The only certainty that has emerged from this week is that by treating this as politics and policy as usual, Rudd has been utterly foolish. Anna Rose has an excellent summary of the scheme design itself. Anybody who thinks it should pass the Senate in its current shape is either being paid to say that, living in an unreality so loopy that I’ll drop out and have what they’re having dude, or never thought we would be able to get organised in time to do anything about the problem. And to the latter, I say screw you emo. Go home and listen to some whinging depressed crooner and let the adults get on with it. For the purposes of this post I’ll leave aside the question of whether, according to some deft Machiavellian logic it’s in Australia’s long term interests to have a scheme so riddled with loopholes, striving for such a pathetic target as to render it worthless in driving appropriate investment and behavioural change.

The Kyoto Protocol ratifying, Stolen Generation Apologising (don’t hear much about Teh Intervention these days, do we?), 2020 Summiting Kevin07 is a very distant memory now. We were expecting a fiscally conservative Kevin08, but this has translated into a blinkered and tawdry managerialism.

The White Paper epitomises this mentality, not just in substance, but in process. Consider, for example:
1) The release of the 800+ page, impenetrable tome of bureaucratese 10 days before Xmas
2) $130m in greenwash funding to advertise it during the silly season
3) The top down, lack of substantive public consultation outside ‘the submissions’.

This whole process is a damning indictment on the Canbureaucracy’s role in the praxis of government in our efforts to come to terms with the problem over the past 20 years – when the director of Toronto Conference declared “The time to act on these problems is now”. Few will remember the National Greenhouse Response of the Hawke era, the valuable discussion papers that emerged from the Australian Greenhouse Office in the late 1990s and numerous interventions at the state level. Of course, all of these hugely expensive processes are quickly forgotten by the myopic public sphere as we wait for CCS, a China+America deal, the end of the commodity boom, the end of the slowdown, Godot or whatever else the lobbyists, shills and emos pick as flavour of the month.

The political Realists in both the Green and Denialist/Emo camps have been focusing on the most obvious processes of politics: questions like ‘will it get through the Senate?’ ‘How much danger are Turnbull, Albo, Tanner and Plibersek in of losing their seat?’ But I think these sort of questions miss the real question of politics here, which is why the government is ostensibly driving for a single carbon price as the centrepiece of its policy at all?

The carbon price really is front and centre of the Canbureau’s response, with expanded Renewables Target and CCS bringing up the rear (excellent topics for later discussion). I took up the question of voluntary response and a secondary market with Blair Comley at the White Paper information session in Sydney on Wednesday. His response was basically: it’s more efficient for us to have a single carbon price. Now I understand the basic economic theory: allocate property rights, create the market structure with appopriate legislation = drive more abatement for less cost. But behind these are epistemological, sociological and essentially political questions about who has the resources, time and expertise to certify that, for example, soil carbon, fugitive emissions for coal mining, forestry plantations, brown coal burnt for power (( interesting aside – until very recently Loy Yang had no idea how much its emissions were – it just dug, shipped and burned ))

Loy Yang pit mine, Latrobe Valley, Vic. Photo credit: author’s own.

If the CPRS is a failure of governance, these processes behind building a form of equilibrium through a carbon price within the polity should be thought of as front and centre to politics rather than at the peripheries or simply a matter for scientists. Our experience with voluntary carbon markets to date should be instructive to policy makers on two fronts: firstly, concentrating on the supply side, the market for emissions reductions (at least when working according to textbooks) renders the uncertainties about the authenticity or permanence of the reductions as ‘risks’ and prices them accordingly. On the demand side, projects are valued by buyers according to very specific marketing criteria. What kind of story does this project tell? How can this story relate to my brand?

Bracketing out these questions of values and evaluation of the socio-technical nature of ‘emissions reductions’ from the regulatory market design process is setting it up for failure. Because in many ways, the White Paper represents the apotheosis of Neoliberal theory at a time when everyone is beginning to once again feel thoroughly alienated from claims that the ‘Free Market’ will liberate us. Witness in the White Paper:

• The rejection of any secondary market for voluntary emissions reductions because it would be ‘inefficient’. True in theory, but why not establish mechanisms to actually drive behavioural change explicitly? The price signal will be far too weak for this.
• The weird international linkages based on the assumption that if we throw our weight behind the CDM process it will somehow become less dodgy. The sheer idiocy of market-like (project based) mechanisms providing any kind of efficient transfer without clearly delinated and enforceable property rights should be a cause for considerable concern
• The horrendously inequitable EITE clauses effectively creating two carbon prices: Anyone who support this in its current uncapped form either has rocks in their head, is a mouthpiece of industry or too emo to take seriously. This creates a basket case culture of industry handouts which may prove extremely difficult to remove the trainer wheels from. Their carbon price is effectively zero because, with banking and borrowing clauses, they’ll be able to hedge their position effectively with the hope of getting a more sympathetic ear in Canberra down the track, deferring any effective decision-making.
• Provisions to keep coal fired power running under the auspices of ‘supply security’. What was wrong with Garnaut’s proposal to provide structural adjustment assistance to the effected communities? This is market fundamentalism in the form of the National Electricity Market whose sole, perverse efficiency is providing Kilowatt hours of power instead of what people actually need: energy services

This dialectic between the unleashing of market forces and the horror at their divisive social effects is the story of the Great Transformation; and I suspect the response to the White Paper we’re seeing unfold will demonstrate its explanatory power in much the same way as the EU ETS Phase I caused great cynicism amongst the population there. The difference is that we’ve allocated property rights but not backed them up with effective governance arrangements. They are treating emissions trading as a rolling series of experiments from which social and institutional learning should feed into each phase of the scheme design, we’re treating it as a problem with essentially a techno-economic fix. Any market will have winners or losers that emerge according to the rules written into its function.

So who are the winners and losers in the current proposal:

Winners:

1. The biggest winners are industry that gets over the line to qualify for EITE assistance, or has cooked their books sufficiently to get them there. Movements in commodity or currency prices will see them have a field day, generating permits for deviations from a historical baseline intended to drive change but simply creates a whole new raft of uncertainties
2. The big financiers and traders. We’re establishing a market, remember. ‘nuf said
3. Consultants. The f*ckin’ thing is 800+ pages of, often impenetrable bureaucratese.

Corresponding Losers:

1. Those suckers (us) who have to pay for their permits one way or another
2. The 900 odd medium sized firms who scraped into the NGER threshold but don’t qualify for EITE. Prepare to get taken to the cleaners by the big end of town, boys
3. Generalists/the public writ large/future generations. This is where the whole thing comes full circle and the challenge is to find avenues of engagement where people can link their actions to effective technological changes.

So far, these avenues appear to be (a) basically to buy permits through some kind of intermediary exchange (linked to solar panel purchase, for example) only if they will retire or bank without using official permits. This will push the permit price up, creating scarcity etc. Just pray we don’t hit the domestic price cap too quickly [edit: I should emphasise that I fully support community projects like putting solar on the surf club etc., but it must somehow incorporate the retirement of permits to be additional] (b) a bloody coup with the emergent carbon elites first against the wall (c) if you’re feeling adventurous, this kind of thing (d) exerting an unprecedented level of civil pressure on sitting members to reform this thing before it’s legislated.

Elsewhere: Guy Beres on Mr 5%, John Quiggin on PPPs, Deltoid: as long as we beat New Zealand.