILLION. They aren’t giving the money to the mining industry you know!
Such a pathetic amount of funding should be recognised as such.
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Brian , I wouldn’t give up on bichar – Monbiot’s article aside. He starts off angry and rushes through complex procedures dismissing them with science from some time ago. The more effort we make to adjust the Carbon cycle to the imbalances we have introduced the better and all efforts need to be considered .
Reading too much Monbiot is bad for your mental health as he is just an unremitting pessimist whose solution is catastrophic demolition of most of our efforts at civilisation – we need to use the physical and intellectual tools we have and start with less prejudiced , blinkered reactions.
Thanks murph – duly corrected! I tend to agree about Monbiot, though with so many political actors operating with ‘bayesian brains’ he’s probably a necessary evil. Fwiw, I really like Roger Pielke Jnr’s academic writing and reckon Lomborg’s an interesting chap but their political interventions look thoroughly disingenuous in comparison.
The admission by the fund managers that no one is too worried about the climate change is welcome, and timely, but hardly surprising. For example the national electricity market regulator (NEMCO) made it quite clear in its submission to the CPRS white paper that the low prices likely to result from the CPRS would do nothing to shift the market share of the coal fired power stations.
Lets go back to the beginning of why we (allegedly) wanted to go down the emissions trading path – if we got the price signals right it would be simple and elegant and we wouldnt have to worry about all that inefficient regulation and government spending…
and where are we now? apart from pathetic targets and enormous compensation we have the government spending billions of dollars on solar, billions on clean coal, billions on insulating our houses, lots of new regulation on energy efficiency…all good ideas, but all a bit pointless when you have already proposed to cap the level of emissions. We have wound up with the worst of both worlds.
The only way you can make sense of the CPRS is to look at it as a mechanism for protecting Australian polluters from the costs of tackling cliamte change. There will be no avoiding the costs to the Australian people and the Australian economy, but if the government can sneak the CPRS through before people really understand what it is (and what it isnt) then the polluters will have secured their certainty at our expense.
Remember how the farmers locked in their ‘rights’ to water just before the water ran out? well the polluters are following the same strategy, and the only thing that stands between them and avoiding responsibility for another 11 years is the Senate.
Presumably the Government responds that all these measures will ‘make it easier to set a lower target in the future’, richard. However, thanks to the gateways mechanism in the legislation, this will always be a decision for the Minister of the day!
I’ve been reading Anthony Giddens new book The Politics of Climate Change, and he sees a role for massive public investment as well as carbon taxes. His conclusion about an international carbon market was basically: don’t hold your breath considering the governance issues involved. But he’s hardly an experienced energy policy commentator and I feel like he’s waded into the debate too brashly.
It looks like we’re getting the massive public investment but it’s directed at protecting the status quo, not at changing how we behave.
Browsing through the linked transcript the protection of the status quo kept coming through whether it was big business or fossil jobs. It seemed that it’s unthinkable to change how we structure human activities in the economy whereas the physical reality of environmental issues can be ignored. Nobody seems to recognise that the economy is something we’ve collectively imagined and reimagining the economy should be more possible than reimagining the environment.
Admittedly the transcript reflects more on Macdonald and Boswell than on the Govt’s actions but their policies seem to follow the same direction of avoiding rather than encouraging change.
Macdonald and Boswell don’t hide their contempt for universities, economists and environmentalists. It seems a little odd for a lawyer to be accusing everyone else of contributing nothing real to the economy.
No doubt you are right dk.au about the governments likely response, but after the debacle of the CPRS marks I and II the idea that we should ever trust the Minister of the day to put the interests of the environment ahead of the interests of polluters is a little unlikely.
The thing about a carbon tax is that it interacts well with other policies such as investment in public transport or insulation. Under a cap and trade, on the other hand, once you set the targets such policies become pointless. There are a whole lot of people running around saying ‘so just get the target right then’, but that misses the point that a) the government of the day clearly lacks the political will to do so and b) the science is moving so fast that if we picked the right target today it would likely be wrong tomorrow.
Of course you could rescue a cap and trade scheme if you were willing to devalue the amount of emissions that a permit entitled the polluter to every time we wanted to change the target, but that would remove all the ‘certainty’ that the polluters are demanding.
The status quo is a dogs breakfast, but the puff piece in today’s Australian magazine makes it pretty clear how hard the government worked to make the polluters happy.
My other concern is with the neoclassical economic response that these firms will respond to the opportunity costs of the free permits. The reason I quoted the analysts in the post was to show that there is absolutely no evidence they’ll do any such thing when they’ve been given such generous concessions by the government. How much economics do they need to study before they’re disciplined into such ‘rationality’????
The irony of whole careers being made on the back of market based environmental policies is their failure to realise just how authoritative measurement regimes (CFCs, SO2) are established to make these ‘collective action’ problems amenable to such solutions – and openly confront the limits of its applicability to climate change.
With the Climate Institute and Garnaut resigned to supporting the CPRS, the challenge for opponents is to imagine an alternative.
Id be getting the job-creation and investment message out – and there’s some sign the ALP is doing that. Strategically, and as limited as it currently is, the CPRS should be supported across the political spectrum for the number of jobs it will create.
Call the lie on the mineral council’s fictions and scare-mongering. Lets hear no more of this ‘job losses’ nonsense. Some unsustainable sectors, yes: but net employment growth is practically inevitable if the scheme comes in. That WHY industry opposes it.
Once we’ve put that red-herring on toast, we can have a sensible debate on the environmental consequences.
Here is a very important report/discussion
http://www.theoildrum.com/node/5382#more
Looks like they heard you Lefty E! Eye for an eye – Climate Institute steps
downup to the plate, commissioning MMA to model renewable job creation.Can’t help but notice they list a lot of ‘biomass’ power plants. Would be interesting to see how many of those will further assure the destruction of more native forests…
And, yes, thanks BilB. I don’t like our chances of having an equivalent study written for Australia.
Yep dk! Let’s shift this low-rent, demented goldfish bowl debate from ‘jobs v environment’ to ‘jobs and environment v wankers’